PREPARING THE SCHOLARLY PAPER PHASE 1

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PREPARING THE SCHOLARLY PAPER PHASE 1

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  1. Carefully read these instructions and the Rubric.
  2. Download the Week 4 Scholarly Paper Phase 1 Template (Links to an external site.)Links to an external site.. Use of the assigned template is required. Rename that document as Your Last Name Scholarly Paper Phase 1.docx, for example Smith Scholarly Paper Phase 1. Save it to your own computer or drive in a location where you will be able to retrieve it later.
  3. Type your assignment directly on the saved template. You are required to complete the form using the productivity tools required by Chamberlain University, which is Microsoft Office Word 2013 (or later version), or Windows and Office 2011 (or later version) for MAC. You must save the file in the “.docx” format. Do NOT save as Word Pad. A later version of the productivity tool includes Office 365, which is available to Chamberlain students for FREE by downloading from the student portal at http://my.chamberlain.edu (Links to an external site.)Links to an external site. Click on the envelope at the top of the page. Remember that only Microsoft Word 2010 or a later version is acceptable. The document must be saved as a .docx. Save your work frequently as you type to prevent loss of your work.
  4. The only resource for your paper is the following assigned article: Article link (Links to an external site.)Links to an external site.
    Note: Logging in to the Chamberlain Library is needed to access this article. Use of the assigned article is required. You must click on the PDF Full Text link on the upper left portion of the page to download the correct version of this required article.
  5. Follow the instructions and specifics on the assigned required template and the rubric. You will demonstrate your scholarly writing abilities as well as APA abilities in references, citations, quotations, and paraphrasing.
  6. See rubric for length limitations for each section and other criteria.
  7. Information below explains how to complete the Article Summary section of the paper (see Rubric for details).
    1. Clearly summarize the major content of the assigned article using 175–200 words.
    2. Content must include main ideas from across the entire article.
    3. Specifics should be excellent.
    4. Content must be attributed to the correct source.
  8. For the Impact section (see rubric for details)
    1. clearly state how learning from the assigned article will impact your future practice;
    2. length must be 125–150 words;
    3. writing must be concise and clearly relate the assigned article contents to practice; and
    4. use first person in this section.
  9. Double check your work with the rubric prior to submission.
  10. Note: Assigned Template must be used for this assignment. The Assigned Template has been specially prepared to help you do well on this assignment. See #2 above.
  11. Note: Assigned Article must be used for this assignment. Failure to do so may result in loss of points and/or Academic Integrity violation investigation.

Health Assessment

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Health Assessment

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This assignment enables the student to meet the following Course Outcomes.

CO1: Utilize prior knowledge of theories and principles of nursing and related disciplines to explain expected client behaviors, while differentiating between normal findings, variations, and abnormalities. (PO #1)

CO5: Explore the professional responsibilities involved in conducting a comprehensive health assessment and provide appropriate documentation. (PO #6)

Points

This assignment is worth a total of 200 points.

Due Date

The Lifestyle and Health Practices Profile is to be submitted at the end of Week 2.

Disclaimer

When completing a Lifestyle and Health Profile on an actual client, it is essential that the information is accurate and all areas are addressed. **Please note that for this assignment, a few sections containing sensitive information have been marked optional.** This assignment will only be shared for academic-related purposes, and will not be seen by your classmates. However, if you wish to leave any of the areas marked “option to not respond” blank, points will not be deducted. All areas not marked as optional must be completed for full credit. Contact your instructor if you have any questions or concerns.

Directions

  1. Download the required NR305 Week 2 Personal Lifestyle Form March19 (Links to an external site.)Links to an external site.. You will document your responses to the profile using this MS Word document.
  2. Complete the Life and Health Practices Profile, using yourself as the client. Please document your responses professionally, as you would in a client’s actual health record. Provide enough information to have answered the questions completely. For clarity, write full sentences in your documentation. To receive full credit, all questions must be addressed, except for those indicated as optional. If a question does not apply to you, please indicate this in the findings as “N/A”.
  3. Once you have completed the profile, type your answers to the three questions listed under the form. APA format is not a requirement, however, please write in paragraph form when appropriate. Sentence structure, spelling, and grammar are important.
  4. You are required to complete the form using the productivity tools required by Chamberlain University, which is Microsoft Office Word 2013 (or later version), or Windows and Office 2011 (or later version) for MAC. You must save the file in the “.docx” format. Do NOT save as Word Pad. A later version of the productivity tool includes Office 365, which is available to Chamberlain students for FREE by downloading from the student portal at http://my.chamberlain.edu (Links to an external site.)Links to an external site.. Click on the envelope at the top of the page.
  5. Save the completed form by clicking on Save as and add your last name to the file name, for example, NR305_W2_Personal_ Lifestyle_Form_Smith.
  6. Submit the completed form to the Lifestyle and Health Practices Profile form by Sunday, 11:59 p.m. MT at the end of Week 2. Please post questions about this assignment to the Q & A Forums so the entire class may view the answers.

**Academic Integrity Reminder**

Chamberlain College of Nursing values honesty and integrity. All students should be aware of the Academic Integrity policy and follow it in all discussions and assignments.

By submitting this assignment, I pledge on my honor that all content contained is my own original work except as quoted and cited appropriately. I have not received any unauthorized assistance on this assignment. Please see the grading criteria and rubrics on the page.

DSM-5/ ICD Coding Assignment

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DSM-5/ ICD Coding Assignment

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WK2 Assgn 1NRNP 6675

Insurance coding and billing is complex, but it boils down to how to accurately apply a code, or CPT (current procedural terminology), to the service that you provided. The payer then reimburses the service at a certain rate. As a provider, you will have to understand what codes to use and what documentation is necessary to support coding.

For this Assignment, you will review evaluation and management (E/M) documentation for a patient and perform a crosswalk of codes from DSM-5 to ICD-10.

The Assignment

  • Assign DSM-5 and      ICD-10 codes to services based upon the patient case scenario. 

Then, in 1–2 pages address the following. You may add your narrative answers to these questions to the bottom of the case scenario document and submit them all together as one document.

  • Explain what pertinent information, generally, is required in documentation to support DSM-5 and ICD-10 coding.
  • Explain what pertinent documentation is missing from the case scenario, and what other information would be helpful to narrow your coding and billing options.
  • Finally, explain how to improve documentation to support coding and billing for maximum reimbursement.

*******NOTE

The case scenario is inside the sample evaluation template.

The answer goes into the attached sample evaluation template.

(The parts printed in red).

