Microeconomics

• CASE TO BE TYPED; GRAPHS TO BE DONE ON THE COMPUTER OR BY HAND WITH A RULER!
• NO NUMBERS NEEDED—CONCEPT!

Microeconomics:  Case Study

1. Classification as One of the Four Basic Market Models

1. 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. (USE CHART, WB PG. 425)

1. State the basic industry problem and proceed to analyze using the following methodology where appropriate. Be sure to include the six (6) graphs, as indicated.

1. Supply & Demand and the Price System Graphs

1. What is the current demand situation – is the curve changing (use graphs)?

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

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

1. 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

1. Market Equilibrium (use graphs)

Graph #3: Demand & Supply Curves with Changes

1. Surplus/shortage (where appropriate)
2. Price ceilings and price floors (where appropriate)

1. Changes in Income & Results
2. Superior/normal or inferior goods

Micro Case Study—cont’d.

1. Changes in Prices of Related Goods & Results—CHOOSE ONE:
2. 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).

1. Short-run Costs (use graphs)

Graph #4: Short-run Profit or Loss (use MC, AR, ATC, and AR; shade where appropriate) WB PG. 224

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. . Long-run Costs (use graphs)

Graph #5: Long-run Profit or Loss (use MC, AR, ATC, and AR; shade where appropriate) WB PG. 224

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) WB PG. 181

1. Graph the LRATC, show economies and diseconomies of scale, and mark with an “X” the company’s position.

• Conclusion/Summary

1. Recapitulation of Findings

1. How could the economic problem be corrected?

1. Prediction for Future

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