Long-Term Investment Decisions

Assignment 3: Long-Term Investment DecisionsDue Week 9 and worth 300 pointsAssume that the low-calorie frozen, microwavableFOOD company from Assignments 1 and 2 wants to expand, and has to make some long-term capital budgeting decisions. The company is currently facing increases in the costs of major ingredients.Use the Internet and Strayer databases to research government policies and regulation.Write a six to eight (6-8) page paper in which you:Outline a plan that managers in the low-calorie, frozen microwaveable food company could follow in anticipation of raising prices when selecting pricing strategies for making their products’ response to a change in price less elastic. Provide a rationale for your response.Examine the major effects that government policies have on production and employment. Predict the potential effects that government policies could have on your company.Determine whether or not government regulation to ensure fairness in the low-calorie, frozen microwavable food industry is needed. Cite the major reasons for government involvement in aMARKET economy. Provide two (2) examples of government involvement in a similar market economy toSUPPORTyour response.Examine the major complexities that would arise under expansion via capital projects. Propose key actions that the company could take in order to prevent or address these complexities.Suggest the substantive manner in which the company could create a convergence between the interests of stockholders and managers. Indicate the most likely impact to profitability of such a convergence. Provide two (2) examples of instances that support your response.Use at least five (5) quality academic resources in this assignment. Note: Wikipedia does not qualify as an academic resource.Your assignment must follow these formatting requirements:Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides; citations and references must follow APA or school-specific format. Check with your professor for any additional instructions.Include a cover page containing the title of the assignment, the student’s name, the professor’s name, the course title, and the date. The cover page and the reference page are not included in the required assignment page length.The specific course learning outcomes associated with this assignment are:Propose how differences in demand and elasticity lead managers to develop various pricing strategies.Analyze the economic impact of contracting, governance and organizational form within organizations.Use technology and information resources to research issues in managerial economics and globalization.Write clearly and concisely about managerial economics and globalization using proper writing mechanics.FIND IN THE ATTACHED DOCUMENTS, THE INTRUCTIONS FOR THE ASSIGNMENT, SUGGESTED RELEVANT TOPICS, ASSIGNMENT 1 & 2 FOR REFERENCE PURPOSES.PLEASE CAREFULLY READ THE INSTRUCTION AND FOLLOW GUIDELINES AS I EXPECT TO RECEIVE AN AWESOME WORK FROM YOU.
assignment_3_instructions.pptx

assignment_3_suggested_relevant_topics.pptx

Don't use plagiarized sources. Get Your Custom Essay on
Long-Term Investment Decisions
Just from $13/Page
Order Essay