BA 101(20 Question)

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BA 101(20 Question)

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 A business producing packaged food products would have the following variable costs:Select one: a. Ingredients b. Computers c. Packaging equipment

Question 2

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Accounting is used to communicate financial information to 2 different groups, internal customers and external customers. External users are:Select one:a. People outside of the business like investorsb. Suppliersc. Stockholders

Question 3

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Assets are just one of the accounts listed on the:Select one: a. statement of cash flows b. income statement c. balance sheet

Question 4

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Break-even determines the point when ________ covers fixed expenses.Select one:a. Variable Costs  b. Salary Expense  c. Contribution Margin

Question 5

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Contribution Margin covers fixed expense at:Select one:a. Equilibrium.  b. Break-even.  c. Year end.

Question 6

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Eliza has just opened a new business near campus that is a combination of a laundromat, a nail salon, and a tanning studio. There is an accounting firm located just down the street and Eliza is paying them to do all of her accounting. At the end of the first quarter (three months of business), Eliza has several questions about how things are going. If she wants to understand how much debt the business has right now, then she should look at the ________ that her accountant has prepared.Select one:  a. the income statement  b. the statement of owner’s equity   c. the balance sheet

Question 7

Extotech has sales of $50 million, cost of goods sold for the same period of $15 million, and average inventory of $250,000. What is Exotech’s inventory turnover?Select one:a. 20b. 200c. 60

Question 8

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Financial accountants:Select one: a. provide information to external entities that allows them to evaluate business performance.  b. have a primary focus on providing managers within the organization with reports to make good business decisions.  c. summarize the company’s production activities in a way that allows managers to make decisions.

Question 9

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Given a contribution margin of $20, if 10,000 units are produced at a cost of $400,000 what is the sales revenue in USD?Select one:  a. $600,000  b. $60  c. $200,000

Question 10

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In a manufacturing operation a variable cost necessary to produce the finished product includes:Select one: a. rent. b. parts. c. electricity.

Question 11

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In a manufacturing operation building rent is considered:Select one: a. Variable Cost  b. Asset  c. Fixed Cost

Question 12

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Income statements and statement of owner’s equity are two of the financial statements used to explain changes in a business:Select one: a. during a period of time.  b. from the beginning of the business.  c. a specific moment in time.

Question 13

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The accounting equation is:Select one: a. owner’s equity = assets + liabilities  b. liabilities = assets + owner’s equity  c. assets = liabilities + owner’s equity

Question 14

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The balance sheet shows which type of account?Select one: a. net sales  b. purchases  c. assets

Question 15

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The break-even point for a business is:Select one: a. the point where income is equal to expenses.  b. the point where costs exceed revenue.  c. the point where profitability is achieved.

Question 16

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The income statement shows which types of accounts?Select one:  a. income  b. assets  c. credits

 

Question 17

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The main goal of accounting is to provide this kind of data to users:Select one: a. scientific data  b. employment data  c. financial data

Question 18

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The No Doze Cafe coffee shop sells 50 different types of coffee to its patrons. It costs $4 for a cup of coffee. Each day it sells on average 500 cups of coffee. On the weekends it sells closer to 1000 cups of coffee. Here is a breakdown of the shop’s expenses per cup of coffee:

Variable Costs：Item/Amount Coffee/Water$1.50；Paper Cup$0.30；Sweetener；$0.20
Fixed Costs：Item/Amount Labor$100/day per employee；Store Space Rent$800/month

What is the contribution margin for the shop selling one cup of coffee on an average day?Select one: a. $2.50 b. $1.92 c. $2.00

Question 19

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The ________ provides a snapshot of the company’s financial position at a specific point in time.Select one: a. income statement  b. statement of cash flows  c. balance sheet

Question 20

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The ________ shows the income and expenses of a company over a period of time.Select one:  a. statement of cash flows  b. balance sheet  c. income statement

Accounting

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Accounting

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Case Citation:

  • Casey J. McNellis (2018) Dynamic Divestures: A Codification Exercise on the Reporting of Discontinued Operations. Issues in Accounting Education: February 2018, Vol. 33, No. 1, pp. 53-63.

    Instructions:

    • Read the case study and prepare answers to the questions at the end of the case for ZD Consulting Services only.
    • APA style formatting is required.
    • Approximate length of the memo using APA style is 3 pages.

Resources:

  • Writing a Research Paper: https://owl.english.purdue.edu/owl/resource/658/01/
  • APA: https://owl.english.purdue.edu/owl/section/2/10/
  • Developing your graduate level writing skills: https://owl.english.purdue.edu/owl/section/1/2/
  • What Constitutes Graduate Level Writing; source unknown. In LEO, Content, Week 9.

ACCOUNTING

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ACCOUNTING

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QUESTION 1

  1. Which of the following statements is FALSE?
In a perpetual inventory system, the “cash register” at the store is a computer terminal that records sales and updates inventory records.
Even in a perpetual inventory system, a business must count inventory at least one a year.
Restaurants and small retail stores often use the periodic inventory system.
In a periodic inventory system, merchandise inventory and purchasing systems are integrated with the records for Accounts Receivable and Sales Revenue.

5 points   

QUESTION 2

  1. Which of the following is true of freight in?
It is an administrative expense.
It is a selling expense.
It is the transportation cost on purchases.
It is the transportation cost on sales.

5 points   

QUESTION 3

  1. Merchandise inventory accounting systems can be broadly categorized into two types. They are __________.
FIFO and LIFO
perpetual and periodic
wholesale and retail
manufacturer and producer

5 points   

QUESTION 4

  1. Which of the following is subtracted from net sales revenue to arrive at gross profit on a multi-step income statement?
Cost of goods available for sale

 
Cost of goods sold

 
Sales discounts and sales returns and allowances
Operating expenses

5 points   

QUESTION 5

  1. A company that uses the perpetual inventory system purchases inventory for $61,000 on account, with terms of 3/10, n/30. Which of the following is the journal entry to record the payment made within 10 days?
A debit to Accounts Payable for $61,000, a credit to Cash for $59,170, and a debit to Merchandise Inventory for $1,830
A debit to Accounts Payable for $61,000, a credit to Merchandise Inventory for $1,830, and a credit to Cash for $59,170
A debit to Merchandise Inventory for $1,830, a debit to Accounts Payable for $61,000, and a credit to Cash for $62,830
A debit to Accounts Payable for $59,170, a debit to Merchandise Inventory for $1,830, and a credit to Cash for $61,000

5 points   

QUESTION 6

  1. What does “2/10” mean, with respect to “credit terms of 2/10, n/30”?
A discount of 2 percent will be allowed if the invoice is paid within 10 days of the invoice date.
Interest of 2 percent will be charged if the invoice is paid after 10 days from the date on the invoice.
A discount of 10 percent will be allowed if the invoice is paid within two days of the invoice date.
Interest of 10 percent will be charged if invoice is paid after two days.

