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 $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 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)

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Part 1 Perfect Competition Analysis Hillary Fair - Micro Economics

Total Fixed Cost (TFC) $10 $10 $10 $10 $10 $10 $10 $10 $10 $10 $10 $10 Total Variable Cost (TVC) $0 7 10 12 13 15 18 22 27 33 40 48 Average Fixed Cost (AFC) 0 10 5 3 3 2 2 1 1 1 1 1 Average Variable Cost (AVC) 0 7 5 4 3 3 3 3 3 4 4 4 Average Total Cost (ATC) 0.00 17.00 10.00 7.33 5.75 5.00 4.67 4.57 4.63 4.78 5.00 5.27

Costs of Production and Profit Maximization Analysis for the Perfect Competitiv Total Output/hr 0 1 2 3 4 5 6 7 8 9 10 11 Total Cost (TC) $10 $17 $20 $22 $23 $25 $28 $32 $37 $43 $50 $58

Average Costs of Production

18 16 14 12 10 8 6 4 2 0 1 2 3 4 5 6 Output 7 8 9 10 11 Production Cost

1. E 2. A 3. S

AFC AVT ATC Mc

Total Costs of Production

$70 $60 $50 Cost $40 $30 $20 Total Fixed Cost (TFC) Total Variable Cost (TVC)

$20 $10 $0 1 2 3 4 5 6 7 8 9 10 11 12 Output

(TVC) Total Cost (TC)

Profit Maximization
$70 $60 Cost, Revenue $50 $40 $30 $20 $10 $0 1 2 3 4 5 6 7 8 9 10 11 12 Output Total Cost (TC) Total Revenue

Measuring Total Profits

18.00 16.00 14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00 1 2 3 4 5 6 7 8 9 10 11 ATC MC MR

sis for the Perfect Competitive Market Structure Marginal Cost (MC) 0 7 3 2 1 2 3 4 5 6 7 8 Market Price Perfect Competition $5 $5 $5 $5 $5 $5 $5 $5 $5 $5 $5 $5 Total Revenue $0 $5 $10 $15 $20 $25 $30 $35 $40 $45 $50 $55 Marginal Revenue (MR) 0 $5 $5 $5 $5 $5 $5 $5 $5 $5 $5 $5

Total Profit

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

Marginal Costs = Marginal Revenue

Maximum Profit at Profit Maximizing Outp

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 produ 3. Should the firm continue to operate at this point?

1.MC=MR is a profit maximizing production level because it occurs where total profit is greatest at the lowest possible overall costs. Beyond this point of costs and revenue, output begins to cost more than the entity is capable of bringing in as revenue. Which would create an unstable growthof production without its couterbalance or revenue.

2. If prices were to drop to $4.25, the loss minimizing level of production would be reached with a smaller output per hour, at 6 and 7 units. This level would be reached more quickly than that of $5 as the price. 3. The firm is accruing a substantial amount of costs, and profit is very low. After passing 11 units per hour of production, profits fall below $0. The firm should cease to operate at this point.

osts = Marginal Revenue

Profit at Profit Maximizing Output

or loss minimizing level of production ?

urs where total profit t of costs and revenue, in as revenue. Which rbalance or revenue.

oduction would be vel would be reached

s very low. After e firm should cease to

Part 2 Monopoly Profitability Analysis Hillary Fair - Micro Economics

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 Monopoly Profit Maximizing Analysis Average Total Total Cost Total Price Total Cost Revenue (TR) (TC) (TP) (ATC) 0.00 10.00 -10.00 7.80 14.00 -6.20 14.00 15.20 17.50 -2.30 8.75 22.20 20.75 1.45 6.92 28.80 23.80 5.00 5.95 35.00 26.70 8.30 5.34 40.80 29.50 11.30 4.92 46.20 32.25 13.95 4.61 51.20 35.10 16.10 4.39 55.80 38.30 17.50 4.26 60.00 42.70 17.30 4.27 63.80 48.70 15.10 4.43 67.20 57.70 9.50 4.81

Monopoly Profit Determination

Price, Marginal Revenue, and Costs $16.00 $14.00 $12.00 $10.00 $8.00 $6.00 $4.00 $2.00 $0.00 1 2 3 4 5 6 7 8 9 10 11 12 13 Output
Monopoly Profit

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

Revenue - Cost Comparison

80.00 Total Costs, Total Revenue 70.00 60.00 50.00 40.00 30.00 20.00 10.00 Total Cost (TC) Total Revenue (TR)

Total Costs, To

10.00 0.00 1 2 3 4 5 6 7 8 9 10 11 12 13 Output

(TC)

1. Explain in your own words why MC=MR is a profit maximizing production level for the Monopoly 2. Explain how the monopolist determines where to price his product 3. A monopoly is considered an inefficient use of resources for what two reasons? 1. When Marginal Costs equal Marginal Revenue, an entity or monopoly is not exceeding its revenue with costs, and can therefor remain in operation. Resources are being used efficiently, managed correctly, and can support success long term.

2. Price should equal the demand and supply of the market, where demand is high but supply is not so low that the market doesn't collapse itself. Place price too low and there will be surplus units. 3. Monopolies are considered to be inefficient because they often do not set their prices at Mc=MR. Profit maxumization and the utilization of being a single seller make monopolies quick to set prices above market equilibrium, and withhold or overuse resources.

sis Marginal Cost (MC) 4.00 3.50 3.25 3.05 2.90 2.80 2.75 2.85 3.20 4.40 6.00 9.00 Marginal Revenue (MR) 7.80 7.40 7.00 6.60 6.20 5.80 5.40 5.00 4.60 4.20 3.80 3.40

Demand Price MC = MR Average Total Costs

n level for the Monopoly

monopoly is not operation. Resources are ccess long term.

where demand is high but ace price too low and

often do not set their eing a single seller make d withhold or overuse