eco_550_assignment_1.docx

eco_550_assignment2.docx

Unformatted Attachment Preview

Assignment 3
INSTRUCTIONS
QUESTION 1
• Outline a plan that managers in the lowcalorie, frozen microwaveable food company
could follow in anticipation of raising prices
when selecting pricing strategies for making
their products response to a change in price
less elastic. Provide a rationale for your
response.
QUESTION 1
• An inelastic product is the one whose demand
does not change significantly when prices
change. A company facing inelastic demand can
take advantage by charging high prices without
worrying about loosing consumers.
• You have to answer the following questions:
– What would a company do if it is forced to charge
higher prices in the future?
– What pricing strategies are appropriate for products
with inelastic demand?
QUESTION 2
• Examine the major effects that government
policies have on production and employment.
Predict the potential effects that government
policies could have on your company.
QUESTION 2
• You have to identify the benefits and costs of
regulations.
• An example of a benefit would be regulations
that improve workers’ health and productivity,
or protect consumers.
• An example of a downside would be that
enforcing regulations may result in substantial
rise in costs of doing business and lower
efficiency.
Question 2
You have to explore the following:
Specific regulations affecting food industry in terms of consumer safety
• You should also identify what type of regulations are important in the food
industry.
– Example: food safety
• You have to identify the regulatory institution responsible for food safety as
well as the main piece of legislation that the regulators use to make sure
that consumers have enough information about the food they consume.
Other regulations affecting industry in general
• Some examples are: employment regulations, occupational safety
regulations, wage policy, environmental regulations, anti-trust regulations,
regulations of advertising…
Macroeconomic policies affecting the industry
• Fiscal policy
• Monetary policy
• You should explore in what way fiscal and monetary policy affect businesses.
QUESTION 3
• Determine whether or not government
regulation to ensure fairness in the lowcalorie, frozen microwavable food industry is
needed. Cite the major reasons for
government involvement in a market
economy. Provide two (2) examples of
government involvement in a similar market
economy to support your response.
QUESTION 3
Rationale for government
involvement in a market economy
Here are some examples:
–Enforcement of contracts.
–Promoting competition
–Welfare assistance
–National defense
–…
Question 3
What justifies government regulation in the lowcalorie microwavable food industry?
Examples:
– Food safety
– Food quality
– Requiring producers to provide information to
consumers
QUESTION 4
• Examine the major complexities that would
arise under expansion via capital projects.
Propose key actions that the company could
take in order to prevent or address these
complexities.
QUESTION 4
The complexities of expansion via capital
projects have been discussed in KC’s scenario.
Here are some examples:
– Capital requirements
– Various types of risk
– Government regulations
–…
Question 4
Here are some examples of key actions to
address complexities of expansion via capital
projects:
– Use of capital budgeting methods
– Business and financial risk management
– Cost control
–…
QUESTION 5
• Suggest the substantive manner in which the
company could create a convergence between
the interests of stockholders and managers.
Indicate the most likely impact to profitability
of such a convergence. Provide two (2)
examples of instances that support your
response.
QUESTION 5
• You should discuss issues such as:
– Principal-agent problem
– Interests of managers
– Interests of stockholders
– Ways to align these interests
• Should use examples
Assignment 3
Suggested Relevant Topics
QUESTION 1
• Outline a plan that managers in the lowcalorie, frozen microwaveable food
company could follow in anticipation of
raising prices when selecting pricing
strategies for making their products
response to a change in price less elastic.
Provide a rationale for your response.
QUESTION 1
Suggested Relevant Topics
• An inelastic product is a product the demand for
which does not change substantially as a result of
price changes.
• This implies that a company facing inelastic
demand can charge higher prices without
worrying about loosing consumers.
• Necessities and products perceived as unique
have relatively low price elasticity of demand
• The purpose of making the product price inelastic
is to charge a higher price without loosing
customers.
Question 1
Suggested Relevant Topics
• The managers in the low-calorie, frozen microwavable food
company should focus on successful differentiation of their
product, i.e., make it less price elastic.
• If consumers perceive the product as unique with very few or
no substitutes, they will be willing to pay higher prices and
will be less sensitive to price increases.
