ADL 04 Managerial Economics V1

Contact www.solvedcare.com for best and lowest cost solution or email solvedcare@gmail.com

ADL 04 Managerial Economics V1

Assignment – A
Question 1. “Managerial Economics is an integration of economic theory with
business practices for the purpose of facilitating decision making and forward
planning by management”. Discuss.
Question 2. State the relationship between elasticity of demand, total revenue,
average revenue and marginal revenue. How does demand elasticity influence
pricing decisions of a firm?
Question 3. What is importance of Demand Forecasting? Explain any two ways in
which demand is generally forecasted.
Question 4. What are Isoquants and Isocosts? Explain graphically the criteria
for lease cost combination of inputs.
Question 5. What are the essential features of monopoly? Can a monopolist incur
losses in the short run? Why does a monopolist produce sub-optimal output in the
long run? Is monopoly socially desirable in India?

 

Assignment – B
Question 1. Explain the concepts of returns to scale and returns to a factor.
Question 2. Explain the relationship between MC, AC, AVC, AFC and TC with the
help of diagrams.
Question 3. What is the equilibrium condition in the long run in perfect
competition?
Question 4. Explain the following
a. Fixed and variable cost
b. Indifference curves
c. Law of diminishing marginal returns
d. Factors influencing demand of a durable commodity
Case Study
DEMAND FORECASTING FOR M/s BENGAL CABLE COMPANY
The market research department of M/s. Bangal Cable Company, Kolkota was
entrusted with forecasting the demand for cables of the company. It was felt
that the demand for cables is considerably influenced by the pace of
industrialization, power development and building activity. Cables are used for
different purpose such as power transmission and industrial and house wiring.
Bengal Cable Company was exclusively engaged in the manufacturing of cable
required by industry and housing. While many factors such as the rate of
building activity purchasing power, etc. are important in determining the demand
for cables, it was felt that most of the demand for cables can be explained in
terms of the growth of power consumption in the country. As cables are a must
for industry and building the price factor was not considered as significant
variable in determining the demand for cables. After all this products has no
substitute.
The market research department of M/s Bengal Cable Company, Kolkata, developed a
model relating all India cable sales (industrial and housing cables) to the peak
demand for power in the country. The analysis based on time series data had
shown a strong positive correlation between all India cable sales and the peak
demand for the corresponding year. The estimating equation was as follows:-
Yt. = 1173 + 28.5 Xt.
Where Yt. = annual cable sales (in thousand coils) for all India in year t
Xt. = peak demand in million K.W. in year t
r2 = 0.94
The Central Electricity Authority of the Government of India has estimated the
peak demand for the year 2004 as 98.5 million K.W., taking into account likely
industrial and building growth and the availability of power on an all India
basis. As there were no marked seasonal fluctuation, it was considered proper to
assume uniform monthly cable sales throughout the year. It was estimated that
Bengal Cables market share in 2004 will be about 20 per cent.
Question 1. Find out the all India cable demand for the year 2004 and monthly
estimated sales of Bengal Cable Company.
Question 2. The Price factor was not considered important in forecasting all
India demand for cables. Will the same be true in estimating demand for the
company’s cables?
Question 3. Suppose the market share of the company during the previous two
years was 10 and 15 percent respectively, was the company justified in assuming
the market share as 20 percent?
Assignment – C
In order to maximize profit, the firm follows:
(a) Incremental concept
(b) Equi-marginal principal
(c) Discounting principle
(d) None of these
2. In choosing between brief and shirts, consumers increase their purchases of
each until:
(a) The marginal utility from the last rupee spent on one is the same as on
the other.
(b) The marginal utility from the last pound of brief is the same as from the
last shirt.
(c) The total utility from one is the same as from the other.
(d) None of the above.
3. Which of the following is fixed cost:
(a) Cost of machinery (b) Wages
(c) Cost of plant (d) Both a & c
4. In the long run there are no:
(a ) Fixed costs (b) Variable costs
(c) Normal profits (c) Economics of scale
5. Marginal cost can be defined as the:
(a) Cost of the most efficient produced item
(b) Change in fixed cost resulting from one more unit of production
(c) Difference between fixed and variable cost at any level of output
