Eco 550 Assignment 2 Operations Decision 2014

Unformatted text preview: Assignment 2 Operations Decision: Economics paper 2 Course name: Course no. Date: Instructor’s name: From the data provided, we can see that the demand function for low-calorie microwavable food is – QD = 20,000 - 10P + 1500A + 5PX + 10 I The most important result that follows from the regression is that advertisement plays an important role in determining the demand. Therefore, the market for low-calorie microwavable food is not perfectly competitive. This is because there is no role of advertisement in a perfectly competitive market. The market is also not a monopoly. This is because even monopoly doesn’t require advertisement expenditure. Moreover, the demand function estimated states that the demand depends on the price of its competitor. Therefore the market for low calorie microwavable food is surely not a monopoly. This implies that, the market for low calorie microwavable food must belong to either an oligopoly market or a monopolistically competitive market. We know that advertisement plays an important role in a monopolistically competitive market. Besides this, another salient feature of a monopolistically competitive market is product differentiation. Every firm under a monopolistically competitive market performs product differentiation. In our example, there are several firms producing low calorie microwavable foods. But each of the firms practices product differentiation. They slightly differentiate their product from their competitors to highlight their own product and thereby increase the market share. Therefore this firm is an example of a monopolistically competitive market . Pricing Strategies : In a monopolistic competitive market, there are a large number of sellers. Hence a price change will induce the consumers to shift to other firm. This makes the demand curve relatively elastic. But since the products sold under monopolistic competitive market are differentiated, the demand curve is not perfectly elastic like that of a perfectly competitive market. competitive market....
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Assignment 2& Operations DecisionEco 550T'e purpose o( t'is paper is to present t'e )o*+ca)orie micro*a!ea")e (oo,s- in support o( t'e company-s )ong run operations ,ecision p)ans. n t'e paper$  *i)) e/amining t'e resu)ts o( t'e ne* supp)y cur!e as it re()ects to t'e current market structure an, t'en take into account t'e e/pecte, c'anges to t'e se))ing en!ironment an, (actors t'at may 'a!e cause, t'e c'ange.  *i)) a)so e/amine c'ie( s'ort+run an, )ong+run pro,uction an, cost (unctions as app)ie, to t'is ne* cost ,ata to ,etermine i( t'ere are con,itions un,er *'ic' operations cou), "e ,iscontinue,. Gi!en t'e c'ange in t'e market structure t'ey *e "e a nee, to re!ie* t'e pricing structure so as to ma/imie pro(its. 1ina))y$  *i)) proposes t*o 23 course o( actions t'at t'e company s'ou), take to increase pro(ita"i)ity an, ma/imie s'are'o),er-s !a)ue.#. T'e e((ecti!eness o( t'e market structure t'e company is operating.E!ery company in a pure competiti!e market is a price taker4 t'e eui)i"rium price an, in,ustry output are is a ,irect resu)t o( ,eman, an, supp)y. T'e market (or )o*+ca)orie micro*a!a")e (oo,7 s'o*s 'o* ,eman, an, supp)y in t'e market (or )o* ca)orie (oo,s$ pro,uce, un,er con,itions o( per(ect competition$ ,etermine t'e tota) output an, price consumers are *i))ing to  pay. T'e eui)i"rium price is %08.65 cents4 t'e eui)i"rium uantity is 2%$995.:D ; 65$#00 +#00<:s ; +8=0=.>= ?8=.0=>=<.1irm operating in a pure competiti!e se))ing en!ironment 'as no ,irect say on *'at t'e (irm c'arges on its pro,uct$ 'o*e!er$ t'e (irm can contro) t'e uantity supp)y to t'e market. Accor,ing to S)ack @ Le*is$ success or (ai)ure ,epen,s in a pure competiti!e market )ies in 'o*a company contro)s pro,uction cost an, portrays its "ran, 200>3. n pick out t'e capacity o(

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