Assessment 1

1. Discuss and integrate microeconomics and macroeconomics in making managerial

decisions by citing examples. (5pts.)
Microeconomics has a great impact on making managerial decisions. Managerial.
Economics applies economic theories and decision-making science that is useful in
making economic decisions. Microeconomics is important in making managerial decisions
because its function is to help identify the proper response of a manager. For example, it
was analysed by Oliver Williamson that managers maximize utility based on
compensation, size of staff, etc. If we will be looking at its function, we can analyse that
microeconomics is where managers can find particular responses that could be helpful
today.
On the other hand, macroeconomics is important in determining the overall performance
of the business that a manager was in. It also helps the manager to understand the
increases and decreases in the economy. These increases and decreases will allow the
managers to formulate a strategy will they check these causes. For example, the increase
in demand for flavoured-canned goods will help the managers of a company that produces
regular canned goods to determine if they will follow the trend.
2. How does the scarcity of resources affect the firm’s decision-making? Justify your
answer by discussing specific situations. (5pts.)
Based on our discussion, the scarcity of resources restricts opinion and demands a
choice. The scarcity of resources plays a great role in the decision-making of a firm
because scarce resources challenge them to advance. An example is a sock-producing
firm. If we will be looking at its demand, the sock is one of our necessities because it is a
part of our clothing. However, the increase of demand for Iconic Socks back in 2016
affects the firm’s decision-making. We know that we have scarce supplies of fabric and
that we have to maximize them properly. Different firms from other companies decided to
combine technology that will maximize them and enable them to produce iconic socks at
a low feasible cost. On the other hand, the scarcity of resources affects the firm’s decisions
in terms of producing products. The price of the resources gives the firm a sign that there
will only be a few goods to produce. One example is the increase in the price of aluminum
alloy, this increase will limit the production of wheels. Wheel-constructing companies use
aluminum alloy to produce steel wheels.
3. Does regulating a firm will be significant for making optimal use of the resources
and production of goods and services? (5pts.)
Regulating a firm is significant for making optimal use of the resources and production of
goods and services. Regulation is important because it helps us to balance particular
resources. The regulation of resources inside the firm is important in resource
maximization. Some firms usually keep their resources and maximize them when the price
is high. One example is the production of mobile phones. We know that there are firms
that don’t regularly produce new versions of their phones. However, they put out their
phone when the specs are needed by different companies.
On the other hand, the government can regulate the different distribution of different
companies. We know that a particular company couldn’t be the only one to enjoy the
benefit of a particular. The role of the government in the market economy is to set rules
whereby different firms could subject. The regulations of the court must be fair and must
give balance in the distribution of resources. One example is the distribution of glycerine,
this expensive resource in making fondant should not be enjoyed by big companies such
as Goldilocks. All producers must be distributed these resources so that everyone can
benefit. Moreover, it prevents the destruction of glycerine; thus, it is beneficial for the
optimal use of resources.
4. Having said that most firms chose to maximize their profit, do you think it is a
hindrance to their contribution to economic welfare? Justify your answer. (5pts.)
I do think that profit maximization is not a hindrance to the firm’s contribution to economic welfare.
As defined by EconomicsOnline, economic welfare represents economic well-being expressed in
terms of the sum of consumer and producer surplus – also known as community surplus. The aim
of economic welfare is to help the consumer to respond to the different changes in the market. I
do think that profit maximization does not contribute to the majority of consumers’ economic
challenges. Most people benefit from profit maximization because a lot of us do work under
different firms. This maximized profit will be one of the employee’s benefits in the future. As we
know, these employees are also the majority of the consumers. The consumer who will be greatly
affected by this is unemployed. I do think that their welfare is as important as the other employed
ones. If we will base my conclusions on the unemployed consumer in our country, then profit
maximization is a hindrance to economic welfare. A lot of big companies used their situations to
gain more profit. From a business perspective, it might not be a problem. However, the economic
side will tell otherwise. The economy wants the consumers to have positive well-being. In case of
abuse of power, the government will be the one to regulate the situation.
 Assessment 2

