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?
(TFC) (TVC) (TC) (AFC) (AVC) (ATC) (MC)
Market
Price
Perfect
Competitio
n
Total
Revenue
Total
Profit (MR)
0 $10 $0 $5
1 $10 7
2 $10 10
3 $10 12
4 $10 13
5 $10 15
6 $10 18
7 $10 22
8 $10 27
9 $10 33
10 $10 40
11 $10 48
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
Price Per
Unit
(Demand) (TR) (TC) (TP) (ATC) (MC) (MR)
0 $8.00 10.00
1 $7.80 14.00
2 $7.60 17.50
3 $7.40 20.75
4 $7.20 23.80
5 $7.00 26.70
6 $6.80 29.50
7 $6.60 32.25
8 $6.40 35.10
9 $6.20 38.30
10 $6.00 42.70
11 $5.80 48.70
12 $5.60 57.70
. Using the data spreadsheet determine what level of production is the most
. Insert a colored, shadowed, vertical line indicating at what level of
Maximum
der the tab: Chart Tools, Format,
: Monopoly Profit Determination.
vel. Also indicate the "area of
. Be certain to appropriately label axis as well as TR and TC curves. (14pt
der the tab: Chart Tools, Format,

Total
Output/
hr
Total
Fixed
Costs
(TFC)
Total
Variable
Costs
(TVC)
Total
Costs (TC)
Average
Fixed
Costs
(AFC)
Average
Variable
Costs
(AVC)
Average
Total Costs
(ATC)
Marginal
Costs
(MC)
0 $10 $0 $10 0 0 0 --
1 $10 7 $17 10 $ 7 $ 17.00 $ 7 $
2 $10 10 $20 5 $ 5 $ 10.00 $ 3 $
3 $10 12 $22 3 $ 4 $ 7.33 $ 2 $
4 $10 13 $23 3 $ 3 $ 5.75 $ 1 $
5 $10 15 $25 2 $ 3 $ 5.00 $ 2 $
6 $10 18 $28 2 $ 3 $ 4.67 $ 3 $
7 $10 22 $32 1 $ 3 $ 4.57 $ 4 $
8 $10 27 $37 1 $ 3 $ 4.63 $ 5 $
9 $10 33 $43 1 $ 4 $ 4.78 $ 6 $
10 $10 40 $50 1 $ 4 $ 5.00 $ 7 $
11 $10 48 $58 1 $ 4 $ 5.27 $ 8 $
Costs of Production and Profit Maximization Analysis
Perfect Competition
$-
$2
$4
$6
$8
$10
$12
$14
$16
$18
1 2 3 4 5 6 7 8 9 10 11
Average Fixed Costs
(AFC) 0
Average Variable Costs
(AVC) 0
Average Total Costs
(ATC) 0
Marginal Costs (MC) --
Average Costs of Production
P
r
o
d
u
c
t
i
o
n

C
o
s
t
s

Output
$40
$50
$60
$70
Profit
R
e
v
e
n
u
e

a
n
d

C
o
s
t
s

$0
$10
$20
$30
$40
1 2 3 4 5
R
e
v
e
n
u
e

a
n
d

C
o
s
t
s
$-
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
$14.00
$16.00
$18.00
1 2 3 4
P
r
i
c
e

a
n
d

C
o
s
t

p
e
r

u
n
i
t

Market
Price
Perfect
Competiti
on
Total
Revenue
Total
Profit
Marginal
Revenue
(MR)
$5 $0 ($10) 5
$5 $5 ($12) 5
$5 $10 ($10) 5
$5 $15 ($7) 5
$5 $20 ($3) 5
$5 $25 $0 5
$5 $30 $2 5
$5 $35 $3 5
$5 $40 $3 5
$5 $45 $2 5
$5 $50 $0 5
$5 $55 ($3) 5
Costs of Production and Profit Maximization Analysis
Average Variable Costs
Marginal Costs (MC) --
$0
$10
$20
$30
$40
$50
$60
$70
1 2 3 4 5 6 7 8 9 10 11 12
Total Fixed Costs (TFC)
Total Variable Costs (TVC)
Total Costs (TC)
Total Costs
of
Production
Output
D
o
l
l
a
r

C
o
s
t
s

Profit
Marginal Cost = Marginal Revenue
Maximum Profit at Profit Maximizing Output
1: MC=MR is a profit maximizing prodution level because
it is the point where your costs equal your revenue. It is the
point where you can produce the most while still getting a
profit in return.

