...LINDSEY APPELGET EGT TASK 1 SUBDOMAIN: 309.1 – ECONOMICS Competency 309.1.1: Marginal Analysis - The graduate correctly applies marginal analysis. Objective 309.1.1.05: Describe the relationship between marginal revenue and marginal cost at the point of profit maximization. Objective 309.1.1.06: Explain the concept of profit maximization. Introduction: Business owners, managers, and aspiring entrepreneurs need to know the best form of business organization to select based on various considerations, including taxes, liability, capital contributions, sharing of profits and losses, management and control, and survivorship. Task: Write an essay (suggested length of 1–3 pages) that explains the relationship between marginal revenue and marginal cost, and the importance of these concepts for profit maximization in which you do the following: A. Define marginal revenue. Marginal Revenue is the change in revenue that results from the sale of one additional unit of output. (McConnell & Brue & Flynn 2012) Marginal revenue is calculated by dividing the change in total revenue by the change in output quantity. 1. Explain its relationship with total revenue. Total revenue is all money/income that a business makes over a period of time from the sale of goods or services. It is calculated by multiplying quantity sold by price. If you know marginal revenue you will be able to tell what total revenues will do if business sales change. If marginal revenue is...
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...EGT 1 Task 1 A. 1. The profit maximization approach used when total revenue and total cost are compared is the largest positive gap or profit gained between total revenue less total cost. In the table provided the largest profit or profit maximization would be $540. When you produce 8 items profit is at its highest point. To calculate total revenue you take the price times the quantity and to calculate total cost you take the sum of variable and fixed costs. 2. The profit maximization approach used when marginal revenue and marginal cost are compared is to take the marginal revenue less the marginal cost. In this process you look at how each additional unit affects total revenue and total cost. Marginal revenue is equal to the change of total revenue divided by change in quantity and Marginal cost is equal to the change in total cost divided by change in quantity. Once marginal cost exceeds marginal revenue it is not effective to produce the product and there is no longer a profit maximization. The profit maximization approach when using marginal revenue and marginal cost is to make as many products as you can until marginal cost equals marginal revenue. B. 1. Marginal revenue it the change in total revenue divided by the change in quantity. To get total revenue so that you can calculate marginal revenue you need to take the price times quantity less total cost. Marginal revenue becomes elastic and stays constant when there is perfect competition. But marginal revenue usually...
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...EGT 1: Task 2-309.1.2-08 & 09 Elasticity of demand is the relationship between the demands for a product with respect to its price. Generally, when the demand for a product is high, the price of the product decreases. When demand decreases, prices tend to climb. Products that exhibit the characteristics of elasticity of demand are usually cars, appliances and other luxury items. Items such as clothing, medicine and food are considered to be necessities. Essential items usually possess inelasticity of demand. When this occurs prices do not change significantly. “The Cross-price elasticity of demand measures the rate of response of quantity demanded of one good, due to a price change of another good” (Economics.about.com, 2013). When two similar products are present they are considered to be substitutes for each other. For example, say you have Coke and Pepsi. When the price of Coke rises so will the increased demand for Pepsi and other like products. This is considered to be a positive relationship. The relationship is negative when you have two products that complement each other. For example, say the price of a car increases. When price escalates the demand for tires, its complementary product, will decrease. Income elasticity is a way that economists measure the level that people act in response to changes in their income that may effect the consumer purchasing more or less of a product. This form of measurement helps to classify products as inferior...
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...A. Explain profit maximization from the following approaches: 1. Total revenue to total cost 2. Marginal revenue to marginal cost Profit maximization is when the largest amount of profit is made based on output levels and prices. In the total revenue to total cost approach, profit is maximized when the total revenue exceeds total cost by the greatest amount. The profit maximization is going to be found between the two break even points. The break even points are where the total revenue and total cost are equal to each other, but that only includes the normal profit. Economic profit is found between the break even points and that is also where the greatest distance between total revenue and total cost is found. In the marginal revenue to marginal cost approach, profit is maximized when the two equal each other. This approach shows profit will be made as long as marginal revenue is more than marginal cost, and the profit is maximized once marginal revenue equals marginal cost. When marginal cost exceeds marginal revenue, profit is no longer being made. Profit maximization will only occur if the price of the product is equal to or greater than the average variable cost. If the marginal revenue does not exceed or at least equal the average variable cost, it would make the most sense to shut down production completely. B. Explain the calculation used to determine marginal revenue. 1. Discuss how marginal revenue increases, decreases, or remains constant in the given scenario. Marginal...
