Hi Fanar, thanks for the mail. To guide you through this problem and its
organization, the first thing you want to do is look at your results to see
which independent variable(s) are statistically significant. It is for this
reason that I asked all of you to include your summary output charts for
all the regressions in 2a (part a, b, and c), 2b, and 3a. Although it
happens less frequently, the risk free rate can also turn up as
significant. Your discussion should start with which of these variables,
if any, are statistically significant. This should be the focus of the
first paragraph. The focus of the second paragraph should include a summary
of the economic interpretations for these variables only. These were
provided in the email that I sent through the Canvas site last week.
Finally, and using these economic interpretations, please perform a google
search to try to understand why these variables are important in driving
the stock price performance for your company remembering that the stock
price performance is an indicator of the performance of the business
itself.
Please focus your organization and structure in your response to question
#4, to these points. After doing this, please let me know if you would like
me to look at it again and if so please also include in your response the
summary output charts so that I can verify which variable(s) are
statistically significant and can guide you more closely. I hope this
helps. Thanks Fanar.
I. Problems (Please show all work and remember to label all graphs!)
1)Competition: Pure, Monopolistic, Monopoly
You are the manager of GetMoney Inc. and you produce cardboard boxes. Suppose that you hired a consultant for your company to estimate the demand for your cardboard boxes. Your consultant determines that you are operating your business in a monopolistically competitive environment. You collect data on the price and quantity of boxes sold and send it to your consultant, who then estimates the inverse demand equation as P= 7–(1.5)*Q. Please also assume that you have a fixed cost of $1and that the variable cost as estimated by your consultant is V(Q) = 3Q + (0.5)∗ 2.
a)What is the quantity that maximizes profits based upon the above information? What are the corresponding maximum profits that you can earn? (Please use graphs to support your answer.)
b)Considering your answer to part a, would you conclude that the profits that you earned were made over the short–run or long–run? What happens in the long run to your profits in this type of market structure?(Please use graphs to support your answer).
c)Considering your answer to part b, what would you expect to happen to your profits if you operate your business in a monopoly? Why or why not?
2) Production processes and cost theory
You are an efficiency expert hired by a manufacturing firm that uses K and L as inputs. The firm produces and sells a given output. If w = $5, r = $11, MPL= 40, and MPK= 60.
a. Please indicate whether your firm is employing the optimal mix of labor and capital.(Please use graphs to support your answer.)
b.Considering your answer in part a, if you concluded that your firm is not using the optimal mix of labor and capital, what must your firm do in order to employ the proper mix of labor and capital? (Please use graphs to support your answer.)
II. Essays
3) Production theory and cost processes this question, please find an article from a mainstream news source pertaining to the same firm you selected for your term project that discusses economies of scale and scope in the market for the product. Please also discuss whether you think that the graphs and noted shocks are consistent with the zoom lecture on this topic. (please use graphs to support your answer).
4) Oligopoly and Game theory, pricing topics competition: Pure, Monopolistic, MonopolyFor this question, please consider the following four market structures that we covered in the zoom lectures: Pure competition, Monopolistic competition, monopoly, and oligopoly. Please select one product market that the firm you selected for your term project operates in. Of the above four market structures, which one does your firm operate within regarding its operation in this market? (Please find an article from a mainstream news source that supports your answer).
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