1. Complete the chart below by using the steps of economic decision-making.

The ABCD Grill House is selling an average of 200 units of grilled whole
chicken per day using the electric griller but there will be an electric
interruption within the area during their operating hours and so, it will
Situation affect their grilled chicken production for that day. The firm also expects
an increase in the demand for grilled chicken considering that many
households also use an electric-powered stove and buying cooked meat
will be their alternative.
The problem of the ABCD Grill House is the expected electric interruption
within their operating hours that will affect their grilles chicken production
Define the
for the day. This problem will give rise to the decision-making skills that
Problem
will tell on how they will produce their average chicken per day. They need
to find an alternative that is just as good as the grilled chicken.
The objective of the business is to find an alternative that will produce
an average of 200 units of grilled whole chicken per day despite the
Determine the electric interruption. Moreover, they will need to find an alternative that
Objective is more affected because there is a possibility that the demand for
grilled chicken will rise because the household will choose to buy food
because they also us an electric-powered stove.
BBQ Grill
Traditionally, people will use BBQ Grill as an alternative in this case. It
is a cheaper option but it requires a lot of work, especially fanning.
Generator
Explore the The company, on the other hand, can buy a generator to power its
Alternatives electric grill. The electric grill doesn’t require a lot of effort and work;
however, it is pricey considering the price of gas today.
Solar Cooking
Solar cooking use reflectors, such as aluminum, to absorb the heat of
sunlight and use to cook and heat foods.
BBQ Grill
The use of a barbeque grill is a good option to produce their average
production unit. Different platforms such as Mang Andoks, here in
Cabanatuan, still use the barbeque grill to cook grilled chicken. This
product is less costly and doesn’t require a huge amount of investment.
Predict the Here in our country, you can a BBQ Grill for the amount of 5000 or sell
Consequences it. On the other hand, charcoals are easy to find and easy to maintain.
The disadvantage of this option is that it requires effort to maintain it.
Fanning the whole day is a different level of work. Plus, the amount of
smoke that the person responsible for fanning will be inhaled could
potentially damage his lungs in the very long term.
 Generator
The generator is probably the best option among the three. The purpose
of the generator is just to bring electricity to the electric griller. As we
know, the business can produce an average of 200 units of grilled
chicken using an electric griller. Giving power to the alternative to the
electric griller will help us achieve our goals including the increase in
demand. The downside of using this particular equipment is that it is
pricey. Nowadays, generators could be purchased at an average
amount of 20,000 and up. Moreover, the price of gasoline in our country
is relatively high. It also has limited use.
Solar Cooking
The use of solar cooking is an option that will only arise if the use of a
BBQ Grill does not exist. This option could only be prepared in the
worst-case scenario. The use of solar cooking is great for
experimenting. However, the business will not need this for operations.
This will not produce even half of their average. Again, this option was
prepared for the worst-case scenarios.

Among the three, the business can avail of the generator. It was never
mentioned that the business was insolvent. If they can afford an electric
griller, then they can afford a generator.
The generator will help them produce average production of 200 grilled
chickens for the day. Moreover, it will allow them to produce more for
Make a Choice the expected rise in the average demand.
This choice is the most feasible because even though it was expensive,
the business could use the generator for other things. Remember that
there was an electricity interruption. They could use the generator to
give comfort to their customer by providing them with an electric fan.
This method will attract more of other customers.
Choosing the generator will help the owners to achieve their primary
goal. Their primary goal is to produce an average of 200 products per
unit and provide services to particular customers if ever the demand will
go high. The generator provides electricity to the whole business which
will also attract a lot of customers. It is the better choice for the business
because the goal of the business is to maximize profit despite having
Perform electricity interruption.
Sensitivity
Analysis On the other hand, if the goal of the business is to go the cheaper way
and will still be able to attain profit, then the better option is the BBQ
goal. The BBQ grill can be a great alternative in the production of grilled
chicken. I do believe that businesses will be able to achieve their
average unit of production if they will try to try early in the morning just
like Mang Andoks. Moreover, the acquisition of the BBQ grill is the
cheaper option. It will only use charcoal for production, unlike gasoline.
 If the goal of the business is just to provide food on their table, then the
use of solar cooking is possible.

2. How do you see the partnership between government and private firms in producing public
goods? Does it convert to the efficiency of government programs? Justify your answer.
The partnership between the government and the private firm offers both an advantage
and a disadvantage. The advantage of this partnership is that if the rules were properly
implemented, the distribution of resources will be fair and just. We know that our resources are
scarce and it is not if not distributed properly some will take advantage. On the other hand, the
downside of this partnership is that often family of the politicians were the ones who owns a
private firm. This connection is dangerous because they can be abused. Our government, after
this election, become a laughing stock in other countries because of the number of corrupt
politicians we voted for. Government officials can abuse their power by distributing the
resources to their connections and to where they will benefit. Some officials use their power to
manipulate.
As I have said, this partnership will be efficient if the government officials will implement
the rules. Their participation in distributing the goods properly will make our economy efficient.
This will lead to particular resources getting properly used. If the government will be corrupted,
then this partnership will only lead to a decrease in our economy. I do think that this is why it is
important to vote for officials who have knowledge about our law and economy. Voting for the
wrong officials can lead to an early decrease in our economy, look where we are now. We must
think twice, and be responsible for our actions.
 Activity No. 5
1. Differentiate implicit and explicit costs by citing examples.
As discussed during our discussion in the Introduction of Economics, the explicit
cost is a cost that has measurable cost to a firm. The explicit costs revolve around the
actual expenditures. On the other hand, the implicit cost is the cost of self-produced
resources.
As accounting students, explicit costs are the expenses we usually encounter on
the trial balance. An example of explicit cost is an electric bill (utility expense), advertising
in the newspaper (advertising expense), and rent of the factory used in production (rent
expense).
On the contrary, the implicit cost is what we know as the opportunity cost. It is the
value of the foregone opportunity. It is hard to anticipate and does not require an outflow
of cash. An example of implicit costs is the capital invested and payment to employees
who were taking a day off.

