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 center
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 (10p
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 produc
most profitable. Insert a colored, vertical line that indicates this Profit Maximizing point. Shadow the line. Be certain to appropriately label a
font)
d) A graph that compares: ATC, MC, and MR. Title this graph: Measuring Total Profits. Insert a colored, shadowed, vertical line indicatin
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 = Margi
Revenue.
g) On (e) above: Insert (arrowhead lines) indicating where Maximum Profit at profit maximizing output. Connect these arrows to a side-b
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: C
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?

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

Total
Fixed
Costs
(TFC)
$10
$10
$10
$10
$10
$10
$10
$10
$10
$10
$10
$10

Total
Variable
Costs
(TVC)
$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

Fixed
Variable
Total
Marginal Market Price
Costs
Costs
Costs
Costs
Total
Perfect
(AFC)
(AVC)
(ATC)
(MC)
Competition Revenue
$5
$0
$5
$ 10.00 $
7.00 $ 17.00
7
$5
$5
$
5.00 $
5.00 $ 10.00
3
$10
$5
$
3.33 $
4.00 $
7.33
2
$15
$5
$
2.50 $
3.25 $
5.75
1
$20
$
2.00 $
3.00 $
5.00
2
$5
$25
$
1.67 $
3.00 $
4.67
3
$5
$30
$
1.43 $
3.14 $
4.57
4
$5
$35
$
1.25 $
3.38 $
4.63
5
$5
$40
$
1.11 $
3.67 $
4.78
6
$5
$45
$
1.00 $
4.00 $
5.00
7
$5
$50
$5
$
0.91 $
4.36 $
5.27
8
$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

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 Pr
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 indicat
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 ea
d) A graph that compares: TR with TC. Title this graph: Revenue - Cost Comparison. Be certain to appropriately label axis as well as T
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: C
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)

Structure

nd centered.

axis (10pt font)

t font)
of production is the
ely label axis (10pt

indicating at what
on level.
= Marginal

o a side-bar label:

the tab: Chart Tools,

opoly Profit

so indicate the "area

bels for each.

well as TR and TC

on
the tab: Chart Tools,

Part 1

Costs of Production and Profit Maximization An

Total
Output/hr

Total Fixed
Costs
(TFC)

Total
Variable
Costs
(TVC)

Total Costs
(TC)

Average
Fixed
Costs
(AFC)

10

10

10

17

10

10

10

20

10

12

22

10

13

23

10

15

25

10

18

28

10

22

32

10

27

37

10

33

43

10

10

40

50

11

10

48

58

Average Costs of Productio

18
16
14
12
10
Production Cost

8
6
4
2
0

10

11

12

Production Cost

8
6
4
2
0

10

11

12

Output

Profit Maximizat
$70

Maximum
Profit
Point

$60
$50
$40
Axis Title

$30
$20
$10
$-

Axis Title

Measuring Tota
18.00
16.00

Maximum
Point

14.00
12.00
10.00
Price and Cost per Unit

8.00
6.00
4.00
2.00
0.00

6
Output

4.00
2.00
0.00

6
Output

ofit Maximization Analysis for the Perfect Competitive Market Structure

Market
Average
Average
Price
Total
Marginal
Marginal
Total Profit
Variable
Total Costs
Perfect
Revenue
Revenue
Costs (MC)
(TP)
Costs (AVC)
(ATC)
Competitio
(TR)
(MR)
n
0

0.00

--

17.00

10.00

5
5

7.33

(10)

--

(12)

10

(10)

15

(7)

20

(3)

5.75

5.00

25

4.67

30

4.57

35

4.63

40

4.78

45

5.00

50

55

(3)

5.27

of Production

Total Costs o
70
60
50
Average Fixed Costs (AFC)
40

Average Variable Costs (AVC)

Average Total Costs (ATC)
Marginal Costs (MC)

Dollar Costs

30
20
10

10

11

12

Average Variable Costs (AVC)

Dollar Costs

Average Total Costs (ATC)

Marginal Costs (MC)

30
20
10

10

11

12

Output

t Maximization
Maximum
Profit
Point

Total Revenue
Total Costs (TC)

10

11

12

xis Title

asuring Total Profits

Maximum Profit
Point
Average Total Costs (ATC)
Marginal Costs (MC)
Marginal Revenue (MR)

6
Output

10

11

12

6
Output

10

11

12

Maimum Profit at Profit Maximizing Output

Marginal Costs = Marginal Revenue

Total Costs of Production

Total Fixed Costs (TFC)

Total Variable Costs (TVF)
Total Costs (TC)

10

11

12

Total Variable Costs (TVF)

Total Costs (TC)

10

11

12

Output

Profitability Analysis:
1. Explain in your own words why MC=MR
is a profit maximizing production level ?
If MR>MC, the firm should produce more output:
it is earning a more profit for output added. If
MR<MC, then the firm should produce less
output: it is making a loss on each additional
product it sells. Another way of looking at it is
MR-MC=MP. If you apply calculus you will know
that MP is the derivative of the function, and
when the derivitive is equal to zero it indicates
the maximum or minimum point of a line. To get
MP=0 than MC=MR.