5 points   

QUESTION 7

  1. The term “freight out” refers to __________.
transportation costs on purchases
cost of inventory purchased
costs that are not actually paid in cash
transportation costs on sales

5 points   

QUESTION 8

  1. If goods are sold on terms free on board (FOB) shipping point, the __________.
seller normally pays the transportation costs
buyer normally pays the transportation costs
buyer and the seller split the transportation costs
shipping company bears the transportation cost

5 points   

QUESTION 9

  1. Changing from the LIFO (Last-In, First-Out) to the specific identification method of valuing inventory ignores the principle of __________.
conservatism
consistency
disclosure
materiality

5 points   

QUESTION 10

  1. A company decides to ignore a very small error in its inventory balance. This is an example of the application of the __________.
conservatism
materiality concept
disclosure principle
consistency principle

5 points   

QUESTION 11

  1. A company purchased 400 units for $20 each on January 31. It purchased 520 units for $26 each on February 28. It sold a total of 560 units for $40 each from March 1 through December 31. What is the amount of ending inventory on December 31 if the company uses the first-in, first-out (FIFO) inventory costing method? (Assume that the company uses a perpetual inventory system.)
$9,360
$4,960
$7,200
$2,240

5 points   

QUESTION 12

  1. Which of the following is the correct formula to calculate weighted-average unit cost for merchandise inventory?
Weighted-average unit cost = Cost of goods available for sale + Number of units available
Weighted-average unit cost = Cost of goods available for sale × Number of units available
Weighted-average unit cost = Cost of goods available for sale – Number of units available
Weighted-average unit cost = Cost of goods available for sale / Number of units available

5 points   

QUESTION 13

  1. Blanchard, Inc. provided the following for 2017:

 

Cost of Goods Sold (Cost of sales)     $1,200,000
Beginning Merchandise Inventory 325,000
Ending Merchandise Inventory 625,000

 

Calculate the company’s inventory turnover ratio for the year. (Round your answer to two decimal places.)

3.69 times per year
2.53 times per year
1.92 times per year
1.26 times per year

5 points   

QUESTION 14

  1. Under the weighted-average method for inventory costing, the cost per unit is determined by __________.
dividing the cost of goods available for sale by the number of units available
dividing the cost of goods available for sale by the number of units in beginning inventory
multiplying the number of units purchased with the weighted-average cost
multiplying the cost of goods available for sale by the ending weighted-average cost of the previous accounting period

5 points   

QUESTION 15

  1. A company purchased 100 units for $30 each on January 31. It purchased 400 units for $20 each on February 28. It sold a total of 470 units for $110 each from March 1 through December 31. If the company uses the last-in, first-out inventory costing method, calculate the amount of ending inventory on December 31. (Assume that the company uses a perpetual inventory system.)
$600
$2,400
$900
$30

5 points   

QUESTION 16

  1. Misty, Inc. had 24,000 units of ending inventory that were recorded at the cost of $8.00 per unit using the FIFO method. The current replacement cost is $4.50 per unit. Which of the following amounts would be reported as Ending Merchandise Inventory on the balance sheet using the lower-of-cost-or-market rule?
$192,000
$300,000
$216,000
$108,000

5 points   

QUESTION 17

  1. Which of the following is the correct formula to calculate inventory turnover?
Inventory turnover = Cost of goods sold / Average merchandise inventory
Inventory turnover = Cost of goods sold × Average merchandise inventory
Inventory turnover = Cost of goods sold + Average merchandise inventory
Inventory turnover = Cost of goods sold – Average merchandise inventory

5 points   

QUESTION 18

  1. The ending merchandise inventory for the current year is overstated by $25,000. What effect will this error have on the following year’s net income?
The net income will be overstated by $50,000.
The net income will be overstated by $25,000.
The net income will be understated by $25,000.
The net income will be understated by $50,000.

5 points   

QUESTION 19

  1. A company that uses the perpetual inventory system purchased 500 pallets of industrial soap for $10,000 and paid $750 for the freight-in. The company sold the whole lot to a supermarket chain for $14,000 on account. The company uses the specific-identification method of inventory costing. Which of the following entries correctly records the cost of goods sold?
Cost of Goods Sold     10,750  
    Merchandise Inventory       10,750
Merchandise Inventory     10,750  
    Cost of Goods Sold       10,750
Cost of Goods Sold     10,000  
    Sales Revenue       10,000
Cost of Goods Sold     10,000  
    Merchandise Inventory       10,000

5 points   

QUESTION 20

  1. A company that uses the perpetual inventory system sold goods for $2,500 to a customer on account. The company had purchased the inventory for $500. Which of the following journal entries correctly records the cost of goods sold?
Cost of Goods Sold         500  
    Sales Revenue           500
Merchandise Inventory         500  
    Cost of Goods Sold           500
Cost of Goods Sold         500  
    Merchandise Inventory           500
Accounts Receivable         500  
    Sales Revenue           500

5 points   

 

Explanation Of How You Decided On The List Of Stakeholders

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Explanation Of How You Decided On The List Of Stakeholders

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Top of Form

Refer to section “The WH Framework for Business Ethics” of Ch. 2, “Business Ethics,” of Dynamic Business Law for information on the WH Framework.

For this assignment, refer to the scenario located in the “Questions & Problems” section of Ch. 2, “Business Ethics” in Dynamic Business Law. This scenario involves Steven J. Trzaska, the head of L’Oreal USA’s regional patent team, and ethical rules and core values of the company.

Read the scenario in the textbook and complete the following activity.

Create a WH Framework chart, similar to Exhibit 2.2. Refer to L’Oreal’s core values and the primary values in Exhibit 2.3 to determine the guidelines to include in the WH Framework.

Write an explanation of how you decided on the list of stakeholders and guidelines to include in your WH Framework. Address the following questions in your explanation:

  • Which stakeholders did Traszka and the management of  L’Oreal cater to? Why?
  • What values did L’Oreal’s management choose when they made the decision to fire Trzaska? Why?

Self-Reflection

In addition to your explanation, address the following self-reflection questions:

o How did the WH Framework help you analyze the situation?

o Now that you’ve put together the framework, how does the WH Framework help managers with making business decisions?

o What type of decisions would the WH Framework chart help you make as a manager?

Chapter 24

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Chapter 24

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Monopoly producers are faced with
A. many competitors producing the same product.
B. only a few competitors producing the same product.
C. at least one competitive producer of the same product.
D. no competitive producers of the same product.

