Investor
Prospectus

Aqua Han is a proposed Hwaseong-based producer of affordable, label-free 500 mL bottled water. Modeled as a price-taking firm in perfect competition, the company maximizes profit by employing seven workers and producing 97,000 bottles per month at the market price of ₩500.

Aqua Han Pure Water is purified Korean drinking water sold in clear, label-free 500 mL PET bottles. Product information is placed through a QR code on the cap and outer packaging. The initial market consists of school cafeterias, offices, fitness centers, event organizers, small retailers, and convenience stores in Seoul and Gyeonggi.

Why this market approximates perfect competition

• Many competing producers supply bottled water nationwide.
• Highly standardized product: 500 mL of purified water is nearly identical across brands.
• Consumers can easily compare prices online and in stores.
• Individual small firms have very little control over the market price.
• Aqua Han must accept the market price, it is a price taker.
• Free entry and exit: firms enter when economic profit is available and exit when long-run losses persist.

Branding does create some real-world product differentiation (e.g., Jeju Samdasoo's volcanic-source image). This project nonetheless models Aqua Han as a price-taking firm in perfect competition.

Aqua Han is a price taker. The market sets the price, so for every bottle sold:

Note: Market share is used as the most reliable publicly available sales indicator because audited brand-level unit sales are not consistently available. Online prices vary by retailer, shipping, package size, and promotion.

Aqua Han operates a simulated factory and warehouse in Hwaseong, Gyeonggi-do: approximately 353 m² (107 pyeong), monthly rent ₩3,000,000, security deposit ₩30,000,000. The Korean government start-up grant covers the deposit and most start-up equipment, so the deposit is not counted as a monthly cost.

Labor costs

Raw materials

This is a transparent simulation assumption for a small producer purchasing packaging in bulk.

Specialization causes MPL to rise for the first three workers. After the third worker, the fixed factory space and bottling equipment become constraints. Additional workers still increase total production, but each adds less output than the previous worker. This demonstrates diminishing marginal returns.

Worked example: seven workers

AFC falls continuously as the fixed ₩3.6 million is spread over more bottles. AVC and ATC are U-shaped because of increasing then diminishing marginal returns. MC falls while MPL rises, reaches its minimum at the third worker, then rises sharply and crosses AVC and ATC near their minimum points.

Minimum ATC is the company's long-run break-even price in this discrete production model: at any price below ₩357.71, Aqua Han cannot cover all of its costs. Minimum AVC (₩308.70 at 66,000 bottles with 4 workers) is the short-run shutdown price: below it, revenue cannot even cover variable cost.

• AFC shifts upward (e.g., at 97,000 bottles: ₩37.11 → ₩43.30).
• ATC shifts upward by the same amount (₩370.28 → ₩376.47 at 97,000).
• AVC remains unchanged.
• MC remains unchanged, rent is a fixed cost, so it does not change the cost of producing another bottle. The profit-maximizing quantity stays at 97,000.

• AVC, ATC, and MC all shift upward.
• AFC remains unchanged because fixed costs did not change.
• Because the raw-material cost rises by a constant ₩18.04 per unit, each affected per-unit curve rises by approximately ₩18.04 (e.g., MC for worker 7: ₩482.82 → ₩500.86, still below MR = ₩500).

• In the long run, Aqua Han should enter when the expected market price is at least minimum ATC. Entry threshold = ₩357.71 per bottle.
• At ₩500, price is above minimum ATC, so the firm can earn positive economic profit.
• Positive economic profit attracts new firms into a perfectly competitive market over time.
• Entry increases market supply (S shifts right) and places downward pressure on price until long-run economic profit approaches zero, near ₩357.71.

The market panel uses a clearly identified stylized quantity index because complete national quantity data are not available to the firm.

The assignment requests accounting profit but also asks for implicit costs. Because implicit costs are not part of accounting profit, both measures are presented.

Discrete decision rule

• The seventh worker adds 7,000 bottles at MC ≈ ₩482.82. Since ₩482.82 < MR of ₩500, hiring worker 7 increases profit.
• The eighth worker adds only 4,000 bottles at MC ≈ ₩709.63. Since ₩709.63 > ₩500, hiring worker 8 would decrease profit.
• Therefore the profit-maximizing level is 97,000 bottles with seven workers.

• AP Microeconomics Unit 3 Summative Project assignment requirements (provided by Mr. Dillhoff), including minimum wage and employer contribution rates.
• Korean bottled-water market comparison (market share): https://www.newsspace.kr/
• Gmarket, Jeju Samdasoo price reference: https://global.gmarket.co.kr/item?goodscode=1281208812
• 11st, Icis 8.0 price search: https://search.11st.co.kr/
• Coupang, Baeksansu 500 mL price search: https://www.coupang.com/np/search?q=%EB%B0%B1%EC%82%B0%EC%88%98+500ml
• Packaging Gateway, South Korea moves to label-free water packaging: https://www.packaging-gateway.com/news/south-korea-moves-to-label-free-water-packaging/
• Government24, factory registration information: https://www.gov.kr/