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Managerial Economics

Assessment: The Homework Assignment

Course: MBA-6212, Summer II, 2024

Instructor: Dr. Ibrahim Abou-Saad

Due: August 1, 2024, at 11:59 PM

Goals:

1. Students fully understand the principles of managerial economics that apply to typical business firms.

2. Students learn how to use the foundation elements of microeconomics in managing the business firm’s

operations based on optimal economic behaviors.

3. Students apply their learned theoretical concepts in managerial economics in a class assignment that simulates

alternative potentials in the business reality.

Student Learning Objective (SLO): Design an economic framework for an efficient advertising campaign for

business firms with market power.

Assessment: The Homework Assignment.

Students are asked to use their learning in the course regarding the economically efficient advertising campaigns

to work on this homework assignment.

The students need to evaluate the information provided in the homework assignment to design tow different

diagrams that represent a full understanding of the content taught.

Framework:

Bloom’s Revised Taxonomy: Analyze; Evaluate; Create.

Prompt Question(s) and Instructions:

Watsonia is an economically rational firm that is preparing an advertising campaign to promote its product,

“Zeta.” Watsonia is a monopolistically competitive firm with a relatively high power over the market price.

The following ten panels represent two groups of graphs: Figure A (i.e., panels 1, 2, 3, 4, and 5) and Figure B

(i.e., panels 1, 2, 3, 4, and 5).

The Assignment:

Combine one panel from “Figure A” and one panel from “Figure B”, at a time, to create two “diagrams” that

represent the following long-run examples (i.e., apply the graph-overlapping technique discussed in Lecture 3

by printing each panel from each figure on a separate transparent paper). In other words: By overlapping of

one panel from Figure A over one panel from Figure B, identify two different “diagrams,” where each diagram

has to represent one of the following cases (i.e., do not change the names of the diagrams):

Diagram 1: The most economically-efficient advertising campaign.

(REQUIRED SUBMISSION).

Diagram 2: An advertising campaign that helped to promote product Zeta and at the same time be most cost

efficient; however, out of all panels that helped promoting product Zeta, this advertising campaign

was the least efficient in promoting the product.

(REQUIRED SUBMISSION).

Instructions (Mandatory)
➢ Scan each created diagram and submit all four diagrams in one PDF file. Before scanning, make sure to show

(mark and shade) the equilibrium status in the long run, AFTER the advertising campaign is executed,

represented by all of the following:

• The equilibrium market price (mark it as “P2” on the vertical axis).

• The Watsonia’s equilibrium level of the long-run average cost (mark it as “LAC2” on the vertical axis).

• The Watsonia’s long-run equilibrium output (mark it as “Q*” on the horizontal axis).

• The long-run profit area (shade the profit area). Type on the shaded area either “Positive Profits” or

“Negative Profits” depending on whether there are positive or negative profits, respectively. If there is

“Zero Profits,” do not type anything or shade anything. In other words, no shadings means that profits

equal zero after the advertising campaign is executed. Important: Only shade the profit areas AFTER

the advertising campaign is executed. Do not show (shade) the profit areas before the advertising

campaign is executed.

➢ Finally: Do not provide any explanation on any of the diagrams for why you have chosen the specific

panels from Figure A and Figure B to create your diagrams. Only marking and shading on the scanned diagrams

are required. Providing such explanation(s) will deduct significant points at the instructor’s discretion. See the

sample on the last page, below, to see an example of how a “diagram” should look like.

➢ Again, do not shade any area other than the long-run profit area (if exists), “at the equilibrium level of

output,” and “after” the advertising campaign is executed.

Important: When printing and scanning, black and white diagrams and color diagrams are both allowed, and

none is preferred to the other.

Important: If you feel there is an error in the graphs, do not indicate such belief on this homework assignment.

Instead, discuss this observation with the instructor before submitting this assignment.

Important: The homework assignment has to be uploaded to Blackboard. No email submission is accepted.

Email submission will result in a zero score for the homework assignment.

Important: You can upload many files, but only the last submitted file will be kept and graded.

Important: Only PDF submission is accepted.

Important: The solved homework assignment must be submitted in one PDF file.

Important: Students are not allowed to recreate the panels in Figure A and Figure B. Recreating these panels

(graphs) will result in a zero score for the homework assignment. Use these panels as images, do not draw-

them/re-create them manually or digitally. The grading of this homework assignment depends ONLY on dealing

with the “panels” as “images” when creating the four “diagrams.”

Practice diagrams:

Practice Diagram 3: The least economically-efficient advertising campaign.

(The instructor may help solve this diagram during class, but this is only for your practice, DO NOT SUBMIT

THIS DIAGRAM).

Practice Diagram 4: An advertising campaign that is most efficient in promoting the product Zeta, but least

cost efficient (i.e., least cost efficient is the same as most cost inefficient).