In a monopoly market structure, the firm (the monopolist)
A. is the whole industry.
B. sells faulty products.
C. gets unconscionably rich.
D. gouges the consumer.

A monopolist is defined as
A. a producer of a good or service that is expensive to produce, requiring large amounts of capital equipment.
B. a large firm, making substantial profits, that is able to make other firms do what it wants.
C. a single supplier of a good or service for which there is no close substitute.
D. a firm with annual sales over $10 million.

A firm can be the sole supplier of a good and still not be considered a monopoly if
A. the firm is making normal profits.
B. the good produced is not important to the economy.
C. the firm is not large.
D. there are very close substitutes for the good.

Which of the following is not a barrier to entry into a market?
A. Diseconomies of scale.
B. Difficulty in raising adequate capital necessary to enter an industry.
C. Ownership of an important resource where there is no good substitute.
D. Governmental restrictions such as tariffs.

As opposed to other types of monopoly, a natural monopoly typically owes its monopoly position to
A. ownership of a resource without close substitutes.
B. tariffs.
C. economies of scale.
D. patents.

A natural monopoly
A. has decreasing long-run average total costs over a very large range of output.
B. has decreasing long-run marginal costs over a very large range of output.
C. has economies of scale over a very large range of output.
D. All of the above.

Given the cost curves in the diagram, what market situation would you expect to occur?
A. Price discrimination.
B. Price differentiation.
C. A natural monopoly.
D. A cartel.

 

 

The demand curve of the monopolist
A. is the same as the industry demand curve.
B. is the same as a price-taking firm.
C. is perfectly inelastic.
D. is perfectly elastic.

Marginal revenue for a monopolist is
A. horizontal, just like for the perfectly competitive firm.
B. downward sloping and always equal to price.
C. downward sloping and always greater than price.
D. downward sloping and always less than price.

The marginal revenue curve for a perfectly competitive firm is _________ while the marginal revenue curve of the monopolist is _________.
A. downward sloping, horizontal
B. horizontal, upward sloping
C. horizontal, downward sloping
D. downward sloping, upward sloping

For a monopoly,
A. price equals average revenue only.
B. price differs from both average revenue and marginal revenue.
C. price equals both average revenue and marginal revenue.
D. price equals marginal revenue only.

You observe that the revenue of a monopolist vary directly with changes in price.

This firm is not maximizing its economic profits because
A. when demand is inelastic, as the price rises, the quantity falls and revenues rise.
B. when demand is elastic, as the price rises, the quantity falls and revenues fall.
C. when demand is elastic, as the price falls, the quantity rises and revenues rise.
D. when demand is inelastic, as the price falls, the quantity rises and revenues fall.
E. All of the above are true.

The demand curve faced by the monopolist
A. is always inelastic where MR = MC and profits are maximized.
B. has lower price elasticity of demand as close substitutes for the monopoly product are developed.
C. has greater price elasticity of demand as close substitutes for the monopoly product are developed.
D. None of the above.

As the number of imperfect substitutes for a monopoly firm’s product increases, the price elasticity of demand
A. decreases.
B. approaches zero.
C. cannot be determined.
D. increases.

The better the substitutes for a monopoly firm’s product, the
A. greater the price elasticity of demand.
B. faster the price elasticity of demand approaches zero.
C. effect on the price elasticity of demand is indeterminate.
D. smaller the price elasticity of demand.

Evaluate the following statement. A profit maximizing monopolist will never operate in a price range in which price elasticity of demand is inelastic.
True                                                                   False
The table below depicts the daily output, price, and costs of a monopoly dry cleaner located near the campus of a remote college town. Compute the revenues at each output level and fill in the blanks
(Enter dollars and cents and include minus signs where necessary.)
Output
(Suits Cleaned) Price per Suit ($) Total Costs ($) Total Revenue ($)
0 $10.00 $3.00 $0
1 $9.50 $6.00 $9.50
2 $9.00 $8.50 $18.00
3 $8.50 $10.50 $25.50
4 $8.00 $11.50 $32.00
5 $7.50 $13.50 $37.50
6 $7.00 $18.00 $42.00
7 $6.50 $24.00 $45.50
8 $6.00 $26.00 $48.00

Given the information in the table at right, calculate the dry cleaner’s marginal revenue (MR) and marginal cost (MC) at each output level. (Your answer should be rounded to the nearest cent.)

Output
(Suits Cleaned) Price per Suit ($) Total Costs ($) Total Revenue ($) MC ($) MR ($)
0 10.00 3.00 0.00 − −
1 9.50 6.00 9.50
2 9.00 8.50 18.00
3 8.50 10.50 25.50
4 8.00 11.50 32.00
5 7.50 13.50 37.50
6 7.00 18.00 42.00
7 6.50 24.00 45.50
8 6.00 26.00 48.00

Based on marginal analysis, what is the profit-maximizing level of output? units.

 

A monopolist’s maximized rate of economic profits is $600 per week. Its weekly output is 300 units, and at this output rate, the firm’s marginal cost is $27 per unit. The price at which it sells each unit is $37 per unit.
At these profit and output rates, the firm’s average total cost is $ .(Enter your response as a whole number.)
At these profit and output rates, the firm’s marginal revenue is $ . (Enter your response as a whole number.)

The table below depicts the daily output, price, and costs of a monopoly dry cleaner located near the campus of a remote college town. Compute the revenues at each output level and fill in the blanks. (Enter dollars and cents and include minus signs where necessary.)

Output
(Suits Cleaned) Price per Suit ($) Total Costs ($) Total Revenue ($)
0 $12.00 $3.00
1 $11.50 $6.00
2 $11.00 $8.50
3 $10.50 $10.50
4 $10.00 $11.50
5 $9.50 $13.50
6 $9.00 $20.00
7 $8.50 $28.00
8 $8.00 $32.00

In the graph, the profit-maximizing price for a monopoly is
A  P4.
B. P2.
C. P3.
D. P1.

The monopolist sets price by
A. charging the price where average total cost equals marginal cost.
B. charging the price where marginal cost equals price.
C. charging the price where marginal revenue equals price.
D. producing the quantity where marginal cost equals marginal revenue and charging the price that corresponds to that quantity.

Which of the following is not necessary for price discrimination to exist?
A. The ability to separate markets at reasonable cost.
B. Buyers in various markets must have different price elasticities of demand.
C. The ability to prevent resale of the product or service.
D. A perfectly elastic demand curve.

