Long-Term Investment Decisions, economics homework help

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Write a six to eight (6-8) page paper in which you:

  1. Outline a plan that managers in the low-calorie, frozen microwaveable food company could follow in anticipation of raising prices when selecting pricing strategies for making their products response to a change in price less elastic. Provide a rationale for your response.
  2. Examine the major effects that government policies have on production and employment. Predict the potential effects that government policies could have on your company.
  3. Determine whether or not government regulation to ensure fairness in the low-calorie, frozen microwavable food industry is needed. Cite the major reasons for government involvement in a market economy. Provide two (2) examples of government involvement in a similar market economy to support your response.
  4. Examine the major complexities that would arise under expansion via capital projects. Propose key actions that the company could take in order to prevent or address these complexities.
  5. Suggest the substantive manner in which the company could create a convergence between the interests of stockholders and managers. Indicate the most likely impact to profitability of such a convergence. Provide two (2) examples of instances that support your response.
  6. Use at least five (5) quality academic resources in this assignment. Note: Wikipedia does not qualify as an academic resource.
  • Propose how differences in demand and elasticity lead managers to develop various pricing strategies.
  • Analyze the economic impact of contracting, governance and organizational form within organizations.
  • 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.
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    Running Head: PRICE & QUANTITY 1 Equilibrium Price & Quantity Rhena Richardson Professor Sumadi Managerial Economics October 28, 2016 PRICE & QUANTITY When it pertained to Option 2, I was given the task of making sure I discovered the quantity demand of the 3-pack unit products as the price of the product increased from 100 cents to 600 cents per 3-pack unit. While the demand curve ended up being 200 cents, I still had to examine the corresponding supply curve based on the given, specified equation. For example, demand and supply simultaneously determine equilibrium market price, which equates the desired rate of purchase quality demand over time with the planned rate of sale (quality sale) over time (McGuigan, J.R., Moyer, R.C., &Harris, F., 29, 2014). Both concepts address intentions, which are purchase intentions and supply intentions (McGuigan, J.R., Moyer, R.C., &Harris, F., 29, 2014). Basically, it all goes back to how much demand is out there for a product that entails how many units have been actually sold. McGuigan, Moyer, and Harris (2014) mentioned that the equilibrium price is a market or a clearing equilibrium concept that equates the flow rates of intended purchase and planned sale (McGuigan, Moyer & Harris, 29, 2014). The calculations of the independent variable (the price of the 3-pack unit) versus the dependent variable (the quality demand) are in line with how the company should operate in terms of the appropriate production and manufacturing of their products. Unsurprisingly, as the price of the 3-pack unit increases, the quantity of demand for the 3-pack unit slightly decreases. For example, it determines the output of each product. The relationship between cost and output is expressed in terms of a cost function: a schedule, graph, or mathematical relationship showing the minimum achievable cost of producing various quantities of output (McGuigan, Moyer & Harris, 286, 2014). Cost functions includes average fixed costs that equates to fixed cost over quantity produced, average variable costs that equates to variable cost over quantity, and average total costs, which equate to total costs over quantity. Significant factors affecting the short-term 2 PRICE & QUANTITY and long-term goals of the 3-pack unit depends if the company is going to continue to raise the price of each 3-pack unit or if they are going to follow the competitor’s lead. The fixed costs for the quantity demand equation consist of the price of the leading competitor’s product, the per capita income of the standard metropolitan statistical area in which the supermarkets are located, and the monthly advertising expenditures. Simply, the production cost functions affect the strategies of individual firms. The variable input costs consist of the costs of all the variable inputs to the production process (McGuigan, Moyer & Harris, 286, 2014), which is the price of the product of the 3-pack units. The marginal cost is defined as the incremental increase in total variable costs that results from a one-unit increase in output (McGuigan, Moyer & Harris, 286, 2014) in which the price of the product begins at 100 cents and increases in increments of 100 cents until 600 cents is achieved by having that as the price of the product. However, on the other hand, the learning curve effect has often been perceived whereby the quantity of labor input required to produce another unit of output decreases as the cumulative volume of output arises (McGuigan, Moyer & Harris, 292, 2014). With an individual firm, managers are called upon to choose a certain strategic direction, to distribute efficiently the resources made available to the organization and to reply successfully to tactical issues, which were mentioned by McGuigan, Moyer & Harris (2014). Similarly, the outcomes of many analyses substantiate the intuition that managerial practices and decisions influence the cost of either providing a service and/or the production of a product (Amy K. Donahue, 2013). Even with the competitor’s leading price of their product at 300 cents per 3-pack unit, this individual firm is still able to compete by keeping their prices lower; however, as the firm grows and has the option of experimenting with prices, the firm could lose their customer base and bottom line just by attempting to compete on another level. 