You have learned about the market structures of pure competition, monopoly, monopolistic competition, and oligopoly. In this assignment, you will apply this learning to create cost and revenue graphs for a business operating in one of these market structures. Hypothetical information should reflect characteristics of the market structure selected.
You are the manager of a firm producing a product in a specific market structure. Provide the following information:
Describe your product and the specific cost components of your product. Make the distinction between the fixed and variable costs associated in the production of your product.
Provide reasons why your firm meets the characteristics of a particular market structure. Explain how this impacts your ability to set price. Does your firm face a downward sloping demand curve? What price do you charge for your product and why?
In a table using hypothetical data, please provide total fixed cost, average fixed cost, total variable cost, average variable cost, total cost, average total cost, and marginal cost schedules.
In a second table, indicate your profit maximizing output using price, marginal revenue, and marginal cost schedules. What profit/loss does your firm earn/incur?
Submit your assignment in a Word document to the appropriate dropbox for grading.
Keep the following points in mind:
Paper follows APA guidelines, including a cover and citation page. The text of the paper is a minimum of 2 page long, double spaced, and completed in MS Word.
The assignment demonstrates an understanding of production costs, revenue, and market structure concepts.
Profit maximization is determined by correctly applying the marginal principle.
Textbook – Microeconomics Principles, Problems and Policies by McConnell, Campbell; Brue, Stanley; Flynn, Sean 20th Edition.
I have not chosen a product. Any product that fits well within this assignment will do. Thank you.
Input from the Professor is below:
My expectations are that you clearly and concisely answer each section and each question of the assignment. I suggest that the hypothetical data that you use in the third section can most easily be acquired via a web search or better yet a look through another economics textbook other than the one we are using for this class. You could also use data from an end of chapter problem in your text (See problems at the end of Chapter: Pure Competition in the Short Run or end of Chapter: Pure Monopoly). Note that the table should include these data at various quantities of output (e.g. 0 units to 10 units). The first table, most easily copied over to or put into an excel table must include all of the data (schedules) listed, total fixed cost, average fixed cost, total variable cost, average variable cost, total cost, average total cost, and marginal cost schedules. The second table, as directed in the fourth section must include price, marginal revenue, and marginal cost, and because you are calculating marginal revenue and marginal cost, it would be a good idea to also include total revenue and total cost, again include different quantities (e.g. 0 units to 10 units). I also suggest the table also include profit at each level of output. Over the range you analyze average cost and marginal cost should first decrease and then increase (review the graphs for each market you have learned about. This will help you to better analyze your tables and determine if there are any errors. Even better, though not necessary, you can also put a graph of average variable cost, average total cost, price, and marginal revenue (properly labeled and analyzed) in your paper in order to help you determine the profit maximizing level of output. All of these things can be copied into the body of a Word document. Finally, remember to determine what is your profit maximizing level of output or at what quantity are profits maximized and do not forget to say what those profits (or losses) are. And yes, profits should maximize at one level (quantity) of output, lower quantities having lower profits and higher quantities having lower profits.
This assignment is a big one. Give it the time it is due. And do well
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