(d) Amount one more unit of output adds to total cost
6. Fixed costs are those costs:
(a) That are subject to diminishing marginal productivity
(b) That are embodied in the calculation of marginal cost
(c) That are independent of the rate or output
(d) That are implicit to a competitive firm
7. A purely competitive firm is in short run equilibrium and its MC exceeds it’s
AC. It can be concluded that:
(a) Firms will leave the industry in the long run
(b) The firm is realizing an economic profit
(c) The firm is realizing a loss
(d) This is an increasing cost industry
8. The competitive sellers short-run supply curve is:
(a) Synonymous with its marginal cost curve
(b) Its marginal revenue curve
(c) That part of its marginal cost curve lying above average variable cost
(d) Its average fixed cost curve
9. The monopolistic firms demand curve:
(a) Is always inelastic
(b) Coincides with its marginal revenue curve
(c) Is perfectly elastic
(d) Is less elastic than a purely competitive firms demand curve
10. If an imperfectly competitive firm is selling its 100th unit of output for
S35, its marginal revenue:
(a) Will be greater than S 35 (b) Will be less than S 35
(c) Will also be S 35 (d) May be either greater or less than S 35
12. A pure monopolist’s demand curve:
(a) Lies below its marginal revenue curve
(b) Lies above its marginal revenue curve
(c) Coincides with its marginal revenue curve
(d) Is linked at the profit maximizing price
(e) Is perfectly inelastic
13. For an imperfectly competitive firm:
(a) The marginal revenue curve will lie below the demand curve because any
reduction in price applies only to the extra units sold.
(b) The marginal revenue curve will lie below the demand curve because any
reduction in price applies to all units sold.
(c) The marginal revenue curve will lie above the demand curve because any
reduction in price applies to all units sold.
(d) Total revenue is a straight, upsloping line because a firms sales are
independent of product price.
14. For an imperfectly competitive firm:
(a) Marginal revenue will become zero at that output where that revenue is at
a maximum
(b) The demand curve will intersect the horizontal axis at the point where
total revenue is at a maximum.
(c) The demand and marginal revenue curves will coincide
(d) The marginal revenue curve will lie above the demand curve
15. When setting its price, an oligopoly:
(a) Does not have to worry about how its rival will react to its price
(b) Knows how its rivals will react to its price
(c) Is uncertain about its rivals reactions
(d) None of the above
16. A firm facing a linked demand curve expects that its competitors:
(a) Will match its price increase but not its price decrease
(b) Will match its price decrease, but not its price increase
(c) Will match any price change it may make
(d) Will not match any price change
17. Monopolistic com petition differs from perfect competition because:
(a) There are many sellers
(b) There is free entry of new firms
(c) Each firm sells a differentiated product
(d) All of the above
18. One of the feature of monopolistic competition that drives a firms profits
to zero in the long run is:.
(a) Product differentiation (b) Price leadership
(c) Market power (d) Free entry
19. A purely competitive firm will be willing to produce at a loss in the short
run provided:
(a) The loss is no greater than its variable costs
(b) The loss is no greater that its marginal costs
(c) The loss is no greater than its fixed costs
(d) Price exceeds marginal costs
20. The demand curve faced by a pure monopolist:
(a) is more elastic than that faced by a single purely competitive firm
(b) Has the same elasticity as that faced by a single purely competitive firm
(c) Is less elastic than that faced by a single purely competitive firm
(d) May be either more or less elastic than that faced by a single purely
competitive firm
21. A pure monopolist:
(a) Always realizes an economic profit
(b) Will realize an economic loss if MC intersects the down sloping portion
of MR
(c) Will realize an economic profit if ATC exceeds M at the equilibrium
output
(d) Will realize an economic profit if price exceeds ATC at the equilibrium
output
22. In the short run, a pure monopolists firm’s profits:
(a) Will be zero (b) Are always positive
(c) May be positive, zero or negative
(d) Will be maximized where price equals average cost
23. Price discrimination refers to:
(a) The difference between the prices a purely competitive seller and a
purely monopolistic seller would charge
(b) the selling of a given product at different prices that do not reflect
cost differences
(c) Any price above that which is equal to minimum average total cost
(d) Selling a given product for different prices at two different points in
time
24. Which of the following is not a precondition for price discrimination:
(a) The seller must possess some degree of monopoly power