(The instructor may help solve this diagram during class, but this is only for your practice, DO NOT SUBMIT

THIS DIAGRAM).

Output (Q)

MR, AR, P, LAC, LMC

Managerial Economics
Instructor: Dr. Ibrahim Abou-Saad

Demand Curve-1

MR-1

Figure A – Panel 1

MR-2

Demand Curve-2

Output (Q)

MR, AR, P, LAC, LMC

Managerial Economics
Instructor: Dr. Ibrahim Abou-Saad

Demand Curve-1

MR-1

Figure A – Panel 2

MR-2

Demand Curve-2

Managerial Economics
Instructor: Dr. Ibrahim Abou-Saad

Output (Q)

MR, AR, P, LAC, LMC

Managerial Economics
Instructor: Dr. Ibrahim Abou-Saad

Demand Curve-1

MR-1

Figure A – Panel 3

MR-2

Demand Curve-2

Output (Q)

MR, AR, P, LAC, LMC

Managerial Economics
Instructor: Dr. Ibrahim Abou-Saad

Demand Curve-1

MR-1

Figure A – Panel 4

MR-2

Demand Curve-2

Output (Q)

MR, AR, P, LAC, LMC

Managerial Economics
Instructor: Dr. Ibrahim Abou-Saad

Demand Curve-1

MR-1

Figure A – Panel 5

MR-2

Demand Curve-2

Output (Q)

MR, AR, P, LAC, LMC

Managerial Economics
Instructor: Dr. Ibrahim Abou-Saad

LAC-1

LMC-1

Figure B – Panel 1

LAC-2
LMC-2

Output (Q)

MR, AR, P, LAC, LMC

Managerial Economics
Instructor: Dr. Ibrahim Abou-Saad

LAC-1

LMC-1

Figure B – Panel 2

LAC-2
LMC-2

Output (Q)

MR, AR, P, LAC, LMC

Managerial Economics
Instructor: Dr. Ibrahim Abou-Saad

LAC-1

LMC-1

Figure B – Panel 3

LAC-2

LMC-2

Output (Q)

MR, AR, P, LAC, LMC

Managerial Economics
Instructor: Dr. Ibrahim Abou-Saad

LAC-1

LMC-1

Figure B – Panel 4

LAC-2

LMC-2

Output (Q)

MR, AR, P, LAC, LMC

Managerial Economics
Instructor: Dr. Ibrahim Abou-Saad

LAC-1

LMC-1

Figure B – Panel 5

LAC-2

LMC-2

Grading Rubrics (out of 100% for the homework assignment):

Category Basic Work Figure Analysis Findings

Poor/Unacceptable (Up to 5%) The student

did not overlap

diagrams

(Up to 5%) The student

did not overlap

diagrams

(Up to 5%) The student

did not overlap

diagrams

Below Expectations (Up to 10%) The

student overlapped the

diagrams but more than

two diagrams were

overlapped incorrectly.

(Up to 20%) The

overlapped diagrams

showed that the student

analyzed the demand

side or the supply side

separately within each

diagram.

(Up to 30%) The

overlapped diagrams

showed that the student

did not conclude the

correct optimal solution

in at least one created

diagram.

Meets Expectations (Up to 20%) The

student overlapped the

diagrams but no more

than two diagrams were

overlapped incorrectly.

(Up to 25%) The

overlapped diagrams

showed that the student

analyzed the demand

side or the supply side

simultaneously within

each diagram but had

difficulties showing the

shaded profit areas as a

factor in distinguishing

between some of the

created diagrams.

(Up to 35%) The

student showed the

correct optimal solution

in each created diagram

separately but was not

able to find the final

correct answers based

on comparing each two

created diagrams.

Above Expectations (Up to 30%) The

student correctly

overlapped the

diagrams

(30%) The overlapped

diagrams showed that

the student analyzed the

demand side or the

supply side

simultaneously within

each diagram and was

able to show the shaded

profit areas that

distinguished between

some of the created

diagrams.

(40%) The student

showed the correct

optimal solution in

each created diagram

separately and was able

to find the final correct

answers by comparing

each two created

diagrams.

Sample of one diagram created from a previous class.

(e.g., information on the homework assignment)

The following is a sample for how to create a “diagram” using the panels in “Figure A and Figure B.”

Important: The two panels in this diagram (i.e., below) are not necessarily identical to any

of the panels that are required in this homework assignment.

Sample Diagram

Output (Q)

MR, AR, P, LAC, LMC

Demand Curve-1

LAC-1

LMC-1

MR-1

LAC-2
LMC-2

MR-2

LAC2

P2

Demand Curve-2

E1

E2

Q*1 Q*2

P1 = LAC1

Figure B – Sample PanelFigure A – Sample Panel

Managerial Economics
Instructor: Dr. Ibrahim Abou-Saad

Positive Profits

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