Question

I. Classification as One of the Four Basic Market Models

A. Select a company from a current business periodical or where you work, and state which market model is represented by this company. Explain your reasoning using a narrative format. (List the characteristics of the market model you chose, and explain how your company operates in an industry with those characteristics)

B. State a basic industry problem and proceed to analyze using the following methodology where appropriate. Be sure to include the six (6) graphs, as indicated. (Each industry market model has drawbacks or problems, explain how this affects your company and how they attempt to deal with it)

II. Supply & Demand and the Price System Graphs

A. What is the current demand situation – is the curve changing (use graphs)? Is demand relatively elastic or inelastic, why?

Graph #1: Demand Curve and any Changes (CHOOSE ONE):

1. Curve shift and underlying causes 2. Movement along the curve and causes

B. What is the current supply situation – is the curve changing (use graphs)? Graph #2: Supply Curve and any Changes (CHOOSE ONE):

1. Curve shift and underlying causes 2. Movement along the curve and causes

C. Market Equilibrium (use graphs)

Graph #3: Demand & Supply Curves with Changes (before and after on same graph)

1. Surplus/shortage (if appropriate) 2. Price ceilings and price floors (if appropriate) D. Changes in Income & Results

1. Superior/normal or inferior goods

E. Changes in Prices of Related Goods & Results—(CHOOSE ONE):

1. Name a Substitute, complement, or independent goods

III. Costs & Profits: From the article see if the company is above target (Eco. Profit), on target (Normal profit) or below target (Loss).

A. Short-run Costs (use graphs)

Graph #4: Short-run Economic Profit, Normal Profit, or Loss (use MC, AR, ATC, and AR; shade where appropriate) (Based on what read, what do the profits look like currently; illustrate this using the cost curves in the text (for the industry model your in, and the companies current profits)

1. State whether firm is earning a normal or economic profit, or a loss. Illustrate on

graph 4. 2. State any productivity and pertinent cost problems and the resulting effects on graphs. 3. B. Long-run Costs (use graphs)

Graph #5: Long-run Profit or Loss (use MC, AR, ATC, and AR; shade where appropriate) (Based on the market model, what are the profit options in the long run, illustrate using graphs in the text)

1. State whether firm is earning a normal or economic profit, or a loss. Illustrate on

graph 5.

Graph #6: The Planning Curve: LRATC & Optimal Plant Size (Economies & Diseconomies of Scale) (Identify the correct shape of the LRATC based on the market model, identify appoximately where your company is (i.e. are they at lowest cost for the industry?))

1. Graph the LRATC, show economies and diseconomies of scale, and mark with an

“X” the company’s position.

III. Conclusion/Summary

A. Recapitulation of Findings

B. How could the economic problem be corrected? (How can they increase profits and maintain them

long term.

IV. Prediction for Future

A. State your personal prediction for the future. Support your answer.

Answer 1