The graph to the right shows demand and marginal revenue curves for a monopoly firm. Complete both steps and then check your answer. Assume the marginal cost is not constant.
1.) Using the line drawing  tool, draw a line showing a possible short-run marginal cost curve for this firm. Label this line ‘MC’.
2.) Using the point drawing tool, plot the point identifying this firm’s profit-maximizing output level and corresponding price to be charged. Label this point ‘B’. Carefully follow the instructions above, and only draw the required objects.

In order to price discriminate, a firm must
A. face a downward-sloping demand curve.
B. have permission from the government.
C. be sure the price-marginal cost ratio is the same for all its submarkets.
D. set price equal to marginal cost.

Charging different prices for similar products that have different marginal costs is called
A. predatory pricing.
B. price dumping.
C. price discrimination.
D. price differentiation.

If a public utility company is considered a monopolist, which of the following is not true?
A. Its profit maximizing quantity is determined where its marginal revenue equals its marginal cost.
B. For the company to practice price discrimination, there should not be any resale of its product.
C. Its price must be higher than its marginal revenue.
D. The company’s demand curve and supply curve are upward sloping.

Why is there a social cost of monopoly?
A. Too many resources are being used in a monopoly.
B. The firm does not equate marginal cost to marginal revenue.
C. The firm produces too much of the good.
D. Too few resources are being used in a monopoly.

Monopoly has social costs because
A. too few resources are being used in the monopoly industry and too many are used elsewhere.
B. a monopoly produces less and charges a higher price than a perfectly competitive firm would producing the same product or service.
C. P is greater than MC and this implies economic inefficiency.
D. All of the above.

If we were to compare the amount produced by firms in a competitive industry to the output produced by a monopoly, the monopolist will produce
A. on the inelastic portion of the demand curve but at a higher price.
B. on the inelastic portion of the demand curve because the monopolist would make the entire demand curve inelastic.
C. the same quantity but would make profits because of economies of scale.
D. on the elastic portion of the demand curve and charge a higher price.

 

A monopoly is socially inefficient because it
A. makes profits even in the long run.
B. makes consumers buy goods they really don’t need.
C. makes profits.
D. charges a price greater than marginal cost.

Selected Occupations Requiring Licenses in Some U.S. States
Acupuncturists Glass Installers Nutritionists
Athletic trainers Hearing-aid fitters Secondhand booksellers
Ballroom-dancing teachers Hunting guides Shampoo specialists
Barbers Librarians Tattoo artists
Dieticians Locksmiths Tour guides
Electricians Manicurists Tree-trimmers
Frozen-dessert retailers Massage therapists Wig specialists
Funeral directors Private detectives Windshield repairers
Hair braiders Respiratory therapists Yoga instructors
The above table lists some of the occupations that require licenses in at least a few states. All told, 1,100 different jobs now require a license in at least one state that is nearly 40 percent larger than three decades ago. Thus, it can surmised that
A. there has been new federal laws passed against license requirement for new jobs.
B. the number of occupational licenses issued have been going down.
C. the number of occupational licenses issued have remained unchanged.
D. there has been an occupational license explosion in the U.S.

Recently in states across the land, licensing rules have expanded with each passing year. In order to obtain occupational licenses, people typically must pay fees or engage in a period of study. Such licensing requirements constitute
A. deregulation.
B. patents.
C. free entry.
D. barriers to entry.

People in licensed occupations earn about 15 percent higher incomes because consumers pay higher prices to obtain the services of people in licensed occupations. Therefore, licenses create
A. low quality products.
B. higher costs of production.
C. free entry and exit to any profession.
D. monopoly profits.

Chapter 24 Homework
Which of the following is not a characteristic of a monopoly?
A. Barriers to entry.
B. Free entry and exit.
C. A product with no close substitutes.
D. A single firm in the market.

 

Which of the following markets has a barrier to entry?
A. Gold can only be mined in certain places in the world.
B. Stan’s Garbage Company runs the only trash collection service in town.
C. There are already many fast food restaurants in the City of Buffalo.
D. An aluminum company owns all bauxite mines, an essential input.

Which of the following markets has a barrier to entry?
A. Joe’s Bar owns the only liquor license issued by the town.
B. Gold can only be mined in certain places in the world.
C. There are already many fast food restaurants in the City of Buffalo.
D. Stan’s Garbage Company runs the only trash collection service in town.

For a monopolist, marginal revenue is (Graph)
A. greater than the price of the product.
B. less than the price of the product.
C. unable to be determined.
D. equal to the price of the product.

Since a monopolist faces the downward-sloping industry demand curve,
A. it can charge any price that it wants.
B. it must charge the same price as a competitive firm.
C. the price it can charge must be regulated by the government.
D. the price it will charge depends on the elasticity of demand.

A manager of a monopoly firm notices that the firm is producing output at a rate at which average total cost is falling but is not at its minimum feasible point. The manager argues that surely the firm must not be maximizing its economic profits. The manager’s argument is
A. incorrect, since profit maximization requires that marginal revenue equals marginal cost but does not require the average total cost to be at any particular level.
B. correct, since a monopolist maximizes profit at a point where average total cost should be at its lowest level.
C. incorrect, since at the minimum feasible point of the average total cost curve, a monopolist earns zero profit.
D. correct, since a monopolist maximizes profit at a point where average total cost is equal to marginal cost.
A new competitor enters the industry and competes with a second firm, which had been a monopolist. The second firm finds that although demand is not perfectly elastic, it is now relatively more elastic. The second firm’s marginal revenue will be _____________ and its profit-maximizing price will be ___________
A. perfectly inelastic; higher.
B. less elastic; higher.
C. more elastic; lower.
D. perfectly elastic; the same.

 

The following table shows demand and marginal cost for a monopolist. Calculate marginal revenue (MR) at each quantity. (Enter your response as an integer.)
Output (units)
(Q) Price per Unit
(P) Marginal Revenue
(MR) Marginal Cost
(MC)
0 40 — —
1 35   5
2 30   10
3 25   15
4 20  20
5 15  25

A profit-maximizing monopolist will produce ___units and set a price of $__.
The following table shows daily demand and costs for a monopolist.
Output (units)
(Q) Price per Unit
(P) Marginal Revenue
(MR) Marginal Cost
(MC) Average Cost
(ATC)
0 30 — — —
1 25 25 5 25
2 20 15 10 15
3 15 5 15 18
4 10 −5 20 21
5 5 −15 25 24
A profit-maximizing monopolist will produce __ units and set a price of $.
This monopolist’s daily profit is equal to $___.

Consider a price discriminating monopolist. Which of the following is true?
A. A monopoly will engage in price discrimination whenever feasible to increase profits.
B. Charging different prices to different customers does not mean the monopoly is necessarily using price discrimination.
C. The monopolist will sell some of its output at higher prices to consumers with less elastic demand.
D. All of the above are true.
E. None of the above are true.

