deliv 7

i need corrections made on the assignment. i will attach the assignment i did, teacher recommendations for passing, and the assignment requirements.


  • 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


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 $10 million, with $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:

  1. TFC
  2. TVC
  3. ATC
  4. AVC
  5. MC

Assume that your firm will hold market power as a supplier of oil
in your region, due to extensive trade restrictions the government has
agreed to put in place after completion of the pipeline. Define the new
market structure, and give new pricing strategies the firm can use to
maximize profits for this particular market structure.

You will also include graphs to show new expected
profit-maximizing quantity and price of oil after completion. After
determining the profit-maximizing price and quantity, as well as the
corresponding average variable cost, determine the expected total profit
for the 15-year duration the pipeline will be in operation.

Be sure to also include a calculation of the cross-price
elasticity of the alternative energy source and oil. Assume the current
price of oil is $50/gallon of crude oil. If the price increases to the
profit-maximizing price, the quantity demanded of the alternative energy
source increases by 20%. Explain if these goods are complementary
goods, substitute goods, or non-related goods. If there is a
relationship, indicate whether the relationship is weak or strong.
Justify your answer with an explanation based on the elasticity figure.

Assume there is a 10% probability of the pipeline leaking, with an
expected liability of $3.2 billion which will be deducted from total
profit. There is a 90% probability the pipeline will not leak. Determine
the expected return on this investment, as well as the variance.

The firm also has an alternative investment which will yield $1.6
billion over the course of the same 15-year period, with a probability
of 80%, or $1.15 billion with a probability of 20%. Calculate the
expected return, as well as the variance. The risk should be expressed
as the standard deviation.

Perform a marginal analysis to determine if the firm should build
the pipeline, considering currently available investments and
opportunity costs.

Format your proposal to include a title page, introduction,
conclusion, and references. Include all relevant graphs, equations, and
calculations. Show your work on calculations to ensure you receive
partial credit for incorrect answers. No credit will be given if your
work is not shown. Remember to cite your sources using correct APA
format, and also use correct grammar, spelling, and formatting.

teacher response:

I was reviewing your Deliverable 7 submission and noticed that you
did not include any calculations in your work. You were given data to
input in an Excel file that included the following columns in addition
to what has been given to you:

1. TFC

2. TVC

3. ATC

4. AVC

5. MC

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