• To differentiate its product, a company can design unique
packaging, provide clear nutrition information, and increase
variety. It can also segment the market based on different
demographic characteristics and target different segments
with different versions of the product.
Question 1
Suggested Relevant Topics
• Appropriate pricing strategies for inelastic products
are price differentiation, premium pricing, high
value moderate cost pricing, and relative pricing.
• Block pricing, two-part tariff, price discrimination
such as quantity discounts, versioning, and
coupons, as well as bundling could be appropriate
pricing strategies for a company in this type of
business.
QUESTION 2
• Examine the major effects that government
policies have on production and employment.
Predict the potential effects that government
policies could have on your company.
QUESTION 2
Suggested Relevant Topics
• Regulations can be designed to explicitly benefit
the economy and particular industries, and can
lead to investments that create jobs, improve
workers’ health and productivity, and spur
technological innovations.
• Well-designed and effectively enforced
regulations are necessary for the economy to
function effectively.
• On the other hand, too much and difficult to
enforce regulations can substantially increase the
costs of doing business and reduce efficiency.
Question 2
Suggested Relevant Topics
• In this particular business, food safety is
essential.
• The Food and Drug Administration (FDA)
enforces the Food Safety Modernization Act of
2010. These regulations affect for example
packaging and nutrition information.
Question 2
Suggested Relevant Topics
• Other regulations affecting the food industry include:
–
–
–
–
–
–
employment regulations
occupational safety regulations
production and product safety regulations
environmental regulations
anti-trust regulations
regulations of advertising
• Fiscal policy affects taxes and government spending.
• Monetary policy affects interest rates, i.e., the cost of
borrowing.
• Wage policy affects the cost of labor.
QUESTION 3
• Determine whether or not government
regulation to ensure fairness in the lowcalorie, frozen microwavable food industry is
needed. Cite the major reasons for
government involvement in a market
economy. Provide two (2) examples of
government involvement in a similar market
economy to support your response.
QUESTION 3
Suggested Relevant Topics
Rationale for government involvement in a market
economy:
1. Providing legal structure – property rights,
enforcement of contracts, penalties
2. Promoting competition – antitrust regulations
3. Redistribution of income – welfare assistance, social
security, Medicare, Medicaid
4. Providing public goods – national defense, police
protection, space exploration
5. Promoting growth and stability – fiscal and monetary
policy
6. Correcting market failures – pollution, education
Question 3
Suggested Relevant Topics
The government’s regulation in the low-calorie
microwavable food industry is justified for the
following reasons:
1. Consumers must be protected from unsafe or
harmful food or drugs
2. Producers have the responsibility to produce
and use quality ingredients.
3. Public safety
4. Labeling is required to provide consumers with
sufficient information.
Question 3
Suggested Relevant Topics
• In the low-calorie, frozen microwavable
food industry, government regulation and
intervention is necessary because
consumers do not have sufficient
information to make informed choices.
• The government role is to force producers
to provide this information to the
consumers. For example, the government
should require proper labeling and nutrition
information.
Question 3
Suggested Relevant Topics
Here is a list the most important justifications for
government intervention in a market economy:
– Consumer protection
– Encouraging competition
– Preventing monopolies
– Consumer protection
– Stabilizing the macro economy
– Correcting market failures
– Providing public goods
– Redistribution of income
QUESTION 4
• Examine the major complexities that would
arise under expansion via capital projects.
Propose key actions that the company could
take in order to prevent or address these
complexities.
QUESTION 4
Suggested Relevant Topics
Complexities of expansion via capital projects:
1. Substantial financing
2. Elevated risk
3. Access to capital markets might be difficult
4. Potential government regulations/restrictions
5. Stockholders’ resistance
6. If the company is considering international
expansion, it has to deal with foreign-exchange
risk as well as regulatory and tax compliance.
Question 4
Suggested Relevant Topics
Key actions to address complexities of expansion
via capital projects:
1. It is important to use capital budgeting methods
to evaluate feasibility of different expansion
projects.
2. Active oversight and scrutiny of capital spending
to ensure financial viability
3. Business and financial risk mitigation
4. Using a variety of capital resources
Question 4
Suggested Relevant Topics
Other actions that a company could take in
