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MC=MR Rule

Assignment 2: LASA 1: The Costs of Production
Joseph Farms, Inc. is a small firm in the agricultural industry. They have asked you to help them complete the limited data they have gathered in an effort to enable effective decision-making. Some work can be done using MS Excel but it must be copied to an MS Word file for the final submission of this assignment. To assist Joseph Farms, Inc., respond to the following:
• Using MS Excel or a table in MS Word, complete Table-1 (Joseph Farms, Inc., Cost and Revenue Data).
o Assume that the price is $165.
o Assume the fixed costs are $125, at an output level of 1.
o Assume that the data represents a firm in pure competition.
o Show your calculations.
• Explain the MC=MR Rule. Describe the market structures to which this rule applies.
• Create a chart to illustrate the data in Columns 9 and 10.
• Describe the profit maximizing (or loss minimizing) output for this firm. Explain why or why not there is an economic profit?
• Explain why a firm in pure competition is considered to be a “price taker.”
(Assignment continues below Table-1.)

Table-1: Joseph Farms, Inc., Cost and Revenue Data
Column 1 Column 2 Column 3 Column 4 Column 5 Column 6 Column 7 Column 8 Column 9 Column 10 Column 11
Output
Level Price per unit Total Fixed Cost Total Variable Cost Total Cost Average Fixed Cost Average Variable Cost Average Total Cost Marginal
Cost Marginal Revenue Total Revenue
0 165 125 $ – NA
1 $ 113.00
2 165 125 $ 213.00 169 100 330
3 $ 300.00
4 $ 375.00
5 $ 463.00
6 $ 563.00
7 $ 675.00
8 $ 813.00
9 $ 975.00
10 $ 1,163.00

• Using the data in Table-1 (Joseph Farms, Inc., Cost and Revenue Data), complete Table-2 (Joseph Farms, Inc., Revenue/Profit/Loss Data). Show your calculations in summary form.
• Using the completed data in Table-2 (Joseph Farms, Inc., Revenue/Profit/Loss Data), Identify the break even output level for this firm.
Table-2: Joseph Farms, Inc., Revenue/Profit/Loss Data
Output
Level Price Total Revenue Total Costs from Table 1
Profit or Loss
0
1
2
3
4
5
6
7
8
9
10

Save your MS Word file including your graphs or charts using the filenameLastnameFirstInitial_M3A2 and submit it to the M3: Assignment 2 Dropbox by Wednesday, November 25, 2015.
Remember, quotations, paraphrases, and ideas you get from books, articles, or other sources of information should be cited using APA style. Help with citing sources can be found through theAcademic Resources page under Course Home.
Assignment 2 Grading Criteria Maximum Points
Accurately calculated cost data (total fixed, total, average fixed, average variable, average total, and marginal) and revenue data (marginal and total) for output level ranging from 1 to 10 in Table-1. Showed calculations in summary form. Correctly assumed data represented a firm in pure competition. (40 points)
Completed Table-1 as Microsoft Excel spreadsheet or Word table. (8 points)
48
Explained the MC=MR Rule. (12 points)
Identified market structures the MC=MR Rule applies to. (8 points)
Explained why MC=MR Rule applies to these market structures. (12 points) 32
Graphed all the data in column 9 of Table-1 (marginal cost) as curves in Microsoft Excel. (8 points)
Graphed all the data in column 10 of Table-1 (marginal revenue) as curves in Microsoft Excel. (8 points)
16
Explained the profit maximizing (or loss minimizing) output for Joseph’s Farms, Inc. (14 points)
Explained whether or not there is an economic profit for Joseph’s Farms, Inc. (14 points) 28
Explained why a firm in pure competition is considered to be a “price taker.” 28
Accurately calculated price, total revenue, and profit or loss data for output level ranging from 0 to 10 in Table-2 using data from Table-1. Showed calculations. (10 points)
Completed Table-2 as Microsoft Excel spreadsheet or Word table. (2 points) 12
Accurately calculated the break-even output level (break-even point) for Joseph’s Farms, Inc. using data in Table-2. Showed calculations. 16
Style (4 points): Tone, audience, and word choice.

Usage and Mechanics (4 points): Grammar, spelling, and sentence structure.

APA Elements (12 points): In text citations and references, paraphrasing, and appropriate use of quotations and other elements of style.
20
Total: 200

 

 
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