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 centered. 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 (10pt font) 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 production is the most profitable. Insert a colored, vertical line that indicates this Profit Maximizing point. Shadow the line. Be certain to appropriately label axis (10pt font) d) A graph that compares: ATC, MC, and MR. Title this graph: Measuring Total Profits. Insert a colored, shadowed, vertical line indicating at what 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 = Marginal Revenue. g) On (e) above: Insert (arrowhead lines) indicating where Maximum Profit at profit maximizing output. Connect these arrows to a side-bar label: 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: Chart Tools, 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

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

(TC)

(AFC)

(AVC)

(ATC)

(MC)

Market Price Perfect Competitio Total n 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 Profit 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 indicate the "area 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 each. d) A graph that compares: TR with TC. Title this graph: Revenue - Cost Comparison. Be certain to appropriately label axis as well as TR and TC 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: Chart Tools, 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)

he most
level of

Maximum

ools, Format,

ermination.

rea of

ves. (14pt

ols, Format,

Cost of Production and Profit Maximization Ana Perfect Competitive Market Structure
Total Fixed Costs (TFC) $10 $10 $10 $10 $10 $10 $10 $10 $10 $10 $10 $10 Total Variable Costs (TVF) $0 7 10 12 13 15 18 22 27 33 40 48 Total Costs (TC) $10 $17 $20 $22 $23 $25 $28 $32 $37 $43 $50 $58 Average Average Average Variable Total Marginal Fixed Costs Costs Costs Costs (AFC) (AVC) (ATC) (MC) 0 $10 $5 $3 $3 $2 $2 $1 $1 $1 $1 $1 0 7 5 4 3 3 3 3 3 4 4 4 $17.00 $10.00 $7.33 $5.75 $5.00 $4.67 $4.57 $4.63 $4.78 $5.00 $5.27 7 3 2 1 2 3 4 5 6 7 8

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

Average Costs of Production

$18 $16 $14 $12 $10 $8 $6 $4 $2 $0 1 2 3 4 5 6 7 8 9 10 11 Output $70 $60 Average Fixed Costs Average Variable Costs Average Total Costs Marginal Costs Dollar Costs $50 $40 $30 $20 $10 $0 Production Costs

Measuring Total Profits

$18.00 $16.00 $14.00 $12.00 $10.00 $8.00 $6.00 $4.00 $2.00 $0.00 Price and Cost per unit

1. MC=MR is a profit ma will lower yields. unit exceeds the additio the amount of units pro cost.
Average Total Costs Marginal Costs Marginal Revenue

2. If prices were to drop of $2.25 per unit sold.

3. The firm should not c $5 or higher in the long

$2.00 $0.00 1 2 3 4 5 6 7 8 9 10 11 Output

3. The firm should not c $5 or higher in the long

ofit Maximization Analysis: e Market Structure

Marginal Market Price Perfect Revenue Competition Total Revenue Total Profit (MR) $4 $4 $4 $4 $4 $4 $4 $4 $4 $4 $4 $4 $0 $4 $9 $13 $17 $21 $26 $30 $34 $38 $43 $47 ($10) ($13) ($12) ($9) ($6) ($4) ($3) ($2) ($3) ($5) ($8) ($11) 0 4.25 4.25 4.25 4.25 4.25 4.25 4.25 4.25 4.25 4.25 4.25

Marginal Cost = Ma

Maximum

Total Costs of Production

$70 $60 $50 $40 $30 $20 $10 $0 1 2 3 4 5 6 7 8 9 10 11 12 Output Total Variable Costs Total Costs Revenue and Costs Total Fixed Costs $70 $60 $50 $40 $30 $20 $10 $0 1 2 3

Profit Maximization

Output

1. MC=MR is a profit maximizing production level because at that point, any additional unit of output will lower yields. The firm will continue to produce more units until the cost of adding an additional unit exceeds the additional, or marginal revenue produced. The firm could also continue to decrease the amount of units produced until the additional, or marginal revenue was less than the reduced cost.
2. If prices were to drop to $4.25, the point of loss minimization would be at 7 units sold, with a loss of $2.25 per unit sold.

3. The firm should not continue to operate at this point, unless there is a chance that prices return to $5 or higher in the long run.

3. The firm should not continue to operate at this point, unless there is a chance that prices return to $5 or higher in the long run.

Marginal Cost = Marginal Revenue

Maximum Profit at Profit Maximizing Output

t Maximization

Total Revenue Total Costs

10 11 12

Monopoly Profit Maximizing Analysis

Total Output Units 0 1 2 3 4 5 6 7 8 9 10 11 12 Price Per Total Unit Revenue Total Total (Demand) (TR) Costs (TC) Profit (TP) $8.00 0.00 10.00 -10.00 $7.80 7.80 14.00 -6.20 $7.60 15.20 17.50 -2.30 $7.40 22.20 20.75 1.45 $7.20 28.80 23.80 5.00 $7.00 35.00 26.70 8.30 $6.80 40.80 29.50 11.30 $6.60 46.20 32.25 13.95 $6.40 51.20 35.10 16.10 $6.20 55.80 38.30 17.50 $6.00 60.00 42.70 17.30 $5.80 63.80 48.70 15.10 $5.60 67.20 57.70 9.50 Average Total Marginal Costs Marginal Revenue (ATC) Cost (MC) (MR) 14.00 8.75 6.92 5.95 5.34 4.92 4.61 4.39 4.26 4.27 4.43 4.81 4.00 3.50 3.25 3.05 2.90 2.80 2.75 2.85 3.20 4.40 6.00 9.00 7.80 7.40 7.00 6.60 6.20 5.80 5.40 5.00 4.60 4.20 3.80 3.40

Monopoly Profit Determination

$16.00 $14.00 $12.00 $10.00 $8.00 $6.00

Price, Marginal Revenue, and Costs

Monopoly Profit
$4.00 $2.00 $0.00 1 2 3 4 5 6 7 8 9 10

Output

ximizing Analysis
Profitability Analysis: 1. MC= MR is a profit maximizing production level for a monopoly because at this point the additional cost of producing another unit surpasses the additional revenue gained, and the cost saved by producing one less unit is less than the additional revenue gained. 2. When the monopolist decides to increase its production, it must lower its price (It's marginal revenue is always below its price). It determines where to stop producing when it finds there point where the cost of producing any additional units is more than the additional revenue gained.

3.A monopoly is considered to be ineffcient because there is no pressure of competition on the firm to drive innovation, and because prices are generally higher and units consumed are usually lower.

Determination

Demand Price
80.00 70.00

Revenue

MC=MR

60.00 50.00 40.00

MC
Price Per Unit (Demand) Average Total Costs (ATC) Marginal Cost (MC) Marginal Revenue (MR)

30.00 20.00 10.00 0.00

MR

Average Total Costs

10

11

12

13

a monopoly because at it surpasses the ucing one less unit is

ction, it must lower its It determines where to st of producing any

here is no pressure of use prices are generally

Revenue-Cost Comparison
TR TC

Total Revenue (TR) Total Costs (TC)

10

11

12

13