3 PRICE & QUANTITY Sometimes, it works, but at other times, it may backfire because it provides an opportunity for faithful customers to look elsewhere for a similar, quality product without spending more money for a 3-pack unit. For example, quality assurance in a global market has involved a degree of change for many academics, which must now produce and deliver programmes not only for a domestic audience, but also for a global audience (R. Fletcher, 307, 2007). With this individual firm taking on new approaches and policies regarding the production of their 3-pack unit prices, the firm may benefit from a globalization economic community (Fletcher, 304, 2007), which garners long-term calculations and results. Figuratively, once the optimum combination of inputs is chosen to produce the desired level of output (at least cost), some of the inputs (plant and equipment) become fixed in the short run; however, in the long run while using different available production methods and technology, the firm can make more informed decisions that may yield the lowest cost of producing the desired amount of output (McGuigan, Moyer & Harris, 291, 2014). Currently, this individual firm has already accomplished some of this concept by maintaining lower costs, which produces more quantity demand for the firm to eventually make more money than the leading competitor regardless of product pricing. With managerial economics, the learning climate includes culture, learning styles, resources, methodology, and environment (Raza, A., Murad, H., &Kayani, A., 2010). Individual firms and other leading competitors can dig deeper into managerial economics by identifying the alternatives, selecting the choice that accomplishes the objective in the most effective manner, taking into account the constraints, and recognizing the likely actions and reactions of rival decision makers (McGuigan, Moyer & Harris, 4, 2014). The calculations for Option 2 Regression Equation is QD= -2000 – 100P + 15A + 25PX + 10I, whereas Q is the 4 PRICE & QUANTITY quantity demanded of 3-pack units, P (in cents) is the price of the product per 3-pack unit, PX (in cents) is the price of the leading competitor’s product per 3-pack unit, I (in dollars) is the per capita income of the SMSA in which the supermarkets are located, and A (in dollars) is the monthly advertising expenditures. When the price of the product varies or changes, some of the results or outcomes can be viewed as the following: QD = -2000 – 100(100 cents) + 15($640) + 25(300 cents) + 10($5,000) = 57,575 (QD) (Cents were converted into dollars) QD = -2000 – 100(200 cents) + 15($640) + 25(300 cents) + 10($5,000) = 57,475 (QD) (Cents were converted into dollars) Demand Curve QD= -2000 – 100(300 cents) + 15($640) + 25(300 cents) + 10($5,000) =57,375 (QD) (Cents were converted into dollars) QD= -2000 – 100(400 cents) + 15($640) + 25(300 cents) + 10($5,000) = 57,275 (QD) (Cents were converted into dollars) QD = -2000 – 100(500 cents) + 15($640) + 25(300 cents) + 10($5,000) = 57,175 (QD) (Cents were converted into dollars) QD= -2000 – 100(600 cents) + 15($640) + 25(300 cents) + 10($5,000) = 57,075 (QD) (Cents were converted into dollars). 5 PRICE & QUANTITY 6 PRICE & QUANTITY 7 References Donahue, A. K. (2013). The influence of management on the cost of fire protection. Journal of Policy Analysis and Management, 23(1), 71-92. doi:10.1002/pam.10179 Fletcher, R. (2007). The Managerial Tutor: A producer of knowledge in a global arena. Journal of Higher Education Policy and Management, 29(3), 303-313. doi:10.1080/13600800701457897 McGuigan, J. R., Moyer, R. C., & Harris, F. (2014). Managerial economics: Applications, strategies and tactics (13th ed.). Mason, OH: Cengage Learning. Raza, A., Murad, H., & Kayani, A. (2010). Perceptions of MBA students towards learning climate for managerial knowledge: A study of business school in lahore. Multicultural Education & Technology Journal, 4(4), 251-260. doi:10.1108/17504971011087540 1 Running Head: Operation Decision Operation Decision Student Name: Course/Number: Due Date: Faculty Name: 2 Operation Decision The regression analysis has been performed for estimating the demand function for lowcalorie microwavable food. The regression equation which is derived in the assignment 1 is given below. QD= -2000 – 100P + 15A + 25PX + 10I The microwavable food industry is consistently growing around the globe due to the reason that the consumers now are not much interested in preparing homemade foods. There are a number of reasons behind this attitude of the consumers i.e. shortage of time. Therefore the demand of the frozen food is rendered the industry a standout amongst the most aggressive industries around the globe. The business works in a monopolistic rivalry. Monopolistic rivalry emerges because of the existence of few leading firms in the market and a large number of competitive organizations. The two companies leading in the frozen food firms are Health choice and the Lean Cuisine. In the paper, the efficacy of the market structure from the companies’ perspective is evaluated. This exercise and the analysis of the structure set the base for the identification of the components that would bring a change into the structure of the market. Additionally, the short run and long cost function applied to the data to decide if there are conditions under which operations could be discontinued. The paper highlights the steps through which management can decide the likelihood of uttering company operations. The pricing strategies are also discussed for maximizing the profit and to expand the operations. At last the recommendations are made to adopt new procedures through which organization can maximize its product line and maximize the income of company and stakeholders. 