2. Assume prices dropped to $4.25. What

then would be the profit maximizing or loss
minimizing level of production ?
There would be no profit maximizing point, if
prices dropped to $4.25 there would only be
losses. The loss minimizing level of production
would be at 7, statistaclly it would be between 7
and 8 but you cannot produce half a product
othwise it would be defective.

3. Should the firm continue to operate at

this point?
Yes, the firm should keep operating, since the
loss is still less than fixed costs. The loss is $2.25
while if the firm stopped operations, the loss
would be $10.

Yes, the firm should keep operating, since the

loss is still less than fixed costs. The loss is $2.25
while if the firm stopped operations, the loss
would be $10.

Part 2
Monopoly Profit Maximizing Analysis
Average
Total
Marginal
Costs Costs (MC)
(ATC)

Total
Output
Units

Price Per
Unit
(Demand)

Total
Revenue
(TR)

Total
Costs
(TC)

Total
Profit
(TP)

0
1
2
3
4

$8.00
$7.80
$7.60
$7.40
$7.20

0.00
7.80
15.20
22.20
28.80

10.00
14.00
17.50
20.75
23.80

-10.00
-6.20
-2.30
1.45
5.00

-14.00
8.75
6.92
5.95

4.00
3.50
3.25
3.05

5
6
7
8
9
10
11

$7.00
$6.80
$6.60
$6.40
$6.20
$6.00
$5.80

35.00
40.80
46.20
51.20
55.80
60.00
63.80

26.70
29.50
32.25
35.10
38.30
42.70
48.70

8.30
11.30
13.95
16.10
17.50
17.30
15.10

5.34
4.92
4.61
4.39
4.26
4.27
4.43

2.90
2.80
2.75
2.85
3.20
4.40
6.00

12

$5.60

67.20

57.70

9.50

4.81

9.00

15.0
Monopoly
Profit Determination
14.0
13.0
12.0
11.0
10.0
9.0
8.0
7.0
6.0
Monopoly Profit

5.0
4.0
3.0
2.0
1.0
0.0

10

11

3.0
2.0
1.0
0.0

10

11

Average Total C

Revenue - Cost Comparison

80.00
70.00
60.00
50.00
40.00
30.00
20.00
10.00
0.00

10

11

12

13

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

Marginal Cost=Marginal Revenue

9

10

11

12

Marginal Cost=Marginal Revenue

9

10

11

12

Average Total Cost

Profitability Analysis:

rison

1. Explain in your own words why MC=MR is a profit maximizing production leve
the Monopoly.

Total Revenue (TR)

If MR>MC, the firm should produce more output: it is earning a more profit for output
added. If MR<MC, then the firm should produce less output: it is making a loss on each
additional product it sells. Another way of looking at it is MR-MC=MP. If you apply
calculus you will know that MP is the derivative of the function, and when the derivitiv
equal to zero it indicates the maximum or minimum point of a line. To get MP=0 than
MC=MR.

Total Costs (TC)

2. Explain how the monoploist determines where to price his product.

The monopolist compares the Demand curve with the Marginal Revenue and Marginal
slopes.. The point at which the MC=MR is the profit mazimizing production level. He u
that point to signal the quantity to be produced, then he compares that quatitiy to the
Demand curve and which ever price corresspondes with that quantity is the price he wil
chose.
3. A monopoly is considered an inefficient use of resources for what two reasons?
12

13

This is becuase the monopolists do not price there product at the point of the lowest am
of Average Total Costs. Plus they do not price there products where MC=MR. Thus the
produce less product than that of the Perfect Competition, while they will charge a high
price.

maximizing production level for

rning a more profit for output

put: it is making a loss on each
MR-MC=MP. If you apply
nction, and when the derivitive is
of a line. To get MP=0 than

ice his product.

rginal Revenue and Marginal Costs

imizing production level. He uses
ompares that quatitiy to the
hat quantity is the price he will

rces for what two reasons?

t at the point of the lowest amount

ucts where MC=MR. Thus they will
while they will charge a higher