ECO 550 WK 6 Assignment 2 - Operations Decisions
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Assignment 2: Operations Decision
Due Week 6 and worth 300 points
Using the regression results and the
other computations from Assignment 1, determine the market structure in which
the low-calorie frozen, microwavable food company operates.
Use the Internet to research two (2)
of the leading competitors in the low-calorie frozen, microwavable food
industry, and take note of their pricing strategies, profitability, and their
relationships within the industry (worldwide).
Write a six to eight (6-8) page
paper in which you:
Outline a plan that will assess the
effectiveness of the market structure for the company’s operations. Note: In
Assignment 1, the assumption was that the market structure [or selling
environment] was perfectly competitive and that the equilibrium price was to be
determined by setting QD equal to QS. You are now aware of recent changes in
the selling environment that suggest an imperfectly competitive market where
your firm now has substantial market power in setting its own “optimal” price.
Given that business operations have
changed from the market structure specified in the original scenario in
Assignment 1, 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.
Analyze the major short run and long
cost functions for the low-calorie, frozen microwaveable food company given the
cost functions below. Suggest substantive ways in which the low-calorie food
company may use this information in order to make decisions in both the
short-run and the long-run.
TC = 160,000,000 + 100Q +
0.0063212Q2
VC = 100Q + 0.0063212Q2
MC= 100 + 0.0126424Q
Determine the possible circumstances
under which the company should discontinue operations. Suggest key actions that
management should take in order to confront these circumstances. Provide a
rationale for your response. (Hint: Your firm’s price must cover average
variable costs in the short run and average total costs in the long run to
continue operations.)
Suggest one (1) pricing policy that
will enable your low-calorie, frozen microwavable food company to maximize
profits. Provide a rationale for your suggestion.
(Hints:
In Assignment 1, you determined your
firm’s market demand equation. Now you need to find the inverse demand
equation. Having found that, find the Total Revenue function for your firm (TR
is P x Q). From your firm’s Total Revenue function, then find your Marginal
Revenue (MR) function.
Use the profit maximization rule MR
= MC to determine your optimal price and optimal output level now that you have
market power. Compare these values with the values you generated in Assignment
1. Determine whether your price higher is or lower.)
Outline a plan, based on the
information provided in the scenario, which 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.
(Hints:
Calculate profit in the short run by
using the price and output levels you generated in part 5. Optional: You may
want to compare this to what profit would have been in Assignment 1 using the
cost function provided here.
Calculate profit in the long run by
using the output level you generated in part 5 and cost data in part 3 and
assuming that the selling environment will likely be very competitive.
Determine why this would be a valid assumption.)
Recommend two (2) actions that the
company could take in order to improve its profitability and deliver more value
to its stakeholders. Outline, in brief, a plan to implement your
recommendations.
Use at least five (5) quality academic
resources in this assignment. Note: Wikipedia does not qualify as an academic
resource
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