Micro Economics

Stage: 1 Short-Run Production Costs (23 points)
 Your business idea and name (5 points)
 From Blackboard, choose the output and variable cost information that more closely represents your cost information (i.e. if you are building pens, choose the cost information that you want to use from the available options)
 Explanation of your variable (2 points)
 Explanation of your fixed costs (2 points)
o (i.e. explain what kind of fixed costs your business venture would face)
 Calculate all of your costs information on the table (8 points)
 Graph your ATC, MC (6 points)
Stage: 2 Revenue Information (16 points)
 Assumption – your business is operating in a monopolistic competitive market model
 Determine the prices for the product you are selling. Remember that you are looking to be a profitable entity (2 points)
 Calculation of your TR and MR (8 points)
o Results of your calculation on a table
 On the previous graph for Stage 1, graph your MR (6 points)
Stage 3: Profit Maximizing Decision (24 points) remember your business is operating in a monopolistic competitive market model!
Short – Run:
 Use the MR = MC rule to calculate your profit maximizing output (4 points)
o Explain what your output would be and why (4 points)
 Illustrate the profit maximizing point on your existing graph (2 points)
 On the graph, draw the demand curve that would exist if your business was experiencing short-run economic profits (4 points)
Long – Run:
 Explain what happens in the long run in your particular industry as a result of businesses experiencing economic profits (4 points)
 Illustrate your existing graph the scenario that would take place in the long run as a result of the existing economic profits both for the firm and the industry ( 6 points

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