Assignment
Price, Profits, and Competition
You may be aware that there are three types of profit: accounting profit, economic profit, and normal profit. The difference between the total revenue and the sum of the explicit and implicit costs of an organization results in economic profit. It is commonly assumed that every firm's goal is to maximize its profit, and the economic theory of business is built on this underlying assumption.
Describe the economic principles that company executives should consider when developing a strategy or strategies that will maximize profits while minimizing incentives for competitors to develop competing products. Explain why each of these economic principles is important to the company's strategy. Recommend and justify a strategy that you believe will maximize profits while minimizing incentives for increased competition.
Assignments must bein APA style and format. Information on APA style is available from theWalden Writing Center.
Learning Resources
Required Resources
Readings
• Frank, R. H., & Bernanke, B. S. (2010). Principles of microeconomics, brief edition(2nd ed.). New York, NY: McGraw-Hill/Irwin.
o Chapter 5, "Perfectly Competitive Supply"
Chapter 5 gives you insight into the supply side of the market. The chapter also revisits the cost-benefit principle from the seller's perspective and examines the factors that a rational seller would consider while marketing a product.
Focus on the graphic interpretations of individual and market supply curves. Review the law of supply, and study the various determinants of supply.
o Chapter 6, "Efficiency, Exchange, and the Invisible Hand in Action"
Chapter 6 introduces the concept of the Pareto efficiency of market equilibrium. The chapter also explains how market equilibrium prices can help in attaining the largest possible total economic surplus. In addition, this chapter focuses on the central role of economic profit and the invisible hand theory of the market.
Focus on the cost of preventing price adjustments and the marginal cost pricing of public services. In addition, study the different graphic interpretations of economic surplus.
Media
• Kahn Academy. (2014d). Economic profit versus accounting profit [Video file]. Retrieved from https://www.khanacademy.org/economics-finance-domain/microeconomics/firm-economic-profit/economic-profit-tutorial/v/economic-profit-vs-accounting-profit
Note: The approximate length of this media piece is 8 minutes.
• Kahn Academy. (2014j). Marginal cost and average total cost [Video file]. Retrieved from https://www.khanacademy.org/economics-finance-domain/microeconomics/firm-economic-profit/average-costs-margin-rev/v/marginal-cost-and-average-total-cost
Note: The approximate length of this media piece is 8 minutes .
• Kahn Academy. (2014f). Fixed, variable, and marginal cost [Video file]. Retrieved from https://www.khanacademy.org/economics-finance-domain/microeconomics/firm-economic-profit/average-costs-tutorial/v/fixed--variable--and-marginal-cost
Note: The approximate length of this media piece is 12 minutes.
Optional Resources
• Frank, R. H., & Bernanke, B. S. (2011). Principles of microeconomics, brief edition (2nd ed.) [Supplemental material]. Retrieved from https://highered.mheducation.com/sites/0077316770/student_view0/index.html