Project Guidelines and Rubric
In this project, you will demonstrate your mastery of the following competencies:
- Inform business decisions using microeconomic models and theories
- Determine the impact of economic costs on organizational and individual decision making
- Explain how market structure impacts a businessâ€™s entry and exit into a market and its ability to generate economic profit
You and your friend from college have just graduated. You majored in business, and your friend majored in a creative field. Your friend is highly inventive and has come up with an excellent idea for a new product. You both believe in this idea so much that you have agreed to become business partners. However, before you embark on your entrepreneurial adventure, you will have to explain some key microeconomics concepts to your partner that are important to make sound business decisions.
Your business partner is less than enthusiastic about this prospect and has never had an interest in what is often described as the dry and boring field of economics. Every time you have tried to engage your partner in practical discussions, they brush you off and decide to go play video games instead.
Aha! This gives you an idea: What if you could convince your friend to learn about economics through games? You have found several simulation games that demonstrate in real and interesting ways the economic principles that you know your partner needs.
begin drafting your memorandum report by completing the following steps:
1. Comparative Advantage:
a. How do individuals evaluate opportunity costs to make business decisions? explain what role the production-possibility frontier (PPF) has in the decision-making process.
b. Explain how comparative advantage impacts a firmâ€™s decision to engage in trade. Would a businessâ€™s decision to trade cause a change to its PPF? Provide specific reasoning to support your claims.
2. Competitive Markets and Externalities:
a. What impact do policy interventions have on the supply and demand equilibrium for a product?
b. What are the determinants of price elasticity of demand? Identify at least three examples. Explain how price elasticity can impact pricing decisions and total revenue of the firm.
c. Can policy market interventions cause consumer or producer surplus? Explain why using specific reasoning.
3. Production, Entry, and Exit:
a. Analyze a business ownerâ€™s decision making regarding whether to enter a market. Use economic models to support your analysis.
b. How does a business owner applying the concept of marginal costs decide how much to produce? Use economic models to explain.
c. How does the impact of fixed costs change production decisions in the short run and in the long run? Use the average-total-cost (ATC) model included in the module reading chapters to demonstrate this impact.
4. Market Structures:
a. Explain what market inefficiencies derive from monopolies and monopolistic competition. Use examples from the textbook to support your claims.
b. How do firms in an oligopolistic market set their prices? Use specific examples from the simulations or from the textbook to support your claims.
c. Explain how firms that compete in the four different market structures determine profitability. Use specific examples from the textbook to support your claims.
- Conclusions: Draw your overall conclusions about the relevance and significance of microeconomics. How will microeconomics principles impact your business decisions moving forward? Provide recommendations to your business partner for your future business venture.
- Finally, ensure that all of your sources are properly cited using in-line citations and references according to APA format.