Conduct a profit analysis of a particular firm

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Reference no: EM133735595

The Primary goal of this spreadsheet assignment is for students to gain comfort in using excel to conduct a profit analysis of a particular firm. Completing it will also depend on the excel spreadsheet that is posted to the canvas site.

Please provide explanations for answers to all questions and include in your explanations how you developed the spreadsheet that you developed to aid you in coming to your answers. Please also do not turn in your spreadsheet, you can include screenshots from your spreadsheet in the final writeup which should be a Microsoft word document.

Please make sure to submit your own work and to put everything in your own words. Again, it is okay to talk to other people, but you must demonstrate full mastery over material to get full credit. Finally, you will turn in the project via canvas and it will check for plagiarism, so, again, please put make sure to put all answers in your own words. Thank you.

Assignment questions

1. cost analysis

As we did on the midterm, we will specify the cost equation using your REDID. The fixed cost for this equation will be the fourth digit of your REDID starting from the right. If this digit is a zero, please pick the digit immediately to its right that is not a zero. The coefficient will be the fifth digit of your REDID starting from the right, but multiplied by (1/2).

So, if your REDID is 123456890, then your cost equation is:.If your REDID is 120456090, then your demand equation will beIf any digit is a zero, please pick the digit immediately to its right that is not a zero. . If your REDID is 987604321, then your demand equation will be. (my ID number is 826998751)

This equation completes the specification for the cost equation for your spreadsheet assignment. Again, the usage of the REDID is to provide some randomization to the cost equation selection to continue to ensure the integrity of the project and not to make you crazy over the demand equation. If you have any questions about the selection of your cost equation, please send me an email.

Once you have the cost equation, please open up the excel spreadsheet. It can be found on the Canvas site under the "Files" tab and specifically within the folder called "Final exam materials". The first task is to fill in the spreadsheet. So, in particular, you will find that the first column headed "Q" is filled in with values. Please use the cost equation you formulated from the REDID above in order to fill in all the columns in the spreadsheet. The lectures on production processes and costs and marginal analysis will direct you through how to compute each variable. Please also compute marginal revenues using the slope formula. A good reference for completing this calculation is to look at the folder "in-class spreadsheet exercises" under the topic of marginal analysis and specifically at the second set of exercises and the tab labeled "Ex.5".

Finally, once we complete this table, we want to graph the relationship between average total cost, marginal cost, average variable cost, and average fixed cost using this table. It is okay if you screenshot this graph or handwrite it into the word document, please make sure to include all explanations and also to label all graphs following your cost equation.

2. Profit analysis

The term project focused on the stock price and as we mentioned during week #1, a closely related often-cited goal in business is profit maximization, and so in the last part of this assignment, we are focused on profits. The goal of our semester has been to manage the following equation:

Total revenues-Total costs

As we discussed in class, total revenues are typically assumed to come from demand and so midterm assignment #1 was all about demand. Total costs are assumed to be of the form we worked with in question #1 of this assignment.

In this last question, please assume that your firm maximizes profit by setting MR=MC and then solving for Q. Then, we assume that we charge the price that corresponds to this firm's demand curve. This is a general pricing strategy for a firm which has at least some market power. Market power is defined as the ability to charge a price that is above the perfectly competitive price.

By employing this resulting pricing strategy, please compute the profits that you would earn and make a graph of your answer.

3. Discussion

Using your web browser and your own judgement and the power points, please interpret and discuss the appropriateness of assuming the above general pricing strategy for the firm you chose to study in the term project. Please be sure to include in your response whether you think that your firm operates in an industry that has at least some market power.

Reference no: EM133735595

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