2. Explain how isoquant curves and isocost lines determine the producer's
equilibrium using graphs.

The graph above shows the isoquant curve. It represents combinations of input
in the same level of output.

The second graph represents the isocost line. It represents a different

combination of inputs that the same budget can purchase.
These two graphs are vital in determining the producer’s equilibrium. In its general
sense, the producer’s equilibrium will be determined by finding the point of tangency
(point where they meet) of the isocost line and cure. The two graphs are important in
determining the point of tangency because the isocost line and curve quantify
combinations that can possibly become show the point where the producer can produce
his maximum production.
In the Graphical illustration of Producer’s equilibrium below, the producer’s
equilibrium will be able to achieve when we employ 25 units of capital and 15 units of
labor. Moreover, there should be a table representing the isocost curve.
3. Explain the Law of Diminishing Returns and Returns to Scale.

Law of Diminishing Marginal Returns

The Law of Diminishing Return States that every successive unit of variable input
combined with fixed units increases the Total Output (TP) but declines at some point.
Before we begin its process, let us start first with the terminologies.
Total Output – is the total physical product produced
Marginal Product – mean s the increase in an output adding another unit. An example
is adding a new worker.
Average Product (AP) – is the output produce per unit.

The table above shows the three levels of production. In stage 1 (represented by
color red), we can see that: TP is increasing, AP and MP are still increasing, AP>MP, and
the value of MP is positive. In stage 2 (represented by color green), we can see that: TP
is increasing, AP and MP are decreasing, AP>MP, and MP is still in positive. As
mentioned earlier, the TP will increase and then eventually will decline. In stage 3
(represented by color blue), TP starts to decrease, AP and MP are decreasing, AP>MP,
and MP is not in its positive rate.
 Moreover, the table shows different boundaries (represented by color yellow) to
represent the distinguishment of the stages, the first boundary shows AP is at its
maximum and AP=MP while the second boundary shows that TP is at its maximum and
MP=0. The graph below represents the curve of Law of Diminshing Marginal return.

Scale of Return
The scale of returns to scale during the long-run analysis of cost. It refers to the
rate of output changes if all inputs are in the same factor. This can always be found in the
lowest point of the short-run average total cost. The long-run analysis is the period by
which all factors or resources can be used as a variable.
This economic phenomenon happens when the level of the firm increases, causing
to the specialization of workers.
The scale of return has a U-shaped slope. It has three types: increasing returns to
scale or economies of scale, the constant return to scale, and decreasing return to scale.
Increasing returns to scale or economies of scale happens when there is an
increase in the scale of production. This increase will lead to a lower average cost causing
ATC to slope downward.
The constant return to scale happens when there is an increase in production
while the average cost remains constant.
Decreasing return to scale or diseconomies of scale happens when there is
an increase in the scale of production, but it leads to higher average costs.
4. Differentiate short-run and long-run production.
There is a big huge difference when it comes to short-run and long-run production
of costs of production. Short-run production is planning by which we consider resources
as variable and fixed. As mentioned earlier, long-run analysis is the period by which all
factors or resources can be used as a variable.
Comparatively, the formula for computing the variable needed in both types of
production is the same. However, their graph differs because the short-run (1st graph) has
fixed resources which means in the graph it has fixed slope.
 The short-run analysis mainly focus on its fixed cost (cost the will not change) and
variable cost (cost that change as output change). The long-run analysis focuses on the
variability of costs and its possibilities: scale of return.
5-6. Computation and Graph.

Average
Total Fixed Variable Average Marginal
Total Cost Variable
Product Cost Cost Total Cost Cost
Cost
0 2000 *** 1. 2000 *** *** ***

20 2000 4000 2. 6000 3. 200 4. 300 5. 200

40 2000 6000 6. 8000 7. 150 8. 200 9. 100

10. 11,000 11. 150 12. 183.33

60 2000 9000 13. 150
14. 13,000 15. 137.5 16. 162.5
80 2000 11000 17. 100
18. 16,000 19. 140 20. 160
100 2000 14000 21. 150
22. 20,000 23. 150 24. 150 25. 200
120 2000 18000

350

300

250

200

150

100

50

0
1 2 3 4 5 6

Average Variable Cost Average Total Cost Marginal Cost

 Activity No. 6
1.

