No cover page needed
Competency
Develop an understanding of how markets structures determine prices under pure competition and varying degrees of market power.
Instructions
Compose a 5-page, double-spaced, 12-font paper with a detailed comparison/contrast of the perfectly competitive, price-searcher with low entry, and price searcher with high entry. Be sure to include the following points in your discussion:
The number and market power of the buyers/sellers, and how these markets have developed as competitive or monopolistic
How price is determined in each, and the sellers’ ability to control price
The able to price discriminate and the potential benefit of price discrimination
Level of economic profit that can exist in each, and what happens when the economic profit for a firm in these markets becomes negative
What forces will limit the ability of a market to be competitive, i.e. what allows monopolies to form and continue to exist
Category: EC–I Principles of Microeconomics
No cover page needed
Competency
Define relevant cost of producing goods and the impact on short-run and long-run production decisions.
Determine factors that impact a firm’s decision to supply goods to the market.
Instructions
1) Complete the following table:
Quantity TVC TFC TC AVC AFC ATC MC PRICE
0 0 50 80
1 50 80
2 90 80
3 110 80
4 150 80
5 210 80
6 290 80
7 410 80
After which quantity level does diminishing marginal returns begin?
Which level of production (quantity) maximizes profit for a perfectly-competitive firm?
What would be the profit at the profit maximizing level of output?
After answering the above questions and completing the table, compose a 3-page write up explaining the essentials of production cost to your manager who doesn’t understand why you would not continue to increase output infinitely. Be sure in your write up to, not only address the questions above but, include the following:
Why the cost of production diminishes at first and then rises
Why some costs remain constant at all levels of production
What the profit maximizing level of output means and why it is not necessarily at the maximum level of workers given in the table
What happens if you continue to increase output above the profit maximizing level
Whether this is a long run view or a short run view
N cover page needed
Competency
Demonstrate a comprehensive understanding of the microeconomic environment and how it facilitates the production of goods and satisfies market needs to the most efficient and complete sense.
Instructions
Detroit City Motors anticipates that the current ‘green’ initiatives being mandated by the federal government will create an increased demand for their most energy efficient vehicle, the Trius. The firm is developing a report of possible constraints that the firm will have to deal with concerning the ability to acquire adequate parts (lithium batteries) and skilled labor (due to labor shortage) to increase production. They are also concerned that the degree of market competition will restrict their ability to increase price of the Trius if faced with higher input cost due to increased competition for batteries.
Your Task
Produce a 3-page executive summary of the issues that will have to be dealt with when increasing production at the facility. Be sure to address the points of:
How the concepts of scarcity and rationing can affect the firm’s ability to meet the anticipated increase in demand
The variables that would impact consumers decision to expand their demand for the product
How increasing demand will necessity the increase in supply to maintain current pricing
How increased input prices could potential affect the market price for fuel efficient cars and how substitutability with its competitors will affect the firms ability to adjust price
How increased input prices could affect the firm’s profitability
Discuss the consequences if the firm decides not to increase production and the market demand for fuel efficient cars does increase, what is the opportunity cost for choosing not to expand