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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Microeconomics Sping Semester 2014

Costs of Production and Profit Maximization Analysis Perfect Competition

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

Total Average Total Fixed Variable Fixed Costs (TFC) Costs Total Costs (TVF) Costs (TC) (AFC) $10 $10 $10 $10 $10 $10 $10 $10 $10 $10 $10 $10 $0 7 10 12 13 15 18 22 27 33 40 48 $10 $17 $20 $22 $23 $25 $28 $32 $37 $43 $50 $58 0 10 5 3 3 2 2 1 1 1 1 1

Average Variable Costs (AVC) 0 7 5 4 3 3 3 3 3 4 4 4

Average Total Costs (ATC) 0 17.00 10.00 7.33 5.75 5.00 4.67 4.57 4.63 4.78 5.00 5.27

Marginal Costs(MC) -7 3 2 1 2 3 4 5 6 7 8

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 Average Fixed Costs (AFC) Average Variable Costs (AVC) Average Total Costs (ATC) Marginal Costs (MC) 18.00 16.00

Price and Cost per unit

Revenue Costs

14.00 12.00 10.00

Production Costs

Output

$70 $60 $50

Total Costs of Production

$70 Total Fixed Costs (TFC) Total Variable Costs (TVF) $60 $50 $40

Dollar Costs

$40 $30

Dollar Costs

$30 $20 $10 $0 1 2 3 4 5 6 7 8 9 10 11 12

Costs (TVF) Total Costs (TC)

Revenue Costs

$40 $30 $20 $10

Axis Title

1. MC=MR is a maximizing production level because at that point you are using l resoures to make you the most money. 2. 3. No

zation Analysis

Marginal Costs=Marginal Revenue 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 Total Profit ($10) ($12) ($10) ($7) ($3) $0 $2 $3 $3 $2 $0 ($3) Marginal Revenue (MR) -5 5 5 5 5 5 5 5 5 5 5 Maximum Profit at Profit Maximizing Output

18.00 16.00

Measuring Total Profits

Price and Cost per unit

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 Average Total Costs (ATC) Marginal Costs (MC) Marginal Revenue (MR)

Output

Profit Maximization
$70 $60 $50 Revenue Costs $40

Revenue Costs

$40 Total Revenue $30 $20 $10 $0 1 2 3 4 5 6 7 Output 8 9 10 11 12 Total Costs

that point you are using labor and

rofit Maximizing Output

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 $7.80 $7.60 $7.40 $7.20 $7.00 $6.80 $6.60 $6.40 $6.20 $6.00 $5.80 $5.60 0.00 7.80 15.20 22.20 28.80 35.00 40.80 46.20 51.20 55.80 60.00 63.80 67.20 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 -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 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

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

Price, Marginal Revenue, and Costs

14 12 10 8 6 4 2 0 1 2 3 4 5 6 7 8 9 10 11 12

MR

Output

Revenue-Cost Comparison
80 70

Total Costs/Total Revenue

60 50 40 30 20 10 0 1 2 3 4 5 6 7 8 9 10 11 12 13

Output
Total Revenue (TR) Total Costs (TC)

1.

2.A monopolist price is determined by the demand curve you find where MC=MR and then find that spot on the demand curve and thats the price. 3. It does not effciently use all its resourses and there is only one seller so whatever the price is set on what the demand is.

Demand Price

MC=MR

Average Total Costs