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Demand Function: Qd = - 5200 - 42P + 20PX + 5.2I + .20A + .25M = - 5200 - 42P + 20(6) + 5.2(5500) + .20(10,000) + .25(5000) = - 5200 - 42P + 1200 + 28,600 + 2000 + 1250 Qd = 26,770 - 42P Supply Function:Qs = -7909.89 + 79.0989P PriceQuantity DemandedQuantity Supplied

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eco 550, assignment 2

Question # 00015162
Subject: Economics
Due on: 05/15/2014
Posted On: 05/12/2014 03:08 PM

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Assignment 2: Operations Decision
Due Week 6 and worth 300 points

Using the regression results and the other computations from Assignment 1, determine the market structure in which the low-calorie frozen, microwavable food company operates.

Use the Internet to research two (2) of the leading competitors in the low-calorie frozen, microwavable food industry, and take note of their pricing strategies, profitability, and their relationships within the industry (worldwide).

Write a six to eight (6-8) page paper in which you:

  1. Outline a plan that will assess the effectiveness of the market structure for the company’s operations. Note: In Assignment 1, the assumption was that the market structure [or selling environment] was perfectly competitive and that the equilibrium price was to be determined by setting QD equal to QS. You are now aware of recent changes in the selling environment that suggest an imperfectly competitive market where your firm now has substantial market power in setting its own “optimal” price.
  2. Given that business operations have changed from the market structure specified in the original scenario in Assignment 1, determine two (2) likely factors that might have caused the change. Predict the primary manner in which this change would likely impact business operations in the new market environment.
  3. Analyze the major short run and long cost functions for the low-calorie, frozen microwaveable food company given the cost functions below. Suggest substantive ways in which the low-calorie food company may use this information in order to make decisions in both the short-run and the long-run.

TC = 160,000,000 + 100Q + 0.0063212Q2
VC = 100Q + 0.0063212Q2
MC= 100 + 0.0126424Q

  1. Determine the possible circumstances under which the company should discontinue operations. Suggest key actions that management should take in order to confront these circumstances. Provide a rationale for your response. (Hint: Your firm’s price must cover average variable costs in the short run and average total costs in the long run to continue operations.)
  2. Suggest one (1) pricing policy that will enable your low-calorie, frozen microwavable food company to maximize profits. Provide a rationale for your suggestion.

(Hints:

  • In Assignment 1, you determined your firm’s market demand equation. Now you need to find the inverse demand equation. Having found that, find the Total Revenue function for your firm (TR is P x Q). From your firm’s Total Revenue function, then find your Marginal Revenue (MR) function.
  • Use the profit maximization rule MR = MC to determine your optimal price and optimal output level now that you have market power. Compare these values with the values you generated in Assignment 1. Determine whether your price higher is or lower.)
  1. Outline a plan, based on the information provided in the scenario, which the company could use in order to evaluate its financial performance. Consider all the key drivers of performance, such as company profit or loss for both the short term and long term, and the fundamental manner in which each factor influences managerial decisions.

(Hints:

  • Calculate profit in the short run by using the price and output levels you generated in part 5. Optional: You may want to compare this to what profit would have been in Assignment 1 using the cost function provided here.
  • Calculate profit in the long run by using the output level you generated in part 5 and cost data in part 3 and assuming that the selling environment will likely be very competitive. Determine why this would be a valid assumption.)
  1. Recommend two (2) actions that the company could take in order to improve its profitability and deliver more value to its stakeholders. Outline, in brief, a plan to implement your recommendations.
  2. Use at least five (5) quality academic resources in this assignment. Note: Wikipedia does not qualify as an academic resource.

Your assignment must follow these formatting requirements:

  • Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides; citations and references must follow APA or school-specific format. Check with your professor for any additional instructions.
  • Include a cover page containing the title of the assignment, the student’s name, the professor’s name, the course title, and the date. The cover page and the reference page are not included in the required assignment page length.

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eco 550, assignment 2

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Preview: In xxxx a xxxxx firm will xxxx down the xxxxxxxxxx instead xx xxxxxxxxxx it xxxx is because xx it shut xxxx the xxxxxxxxxxx xxx loss xxxxx be just xxxxx cost but xx it xxxxxxxxx xxxx production, xxx loss would xx higher than xxxxx cost xxxxxxx xxxxx some xxxxxxx of total xxxxxxxx cost) Hence, xxxx will xxxx xxxx the xxxxxxxxxx when price xx less than xxxxxxx variable xxxx xx the xxxxxxx production point xxxxxxxx discontinue point/exit xxxxxxxx the xxxx xxxx there xxxx be no xxxxx costs So, xxxxxxx variable xxxx xxxxx be xxxxx to average xxxxx cost In xxxx case, xxxx xxxx discontinue xxx production if xxxxx is less xxxx average xxxx xx production xx the optimal xxxxxxxxxx point This xx because xxxx xxxxx is xxxx than average xxxx of production, xxxx would xx xxxxxx losses; xx there is xx logic in xxxxxxxxxx the xxxxxxxxxx xxxxxx firm xxxx discontinue or xxxx the market xxxxx can xxxx xxxx actions xxxx confront with xxxxx circumstances; There xxx be xxx xxxxxx here; xx either operational xxxxx are too xxxx that xxx xxxxxxx is xxx able to xxxxxxx them or xx company xx xxxxxx very xxx level of xxxxxx Operational costs xxxxx be xxxx xxxxxxx of xxx of outdated xxxxxxxxxxx high input xxxxx or xxxxxxxxxxx xxxxxxxxxxxxxx So, xxxxxxxxxx should try xx reduce these xxxxxxxxxxx costs xx xxxxx new xxxx effective technology, xxxxx cheap alternative xxxxxxx or xx xxxxxxxx operational xxxxxxxxxxxxxx The demand xxxxx be lower xxxxxxx of; xxxx xx promotion, xxxxxx price, or xxxxxxx of product xx less xxxx xxxxxxx market xxxxxxx In such xxxxx the management xxxxxx actively xxxxxxx xxx product, xxxxxx reduce the xxxxx or improve xxx quality xx xxxxxxx to xx comparable with xxxxxxx market quality xxxx would xxxx xx restoring/increasing xxx demand for xxxxxxx and thereby xx would xxxx xxx management xx avoid the xxxxxxxxx of shut xxxx Both xx xxx actions xxxxxxxxx above can xxxx be used xxx improving xxx xxxxxxxxxxxxx of xxxxxxx and thereby xxxxxxxxxx more values xx its xxxxxxxxxxxx xxxxxxx policy xx maximize the xxxxxxxxxxx firm should xxxxxxx at x xxxxx where xxx profit is xxxxxxxxx Profit of xxx firm xxxxx xx maximized xx a point xxxxx the difference xxxxxxx total xxxxxxx xxx total xxxx is maximized xxxxxxxxxxxxxx it.....
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