Pure Monopolistic
Characteristics Monopoly Oligopoly
Competition Competition
Number of 1. A very large 6. One 11. Many 16. Few
Firms number

Type of 2. Standardized 7. Unique-no 12. 17. Standardized

Products close substitutes Differentiated or differentiated

Price Setting 3. None 8. Considerable 13. Some, but 18. Limited by

and Control within narrow mutual
limits interdependence;
considerable with
illusion
Entry of Firm 4. Very easy. No 9. Blocked 14. relatively 19. Significant
obstacles easy Obstacles

Local 5. Agriculture 10. Local utilities 15. Retail trade 20. Automobile
Examples and shoes. and steel.

2. How does the purely competitive firm maximize its profit? Explain using graphical
illustration.
Beforehand, we have to understand that profit maximization stays where MC=MR. This
applies to any type of competition even though they have different rules.
Profit maximization in a purely competitive firm is relatively easy to understand. The
characteristics of a purely competitive firm are: it has many buyers and sellers which leads to
perfect information, identical products, and no barrier to entry/exit.

The basic rule in a perfectly competitive firm is that the price between the market and the
firm is equal. Moreover, the quantity that the firm will produce is at the part where MC intersects
the price. For a better understanding, Marginal Revenue = Demand = Price in the perfect
competition.
 When it comes to profit and loss, these are the rules which will make the concept easier
to explain and understand:

When does the firm shut down?

In the short run, the firm will produce until P<ATC only.

In the long run, these are the possibilities:

3. How does a monopolist firm maximize its profit? Explain using graphical illustration.
A monopolist firm has only one seller and barriers. Its barrier is the economies of scale,
which produces natural monopoly and actions of the firm and government. In order to maintain its
uniqueness in the market, the firm's action ranges from patent and copyright to high advertising
expenditures for high sunk costs. On the other hand, the actions of the government usually focus
on franchises and licensing.
In monopolist firm, these are the rule in getting economic profit and loss:

In a monopolist, we also experience the dead weight loss. Dead-weight loss in the space
remaining from the consumer surplus up until the marginal revenue. Here, we can see the dead-
weight loss a monopolis firm:
 In monopolist firms, we also experience price discrimination. Price discrimination is when
the firm charge more price to the customer that is inelastic with the product. It goes under the
conditions: of not being a price–taker, sort customer, and not feasible for sale.
Moreover, we do experience dumping in this type of market. Predatory dumping,
specifically, mentions the concept of lowering the price to drive out a domestic competitor and
increasing it when domestic competitors are destroyed.
This type of market gives rise to two more concepts: x-inefficiency and rent-seeking
behavior. X-inefficiency states that there is a firm who does not gain incentive in the least cost
production. On the other hand, rent-seeking behavior states that some firms gain monopoly power
by taking it as a cost. However, this behavior does not benefit the economy and drives the
resources away.

4. When should a monopolistically competitive firm exit the market? Explain using
graphical illustration.
For a better understanding, we have to understand monopolistic competitive firms first.
Monopolistic competition has many buyers and sellers, is differentiated, and is easy to enter/exit.
It is similar to perfect competition by having many buyers and sellers and having no barriers.
Moreover, it is similar to a monopoly by being a sole producer and by downward sloping demand
curve. An example of its graph in short-run is this:
 For a monopolistic competitive firm to exit, they need to suffer losses. To suffer losses,
ATC should be higher than the price. Its graph works similarly to that of a monopolistic firm.
However, the entrance of different firms makes only its demand curve steeper. To illustrate:
5. Explain the three models of Oligopoly.
Kinked-Demand Theory has a kinked demand curve. The characteristic of
a kinked-demand curve is noncollusive.
This theory assumes that firms prices are settled on a price of P1 and
quantity Q1.
(a) At price D1 - demand curve is elastic above P1
- demand inelastic below P1
(b) Raising the price above P1 - it will cause an elastic demand
- it results in lost sales and falling Total
Revenue
(c) Cutting the price below P1 - it will cause a price reduction
- demand is relatively inelastic
(d) The Kink - demand is relatively elastic
- we need this in an oligoply

Through kinked-demand theories, there are two types of price strategies: Match
price changes and ignore price changes

Collusion is an attempt to suppress competition while on the other hand, the

cartel is a group of the market who concurrently raise the market price or decrease
market output. This will lead us to our third oligopoly model which is cartel and collusion.
The goals of these two are: to consider circumstances that will retain cartels, determine
the policy to prevent cartels, and consider how cartels will stay together. This is an
example of a type of collusion:
 Price-leadership model motivates oligopolists to coordinate prices without
engaging in outright collusion (secret meetings). This concept mainly focuses on the
largest or most efficient industry firm and then begin to race prices based on them.