Assignment 2: Operations Decision
> Due Week 6 and worth 300 points
> Using the regression results and the other computations from Assignment 1,
> determine the market structure in which this frozen, low-calorie
> microwavable
> food company now operates.
> [In assignment #1, the company estimated a demand curve and used a marginal
> cost curve as its supply curve. You determined the equilibrium in the market
> where P =MC [or Qs = Qd]. You calculated the various elasticities using the
> estimated demand at its current price of 500 cents. While not required, if
> you
> look at the own price elasticity at the equilibrium price and quantity
> solved
> for in Assignment #1 you will notice a problem for the firm if it thinks it
> is
> operating in a competitive market.
> Now that you know that the firm faces a downward sloping demand curve and
> that
> it has pricing power, you are being asked to rethink how the firm should
> behave
> in the market as it actually used its pricing power to determine the profit
> maximizing price and output in this assignment.
> Use the Internet to research two (2) leading competitors in the low-calorie
> microwavable food industry, and take note of their pricing strategies,
> profitability, and their relationships within this industry (within the USA
> and
> worldwide). Use the IBIS Report for the Frozen Food Production Industry (SIC
> Code 31141) to be provided by your instructor.
> Write a six to eight (6-8) page paper in which you:
> 1. Outline a plan that will assess the impact of the market structure/cost
> data
> based on the activity in the first assignment for the company’s operations.
> Use
> a supply curve of the following form to reexamine your conclusions from the
> first assignment: Qs = -7909.89 +79.0989P [OR MC = 100 + 0.01264Q]. This new
> supply curve gives you the same equilibrium price and quantity as before,
> but is
> based on the firm’s marginal cost curve and its behavior in Assignment #1.
> Further assume that the estimate of the firm’s AVC = 100 + 0.009Q and that
> =0.71 always [implying that FC/TC = 0.289]. These are the industry average
> estimates from the IBIS report for this industry.
> 2. Suppose the business operations have now changed from the market
> structure
> analyzed in the activities required for the first assignment due to this new
> data about costs. Determine two (2) likely factors that might have caused
> the
> changed behavior. Predict the primary manner in which this change would
> likely
> impact business decisions in the new market environment.
> 3. Analyze the major short-run and long-run production and cost functions
> implied by this new cost data for the frozen, low-calorie microwaveable food
> company. Use the information contained in the IBIS report. Suggest
> substantive
> ways in which the frozen, low-calorie food company may use this information
> in
> order to make decisions in both the short-run and the long run.
> 4. Determine the possible circumstances under which the company should
> discontinue operations. While no specific fixed or total cost data are
> provided,
> use the newly provided cost data above and your knowledge from the textbook
> on
> the relation of fixed and variable costs to revenue to develop estimates
> that
> might suggest key actions that management should take in order to confront
> these
> circumstances. Provide a rationale for your response.
> 5. Suggest one (1) pricing policy that will enable your frozen, low-calorie
> microwavable food company to maximize profits. Provide a rationale for your
> suggestion that will involve comparison of the first assignments two
> possible
> price and quantity pairs with the new optimum presented here in Assignment
> #2
> 6. Outline a plan, [based on the original information provided in the first
> assignment along with the IBIS report industry cost data for the firm], that
> the
> company could use in order to evaluate its financial performance. Consider
> all
> the key drivers of performance, such as company profit or loss for both the
> short term and long term, and the fundamental manner in which each factor
> influences managerial decisions.
> 7. Recommend two (2) actions that the company could take in order to improve
> its
> profitability and deliver more value to its stakeholders in line with the
> recent
> history and forecast future behavior for the Frozen Food Production Industry
> [SIC Code 31141] as outlined in the IBIS report. Outline, in brief, a plan
> to
> implement your recommendations.
> 8. 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.

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