3 Operation Decision Presently, firms under perfect rivalry have no market control and subsequently can't influence the market cost. They will undoubtedly offer at the progressing market cost. Now the attributes of the market are evolving. Since the tastes of individuals are distinctive, there is a ton of degree for item separation in this market. The sellers are likewise taking the advantage of this taste separation and are separating their item. Consequently the sellers of the microwavable nourishment industry are attempting to beat each other. Because of item separation, the items no more stay homogeneous. In the competitive market, every organization is the price taker while the equilibrium price and the output of the product are the effects of demand and supply. The market for lowcalorie microwavable sustenance" indicates the function of demand and supply for low chloride food produced in a monopolistic environment while deciding the output of the product and the value costumers are agrees to pay (McGuigan, 2014). In the completive marketplace, it’s not possible for firms to decide the higher price for the product but the companies can control the supply of the product which can affect the price for a specific period of time. The achievement or disappointment of an organization depends on a purely competitive market lies in how an organization controls generation cost and depicts its image (Slack et al, 2008). To increase the productivity of the firm there is need to develop the new ways for carrying out the operations of the firm. The formation of a good strategy is vital for the usefulness of the market arrangement in which the company operates. The strategy must be designed in a way that it focuses on the number of items available for sale, including the number 4 Operation Decision of companies participating, pricing policy and the promotion methods used by the firm (Bragg, 2012). According to Bragg to decide the adequacy of this market we have to substantiate the distinctive items advertised. The frozen food industry is driven by the customer's inclinations and cravings. Customer inclinations are inclined to consistent changes. This influences the market structure in that it requires the accessibility of substitute products (2012). The further step ought to be the section boundaries to the market. Because of the easy accessibility of frozen items accessible the entry obstructions to the market are generally simple to maneuver. Along these lines, the market circumstance is constantly defenseless against rivalry by new firms. An organization ought to gauge the costs of its rivals and the amount offered by the organization. This is because of the impact of costs on the demand for products. Factors that can change Market Structure Choice of Consumers In the first part the assumptions are made for a perfect market competition, therefore, the evaluation is based on the monopolistic rivalry. In this type of structure, the major role played by the choice of consumers and the presence of barriers to enter the market. In case the preferences of the consumer are changed the firms would be compelled to adjust its items to take care of the new demand. Then again an organization that remaining parts willful to its creation risks losing business. It is, therefore, necessary for the firm to be aware of new trends in this market it ought to guarantee that its products are according to the choice of consumers and must fulfill their requirements (McGuigan, 2014). 5 Operation Decision Advertisement / Promotion The advertisement assumes a critical part in deciding the demand of the product. Since it has no part to play in a competitive market, we can rule out the likelihood of the market being perfectly focused. The market is likewise not a restraining infrastructure. This is on account of even imposing business model doesn't require notice consumption. The requested work likewise relies on upon the cost of another item "X" which is in rivalry with the item examined. This totally decides out the likelihood that the market is a monopoly. In this manner, the market is a monopolistic competitive market. We realize that advertisement assumes an essential part in a monopolistic competitive market. In an oligopoly market, the advertisement is not any imperative. Other than this, another notable component of a monopolistic focused market is item separation. In our case, there are a few firms produce different products. They marginally separate their item from their rivals to highlight their own item and in this manner increment the market share. Consequently, this firm is a case of a monopolistic competitive market. Short Run & Long Cost Function In the short run monopolistic competitive companies can earn supernormal profits, can continue operations at breakeven, or can even incur losses. If we imagine that a monopolistic competitive firm is initially earning an economic profit, other firms will be attracted. As with the passage of time number of firms increase I the market then there will be more options available to the consumers. This way curve will be moved to the left whereas there will be opposite case if firm starts operations with losses. This will continue until and unless each firm operates at the breakeven point. In the long run both of the firms can earn a good profit. 