Microeconomics Course Assignment

In fulfillment of Course ePortfolio and CSIS requirement

This Assignment is required and totals 50 points

Part 1 Perfect Competition Analysis

Using the spread sheet data below complete the following steps:

1. Copy and paste the spread sheet data below to (Sheet 2)

2. Title this spread sheet: Costs of Production and Profit Maximization Analysis for the Perfect Competitive Market Structure
3. Place boarders around each cell in the spread sheet.
4. Expand the column titles for each of the 8 columns (ie) (TFC) = Total Fixed Costs (TFC). Make certain the titles are stacked and center
5. Be certain to BOLD all titles used throughout assignment
6. Calculate the appropriate fomula for each cell of the 8 blank columns
-(ATC) should be rounded to (2.00) decimals - no need to show dollar ($) signs
-All other columns should be single (5) or double digit (17) format

Construct the following Smooth Line Graphs:

a) A graph that compares: MC, ATC, AVC, AFC. Title this graph: Average Costs of Production. Be certain to appropriately label axis (10p
b) A graph that compares: TC, TVC, TFC. Title this graph: Total Costs of Production. Be certain to appropriately label axis (10pt font)
c) A graph that compares: TR with TC. Title this graph: Profit Maximization. Using the data spreadsheet determine what level of produc
most profitable. Insert a colored, vertical line that indicates this Profit Maximizing point. Shadow the line. Be certain to appropriately label a
font)
d) A graph that compares: ATC, MC, and MR. Title this graph: Measuring Total Profits. Insert a colored, shadowed, vertical line indicatin
level of production total profits are the greatest. Align this graph (d) under graph (c) at the appropriate profit maximizing production level.
Be certain to appropriately label the axis (10pt font)
e) On the completed spreadsheet data: high light (color) the entire row showing the proift maxizing level of production
f) On (e) above: Insert (arrowhead lines) indicating where MC = MR. Connect these arrows to a side-bar label: Marginal Costs = Margi
Revenue.
g) On (e) above: Insert (arrowhead lines) indicating where Maximum Profit at profit maximizing output. Connect these arrows to a side-b
Maximum Profit at Profit Maximizing Output.
h) Each grpah should include the use of (gradient, texture, and shape effects (preset 2)) of your choice. Most will be found under the tab: C
Format, and Layout.
i) Insert a (Text Box) and answer the following questions:
1. Explain in your own words why MC=MR is a profit maximizing production level ?
2. Assume prices dropped to $4.25. What then would be the profit maximizing or loss minimizing level of production ?
3. Should the firm continue to operate at this point?

h) Each grpah should include the use of (gradient, texture, and shape effects (preset 2)) of your choice. Most will be found under the tab: C
Format, and Layout.
i) Insert a (Text Box) and answer the following questions:
1. Explain in your own words why MC=MR is a profit maximizing production level ?
2. Assume prices dropped to $4.25. What then would be the profit maximizing or loss minimizing level of production ?
3. Should the firm continue to operate at this point?

Total
Output/hr
0
1
2
3
4
5
6
7
8
9
10
11

(TFC)
$10
$10
$10
$10
$10
$10
$10
$10
$10
$10
$10
$10

(TVC)
$0
7
10
12
13
15
18
22
27
33
40
48

(TC)

(AFC)

(AVC)

(ATC)

(MC)

Market
Price
Perfect
Competiti
Total
on
Revenue
$5

Total
Profit

(MR)

Part 2 Monopoly Profitability Analysis

Using the spread sheet data below complete the following steps:
1. Copy and paste the spread sheet data below to (Sheet 3)
2. Title this spread sheet: Monopoly Profit Maximizing Analysis
5. Be certain to BOLD all titles and Axis used throughout assignment
6. Calculate the appropriate fomula for each cell of the (5) blank columns
-Each cell should show (2.00) decimal places value