For each of the following examples, which group will pay the higher price?

Air transport for businesspeople and tourists

Serving food on weekdays to businesspeople and retired people. (Hint: Which group has more flexibility during a weekday to adjust to a price change and, hence, a higher price elasticity of demand?)
A theater that shows the same movie to large families and to individuals and couples. (Hint: For which set of people will the overall expense of a movie be a larger part of their budget, so that demand is more elastic?)

Which of the following is necessary for a firm to practice price discrimination?
A. The firm must be a monopoly.
B. The firm must be able to prevent resale of the product.
C. The firm must be selling a service, not a product.
D. There must be only two groups of buyers in the market.

As compared to a perfectly competitive industry, a monopoly industry with identical cost curves will
A. produce less and set a lower price.
B. produce less and set a higher price.
C. produce less and set the same price.
D. produce more and set a higher price.
E. produce more and set a lower price.

The marginal revenue curve of a monopoly crosses its marginal cost curve at $31 per unit, and an output of 3 million units.

What is the profit-maximizing (loss-minimizing) output?

When the demand for a monopolist falls, the marginal revenue also shifts left and will intersect the marginal cost at a l—–output level. The output rate will____, and economic profits will likely ________.

Simulation Practice Round 1

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Hello Asma,

 

After you login, go to Dashboard and under Practice Round 1 > click Homework. Under Assignment click > Review and do the 7 questions.

 

 

To get to the data to answer the questions do the following: Dashboard and under Practice Round 1 > click decisions. Launch the web spreadsheet. Click > continue as draft.  You don’t have to enter any data just view the data to provide the analysis. View the data under  Decisions, Proformas and Reports. My team is the ‘Baldwin” team so only view the data from my team to do the analysis. Just click file exit to exit please do not save. I uploaded some but all supporting files if you need them can be found by going  to Dashboard and under Practice Round 1click > Round 0 Reports. I really need this by 9 am EST June 6 2013 If you have any questions, please advise.

 

Thank you.

4-2 Final Project Milestone

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4-2 Final Project Milestone

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Milestone Two Tips

 

Part II: Critical Element “Impact”

Part II: Critical Element “Firm’s Actions”

 

To receive an exemplary score on the Supply and Demand section of your paper, you’ll need to do the following:

-Effectively evaluate trends in demand over time

-Explain the impact the demand trends have on the industry and the firm in detail

-Analyze information and data related to the demand and supply for the firm’s product(s)

-Use the information and data on supply and demand to support a recommendation (or recommendations) for the firm’s actions (noted in bold text in example below)

-Include a graphical representation of data and information (using the last 5 years of company sales data is a great choice, as shown in example below)

-Use concrete examples in your analysis (in the example below you’ll notice a discussion of demand in China and of the supply of cocoa)

Here is an example that meets the above requirements:

 

Supply and Demand

With the demand for chocolate rising and its growing popularity in the international markets, it’s important that we analyze and understand the supply and demand trends to determine how Hershey can best align its firm’s product to sustain future growth in the confectionery market.  In addition, we need to evaluate pricing along with revenue growth to understand the impact it will have on consumer responsiveness by utilizing the price of elasticity of demand as our guide.  As noted in my initial introduction, the demand for chocolate in the global market is expected to have an annual rate increase of about 3 percent with “Asia being the major source in growth sales, and is expected to rise to a 20 percent share in the global market by 2016” (Bradford, n.d.).

As illustrated in the graph below, Hershey has shown tremendous growth in sales over the last 5-years and contributes much of its growth from “a nearly 10% price increase that was phased in over the last couple of years” (Wismer, 2013).

Figure 1. Hershey’s Revenue and Cost of Goods Sold (COGS incl. D&A) data for the past 5-years.  Adapted from HSY Annual Income Statement – Hershey Co. Annual Financials. (n.d.). Retrieved from http://www.marketwatch.com/investing/stock/hsy/financials

The company also had a strong, aggressive business strategy that included special promotions, brand extensions, new products, and acquisitions of candy makers that offered diversity in product textures and unique flavors.  With a solid rank in the U.S. market, the company is now positioned to expand its operation into key international markets to improve global sales (Wismer, 2013).

In 2013, the company expanded into China and acquired 80% of renowned candy maker, Shanghai Golden Monkey.  The established company is recognized in its home market with supported net sales growth in the double-digits making it the ideal partnership for Hershey to expand its footprint and gain access to an emerging demographic market (Merced, 2013).  The acquisition resulted in a good deal with Hershey growing its sales to $7.4 billion in 2014, and China being responsible for 4.5 percent of those earnings.  According to Reuters (2015), “the chocolate consumption growth in the emerging markets closely tracks GDP growth, suggesting China’s increasing urban population would drive chocolate consumption”.  Based on these facts, the rising demand for chocolate by the urban population in China is expected to grow to $4.3 billion by 2019.  That would be almost a sixty percent increase from the $2.7 billion sales in 2014 (Reuters, 2015).  Given the surging demand for chocolate in China, I recommend that Hershey continue to invest resources into expanding their operations to grow their sales in China.

As the popularity for the taste of chocolate grows so does the increased demand for cocoa, which is the main ingredient needed to make chocolate.  There are many factors that influence the price of cocoa with the most serious being lack of resources and monetary earnings by the “small-scale family farmers who grow 90% of the worlds cocoa” (Goodyear, n.d.).  This has resulted in low production with many farmers leaving the industry due to low wages and poverty in their community.  The “demand for cocoa is predicted to rise by 30% by 2020 but without investing in small-scale farmers, the industry will struggle to provide sufficient supply” (Goodyear, n.d.).  My recommendation would be for Hershey to support and invest in Fairtrade certified cocoa organizations, which encourage long-term business relationships with cocoa farmers by ensuring higher wages and proper resources to produce long-term quality products.  By aligning and buying their supplies from Fairtrade certified farmers, the company would be strengthening their business relationship and investing in the most crucial ingredient for the company’s products, cocoa.  Without this ingredient, the company would no longer have a functioning chocolate confectionery business.

Tips on how to start writing about supply and demand for Part II:

 

One of the critical elements is to evaluate the trends in demand over time and explain their impact on the industry and on the firm.  But how do you evaluate the trends in demand over time and explain their impact on the industry and the firm?  Here are some ideas of concepts that could be applied to your firm to help you evaluate the trends in demand.  Your company’s press releases (available on their website) and various financial websites (Yahoo Finance, etc.) are a great place to find out some demand and supply issues that your firm faces.  You don’t need to discuss everything below; this is just to provide some ideas to help you get started on your research!

