ECO 550
B8365
Assignment3Instructions.pptxAssignment 3
INSTRUCTIONS
QUESTION 1
Outline a plan that managers in the low-calorie, frozen microwaveable food company could follow in anticipation of raising prices when selecting pricing strategies for making their products response to a change in price less elastic. Provide a rationale for your response.
QUESTION 1
An inelastic product is the one whose demand does not change significantly when prices change. A company facing inelastic demand can take advantage by charging high prices without worrying about loosing consumers.
You have to answer the following questions:
What would a company do if it is forced to charge higher prices in the future?
What pricing strategies are appropriate for products with inelastic demand?
QUESTION 2
Examine the major effects that government policies have on production and employment. Predict the potential effects that government policies could have on your company.
QUESTION 2
You have to identify the benefits and costs of regulations.
An example of a benefit would be regulations that improve workers’ health and productivity, or protect consumers.
An example of a downside would be that enforcing regulations may result in substantial rise in costs of doing business and lower efficiency.
Question 2
You have to explore the following:
Specific regulations affecting food industry in terms of consumer safety
You should also identify what type of regulations are important in the food industry.
Example: food safety
You have to identify the regulatory institution responsible for food safety as well as the main piece of legislation that the regulators use to make sure that consumers have enough information about the food they consume.
Other regulations affecting industry in general
Some examples are: employment regulations, occupational safety regulations, wage policy, environmental regulations, anti-trust regulations, regulations of advertising…
Macroeconomic policies affecting the industry
Fiscal policy
Monetary policy
You should explore in what way fiscal and monetary policy affect businesses.
QUESTION 3
Determine whether or not government regulation to ensure fairness in the low-calorie, frozen microwavable food industry is needed. Cite the major reasons for government involvement in a market economy. Provide two (2) examples of government involvement in a similar market economy to support your response.
QUESTION 3
Rationale for government involvement in a market economy
Here are some examples:
Enforcement of contracts.
Promoting competition
Welfare assistance
National defense
…
Question 3
What justifies government regulation in the low-calorie microwavable food industry?
Examples:
Food safety
Food quality
Requiring producers to provide information to consumers
QUESTION 4
Examine the major complexities that would arise under expansion via capital projects. Propose key actions that the company could take in order to prevent or address these complexities.
QUESTION 4
The complexities of expansion via capital projects have been discussed in KC’s scenario.
Here are some examples:
Capital requirements
Various types of risk
Government regulations
…
Question 4
Here are some examples of key actions to address complexities of expansion via capital projects:
Use of capital budgeting methods
Business and financial risk management
Cost control
…
QUESTION 5
Suggest the substantive manner in which the company could create a convergence between the interests of stockholders and managers. Indicate the most likely impact to profitability of such a convergence. Provide two (2) examples of instances that support your response.
QUESTION 5
You should discuss issues such as:
Principal-agent problem
Interests of managers
Interests of stockholders
Ways to align these interests
Should use examples