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...EGT1: Economics and Global Business Applications Marginal Analysis By Christine Poole April 12, 2013 Abstract This essay will define marginal revenue, marginal cost, and profit, and it will explain the relationship each has with total revenue, total cost, and it will explain the concept of profit maximization. Marginal Revenue Marginal revenue is “The change in total revenue that results from the sale of 1 additional unit of a firm’s product; equal to the change in total revenue divided by the change in the quantity of the product sold.”(McConnell, C. R., & Brue, S. L., Flynn, S. (2012)). Total revenue is the total receipts of a firm from the sales of any given quantity of a product. It can be calculated as the selling price of the firm’s product times the number of items sold. If the total revenue is zero when zero units are sold, then the first unit of output sold increases total revenue by the selling amount, which is also the marginal revenue amount. The demand for the product will determine whether the marginal revenue is higher, lower or the same as the revenue from the previous unit produced. “While marginal revenue can remain constant over a certain level of output, it follows the law of diminishing returns and will eventually slow down, as the output level increases.” www.investopedia.com/terms/m/marginal-revenue-mr.asp. When marginal revenue equals marginal cost competitive firms will stop producing output. Marginal Cost Marginal cost...
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...Running head: MAXIMIZING PROFIT WITH MARGINAL ANALYSIS 1 Maximizing Profit with Marginal Analysis Timothy L. Gould Western Governors University MAXIMIZING PROFIT WITH MARGINAL ANALYSIS 2 Abstract In today’s market it is important to not only stay competitive but be able to grow with the market. In order to accomplish this, a company must pay close attention to its total revenue earned versus its total costs incurred. It must maximize its earnings while assuring that the reward is outweighing the cost of pursuing that reward. MAXIMIZING PROFIT WITH MARGINAL ANALYSIS 3 Total revenue to total cost Of course we want to make money. We have also heard the term “it takes money to make money”. This is very true in any institution that manufactures goods that it then resells for a profit. We do not want to spend five dollars of “total cost” to make only 4 dollars of ”total revenue”. Therefore we must evaluate our total costs of producing an item and assure that we make a profit when we sell the item to a customer. We also want to assure we are maximizing our profit by getting the most we can in our market. As a company that produces widgets we will always have certain costs to do business. Electricity, labor, materials and even rent are always present in our expenses. Some costs are going to be present regardless of how many items we make. These costs are considered fixed expenses. Rent...
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...cost you will have a profit but when total cost exceeds total revenue you have a loss. In the graph below you can see at 8 units is where the maximum profit would be. After 8 units are produce you see the effect of diminishing returns as your profit for each unit produced gets smaller and smaller until it hits 15 units and you are now taking a loss for each unit produced. Profit maximization is determined by the greatest gap between TR & TC. Quantity TR TC Profit 0 $0.00 $10.00 ($10.00) 1 $150.00 $30.00 $120.00 2 $290.00 $50.00 $240.00 3 $420.00 $80.00 $340.00 4 $540.00 $120.00 $420.00 5 $650.00 $170.00 $480.00 6 $750.00 $230.00 $520.00 7 $840.00 $300.00 $540.00 8 $920.00 $380.00 $540.00 9 $990.00 $470.00 $520.00 10 $1,050.00 $570.00 $480.00 11 $1,100.00 $680.00 $420.00 12 $1,140.00 $800.00 $340.00 13 $1,170.00 $930.00 $240.00 14 $1,190.00 $1,070.00 $120.00 15 $1,200.00 $1,220.00 ($20.00) Quantity MR MC 0 $0.00 $0.00 1 $150.00 $20.00 2 $140.00 $20.00 3 $130.00 $30.00 4 $120.00 $40.00 5 $110.00 $50.00 6 $100.00 $60.00 7 $90.00 $70.00 8 $80.00 $80.00 9 $70.00 $90.00 10 $60.00 $100.00 11 $50.00 $110.00 12 $40.00 $120.00 13 $30.00 $130.00 14 $20.00 $140.00 15 $10.00 $150.00 When using the marginal cost to marginal revenue to determine maximum profit you would use the formula MR=MC. So when the marginal revenue is equal to marginal cost your profit is at its maximum...
