Project2Questions-ReportTemplate 2242

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University of Maryland Global Campus (UMGC) *

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620

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Business

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May 1, 2024

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docx

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Project 2 Report Instructions Largo Global Inc. is a fictitious firm that will allow you to understand the market forces of supply and demand as they impact a company and the industry in which the company operates. The company produces several product lines: a simple Standard box and a more elaborate Deluxe box. Many other companies also produce these boxes. In Project 2, you will learn how to apply microeconomics to improve the company's profitability. After reading the instructions in tab one, you will chart the supply and demand curves for the two boxes. In tab two, you will focus on the price elasticity of demand for these two products. In tab 3, you will approximate the prices that maximize the profit for both boxes. Project 2 is the team assignment in MBA 620. Follow these steps to complete the project: 1. In step 3, the team will complete their Team Agreement and Work Plan and submit it to their faculty member by the due date noted by their faculty member. 1. In step 4, the team will complete this Excel file by answering the questions for all three tabs in the boxes provided. One team member will submit this file to the Project 2 Milestone assignment folder by the stated due date to receive feedback from their faculty member. Upon receipt of the feedback, the team will coordinate any necessary corrections. 2. In step 5, each team member must answer all questions for two of the five topics provided in the Word file. These questions constitute the core of your team's report. Each team member will serve as the team’s primary respondent for one of the five topics and coordinate the answers. Each team member will also serve as the secondary respondent to one of the five topics and submit their answers to the primary respondent. a. The faculty member will create a separate Team Project 2 Discussion forum for each team, including all five topics. All team members should prepare their answers to the questions for their two chosen topics as separate Word files. They should post their two files on the appropriate issues in the Team Project 2 Discussion forum. b. After coordinating with the other team members, the primary respondent for each topic will submit their answers to the team’s Word file editor. The editor will then consolidate the answers to the questions for all five topics in a single Word file and submit that file along with the team's revised Excel file to the Project 2 Final assignment folder. c. If the team does not receive a Meets Requirements or Exceeds Requirements grade, the primary respondents will coordinate any necessary changes to the answers for their topic questions and resubmit them to the editor. The editor will then consolidate all changes to the Word file and resubmit the file along with the team's Excel file to the Project 2 Final assignment folder.

Title Page Name Course and section number Faculty name Submission date First Revision Changes (if necessary) Second Revision Changes (if necessary)

Supply and Demand 1. Explain why understanding the law of demand and the law of supply is essential to being an effective manager. 2. Identify the supply factors that are most important in determining the market equilibrium for the Deluxe box. 3. Identify the demand factors that are most important in determining the market equilibrium for the Standard box. Market Structure 1. Explain why understanding the market structure in which the company operates is vital to being an effective manager. Comprehending market structure is crucial for assessing a company's economic choices (Dale, 2011). LGI faces monopolistic competition due to the presence of numerous enterprises with diverse product lines. Based on this information, management can make informed decisions regarding product selection, production methods, output quantities, product pricing, and labor allocation (Greenlaw & Shapiro, 2017). A proficient manager utilizes market structure to comprehend which choices will impact the economic conduct of their industry's rivals. LGI is aware of its significant market influence and hence utilizes it to strategically establish pricing (Dale, 2011). These benefits also contribute to the ease of entry and competitiveness of monopolistic markets. Therefore, LGI must employ umbrella branding and reputation to enhance its market share and gain value (Rasmusen, 2016). Comprehending market structure enables managers to make well-informed judgments, accurately assess competition, identify factors that affect market price, oversee regulations on buying and selling items, and achieve organizational objectives. 2. Explain the market structure that is most likely operating in the market for the Deluxe boxes. LGI has made deliberate steps to distinguish their Deluxe boxes from both their own Standard boxes and those of their competitors. The Deluxe boxes, being more expensive, have lower monthly sales volume compared to the Standard boxes. As a result, it is likely that the Deluxe boxes fall under the category of monopolistic competition. Monopolistic competition refers to a market structure where multiple firms sell products that are similar but not identical, and these products have certain unique characteristics (Greenlaw & Shapiro, 2017). Furthermore, as stated by Greenlaw & Shapiro (2017), businesses operating under monopolistic competition exert significant endeavors to rival other varieties, flavors, and brands. As a monopolistic market, LGI should employ umbrella branding, which involves labeling several items under a single brand name, in order to enhance the profitability of their offers. By ensuring that the Deluxe boxes are of superior quality, LGI may enhance their reputation and drive sales growth (Rasmusen, 2016). LGI can enhance its ability to uphold superior quality by diversifying its product offerings (Rasmusen, 2016). Given that LGI operates inside a monopolistic rivalry market structure, the quantity of goods and services it produces is governed by the interplay between supply and demand. Companies in the industry have different levels of marketing strength, which makes it harder for them to control the market pricing of equivalent goods and services (Dale, 2011). In the context of monopolistic competition, LGI is required to maintain competitiveness in the presence of several industry competitors, all the while comprehending the demands of its consumer base (Rasmusen,

