28 Dec Understand economic te

Competencies

Understand economic terminology and economic definitions pertaining to decisions made by managers.
Explain and demonstrate knowledge of concepts including the supply/demand relationship, price ceilings and floors, and market surpluses and shortages.
Elasticity, consumer choice, utility, productivity, and nature of costs.
Demonstrate how economic theory contributes to strategic managerial decision-making.
Understand various market structures and impacts upon firms, consumers, and government policies.
Calculate profits and profit maximization in order to determine the optimal price and output at which firms should produce.
Course Scenario

Oil Company X is a large oil refinery which has been expanding and taking on new investment projects. Recently, they have considered building a pipeline that stretches across the United States, from Canada to New Orleans.

As a cost analyst at Oil Company X, submit a proposal to the board of the company critiquing the costs and benefits of building a new oil pipeline that stands to generate copious amounts of revenue. Include in your report the following: expected changes to supply and demand, a cost analysis of the project, the cross-price elasticity of an alternative energy source, cost curves, the new expected profit-maximizing quantity and price of oil after completion, a risk assessment evaluating liabilities from potential environmental damage, and a final recommendation.

Instructions

Use the Excel document below to complete the assignment, and submit it to the Drop Box when finished. Student Excel Spreadsheet

As an economic analyst at your firm, you are being asked to evaluate this investment opportunity and submit a 5-page proposal as a Word document.

You must include an explanation of expected changes to supply and/or demand from economic shocks such as natural disasters and recessions, as well as the anticipated effect of substitute goods (alternative energy sources) flooding the oil market. Be sure to include the expected impact on equilibrium quantity and price in your regional market from these potential changes.

Another team member in the Cost Analysis Department has compiled the necessary data in the attached spreadsheet below.The total upfront cost of this project is $1.72 million in fixed costs. Be sure to include in your proposal any relevant curves graphed from the data in the spreadsheet. Your Excel spreadsheet needs to include the following columns in addition to what has been given to you:

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