Construct the following Smooth Line Graphs:

a) A graph that compares: Price/Unit Demand, Marginal Cost, Marginal Revenue, and Average Total Costs. Title this graph: Monopoly Pr
Determination. Be certain to appropriately label axis (14pt font)
b) Add to graph(a): colored dashed lines indicating (1) most profitable price level, (2) profit maximizing output, (3) ATC level. Also indicat
of monopoly profitablility" by typing the words Monopoly Profit
c) Add to graph(a): arrows indicating Demand Price juncture, MC=MR, Average Total Costs. Connect these arrows to side-bar labels for ea
d) A graph that compares: TR with TC. Title this graph: Revenue - Cost Comparison. Be certain to appropriately label axis as well as T
curves. (14pt font)
e) On the completed spreadsheet data: high light (color) the entire row(s) showing the proift maxizing level (range) of production
f) Each grpah should include the use of (gradient, texture, and shape effects (preset 2)) of your choice. Most will be found under the tab: C
Format, and Layout.
g) Insert a (Text Box) and answer the following question:
1. Explain in your own words why MC=MR is a profit maximizing production level for the Monopoly
2. Explain how the monoploist determines where to price his product
3. A monopoly is considered an inefficient use of resources for what two reasons?

Microeconomics Course Assignment

In fulfillment of Course ePortfolio and CSIS requirement

Part 2
Total
Output
Units
0
1
2
3
4
5
6
7
8
9
10
11
12

Price Per
Unit
(Demand)
$8.00
$7.80
$7.60
$7.40
$7.20
$7.00
$6.80
$6.60
$6.40
$6.20
$6.00
$5.80
$5.60

(TR)

(TC)
10.00
14.00
17.50
20.75
23.80
26.70
29.50
32.25
35.10
38.30
42.70
48.70
57.70

(TP)

(ATC)

(MC)

(MR)

Structure

nd centered.

axis (10pt font)

t font)
of production is the
ely label axis (10pt

indicating at what
on level.
= Marginal

o a side-bar label:

the tab: Chart Tools,

the tab: Chart Tools,

opoly Profit

so indicate the "area

bels for each.

well as TR and TC

on
the tab: Chart Tools,

Costs of Production and Profit Maximization A

Perfect Competition

Total
Output/hr
0
1
2
3
4
5
6
7
8
9
10
11

Total
Fixed
Costs
(TFC)
$10
$10
$10
$10
$10
$10
$10
$10
$10
$10
$10
$10

Total
Varible
Costs
(TVC)
$0
7
10
12
13
15
18
22
27
33
40
48

Average Average Average

Fixed
Varible
Total
Marginal
Total
Costs
Costs
Costs
Cost
Costs (TC) (AFC)
(AVC)
(ATC)
(MC)
10
0
0
0.00
17
10
7
17.00
7
20
5
5
10.00
3
22
3
4
7.33
2
23
3
3
5.75
1
25
2
3
5.00
2
28
2
3
4.67
3
32
1
3
4.57
4
37
1
3
4.63
5
43
1
4
4.78
6
50
1
4
5.00
7
58
1
4
5.27
8

Average Costs of Production

Production Costs

18
16
14
12
10
8
6
4
2
0
1 2 3 4 5 6 7 8 9 1011

Average Fixed Costs (AFC)

Average Varible Costs
(AVC)
Average Total Costs (ATC)
Marginal Cost (MC)

Output

Profit Maximiation

$70.00
$60.00
$50.00

$40.00
Total Cost/T
otal Revenue
$30.00

Total Costs (TC)

Total Revenue

$20.00
$10.00
$0.00
1

10 11 12

$50.00
$40.00
Total Cost/T
otal Revenue
$30.00

Total Costs (TC)

Total Revenue

$20.00
$10.00
$0.00
1

Output

10 11 12

fit Maximization Analysis

petition

Market Price
Perfect
Total
Competition Revenue
$5
$0
$5
$5
$5
$10
$5
$15
$5
$20
$5
$25
$5
$30
$5
$35
$5
$40
$5
$45
$5
$50
$5
$55