order to prevent or address the complexities of
capital expansion are:
– Focus on core competency
– Economies of scale and more control over costs
– Access to advanced technology and know how
– Compliance and regulation
– Risk management
QUESTION 5
• Suggest the substantive manner in which the
company could create a convergence between
the interests of stockholders and managers.
Indicate the most likely impact to profitability
of such a convergence. Provide two (2)
examples of instances that support your
response.
QUESTION 5
Suggested Relevant Topics
• The agency problem
– Stockholders and managers have different interests.
The managers are mostly interested in their salaries
and perks. Stockholders/owners are ultimately
interested in the stock price, which increases if the
company consistently maximizes its profits.
• Self-expansion or a merger can benefit managers,
but not necessarily stockholders. Thus, the
question is how the interests of managers are
aligned with the interests of the stockholders.
Question 5
Suggested Relevant Topics
• One way to align incentives is executives’
stock options, which give incentives to
managers to behave like owners.
• The main idea is to align incentives.
Executives’ stock options, for example, give
incentives to managers to behave like
stockholders/owners.
Running Header: DEMAND ESTIMATION
Demand Estimation
ECO 550: Managerial Economics And Globalization
Prof. Diana Bonina
October 22, 2017
Arinze Kenneth Okoye
Strayer University
1
DEMAND ESTIMATION
2
Note: The following is a regression equation. Standard errors are in parentheses for the demand
for widgets.
QD = -2,000 – 100P + 15A + 25PX + 10I
(5,234) (2.29) (525) (1.75) (1.5)
R2 = 0.85 n = 120 F = 35.25
Your supervisor has asked you to compute the elasticities for each independent variable. Assume
the following values for the independent variables:
Q = Quantity demanded of 3-pack units
P (in cents) = Price of the product = 200 cents per 3-pack unit
PX (in cents) = Price of leading competitor’s product = 300 cents per 3-pack unit
I (in dollars) = Per capita income of the standard metropolitan statistical area
(SMSA) in which the supermarkets are located = $5,000
A (in dollars) = Monthly advertising expenditures = $640
1. Compute the elasticities for each independent variable. Note: Write down all of your
calculations.
QD = -2,000 – 100P + 15A + 25PX + 10I
P=200, PX= 300, I= 5000, A= 640
QD= -2000-100(200) +15(640) +25(300) +10(5000)
QD= 45,100
Income elasticity= (10) (5000/45100) = 1.11
Price elasticity (Ep) = (P/Q) (?Q/?P)
Ep= (P/Q) (?Q/?P)…… (?Q/?P)= -100
DEMAND ESTIMATION
3
Ep= (200/45100) (-100) = -0.44
Cross-price elasticity= 25(300/45100) = 0.17
Advertisement elasticity= (15) (640/45100) = 0.21
2. Determine the implications for each of the computed elasticities for the business in
terms of short-term and long-term pricing strategies. Provide a rationale in which
you cite your results.
The income elasticity of demand is 1.11. An income elasticity of 1.11 implies that a one
percent increase in the income of the consumers leads to a 1.11% increase in the quantity of
the goods demanded. Therefore, the demand is elastic. An increase in the quantity of goods
demanded is thus more in comparison to the increase of the average income of the consumers
McGuigan, Moyer & Harris, 2013).
The price elasticity -0.44. A price elasticity of -0.44 means that a one percent rise in the
price of particular goods leads to a decrease of the quantity of demanded of the same goods by
0.44%. Therefore, demand is inelastic. The rate of change of demand is less than the price
change.
The cross-price elasticity is 0.17. It means that a one percent increase in the price of
competitor’s goods results to a 0.17 increase in the quantity of the goods demanded. Therefore,
when the competitors increase their prices, there is no significant change in the quantity of goods
demanded for the organization.
The advertisement elasticity is 0.21. An advertisement elasticity of 0.21 implies that a
one percent increase in the costs of advertising the good results in a 0.21% increase in the
DEMAND ESTIMATION
4
quantity of goods demanded. Therefore, the demand is inelastic. There is no significant
relationship between the increase in the advertising expenses and the demand for the goods.
3. Recommend whether you believe that this firm should or should not cut its price to
increase its market share. Provide support for your recommendation.
The firm should not cut its prices so as to increase its market share. Remember that the
price elasticity of demand is -0.44. This means that the demand is inelastic. The rate of change of
demand is less than the price change. Therefore, a decrease in price does not lead to a significant
change in the quantity of goods demanded.
4. Assume that all the factors affecting demand in this model remain the same, but
that the price has changed. Further assume that the price changes are 100, 200, 300,
400, 500, 600 cents.
1. Plot the demand curve for the firm.
QD = -2,000 – 100P + 15A + 25PX + 10I
P=200, PX= 300, I= 5000, A= 640
