Assignment-daixieTM为您提供剑桥大学University of Cambridge Business economics 3E1商业经济学代写代考和辅导服务！
Instructions:
Business economics is the study of the principles and theories that underlie the decision-making process of businesses. It involves the application of economic concepts and theories to analyze business problems and make strategic decisions that maximize profits and efficiency.
Business economics encompasses a wide range of topics, including microeconomics (the study of individual markets and consumer behavior), macroeconomics (the study of the economy as a whole), accounting, finance, and management. It can be applied to a variety of industries, including manufacturing, finance, healthcare, retail, and technology.
Some of the key concepts in business economics include demand and supply analysis, market structure and competition, cost and production analysis, pricing strategies, risk management, and financial analysis. By applying these concepts, businesses can make informed decisions that optimize their resources and achieve their objectives.
(a) The demand for organic yogurt for a monopoly firm has been estimated according to the following linear regression model, where $\ln \mathrm{X}$ stands for the natural logarithm of variable $\mathrm{X}$ : $$ \ln \mathrm{Q}=7-1.4 \ln \mathrm{P}+1.8 \ln \mathrm{A}+0.1 \ln \mathrm{M} $$ std errors: $(5.2)(0.45) \quad(2.2) \quad(0.04)$ Q is quantity demanded of yogurt, P is price of yogurt, A is advertising and M is income. The marginal cost of producing the yogurt is $£ 0.5$. The standard errors are given in parenthesis below each estimate. Interpret the results. What price would you advise the CEO to charge in order to maximize profits? Explain.
(a) The demand function for the organic yogurt can be expressed as:
$Q=e^{7-1.4 \ln P+1.8 \ln A+0.1 \ln M}$
Taking the derivative of the demand function with respect to P, we get:
$\frac{\partial Q}{\partial P}=-\frac{1.4 e^{7-1.4 \ln P+1.8 \ln A+0.1 \ln M}}{P}$
The marginal revenue function for the firm is given by:
$M R=\frac{\partial T R}{\partial Q}=\frac{\partial(P Q)}{\partial Q}+Q \frac{\partial P}{\partial Q}=P\left(1-\frac{1.4 e^{7-1.4 \ln P+1.8 \ln A+0.1 \ln M}}{Q}\right)$
The profit-maximizing condition for the monopoly firm is:
$M R=M C$
Substituting the values of MR and MC, we get:
$P\left(1-\frac{1.4 e^{7-1.4 \ln P+1.8 \ln A+0.1 \ln M}}{Q}\right)=0.5$
Solving for P, we get:
$P=e^{2.764+0.7 \ln A-0.05 \ln M}$
To determine the optimal price, we need to know the values of A and M. Assuming A = 100 and M = 10,000, we get:
$P=e^{2.764+0.7 \ln 100-0.05 \ln 10000}=£ 2.19$
Therefore, the CEO should charge £2.19 for the organic yogurt to maximize profits.
(b) A utility company faces economies of scale over all relevant levels of output. If the government wants to regulate the monopoly to produce the quantity that would be expected to hold under perfect competition, what price should the government stipulate? Include a diagram in your answer.
Under perfect competition, the firm produces where marginal cost (MC) equals marginal revenue (MR), which is also equal to price (P). This can be shown in the following diagram:
In this case, the government wants the monopoly to produce the quantity that would be expected to hold under perfect competition. This is shown as Qpc in the diagram. Since the monopoly faces economies of scale over all relevant levels of output, its average total cost (ATC) is decreasing over the range of output. This means that the price (P) must be equal to the minimum point of the ATC curve at Qpc in order for the firm to produce at the efficient scale. This is shown in the following diagram:
Therefore, the government should stipulate a price equal to the minimum point of the ATC curve at Qpc in order to regulate the monopoly to produce the efficient quantity.
(c) The ‘invisible hand’ is an old-fashioned idea of how markets should function. Discuss.
(c) The “invisible hand” is an old-fashioned idea that suggests that markets will allocate resources efficiently without the need for government intervention. According to this idea, individuals pursuing their own self-interest in a competitive market will create a balance between supply and demand that leads to the efficient allocation of resources. The concept was popularized by the economist Adam Smith in his book “The Wealth of Nations”.
However, the idea of the “invisible hand” has been subject to much criticism. Some argue that markets do not always function efficiently and can lead to market failures such as externalities, public goods
