Description 
In this simulation you play the role of an ostrich farmer operating in a perfectly competitive market. (If you have not yet played with the Perfect Competition Tool, you should do so before starting this simulation.) Your goal here is to gain a better understanding of the nature of profit maximization in perfect competition, and in particular, of how perfectly competitive firms can react to changing market conditions. You should also come to recognize the relative futility of perfect competition.
 
 
 
 
 

You will play the role of Mort, the owner and operator of Mort's Ostrich Farm. You have to make short-run and long-run decisions that affect the operation of your farm. There are four different scenarios for you to choose from, each of which describes a different market situation. Your objective is to maximize your profits given these conditions. Once you begin the simulation you will be presented with short-run and long-run controls.

Your short-run control is quantity. As you already know, the nature of perfect competition makes you a price taker. You should choose the quantity to maximize your profit in the short run.

You have two different long-run controls: farm size and advertising. By changing the farm size you change the amount of output you are able to produce. In other words, increasing plant size will shift your cost functions to the right.

The advertising slider determines how much money you spend on advertising your product. If you set the slider all the way to the left, your advertising spending will be zero, and it increases as you move the slider to the right. You hope that advertising will increase demand for your product, but you will have to experiment with it and consider what you know about perfect competition to see if this is true. Increasing advertising will also mean increasing fixed costs.

There are four iterations in this simulation. For each iteration you should set your short-run slider in order to try to maximize your profit for that iteration. In addition you should make any changes you think are appropriate to the long-run sliders. These changes will be reflected at the beginning of the next iteration. Once you have the sliders set the way you want, click on the "ACCEPT VALUES" button to end the iteration. You have a maximum of 60 seconds per iteration to make your decisions. At the end of the simulation your total profit will be displayed. Consider this your score for the simulation. As you come to understand the nature of perfect competition you should be able to improve on your score 
 
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