Define Product/Service you will be producing 1. Clearly define your target market Estimate the value of your firm using 10-year expected profits Define in detail the six principal variables that influence Quantity Demand for your product Define in detail the six principal variables that influence Quantity Supplied for your product Estimate a Total Benefit and Total Cost Formula for your product. Use Excel to produce a chart that shows both functions. Use 50 data points (i.e. A=1….. 50) 1. This is an example of a TB/TC function: TB=170A – A^2 TC=100 – 10A + 2A^2 (All you have to do is define thttp://cheaptermpapers.us/wp-admin/post-new.phphe levels of activity on the horizontal axis and solve for TB/TC at each level of activity A.) MB=170 – 2A MC=10+4A Estimate the Marginal Cost/Marginal Benefit and show them in a chart (Take the derivative of TB and TC). What is the Optimal Level of Activity? Assume you are producing at half the optimal level of Activity A* What is the MB at A*/2? What is the MC at A*/2? What should you do? Explain Assume you are producing at twice the optimal level of activity 2A* What is MB at 2A*? What is MC at 2A*? What should you do? Explain. Explain all your findings having your product/market as a backdrop. Want to see how can relate these estimations to your specific business. Verbally define and detail a relevant question that you may need to answer in planning your business operations. Define that question in terms of a regression analysis. For that, you need to find a DEPENDENT variable (Y) that can be explained by changes in an INDEPENDENT variable (X). The relationship between the two variables has to be revenant for your product. Come up with 50 observations of both variables. In Excel, run a simple regression: Y = a + bX Instructions: In excel, go to DATA, click on Data Analysis^2. From the Analysis Tools choose Regression. Select the data for the Output Y data (your data for the dependent variable Y). Then do the same for X and click OK. Interpret your results. Make sure you stress the results’ relevance for your project. Use these results to conduct some forecasting, playing with different values of X. Assume that you consume 1 to 10 units of your product. In the Table, assign the marginal utility you give to the product each time you add one unit. Just come up with a number, higher when you get more marginal utility and lower when you get less, and even negative when you consume much of it. PLOT A CHART. Then, estimate the Total Utility. PLOT A CHART. When do we see diminishing marginal utility? What does it mean in the specific context of your product? Explain. ASSUME your clients can either buy your product or another similar product. Define the income you deem your customers will have to spend on these two items and also define the price of your product and the other product, as well as the marginal utility of the other product before you fill in the table. Based on the results on the table, determine how your consumer would allocate their budget. Assume you got the following data from the production of your product, Q and P can be in units, tens, hundreds, thousands, or millions, depending on your product. Make sure you choose the appropriate units. Estimate Total Revenue (TR), Marginal Revenue (MR) and Price Elasticity of Demand (E) at every level of quantity demand. Draw a chart for each (TR,MR, and E). In each of the charts, explain in detail– and specifically related to YOUR product–the relationship between Elasticity and Quantity demanded, Total Revenue and Marginal Revenue. Use your own words and make sure that it makes sense for your product. Come up with the levels of sales you expect for your product in the first 10 months of operation (From January to October 2018). Make sure you define sales levels that increase over time. Fill in the Actual Observations (Sales) column in the table. Use the coefficient values ( a ) and ( b ) obtained in your own regression and find the estimated regression line at each point and fill in the values in the third column in the table above. Compare the actual observations with your estimated regression. Forecast your level of sales in September 2019. Show your results in a chart and explain why you would expect such results form your product. Assuming capital fixed at a given level, your total short term production (Q) is given by the first column in the table. Also, the number of workers (L) needed for each level of production is given by the second column. the wage rate (w) is “give price”. The units for Q and L and the wage rates (W) can be tens, hundreds, thousands, or millions depending on your product. Make sure you chose the appropriate units. With the appropriate units, estimate the TVC, MP, MC, AP, and AVC and fill in the table. In a Chart, show the MP (left axis) and MC (right axis). Why are they different? Explain that in the context of your product. In a chart, show the AP (left axis) and AVC (right axis). Why are they different? Explain that in the context of your product. In a chart, show the MP (left axis) and the AP (right axis). What happens at the intersection point? Explain that in the context of your product. In a chart, show the MC (left axis) and the AVC (right axis). What happens at the intersection point? Explain that in the context of your product. Derive the Long Run Cost Schedule assuming that the least cost combination of labor and capital units (L* and K* and the wage rates (W) and cost of capital (r) can be tens, hundreds, thousands or millions depending on your product. Make sure you choose the appropriate units. It has to make sense for your product. Draw a chart with the TC function. Does it look like the cubic functions? Why? Draw a chart with the LAC and the LMC functions. Describe what happens before the curves intersect, at the intersection point, and after the intersection point. Make sure you relate your technical explanation with the specific context of your product. Assume you observed the following data from your operations. The units for Q and L tens, hundreds, thousands, or millions depending on your product. Make sure you choose the appropriate units. It has to make sense for your product. a. How well the estimated Q represents the true Q? b. Do the parameter estimates have the appropriate algebraic signs? c. Are they statistically significant at the 1 percent level of statistical significance? d. At what level of labor usage does average product reach its maximum value? e. What is average variable cost when average product is maximized? f. What is short-run marginal cost when average product is maximized? g. Beyond what level of labor employment does the law of diminishing returns set in? Beyond what level of output?
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