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

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
Market
f) On (e) above: Insert (arrowhead lines) indicating where MC = MR. Connect these arrows
to a side-bar label: Marginal Costs = Margi
Price
Revenue.
Perfectoutput. Connect these arrows to a side-b
g) On (e) above: Insert (arrowhead lines) indicating where Maximum Profit at profit maximizing
Maximum
Total
Profit at Profit Maximizing Output.
Competiti
Total
Total
h) Each grpah
should include
of (gradient,
texture,
and shape
effects (preset
Most willProfit
be found under
Output/hr
(TFC)
(TVC)the use(TC)
(AFC)
(AVC)
(ATC)
(MC) 2)) of your
on choice.
Revenue
(MR)the tab: C
Format,
and Layout.
0
$10
$0
$5
i) Insert
a (Text
Box) and answer
the following questions:
1
$10
7
1.
in your own 10
words why MC=MR is a profit maximizing production level ?
2 Explain $10
2.
Assume
prices
dropped
3
$10
12 to $4.25. What then would be the profit maximizing or loss minimizing level of production ?
3.
Should
the
firm
continue
4
$10
13 to operate at this point?
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 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

e indicating at what
ion level.
= Marginal

to a side-bar label:
the tab: Chart Tools,

e indicating at what
ion level.
= Marginal

to a side-bar label:
the tab: Chart Tools,

opoly Profit

so indicate the "area

bels for each.

s well as TR and TC

on
the tab: Chart Tools,

Costs of Production and Profit Maxim

Costs of Production and Profit Maxim
Analysis for the Perfect Competitive M
Analysis for the Perfect Competitive
Structure
Structure
Total
Output/h
r
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
Cosst
(TVC)
$0
7
10
12
13
15
18
22
27
33
40
48

Average Average Average

Fixed
Variable
Total
Costs
Costs
Costs
(AFC)
(AVC)
(ATC)
0
0
0.00
10
7
17.00
5
5
10.00
3
4
7.33
3
3
5.75
2
3
5.00
2
3
4.67
1
3
4.57
1
3
4.63
1
4
4.78
1
4
5.00
1
4
5.27

Total
Costs
(TC)
$10
$17
$20
$22
$23
$25
$28
$32
$37
$43
$50
$58

Average Costs of Production

20
15

production costs

10
5
0

output
Average Fixed Costs

(AFC) 0

Average Total Costs (ATC) 0.00

Average Variable Costs (AVC) 0

Marginal Costs (MC) 0

Profit Maximization
$70
$60
$50

Revenue and costs

$40
$30
$20

10

11

Profit Maximization
$70
$60
$50

Revenue and costs

$40
$30
$20
$10
$0

10

11

12

output
Total Costs

(TC)

Total Revenue

1. Marginal cost is the cost a firm incures from makeing one more widget. Marginal Revenue i
1. Marginal
cost
the costby
a producing
firm incures
from
makeing
more
widget.
Marginal
Revenue
total
revenue a
firmisincures
one
more
widget.one
With
both
marginal
cost and
marg
dealing
total revenue
with the adiffernece
firm incures
from
byproduceing
producing one
one more
more widget.
widget, With
the spot
bothatmarginal
which they
costintersec
and ma
dealing
with the
differnece
from
produceing
the spot
at which
they inters
optimal
output
level
where the
most
money willone
be more
madewidget,
or the least
amount
of money
will b
optimal output level where the most money will be made or the least amount of money will
2.If the price dropped to $4.25 then the profit minimizing level would be 7.
2.If the price dropped to $4.25 then the profit minimizing level would be 7.
3. If prices dropped to $4.25 the business would be loosing money, but the business should ke
3. If prices
dropped
to $4.25
the the
business
would
becost.
loosing money, but the business should
because
the market
price
is above
average
fixed
because the market price is above the average fixed cost.

Profit Maximization
Profit Maximization
ompetitive Market
Competitive Market
re
ure
Market
Marginal
Price
Costs
Perfect
Total
(MC)
Competition Revenue
0
$0
$5.00
7
$5
$5.00
3
$10
$5.00
2
$15
$5.00
1
$20
$5.00
2
$25
$5.00
3
$30
$5.00
4
$35
$5.00
5
$40
$5.00
6
$45
$5.00
7
$50
$5.00
8
$55
$5.00

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

Maximum Profit at Profit Maxim

Maximum Profit at Profit Max

Marginal
Revenue
(MR)
0
$5
$5
$5
$5
$5
$5
$5
$5
$5
$5
$5

Marginal Cost =marginal Reve

Marginal Cost =marginal Re

Total Cost of Production

$80
$60

Dollar costs

$40
$20
$0

Output
Total Fixed Costs (TFC)
Total Costs

Total Variable Cosst (TVC)