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2016). It can be reasonably assumed that the price of the boxes, both Standard and Deluxe, is only influenced by the cost of materials and not by any other economic considerations. The term used to describe this assumption is ceteris paribus, which is a Latin word that translates to "other things being equal" (Greenlaw & Shapiro, 2017). LGI operates as a monopoly, with a monthly equilibrium point of 0.90 for Deluxe boxes, priced at $28.00 each box. This information is included in the Supply and Demand Graph section of LGI's excel calculations. If businesses attempt to unjustifiably increase prices, consumers may seek an alternative product (Klein, 2010). On the other hand, if businesses attempt to significantly reduce their pricing to sell more products, it could have a detrimental impact on their profitability (Wen, 2010). Consequently, they should avoid using price adjustments as a means to boost revenue. In order to achieve the highest possible economic profit, it is necessary for the marginal cost (MC) of production (the cost of producing one additional unit of output) to be equal to the marginal revenue (MR) generated from selling additional units of output. A monopolist corporation should select the output level at which these values are equivalent (Wen, 2010). 3. Explain the market structure that is most likely operating in the market for Standard boxes. Indications that the market falls somewhere between a perfect and imperfect monopolistic market. Given that the product is standardized, it is quite probable that it is indistinguishable from the products of numerous other companies. Perfect competition is characterized by the presence of multiple firms that sell similar items to many consumers. In this market structure, both sellers and purchasers possess accurate knowledge about the products. Additionally, firms have the freedom to enter or depart the market at will (Greenlaw & Shapiro, 2017). These facts indicate that the Standard box is categorized inside the ideal competition market structure. Consequently, the corporation has constraints in adjusting the box price because of intense competition from other companies selling their products at a similar price point (UMGC, 2022). In a market that operates under perfect competition, prices are determined by the forces of supply and demand, while enterprises have control over their production levels (Dale, 2011). In this market, the company is expected to function as either a price taker or a firm that adjusts its pricing to match those of its competitors (Greenlaw & Shapiro, 2017). According to Dale (2011), LGI's ability to affect market prices is dependent on its level of marketing power. If LGI lacks sufficient marketing power, it will not be able to have an impact on market prices. Hence, it is advisable to augment the customer base when operating in this sector, as the price disparity is negligible and unlikely to have an impact (Greenlaw & Shapiro, 2017). Customers would prioritize pricing as the primary consideration for buying since LGI's goods is not essential (Henry, 2015). Hence, LGI must prioritize the examination of the interplay between supply and demand to establish prices. Standard boxes are categorized as belonging to an imperfect monopolistic competition framework due to the presence of numerous similar alternatives (differentiated), the ability for enterprises to freely enter or exit the market, and the strong impact of brand awareness on their sales (UMGC, 2022). LGI achieves higher sales volume of Standard boxes per month by offering a reduced price, resulting in an equilibrium point of 0.70 at a price of $18.20 per box. In a monopolistic market, the revenue is contingent upon the level of output. LGI should continue the practice of offering Deluxe and Standard boxes since it helps them to generate additional money without reducing prices or increasing production costs (Wen, 2010). LGI must prioritize the maintenance of the quality of its Standard and Deluxe boxes due to the presence of numerous competitors. Enhancing the quality of a product has the potential to augment the portion of the market that a company can capture (Dana & Fong, 2011). Studying the market structures of LGI's Standard boxes will help them determine if growing customers or production will yield the highest profits. Both factors should be considered to make the optimal decision.

Price Elasticity 1. Discuss what actions the company should take in setting the Standard box price given its price elasticity of demand. 2. Discuss what actions the company should take in setting the price of the Deluxe box, given its price elasticity of demand. 3. Assuming the price elasticity of supply for the Standard box is inelastic, explain the key factors the company must consider in expanding production. Profit Maximization 1. Explain under what conditions profit maximization would be appropriate for the Standard box. 2. Explain why the concepts of marginal revenue, marginal cost, and economies of scale are essential to the financial objective of maximizing profit. 3. Discuss the overall financial objective, Assuming the company only manufactures these two product lines and has customers who purchase both products from them. Economics and Decision-Making 1. Explain how understanding economics is essential to being an effective manager. 2. Explain why understanding the economic concept of opportunity cost is essential to managers making better decisions. 3. Explain why understanding the economic concepts of marginal revenue and marginal cost is essential to managers making better decisions.

Project2Questions-ReportTemplate 2242

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