Krispy Kreme Microeconomic Analysis: Dozen Glazed Donuts

1298 WordsJun 9, 20096 Pages
Krispy Kreme Microeconomic Analysis: Dozen Glazed Donuts Elizabeth Reel GM 545 Ben Gruszczyk Introduction Krispy Kreme's glazed donuts are a tasty treat especially hot out of the oven. Thousands of people enjoy this delectable delight every day. Knowing this I will attempt to analyze the microeconomics of a dozen glazed donuts at a weekly basis. I will be covering terminal course objectives A through D. The TCOs are as follows: TCO A- Illustrate how the price mechanism, in response to changes in other demand or supply factors leads to a new market equilibrium price and level of output. TCO B- Given appropriate marketing data, including price elasticity coefficients, demonstrate how to use this information in product pricing…show more content…
There is no TR test for the elasticity of supply, price and TR always move together. Marginal Analysis Total Quantity TFC TVC TC ATC MC TR (price=$4.40) Profit or Loss 260,000 $150,000 $150,000 $300,000 $1.15 $.71 $1,170,000 870,000 190,000 150,000 100,000 250,000 1.32 .1 855,000 605,000 120,000 150,000 93,000 243,000 2.03 .73 540,000 297,000 75,000 150,000 60,000 210,000 2.8 1.4 337,500 127,500 50,000 150,000 25,000 175,000 3.5 .5 225,000 50,000 0 150,000 0 150,000 0 (150,000) From the above information (which is fictional data), we can assume that the breakeven point is somewhere between 75,000 and 120,000 dozen donuts produced, and the more they produce the more profit they will have. That is if they have a set price of $4.50 per dozen. In evaluating this data, I think that Krispy Kreme should and will stay in business due to the fact that the profit potential is very high. Competitive Market This last TCO asks us to discuss optimal output levels for a competitive firm versus an imperfectly competitive firm. I do not think that this applies to this particular firm due to the fact that there are so many producers of glazed donuts in all competitive markets. There are no donut monopolies and I doubt that any antitrust laws will be broken by Krispy Kreme now or in the near future. NOTE: With the exception of the current selling

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