Market demand is the demand by all the consumers of a given good or service.  Find out who your customers are and provide detail on them. Use annual sales data to find out how much of the product is purchased.  Building on that idea, how has the annual sales data changed over time?  There are several variables that can shift market demand: income, prices of related goods, tastes, population and demographics, expected future prices.  Discuss those in variables in detail that relate to demand changes for your firm.  Here is some further detail on each of these factors that can help you as you write your paper.

Income

The available income of a consumer impacts their willingness and ability to buy your product(s).  Discuss whether your product is a normal good or an inferior good.  A product is a normal good if demand increases and income rises and decreases as income falls.  A product is an inferior good if the demand increases as income falls and decreases as income rises.  In your paper you could discuss any changes in disposable income for your customers as a whole and how that impacts demand.  Explain which way the demand curve shifts and how that impacts the equilibrium price and quantity.

Prices of related goods

The prices of other goods can be a big factor impacting the demand for a product.  Substitutes are goods and services that can be used for the same purpose as your product.  If your firm was impacted by the price change of a good that many consider to be a substitute for your product, you can discuss the impact in this section.  If the price of a substitute good falls, then the demand for your product would fall (demand curve shifts to the left).  If the price of a substitute good increases, then the demand for your product would increase (demand curve shifts to the right).  Explain how the shift in demand impacts equilibrium price and quantity.  You could also discuss any goods that are complements to your product in this section.  Complements are goods and services that are used together.  If the price of a complement good falls, then the demand for your product would increase (demand curve shifts to the right).  If the price of a complement good increases, then the demand for your product would decrease (demand curve shifts to the left) because it is more expensive to buy a good that is used together with your product.

Tastes

What could impact consumer tastes (preferences) for your product?  One idea might be advertising, which could help increase the demand.  Negative advertising by competing firms, or perhaps by reviewers of the product, could decrease the demand.  Other trends, such as environmental consciousness, could impact your product as people move to change their purchasing behavior.

Population and Demographics

Population can impact demand because as the population increases, the number of consumers also increases which should lead to an increase in demand of most goods.  Changes in demographics (characteristics of a population such as age, race, and gender) could also impact the demand of your product because different groups of people have different preferences for the goods they purchase.

Expected Future Prices

Consumers of your product might delay making a purchase for a while if they expect that prices of your product will fall.  That would decrease the demand for your product right now.  Alternatively, if consumers are expecting the price of your product to rise, the demand for your product will increase as consumers try to purchase before the expected price hike.

 

One of the critical elements is to analyze information and data related to the demand and supply for your firm’s product(s) to support your recommendation for the firm’s actions.  You will include a graphical representation of the data and information used in your analysis.

Here’s how you can get started with your discussion on supply.  You don’t need to discuss everything I cover below; this is just to provide some ideas to help you get started on your research!  The supply curve represents the relationship between the price of a product and the quantity of the product supplied.  You’ll want to use information and data to discuss some of the variables that shift market supply, explain the direction the supply curve will shift and the resulting impact on equilibrium price and quantity, and use that analysis to recommend specific actions to your firm.  Here is a quick explanation of variables that can shift market supply.

Price of Inputs

This is the factor which is most likely to cause a shift in the supply curve and the price of inputs should definitely be discussed in your paper.  An input is anything used in the production of a good or service.  If the price of an input for your product rises, the supply will decline (supply curve shifts to the left).  This shows that your firm will supply a lower quantity at each price point than it previously could.  On the other hand, if the price of an input declines, the supply will increase (supply curve shifts to the right).

Technological Change

This is a factor that describes a positive or negative change in the ability of a firm to produce a given level of output with a given quantity of inputs.  A positive technological change means that the productivity of the firm’s workers or machines has increased; the firm is able to produce more output using the same amount of inputs.  When a firm can produce more output with the same amount of inputs, its costs will be lower and the good will be more profitable to produce at any given point, which shifts the supply curve to the right.  A negative technological change is rare, but it could result from a natural disaster or a war that reduces the ability of the firms to supply as much output with a given amount of inputs.  In this case, the costs the firm experiences increases, the firm will earn lower profits from producing the good, and the supply curve will shift to the left.

Prices of Substitutes in Production

Alternative products that a firm could produce are called substitutes in production, which generally use similar components and can be assembled in the same factory.  When the price of one product goes up relative to another, the firm can shift more production to the product that has become more profitable.

Number of Firms in the Market

Changes in the number of firms in the market will shift the supply curve.  If a new firm has entered the market the supply curve will shift to the right, which lowers the equilibrium price and increases the quantity supplied.  If an existing firm leaves the market the supply curve will shift to the left, which increases the equilibrium price and decreases the quantity supplied.

Expected Future Prices

If your firm expects that the price of its product will increase in the future, the best interest of your firm is to decrease supply now and increase it in the future when the price rises.  If your firm expects that the price of its product will fall in the future, it should increase production now to take advantage of the higher price.

I hope this was helpful.  There is a chart you may find useful on page 81 of your text summarizing the most important variables that cause market supply curves to shift.  These are the shifts that you will be most likely to see for your firm.

 

Part III: Price Elasticity of Demand

Critical Element “Analyze”

Critical Element “Consumer Responsiveness”

Critical Element “Pricing Decisions”

 

In order to receive an exemplary score on the 3 different elements of the elasticity of demand section, you’ll need to meet the following criteria:

–Analyze available data and information to justify how the price elasticity of demand for the firm’s product was determined and use research to illustrate these claims (see underlined text in the sample paper for an example of how to meet these criteria).  In other words, be sure to state whether you have concluded the demand for your good is elastic or inelastic and use specific evidence to explain why.  While you may be able to find enough information to calculate the price elasticity of demand, this is not required.  You can use research on the factors of consumer responsiveness or evidence based on pricing and revenue growth to support your claim.

–Explain all 5 factors that affect consumer responsiveness to price changes for the product using the concept of price elasticity of demand as a guide (see bold text in the sample paper).  The factors affecting consumer responsiveness are: the availability of substitutes, the passage of time, luxuries vs. necessities, the definition of the market, and the share of a good in a consumers budget.  More details on these factors are explained on pages 178-179 of your text.

–Accurately assess how the price elasticity of demand impacts the firm’s pricing decisions and revenue growth, using research to illustrate claims (see italic text in the sample paper).  See section below for further detail on how to write this section.

I really recommend narrowing your focus to one product or type of products when discussing elasticity of demand, particularly if you selected a firm that creates a diverse product line.  For example, if you  have chosen Apple as your firm, I would recommend discussing the elasticity of one product line such as the iPhone or the iPad.