2: The new loss minimizing level of production would be 7.

3: Seeing as the company has a TFC of $10, it would be better
5 6 7 8 9 10 11 12
Total Costs (TC)
Total Revenue
Output
4 5 6 7 8 9 10 11 12
Average Total Costs
(ATC)
Marginal Costs (MC)
Marginal Revenue (MR)
Measuring Total
Profits
Output
3: Seeing as the company has a TFC of $10, it would be better
to stay open and lose $2 than to close and still have to pay the
$10 TFC with no money coming in.
Total Fixed Costs (TFC)
Total Variable Costs (TVC)
= Marginal Revenue
Maximum Profit at Profit Maximizing Output
1: MC=MR is a profit maximizing prodution level because
the point where your costs equal your revenue. It is the
point where you can produce the most while still getting a
2: The new loss minimizing level of production would be 7.
3: Seeing as the company has a TFC of $10, it would be better
3: Seeing as the company has a TFC of $10, it would be better
to stay open and lose $2 than to close and still have to pay the
Total
Output
Units
Price Per
Unit
(Demand)
Total
Revenue
(TR)
Total
Costs
(TC)
Total
Profit (TP)
Average
Total
Costs
(ATC)
Marginal
Cost (MC)
Marginal
Revenue(
MR)
0 $8.00 0.00 10.00 -10.00 --
1 $7.80 7.80 14.00 -6.20 14.00 4.00 7.80
2 $7.60 15.20 17.50 -2.30 8.75 3.50 7.40
3 $7.40 22.20 20.75 1.45 6.92 3.25 7.00
4 $7.20 28.80 23.80 5.00 5.95 3.05 6.60
5 $7.00 35.00 26.70 8.30 5.34 2.90 6.20
6 $6.80 40.80 29.50 11.30 4.92 2.80 5.80
7 $6.60 46.20 32.25 13.95 4.61 2.75 5.40
8 $6.40 51.20 35.10 16.10 4.39 2.85 5.00
9 $6.20 55.80 38.30 17.50 4.26 3.20 4.60
10 $6.00 60.00 42.70 17.30 4.27 4.40 4.20
11 $5.80 63.80 48.70 15.10 4.43 6.00 3.80
12 $5.60 67.20 57.70 9.50 4.81 9.00 3.40
Monopoly Profit Maximizing Analysis
$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
$14.00
$16.00
1 2 3 4 5 6 7 8 9 10
Monopoly Profit Determination
Output
P
r
o
f
i
t
,

M
a
r
g
i
n
a
l

R
e
v
e
n
u
e
,

a
n
d

C
o
s
t
s

Monopoly Profit
Revenue-Cost Comparison
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
80.00
1 2 3 4 5 6 7 8 9 10 11 12 13
Revenue-Cost Comparison
Total Revenue (TR) Total Costs (TC)
10 11 12 13
Monopoly Profit Determination
Price Per Unit (Demand)
Average Total Costs (ATC)
Marginal Cost (MC)
Marginal Revenue(MR)
Demand Price
Average Total Costs
MC = MR
1: Although it is a Monopoly, it still needs to consider
what people will pay. They can only sell a certain quantity
at a certain price, even if they are the only company selling
their product. MC=MR is profit maximizing because it is the
quantity and price where they will get the highest profit.

2: The Monopolist determines where to price his product based
off of MC=MR.

3: Prices exceed MC and resources are being misallocated.