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.
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.
