Assignment:
1. Outline a plan that managers in the low-calorie, frozen microwaveable food company could follow in anticipation of raising prices when selecting pricing strategies for making their products response to a change in price less elastic. Provide a rationale for your response.
We knowthat the demand for low-calorie frozen food is inelastic. Therefore, the company can raise price to raise total revenue.
We also know that the low-calorie frozen food is a normal good. Therefore, the company should sell the product in rich/affluent neighborhoods.
2. Examine the major effects that government policies have on production and employment. Predict the potential effects that government policies could have on your company.
If the company has to provide minimum wage to its workers, the cost of production goes up, supply curve shifts to the left, and employment falls. [Worst case, company incurs loss, or may go out of business]
Similarly, if the company has to provide health care (due to Affordable Care Act) to its workers, the cost of production goes up, supply curve shifts to the left, and employment falls. [Worst case, company incurs loss, or may go out of business]
Another example, implementation of the Occupational Safety & Health Administration (OSHA) regulations would increase the cost of production and consequences would be similar as stated before.
I am open if you chose other relevant regulations as part of the answers as long as it was cogent and analytical.
3. Determine whether or not government regulation to ensure fairness in the low-calorie, frozen microwavable food industry is needed. Cite the major reasons for government involvement in a market economy. Provide two (2) examples of government involvement in a similar market economy to support your response.
Government regulation is necessary in this low-calorie, frozen microwavable food industry because we learned from Assignment 2, it was beginning to have market power.
To monitor that the industry does not exert market power by reducing output and raising price, the role of the Federal Trade Commission and the Antitrust Division of the U.S. Department of Justice becomes important. The role of the U.S. Department of Agriculture is also important to ensure the food is safe and meets federal guidelines.
Strictly speaking, there is no interventionist role of the government in a laissez faire economy, except for protecting the nation, maintaining law and order and supporting the legal system. Government may intervene in the economy when there is externality in production (ex.
pollution) and externality in consumption (ex. smoking). That said, the U.S. government’s role in the economy has increased since the 1929-1933 Great Depression. On a macroeconomics level, the U.S. government has to ensure price stability and full employment.
On a microeconomics level, the U.S. government has to ensure producers and consumers are well-protected in terms of buying/selling of goods and services. Uncle Sam ensures it through implementation of the federal regulations and the systems available to support it.
4. Examine the major complexities that would arise under expansion via capital projects. Propose key actions that the company could take in order to prevent or address these complexities.
. Physical constraints
. Legal constraints
. Administrative constraints
. Distribution constraints
. Political constraints
. Financial or budget constraints
. Social or religious constraints
5. Suggest the substantive manner in which the company could create a convergence between the interests of stockholders and managers. Indicate the most likely impact to profitability of such a convergence. Provide two (2) examples of instances that support your response.
Incentive compatibility constraint and participation constraint
6. 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.