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Monopoly Simulation: Fish-shaped plates

Monopoly Simulation: Fish-shaped plates. ECO 284 – Foster – Fall 2011. Decision: Pick P,Q to maximize profits. Economic profit = TR – TC TC = TVC + TFC TVC = AVC * Q Year 1: P=$16 Q=4,000. Year 2 – Business selling price. Minimum price = remaining economic profit

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Monopoly Simulation: Fish-shaped plates

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  1. Monopoly Simulation:Fish-shaped plates ECO 284 – Foster – Fall 2011

  2. Decision: Pick P,Qto maximize profits Economic profit = TR – TC TC = TVC + TFC TVC = AVC * Q Year 1: P=$16 Q=4,000

  3. Year 2 – Business selling price • Minimum price = remaining economic profit • At 9 years * $8,000, selling price = $72,000 • P=$16 • Q=4,000 • Econ profit = $8,000

  4. Year 3 – FC to $16,000 • No change in profit max. choices, but profit is less than before. • P = $14 Q = 4,000 • Econ Profit = $4,000

  5. Year 4 – Increased Demand • P= $17 Q = 6,000 Econ profit = $18,980

  6. Year 5 - Lobbyists • 25% of remaining economic profit • ($18,980)*(6 years)*(.25) = $28,470 • P = $17 Q = $6,000 Econ profit = $18,980

  7. Year 6 -  fixed costs No change in profit max. choices, but profit is more than before. P = $17 Q = 6,000 Econ Profit = $24,980

  8. Year 7 – demand • P=$16 q = 4,000 Econ profit = $10,000[Same P/Q outcome as years 1, 2, 3!]

  9. Year 8 – demand, FC • P = $14 Q = 3,000 Econ Profit = $2,010

  10. Year 9 – $15 price ceiling • P= $15 Q = 5,000 Econ profit = $13,900

  11. Year 10 - $10 price ceiling • Best option is to shut down!! • Econ profit = -$6000

  12. Monopoly Simulation:Fish-shaped plates ECO 284 – Foster – Fall 2011

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