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...Course ID: EGT 1 Task 2 Task: Section A When discussing elasticity of demand we discover three major terms. When company A reduces the given unit price and the consumer reacts by purchasing larger quantities, which in turn creates an increased profit margin, we term this elastic meaning the increased demand percentage change in quantity is greater than the change in price percentage. Given the same scenario and consumer purchases increase, but not enough to cause a gain in revenue, instead it creates a loss in revenue, we call this inelastic demand. Unit elasticity can occur from the same scenario when the increase consumption causes revenue to remain the same with no increase or decrease. = The coefficient is what economist use to measure elasticity or inelasticity. Section B Cross elasticity of demand measures the sensitivity of consumer purchases. It shows the effect of price changes to consumer purchases. Example product X has price percentage change, which cause a percentage change in purchase quantity of product Y. = When we talk about cross price elasticity as it pertains to substitute goods, we can use the example of Coke and Pepsi. If the price of Coke is raised 15%, the consumption of Pepsi will go up in reaction. Pepsi would be considered a good substitute. This would be considered a positive cost elasticity for Pepsi because of the increase in sales; meaning that the sales of one product moves is the same direction as the change in price of another. In short...
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...EGT1 Task 2 A Define the following three terms A1. Elasticity of Demand is the consumers response or sensitivity to a change in price. It is classified as elastic, inelastic, or unit elasticity. Elastic demand is when a specific percentage change in price results in a larger percentage change in quantity demand. Inelastic demand is when a specific change in price produces a smaller percentage change in quantity demand, Unit elasticity is when the percentage in change in price is the same as the percentage change in demand. A2. Cross Elasticity of Demand is the ratio of percentage change in quantity demand of one good to the percentage in the price of some other good. A positive coefficient indicates the tho products are substitutes a negative coefficient indicates the two products are complementary. A zero or near zero cross elasticity means the products are considered independent. A3.Income Elasticity of Demand is the ratio of the percentage change in the quantity demand of a good to a percentage change in consumer income; it measures the responsiveness of consumer purchases to income changes. A positive coefficient means more of the product is in demand as income rises, they are known as normal goods. A negative coefficient mean purchasing of a product decreases as income rises means the product is an inferior good. B. Explain the elasticity coefficients for each of the three terms defined in part A. B1. Elasticity of Demand. If the coefficient is greater...
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...Western Governors University Economics and Global Business Task 2 Egt1: Task 2 A) Elasticity of demand is describes as the degree of percentage change in demand for a good or service due to variation in price. Elasticity measurements can be expressed by three types of demand; inelastic demand, unit elastic demand, or relatively elastic demand. To determine the percentage of change in demand for a product or service the price elasticity equation and coefficient are used. The coefficient Ed is defined as “the percentage change in quantity demanded of product divided by the percentage change in price of product X” (McConnell, Brue, Flynn, 2012, pg. 76) The three expressions of Ed are Elastic, Inelastic, and Unit Elasticity. Elastic demand occurs “if a specific percentage change in price results in a larger percentage change in quantity demanded” (McConnell, Brue, Flynn, 2012, pg. 77). For a product with inelastic demand Ed < 1. An example of elastic demand is when there is a 2% decrease in the price of chocolate that results in a 6% increase in quantity. Ed= .06/.02 = 3 Inelastic demand occurs “if a specific percentage change in price produces a smaller percentage change in quantity demanded.”(McConnell, Brue, Flynn, 2012, pg. 77) For products with inelastic demand Ed <1. An example of inelastic demand is when there’s a 2% decrease in the price of milk that results in a 1% increase of demand. Ed= .01/.02 = .5 Unit elasticity of demand occurs “where a percentage...
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...Company A has made a decision to expand their company in Japan. Our company is going to face some failures in this market located in Japan. When looking at this we do not want to fail on our first attempt. Of course, this is a risk that will have to be taken. If there is a failure on this first attempt, we will incur a great expense, and not mention the difficulty to attempt a second attempt in that particular market. I feel that the most important problem that we are going to face will be the language barrier. The official language in Japan is Japanese. If the local business chooses to conduct a business in Japan, a fluent interpreter will need to be present at all times. This is another expense for the company. English is a language that is taught in Japan, but it is not the primary language that is spoken there. The Japanese have a tendency to be passive resistance. There are a couple of things that this culture takes very seriously. One would be body language. Silence is something that is more integrated in their culture and customs. Helping to avoid a misunderstanding between you and the Japanese conversationalist you will need to use the Japanese body language along with verbal communication. Eye contact here in the United States is something that we use, that is considered very important. In Japan this is to be considered very rude and also aggressive. I feel that to get buy in Japan we need to make sure that we have just a basic knowledge of their culture...