6 Operation Decision Short-Run Equilibrium Short Run Equilibrium Discontinued Operations We realize that the organizations can proceed with production process in the short run even if they are facing a tough time and in the case of incurring losses in the event that it can recuperate a portion of the variable expenses. Numerically, if P > AVC, then the organizations will proceed with generation. In the present situation, the firm can recoup its variable cost in this 7 Operation Decision way the organizations ought to proceed with production in the short run notwithstanding acquiring misfortunes. Over the long haul, there are no settled expenses. The organizations are just left with variable expenses. In the long run, organizations can win financial benefits. The company should discontinue its operation when the price falls below the minimum point of the average cost curve. In order to deal with such situation, there is need to indulge in Research and development for investigating the cause and management must try to introduce a new cost effective method of production, this way firm can restart its operation. Pricing Policy to Maximize Profit To maximize its profit, the company will equate its MR with MC. We can get the same condition from the first order condition of profit maximization. Profit (π) = TR - TC = P×Q – TC According to the FOC of profit maximization, we get 𝑑𝜋 𝑑𝑄 = 𝑑(𝑇𝑅) 𝑑𝑄 - 𝑑(𝑇𝐶) 𝑑𝑄 : P is not fixed = MR – MC = 0 Therefore MR = MC If the organization has a market control as appeared above, then the firm will appreciate a supernormal benefit. With a specific end goal to keep up its benefit and imposing business model position, the organization must bring about a few expenses to limit entry in the market. In this way keeping up monopoly model will be the real concern for the organization. In the short run, if the monopolist is gaining supernormal benefit, more firms will be pulled in. The market output 8 Operation Decision will ascend, therefore. Advertise cost will likewise fall and this procedure will go ahead until the whole benefit is depleted. Now every firm will work at their breakeven point. In this manner, maintaining monopoly infrastructure over the long period will be difficult. 9 Operation Decision References Bragg, M. S., (2012). Financial Analysis: A Controller's Guide. (2nd Ed.). John Wiley & Sons. Slack, N. & Lewis, M. (2003). Operations Management: Critical Perspectives on Business and Management. McGuigan, J. R., Moyer, R. C., & Harris, F. H. deB. (2014). Managerial economics: applications, strategies and tactics (13th ed.). Stamford, CT: Cengage Learning. Enke, S. (n.d.). Profit Maximization under Monopolistic Competition. The American Economic Review, Vol. 31, No. 2, 317-326. Retrieved from http://www.jstor.org/discover/10.2307/362?uid=3738256&uid=2129&uid=2&uid=70&ui d=4&sid=21102582087203.
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    Long Term Investment Decisions – Outline
    Thesis statement: There are different considerations while making the investment decisions and
    they help in the development of strategies that will see the business succeed.
    Pricing Strategy
    A. Interests of both the consumers and the producers.
    B. Labeling.
    Effects of Government Policies on Production and Employment
    A. Health issues.
    B. Regulation of quality.
    Government Regulation
    A. Exploitation of consumers.
    B. Consumer’s needs.
    Complexities under Expansion
    A. Advancement in technology.
    B. Price reviews.
    Convergence between the Interests of Stockholders and Managers
    A. Maximization of value and profits.
    B. Managers as stockholders.


    Long Term Investment Decisions




    Long Term Investment Decisions
    The Frozen Microwavable Industries growth is seen to increase and as such the increase
    had led to increase in competition in the market with people coming up with various ways to
    ensure that they capture the market share. The sales in the industry continue to increase and this
    is due to the increase in demand of the foods and as such the prices in the market also become
    competitive. The strategy that is use to capture the elastic demand should be considered as it is
    through this that companies in the industry are responsive to the prices in the market. There are
    different considerations while making the investment decisions and they help in the development
    of strategies that will see the business succeed.
    Pricing Strategy
    According to Bos et al. (2013), price elasticity of demand is defined as the percentage
    change in the quantity demanded when the price of the commodity changes. It is seen that the
    industry of low calories microwavable food is relatively elastic and this makes it important for
    the managers to ensure that the prices that they suggest for the products are well thought out.
    With elastic demand in in low-calories microwavable foods it is seen that when the prices are
    increased, there is the decrease in demand for the products and the reduction in price would lead
    to increase in the demand of the products. The strategy in pricing then should focus on the
    interests of both the consumers and the producers. The pricing strategy that should be applied in
    the case is the increase of the supply of the low-calorie microwavable foods, as this would woo
    the customers even when the prices are slightly increased.
    The use of labelling as a strategy to pricing is also important as it ensures that more
    customers are wooed into buying the products. In the case, the demand of the brand is likely to
    increase and this makes it possible to increase the price ...

    Very useful material for studying!


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