Using the regression results and the other computations from Assignment 1, determine the market structure in which this frozen, low-calorie microwavable food company now operates.
In assignment #1, the company estimated a demand curve and used a marginal cost curve as its supply curve. You determined the equilibrium in the market where Qs = Qd. You calculated the various elasticities using the estimated demand at its current price of 500 cents.
Since the firm faces a downward sloping demand curve it has pricing power. You should determine how the firm should behave in the market as it actually used its pricing power to determine the profit maximizing price and output in this assignment.
Use the IBIS Report for the Frozen Food Production Industry (SIC Code 31141) provided by your instructor.
Write a five(5) pages paper in which you:
1. Outline a plan that will assess the impact of the market structure/cost data based on the activity in the first assignment for the company’s operations. Use a supply curve of the following form to reexamine your conclusions from the first assignment: Qs = -7909.89 +79.0989P [OR MC = 100 + 0.01264Q]. This new supply curve gives you the same equilibrium price and quantity as before, but is based on the firm’s marginal cost curve.
Further assume that the estimate of the firm’s AVC = 100 + 0.009Q and that VC/TC =0.71 always [implying that FC/TC = 0.289]. These are the industry average estimates from the IBIS report for this industry.
2. Suppose the business operations have now changed from the market structure analyzed in the activities requires assignment due to this new data about costs. Determine two (2) likely factors that might have caused the changed behavior. Predict the primary manner in which this change would likely impact business decisions in the new market environment.
3. Analyze the major short-run and long-run production and cost functions implied by this new cost data for the frozen, low-calorie microwaveable food company. Use the information contained in the IBIS report. Suggest substantive ways in which the frozen, low-calorie food company may use this information in order to make decisions in both the short-run and the long run.
4. Determine the possible circumstances under which the company should discontinue operations. While no specific fixed or total cost data are provided, use the newly provided cost data above and your knowledge from the textbook on the relation of fixed and variable costs to revenue to develop estimates that might suggest key actions that management should take in order to confront these circumstances. Provide a rationale for your response.
5. Suggest one (1) pricing policy that will enable your frozen, low-calorie microwavable food company to maximize profits. Provide a rationale for your suggestion that will involve comparison of the first assignments two possible price and quantity pairs with the new optimum presented here in Assignment #2.
6. Outline a plan, [based on the original information provided in the first assignment along with the IBIS report industry cost data for the firm], that the company could use in order to evaluate its financial performance. Consider all the key drivers of performance, such as company profit or loss for both the short term and long term, and the fundamental manner in which each factor influences managerial decisions.
7. Recommend two (2) actions that the company could take in order to improve its profitability and deliver more value to its stakeholders in line with the recent history and forecast future behavior for the Frozen Food Production Industry [SIC Code 31141] as outlined in the IBIS report. Outline, in brief, a plan to implement your recommendations.
8. Use at least five (5) quality academic resources in this assignment. Note: Wikipedia does not qualify as an academic resource.<
Your assignment must follow these formatting requirements:
• Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides; citations and references must follow APA or school-specific format. Check with your professor for any additional instructions.
• Include a cover page containing the title of the assignment, the student’s name, the professor’s name, the course title, and the date. The cover page and the reference page are not included in the required assignment page length.
The specific course learning outcomes associated with this assignment are:
• Analyze short-run and long-run production and cost functions.
• Apply macroeconomic concepts to changes in global and national economies and how they affect economic growth, inflation, interest rates, and wage rates.
• Evaluate the profit-maximizing price and output level for given operating costs for monopolies and firms in competitive industries.
• Use technology and information resources to research issues in managerial economics and globalization.
• Write clearly and concisely about managerial economics and globalization using proper writing mechanics.
Grading for this assignment will be based on answer quality, logic / organization of the paper, and language and writing skills, using the following rubric.
Points: 300 Assignment 2: Operations Decision
Criteria Unacceptable
Below 70% F Fair
70-79% C Proficient
80-89% B Exemplary
90-100%
1. Outline a plan that will assess the impact of the market structure/cost data for the company’s operations.
Weight: 10% Did not submit or incompletely outlined a plan that will assess the impact of the market structure/cost data for the company’s operations. Partially outlined a plan that will assess the impact of the market structure/cost data for the company’s operations. Satisfactorily outlined a plan that will assess the impact of the market structure/cost data for the company’s operations. Thoroughly outlined a plan that will assess the impact of the market structure/cost data for the company’s operations.
2. Suppose the business operations have now changed from the market structure specified in the 1st assignment results as a result of the new cost data and demand understanding. Determine two (2) likely factors that might have caused the change. Predict the primary manner in which this change would likely impact business operations in the new market environment.
Weight: 10% Did not submit or incompletely supposed the business operations have now changed from the market structure specified in the 1st assignment results. Did not submit or incompletely determined two (2) likely factors that might have caused the change. Did not submit or incompletely predicted the primary manner in which this change would likely impact business operations in the new market environment. Partially supposed the business operations have now changed from the market structure specified in the 1st assignment results. Partially determined two (2) likely factors that might have caused the change. Partially predicted the primary manner in which this change would likely impact business operations in the new market environment. Satisfactorily supposed the business operations have now changed from the market structure specified in the 1st assignment results. Satisfactorily determined two (2) likely factors that might have caused the change. Satisfactorily predicted the primary manner in which this change would likely impact business operations in the new market environment. Thoroughly supposed the business operations have now changed from the market structure specified in the 1st assignment results.
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