Below is a sample paper on the price elasticity of demand for chocolate.  Note that the formatting of this example is only to show you how the critical elements are met.  Please do not bold, underline, or italicize the different elements on your paper.

 

Price Elasticity of Demand

A shortage in the supply of cocoa would have a significant impact on the confectionery market and its input costs leading to a major shift in retail pricing for chocolate.  As a result – without a reasonable substitute for chocolate, consumers craving the taste for chocolate will not be able to replace the desirable treat for another confectionery product making the demand for chocolate inelastic.  However, there are many different types of chocolate products available for purchase that can be substitutes.  When we narrow the market, we know that if a particular brand of chocolate goes up in price then the consumer could substitute their choice by switching to another brand making the demand for the brand of chocolate elastic.   The “biggest fear surrounding the chocolate industry right now it that the supply situation leads to further retail price increases which creates conditions where chocolate is seen as a luxury” (Maduri, 2014).  When a product is viewed as a necessity such as; gas, milk, or bread – the quantity demanded would not change in response to price fluctuations.   But when a product is seen as a luxury, the price change would influence the quantity demanded as consumers with less disposable income would do away with the purchase all together.  The possible thought behind this fear is that chocolate once viewed as an affordable treat could now be considered too expensive by the average consumer, which cause the demand for chocolate to become more elastic (Maduri, 2014).

As an example, in 2012 – Hershey “increased its prices on products by 6% on average, which resulted in a 2% increase in sales volume, a 140 basis point increase in gross margins, and a 14% year-over-year increase in EPS” (Asad, 2014).  For Hershey in 2012, the price increased by 6% and the change in quantity demanded did not decrease by more than 6% (it actually increased 2%), which indicates that consumers are less sensitive to price changes and that the demand for Hershey’s chocolate is inelastic.  This is supported by the idea that consumers consider chocolate to be a necessity and that it currently makes up a small enough part of the average consumer’s budget to make price increases less noticeable.

Since 2012, chocolate retail prices have increased by 60%, prompting Hershey to implement a pricing strategy focused on consumer responsiveness (Maduri, 2014).  To diminish the shock of rising retail prices, Hershey gradually increased the costs on its retail products by adding a certain percent over time in order to avoid interruptions with consumer demand.  By incorporating this strategy, consumers continued to buy their brands instead of avoiding the purchase altogether leading to increased sales and revenue growth over the last couple of years (Maduri, 2014).  In recognizing the impact the supply cost of cocoa would have on their input costs, Hershey was able to sell their products by gradually increasing the costs by a certain percent over time to its retail products making the consumer view the demand for the product still affordable.  This pricing increase had a positive impact on revenue due to the inelastic demand for chocolate.  If the demand of chocolate were to become elastic as time passes, then Hershey may want to adjust its pricing strategy to avoid experiencing a decline in revenue from raising prices.

Part III: Critical Element “Consumer Responsiveness”

There are five determinants that we can use to determine whether the demand for your product is likely to be elastic or inelastic.  You should cover at least two or three of the following characteristics to receive a score of proficient (or all five to receive an exemplary) and apply them to your product to support your determination of elastic or inelastic demand.  Here is an example of the application of these determinants to gasoline, as we previously covered in a discussion board assignment.

 

The availability of close substitutes to the good: Thinking back to module two, we learned that substitutes are goods and services that can be used for the same purpose.  If consumers have few options for substitutes, as in the case of gasoline, when the price rises the quantity demanded only falls slightly.  If few substitutes are available, the demand for the good tends to be more inelastic.  The demand for a good with many substitutes tends to be more elastic.

The passage of time: In general, the more time that passes, the more elastic the demand for a product becomes.  If the price of gas goes up one day, most people are still going to drive to work, the store, and to any other planned activities.  If the price of gas stays high, eventually people will start making adjustments that could include: carpooling, taking public transportation, purchasing a more fuel efficient vehicle, or finding a job closer to where they live.

Luxuries vs Necessities: Goods that are luxuries usually have more elastic demand than goods that are considered to be necessities.  Gasoline is considered to be a necessity for many people, which supports the inelastic demand for gas.

The definition of the market: As a general rule, the more narrowly we define a market, the more elastic the demand will be.  If you are stopping to fill up your car and you notice that the gas station across the street is 3 cents cheaper, you’ll probably visit the station across the street, making the demand for gas at one particular gas station elastic.  But, at the end of the day the only thing you can put in your tank is gasoline, so your overall demand for gas is inelastic.

Share of a good in a consumer’s budget: In general, the demand for a good will be more elastic the larger the share of the good in the average consumer’s budget.  This is where the gasoline example gets tricky, because for many people gas makes up a sizeable portion of their budget.  This is why we need to look at multiple determinants when we are trying to determine the elasticity of demand for a product, especially if you don’t have the data to calculate it.  In the case of your final project (and Milestone Two), you might not have enough information to calculate the elasticity of demand for your product, so you’ll have to use several of these determinants to decide whether your firm faces an elastic or inelastic demand curve.

 

 

Part III: Critical Element “Pricing Decisions

 

In this portion of your paper you will need to accurately assess how the price elasticity of demand impacts the firm’s pricing decisions and revenue growths.  A good place to look to help you answer this question is in section 6.3 of your text: The Relationship between Price Elasticity of Demand and Total Revenue (pg. 181-184).  When you write this section you should already have used several of the 5 determinants of elasticity of demand to determine whether or not your firm’s product faces an elastic or inelastic demand curve.

Before we get into the relationship between elasticity of demand and total revenue, we should first understand what total revenue is and how it is calculated.  Total revenue is the total amount of funds a seller receives from selling a good or service, which is calculated by multiplying the price per unit by the number of units sold.

If the demand for your product is inelastic, then the price and total revenue move in the same direction.  This means that an increase in price would increase the total revenue for that product, and a decrease in the price would decrease.  Why?  Let’s think back to the definition of inelastic demand: the percentage change in quantity demanded is less than the percentage change in price.  So, if the quantity demanded isn’t changing much, then the revenue is going to be influenced by the change in price.  If you the demand for your product is inelastic you should increase the price in order to increase revenue.

If the demand for your product is elastic, then the price and revenue move in opposite directions.  In other words, if you increase the price of an elastic good the total revenue will fall, but if you decrease the price then the total revenue will rise.  Thinking back to the definition of elastic demand: when the percentage change in quantity demanded is greater than the percentage change in price.  This means that even though you are decreasing the price the additional quantity you will be able to sell will increase the total revenue; remembering that total revenue = price x quantity sold.  So if you are facing elastic demand for your product you should decrease the price in order to increase revenue.