Total
Profit
($10)
($12)
($10)
($7)
($3)
$0
$2
$3
$3
$2
$0
($3)

Marginal
Revenue
(MR)
Marginal Costs = Marginal Revenue

5
5
5
5
5
5
5
5
5
5
5

Maximum Profit at Profit Maximizing Output

Total Cost Production

$70
$60
$50

Total Fixed Costs

(TFC)

$40
Dollar Cost
$30
$20

Total Varible Costs

(TVC)

$10

Total Costs (TC)

$0

10 11 12

Output

Measuring Total Profits

20.00
15.00
Average Total Costs (ATC)
Price Cost per unit

10.00

Marginal Cost (MC)

Marginal Revenue (MR)

5.00
0.00
1 2 3 4 5 6 7 8 9 1011

15.00
Average Total Costs (ATC)
Price Cost per unit

Marginal Cost (MC)

10.00

Marginal Revenue (MR)

5.00
0.00
1 2 3 4 5 6 7 8 9 1011
Output

1. MC = MR is the maximizing profit because you use

all your costs to make your revenue. If one is too big
or too small than you are either using too much
recources or too little resulting in you not maximizing
your full potential.

inal Revenue

t Maximizing Output

2. If prices dropped from 5$ to 4.25$ it would be at

level 7.
3. The Firm should still continue at this point.

Costs of Production and Profit Maximization Analysis for

the Perfect Competitive Market Structure

Total
Output
Units
0
1
2
3
4
5
6
7
8
9
10
11
12

Price Per
Total
Unit
Revenue
(Demand)
(TR)
$8.00
0.00
$7.80
7.80
$7.60
15.20
$7.40
22.20
$7.20
28.80
$7.00
35.00
$6.80
40.80
$6.60
46.20
$6.40
51.20
$6.20
55.80
$6.00
60.00
$5.80
63.80
$5.60
67.20

Total
Costs
(TC)
10.00
14.00
17.50
20.75
23.80
26.70
29.50
32.25
35.10
38.30
42.70
48.70
57.70

Average
Total
Marginal Marginal
Costs
Cost
Revenue
(ATC)
(MC)
(MR)
-14.00
4.00
7.80
8.75
3.50
7.40
6.92
3.25
7.00
5.95
3.05
6.60
5.34
2.90
6.20
4.92
2.80
5.80
4.61
2.75
5.40
4.39
2.85
5.00
4.26
3.20
4.60
4.27
4.40
4.20
4.43
6.00
3.80
4.81
9.00
3.40

Total
Profit
(TP)
-10.00
-6.20
-2.30
1.45
5.00
8.30
11.30
13.95
16.10
17.50
17.30
15.10
9.50

Monopoly Profit Determination

16
14
Price, Marginal Revenue, and Costs
12

Price Per Unit (Demand)

MC

10

Average Total Costs (ATC)

Marginal Cost (MC)

Marginal Revenue (MR)

Monopoly Profit
MR

4
2
0
1

Output

10

11

12

0
1

Output

10

11

12

1. MC=MR is perfect for monopoly because just like the

perfect competition you don't want to make too little or
too much of a product to sell. You want to make it perfect
and consistant at that level to maximize your highest
earning potential.
2. A Monopolist decides where to price his products by
surveying his target consumers to see how much they
are willing to pay. Too high and no one will buy but if it's
too low then his earning potential will decrease.
3. A monoply is considered inefficent when the price is
higher than the MC, and if the monopoly doesn't meet
the demand of the consumer.

Demand Price

Revenue-Cost C

80

Total Costs/T
70 otal Revenue

MC=MR
Unit (Demand)

60
50

Total Costs (ATC)

Cost (MC)
Revenue (MR)

40

Average Total Cost

30
20
10
0
1

Output

ke the
ittle or
t perfect
hest

cts by
they
ut if it's

rice is
meet

Revenue-Cost Comparison

enue

Total Revenue (TR)

Total Costs (TC)

Output

10 11 12 13