(b) The seller must be able to segment the market; that is, the seller must
distinguish buyers with different elasticities of demand
(c) The goods or services cannot be resold by original buyers
(d) The commodity involved must be a durable good
25. If a pure monopolist is producing a level of output in excess of the MR=MC:
(a) It will be in the interest of the firm and society to reduce output
(b) It will be in the interest of the firm and society to increase output
(c) It will be in the interest of the firm, but not necessarily of society,
to reduce output
(d) The firm may or may not, be maximizing profit
26. A non discriminating monopolist:
(a) May produce where demand is either elastic or inelastic, depending upon
the level of production costs
(b) Will never produce in the output range where demand is elastic
(c) Will never produce in the output range where demand is inelastic
(d) Will never produce in the output range where marginal revenue is positive
27. Monopolistic competition resembles pure competition because:
(a) Barriers to entry are either weak or nonexistent
(b) Both industries entail the production of differentiated products
(c) In both instances firms will operate at the minimum point on their long
run average cost curve
(d) Both industries emphasize non price competition
28. The monopolistically competitive sellers demand curve will tend to become
more elastic because:
(a) Smaller the number of competitors
(b) Larger the number of competitors
(c) Greater the degree of product differentiation
(d) More significant the barriers to entering the industry
29. The monopolistically competitive seller maximizes profits by producing at
the point where:
(a) Marginal revenue equals average cost
(b) Price equals marginal revenue
(c) Marginal revenue equals marginal cost
(d) Average costs are at a minimum
30. Given the same cost and revenue schedules, a profit maximizing monopolist
will produce:
(a) Less output than a competitive industry
(b) More output than a competitive industry
(c) The same amount of output as a competitive industry
(d) None of the above
31. The larger the number of firms and smaller the degree of product
differentiation, the:
(a) More elastic is the monopolistically competitive firm’s demand curve
(b) Less elastic is the monopolistically competitive firm’s demand curve
(c) Larger will be the monopolistically competitive firm’s fixed costs
(d) Greater the divergence between the demand and the marginal revenue curves
of the monopolistically competitive firm
32. If the number of firms in a monopolistically competitive industry increases
and the degree of product differentiation diminishes:
(a) The likelihood of collusive pricing would increase
(b) The industry would more closely approximate pure competition
(c) Individual firms would now be operating at outputs where their average
total costs would be higher
(d) The likelihood of realizing economic profits in the long run would be
enhanced
33. Oligopolistic industries are characterized by:
(a) A few dominant firms and substantial entry barriers
(b) A large number of firms and low entry barriers
(c) A few dominant firms and low entry barriers
(d) None of the above
34. One would expect that collusion among oligopolistic producers would be
easiest to achieve in which of the following cases:
(a) A very few forms producing a homogeneous product
(b) A rather large number of firms producing a homogeneous product
(c) A very few firms producing a differentiated product
(d) A rather large number of firms producing a differentiated product
35. Under which of the following market structures will equilibrium price be
equal to marginal cost:
(a) Pure competition (b) Pure monopoly
(c) Monopolistic competition (d) Oligopoly
36. Which of the following is a unique feature of oligopoly:
(a) Non price competition (b) Product differentiation
(c) Advertising expenditures (d) Mutual interdependence
37. “Mutual interdependence” means that each firm:
(a) Produces a product similar but not identical to the products of its
rivals
(b) Produces a product identical to the products produced by its rivals
(c) Must consider the reactions of its rivals when it determines its price
policy
(d) Faces a perfectly elastic demand for its product
38. A firms short run supply is constructed from its:
(a) Fixed cost (b) Short run marginal cost and average variable cost
(c) Average fixed cost (d) None of the above
39. U-shape of short run cost curves reflects:
(a) The law of returns to scale
(b) Technological changes
(c) The laws of variable proportions
(d) None of the above
40. Demand for a product is elastic because:
(a) It has close substitutes
(b) It has no close substitutes
(c) It has alternative uses
(d) None of the above

Contact www.solvedcare.com for best and lowest cost solution or email solvedcare@gmail.com

Comments are closed.