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Monopoly Simulation: Fish-shaped plates

This simulation explores the economics behind the production of fish-shaped plates over a decade, evaluating pricing strategies and their impact on economic profits. Starting with a selling price of $16 and a quantity of 4,000 units, the simulation analyzes changes in market demand, fixed costs, and economic profit. The iterations demonstrate the effects of lobbying, price ceilings, and shifts in demand on profitability. Key findings reveal maximum profit points and strategic decisions to navigate fluctuating market conditions effectively.

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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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