QD= -2000-100P +15(640) +25(300) +10(5000)
QD= 65100-100P
When the price is 600, = 65100- 100(600) = 5100
When the price is 500, = 65100- 100(500) = 15100
When the price is 400, = 65100- 100(400) = 25100
DEMAND ESTIMATION
5
When the price is 300, = 65100- 100(300) = 35100
When the price is 200, = 65100- 100(200) = 45100
When the price is 100, = 65100- 100(100) = 55100
Price
100
200
300
400
500
600
QD
55100
45100
35100
25100
15100
5100
The demand curve;
Quantity Demanded
60000
50000
40000
30000
20000
10000
0
0
100
200
300
400
500
600
700
2. Plot the corresponding supply curve on the same graph using the following MC /
supply function Q = -7909.89 + 79.1P with the same prices.
Supply function=Q= -7909.89+79.1P
When the price is 100, = -7909.89- 79.1(100) =0.11
When the price is 200, = -7909.89- 79.1(200) = 7910.01
DEMAND ESTIMATION
6
When the price is 300, = -7909.89- 79.1(300) = 15820
When the price is 400, = -7909.89- 79.1(400) = 23730
When the price is 500, = -7909.89- 79.1(500) = 31640
When the price is 600, = -7909.89- 79.1(600) = 39550
Price
Quantity
Demanded
100
200
300
400
500
600
Quantity
Supplied
55100
45100
35100
25100
15100
5100
0.11
7910.01
15820
23730
31640
39550
Demand and supply curve
60000
50000
40000
30000
20000
10000
0
0
100
200
300
Quantity Demanded
400
500
Quantity Supplied
3. Determine the equilibrium price and quantity.
QD= 65100-100P
QS= -7909.89+79.1P
600
700
DEMAND ESTIMATION
7
At equilibrium, QS=QD
65100-100P = -7909.89+79.1P
65100+7909.89=100+79.1
73010=179.10P
P= 407.65
Substituting for P
= 65100-100(407.65) = 24,335units
The Demand curve and the Supply curve meets at P= $407.65 and Q= 24,335 Units
4. Outline the significant factors that could cause changes in supply and demand for
the low-calorie, frozen microwavable food. Determine the primary manner in which
both the short-term and the long-term changes in market conditions could impact
the demand for, and the supply, of the product.
Factors that lead to changes in demand and supply include; an increase or decrease in the
average income of the consumers, their tastes and preferences and an increase or a decrease in
the costs of production respectively (Froeb et al., 2015).
5. Indicate the crucial factors that could cause rightward shifts and leftward shifts of
the demand and supply curves for the low-calorie, frozen microwavable food.
Rightward shifts in demand are as a result of increase in the demand for goods. On the
other hand, leftward shifts in demand are due to a decrease in the demand for goods. The
DEMAND ESTIMATION
8
increase in the average income of the consumers and the increase in the price of substitute goods
result in the rightward shifts in demand.
Leftward shifts in demand are caused by a decrease in the demand for goods. Therefore,
factors that lead to the decrease in the demand for goods such as a decrease in the prices of
substitutes and the shifting of tastes to the lesser popularity and future expectations that
demotivate consumers from buying the product cause a leftward shift in the demand curve.
On the other hand, a rightward shift in the supply curve can be due to decrease in the
prices of outputs and advancements in technology. On the other hand, a leftward shift can be
caused by a rise in the prices of the outputs and costly technology (Friedman, 2017).
DEMAND ESTIMATION
9
References
Friedman, L. S. (2017). The microeconomics of public policy analysis. Princeton University
Press.
Froeb, L. M., McCann, B. T., Ward, M. R., & Shor, M. (2015). Managerial Economics. Cengage
learning.
McGuigan, J., Moyer, R. C., & Harris, F. (2013). Managerial economics: applications,
strategies and tactics. Nelson Education.
Running Head: OPERATIONS DECISION
Operations Decision
ECO 550: Managerial Economics And Globalization
Prof. Diana Bonina
November 25, 2017
Arinze Kenneth Okoye
Strayer University
1
OPERATIONS DECISION
2
Operations Decision
Question #1
While the information provided does not expressly show the structure in which the firm
exists, it is highly likely that it is an oligopoly structure, where there are chances that it is in a
duopolistic setting. In such a landscape, the market features a limited number of sellers but
highly numbers of buyers, but still, other factors make it difficult to determine its specific
organization (Jullien & Pavan, 2014). However, an in-depth examination of the figures provided
by …
Purchase answer to see full
attachment

Order a unique copy of this paper
(550 words)

Approximate price: $22

Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

Read more

Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

Read more

Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.

Read more

Privacy policy

Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.

Read more

Fair-cooperation guarantee

By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.

Read more

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
$26
The price is based on these factors:
Academic level
Number of pages
Urgency

Order your essay today and save 15% with the discount code ESSAYHELP