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...prohibit mergers and acquisitions when those would substantially lessen competition. ○ enabled state attorney generals the ability to prosecute and enforce federal antitrust laws. ○ outlawed price discrimination, regulated stock acquisitions, and tying contracts ○ The Robinson - Pitman Act amended the Clayton Antitrust Act by banning discriminatory business practices. Celler-Kefauver Act 1950 ○ passed to regulate the acquisition of firms that were not in direct competition ○ limited mergers that would result in less competition in a market (Research Paper by Eveningepiphany. (n.d) B. Discuss the intended purpose of industrial (i.e., economic) regulation as it applies to the following market structures: 1....
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...Egt Task 1 Quantity 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 TR TC $0.00 $10.00 $150.00 $30.00 $290.00 $50.00 $420.00 $80.00 $540.00 $120.00 $650.00 $170.00 $750.00 $230.00 $840.00 $300.00 $920.00 $380.00 $990.00 $470.00 $1,050.00 $570.00 $1,100.00 $680.00 $1,140.00 $800.00 $1,170.00 $930.00 $1,190.00 $1,070.00 $1,200.00 $1,220.00 Profit MR MC ($10.00) $0.00 $10.00 $120.00 $150.00 $20.00 $140.00 $140.00 $20.00 $340.00 $130.00 $30.00 $420.00 $120.00 $40.00 $480.00 $110.00 $50.00 $520.00 $100.00 $60.00 $540.00 $90.00 $70.00 $540.00 $80.00 $80.00 $520.00 $70.00 $90.00 $480.00 $60.00 $100.00 $420.00 $50.00 $110.00 $340.00 $40.00 $120.00 $240.00 $30.00 $130.00 $120.00 $20.00 $140.00 ($20.00) $10.00 $150.00 A. 1. Total revenue is found by multiplying output by the price. We also will find the profit amount by subtracting the total cost from the total revenue. From there we look for the largest difference in the Total cost and total revenue which will give us the maximum profit amount. 2. The Marginal Revenue and Marginal Cost approach for profit maximization is found when the marginal revenue equals the marginal costs. B. To figure marginal revenue we divide the change in total revenue by the change in quantity. 1. The marginal revenue decreases by 10 for each of the widgets that Company A produces. C. To figure marginal cost we divide the change in total costs by the change in quantity...
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...EGT 1 Task 4 In choosing to expand my business globally into the Asian continent, I would highly favor Singapore. After much research, I discovered that Singapore is paramount in global ranking in satisfaction of achieving a successful business. Doing business in Singapore provides boundless advantages which could lead one to believe that establishing ones business there could be done without challenges in regard to cultural differences. Nonetheless, there are several crucial cultural hurdles, if not addressed, could lead to incurring massive costs, should they be overlooked. Following are three primary cross-cultural differences to be considered in doing business in Singapore. In regard to relationships, Singapore is greatly persuaded by Asian ideologies. There is a strong emphasis on the significance of establishing a good relationship prior to doing business. This process is often unhurried as Singaporeans are guarded, wanting to be sure they are forming business relationships with those they are able trust. It is beneficial to keep in mind when doing business in Singapore, devoting time to create solid relationships will be best for business in the long haul. In establishing these bonds, it is crucial to be genuine and demonstrate good character and capabilities. Singapore, being a somewhat immature country, is influenced by both east and west and is well set to do business profitably with both. As the most advanced country in Southeast Asia, Singapore harmoniously...
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...EGT1 Task 1 – Marginal Analysis The profit calculation of total revenue and total costs is Profit (P) equals total revenue (TR) minus total costs (TC) and focuses on maximizing this difference. Profit will be maximized when the total revenue, or the amount they would receive by selling that particular widget exceeds the total cost, or the costs associated with making this widget by the greatest amount. The greatest difference between these two is considered the profit.The profit calculation of marginal revenue to marginal costs is different where the company will compare the marginal revenue (MR) they would receive from selling one more widget to the marginal cost (MC) of producing that additional widget, and how much cost it would add to the total revenue and total costs. Profit maximization occurs when the marginal revenue received from the widget is the same as the marginal cost of producing the widget.Marginal revenue is calculated by dividing the change in total revenue (TR) by the change in quantity (Q) sold, which is calculated as ΔTR/ΔQ (MR = ΔTR/ΔQ) (Gish). Another way to figure marginal revenue is to take the total revenue of a particular quantity of widgets and subtracting the total revenue of one less widget. Quantity | TR | MR | 0 | $0.00 | $0.00 | 1 | $150.00 | $150.00 | 2 | $290.00 | $140.00 | 3 | $420.00 | $130.00 | 4 | $540.00 | $120.00 | 5 | $650.00 | $110.00 | 6 | $750.00 | $100.00 | 7 | $840.00 | $90.00 | 8 | $920.00 ...
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