(TC)

Measuring Total Profits

20.00
15.00

Price and sot per unit

10.00
5.00
0.00

10

11

12

Measuring Total Profits

20.00
15.00

Price and sot per unit

10.00
5.00
0.00

output
Average Total Costs (ATC) 0.00
Marginal Revenue (MR) 0

dget. Marginal Revenue is the change in

widget.
Marginal
Revenue
is the
change in
h
marginal
cost and
marginal
revenue
ot
othatmarginal
which they
costintersect
and marginal
becomes
revenue
the
spot
at which
they intersect
becomes the
amount
of money
will be lost.
st amount of money will be lost.
be 7.
ld be 7.
ut the business should keep producing
but the business should keep producing

Marginal Costs (MC) 0

10

11

ofit at Profit Maximizing Output

Profit at Profit Maximizing Output

ost =marginal Revenue

Cost =marginal Revenue

Monopoly Profit
Monopoly Profit
Maximizing Analysis
Maximizing Analysis
Total
Output
Units
0
1
2
3
4
5
6
7
8
9
10
11
12

Price Per
Total
Unit
Revenue
(Demand)
(TR)
$8.00
0.00
$7.80
7.80
$7.60
15.20
$7.40
22.20
$7.20
28.80
$7.00
35.00
$6.80
40.80
$6.60
46.20
$6.40
51.20
$6.20
55.80
$6.00
60.00
$5.80
63.80
$5.60
67.20

Total
Costs
(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

Total
Profit
(TP)
-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
Costs
(ATC)
(MC)
0
0
14.00
4.00
8.75
3.50
6.92
3.25
5.95
3.05
5.34
2.90
4.92
2.80
4.61
2.75
4.39
2.85
4.26
3.20
4.27
4.40
4.43
6.00
4.81
9.00

Monopoly Profit Determination

$16.00
$14.00
$12.00
$10.00

Price,marginal revenue,and costs

Monopoly Profit
Monopoly Profit

$8.00
$6.00
$4.00
$2.00
$0.00

output
Price Per Unit (Demand) $8.00

Average Total Costs (ATC) 0

Marginal Costs (MC) 0

Marginal Revenue (MR) 0

output
Price Per Unit (Demand) $8.00

Average Total Costs (ATC) 0

Marginal Costs (MC) 0

Marginal Revenue (MR) 0

Revenue-Cost Comparison
80.00
70.00
60.00
50.00

Total costs/total revenue

40.00
30.00
20.00
10.00
0.00

Output
Total Revenue (TR)

Total Costs (TC)

1. Marginal Cost equals marginal revenue for the monopolists becasue of the same
1. Marginal
Cost
equals
marginal
revenue
forfor
theperfect
monopolists
becasue
of is
the
same
reason
marginal
cost
equals
marginal
revenue
competition.
This
the
reason
marginal
cost equalswill
marginal
revenue
for perfect
competition.
Thiswhich
is the
point
at which
the monopolist
maximise
its profits
or minimize
its losses,
pointitatthe
which
the monopolist
maximise its profits or minimize its losses, which
makes
optimal
point for thewill
monopolist.
makes it the optimal point for the monopolist.
2.The monopolist prices its product where marginal cost equals marginal revenue,
2.The monopolist
prices
its product
where marginal
marginal
becasue
this is the point
where
the monopolists
profitscost
will equals
be maximized
orrevenue,
its
becasue
this is the point where the monopolists profits will be maximized or its
losses
be minimized.
losses be minimized.
3. A monopolist is ineffecient because monopolist restricts the supply inorder to
3. A monopolist
is ineffecient
because
restricts
the supply
inorderofto
charge
a higher price.
The second
reasonmonopolist
a monopolist
is ineffecient
is becaue
thecharge
barriers
a higher
to entry
price.
thatThe
exsitsecond
which reason
make others
a monopolist
not be able
is ineffecient
to join the
is market.
becaue of
the barriers to entry that exsit which make others not be able to join the market.

10

Marginal
Revenue
(MR)
0
7.80
7.40
7.00
6.60
6.20
5.80
5.40
5.00
4.60
4.20
3.80
3.40

nation

MC
MC

Demand Price
Demand Price
Marginal Cost=Marginal Revenue
Marginal Cost=Marginal Revenue
Average Total Costs
Average Total Costs

MR
MR
7

tput

l Costs (ATC) 0

enue (MR) 0

10

11

12

10

11

12

tput

l Costs (ATC) 0

enue (MR) 0

son

C)

of the same
ue
of is
the
same
This
the
n. Thiswhich
is the
osses,
s losses, which

al revenue,
ginal
ed orrevenue,
its
mized or its

norder to
ybecaue
inorderofto
e
is market.
becaue of
the market.

10

11

12

13