Eco 550 Assignment 2 Assignment

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Assignment 2: Operations Decision Strayer University ECO 550 – Managerial Economics Professor Dr. Pennington 19 May 2014 1. Plan Outline to Set Its Own “Optimal Price” This case study involves leading brands of low-calorie, frozen, microwavable food that estimates the following demand equation for its product using data from 26 supermarkets around the country in the month of April. Furthermore, we are using the regression equation from Assignment 1 to determine the market structure in which the low-calorie frozen, microwavable food company operates. The following is the optimal price with new data from the information of previous data that was collected for the regression equation from the 26 supermarkets observed. The plan is to obtain an “optimal” selling price due to recent changes by selling environment. That suggests an imperfectly competitive market where our company has substantial market power to set our own price. From Assignment ,1 it was determined that the market structure (or selling environment) was perfectly competitive and the equilibrium price was to be calculated by setting QD equal to QS. The estimated price of Quantity demanded for the optimal price is as follows: Regression Equation If P =0, Q = 38650, Q = 0, P= 920 QD = 38650 -42P FC = 160,000,000 cents +42P = 38650 –Q VC = 100Q + 0.0 +0.0063212Q2 P = 38650/42 – 1/42Q TC = $1,600,00,0 100Q + 0.0126424 P = 920.24 – .0238095Q Q = 100 + 0.0126424 MR = 920.24-.047619Q = MC = 100 + 0.0126424Q =-920.24 - 100 = 0.047619Q + 0.012642Q = 820.24 = 0.0602614Q MC = 100 + 0.0126424(13611) Q = 820.24/0.0602614 MC + 100 + 172.08 Q = 13611 rounded MC = 272 P = 920.24 - .023809Q(13611) MR = 920.24 -.047619 * 13611 P = 920.24 – 324.06 MR = 920.24 -648.14 = 272 P = 596.18 cents or $5.96 Optimal Price AFC = 160,000,000/13611 = 11.75 AVC = 100 + .0063212(13611) = 1.86 ATC = $11.75 + 1.86 = $13.61 The above calculation shows the optimal selling price of $5.96 using a quantity of 13611 this is compared as to competitor’s selling price of $6.00 from the regression analysis in Assignment 1. 2. Two Likely Factors That May Have Caused Changes: Factors that determined change from

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