INSTITUTE OF BUSINESS AND ACCOUNTING STUDIES
INTERMEDIATE DIPLOMA
PILOT EXAMINATION QUESTION PAPER
MANAGERIAL ECONOMICS
PILOT PAPER
TIME: 3 HOURS
INSTRUCTIONS TO CANDIDATES
1.
2.
3.
4.
Answer any five (5) questions.
Use of non-programmable calculator is permitted.
Discounting tables are provided at the end of the paper.
No cell phones are allowed in the examination venue.
MARK ALLOCATION
Each question carries 20 marks.
Total:
100 marks
The examination script is the property of IBAS and is not to be removed from
the examination venue.
Managerial Economics: Intermediate Diploma: Pilot Examination Question Paper
Page 1
Question 1
(a)
Explain how economics contributes to management.
(10 marks)
(b)
Explain the main features of the following management models:
i)
Analog model.
ii)
Symbolic model.
iii)
Scale (Physical) Models.
(10 marks)
[Total: 20 marks]
Question 2
(a)
Distinguish between risk and uncertainty.
(5 marks)
(b)
With the aid of arbitrary figures, explain the following decision making
techniques that are used under conditions of uncertainty:
(i)
Minimax regret criterion.
(ii)
Maximax criterion.
(iii)
Maximin criterion.
(15 marks)
[Total: 20 marks]
Question 3
(a)
Distinguish the following:
(i)
Demand.
(ii)
Quantity demanded.
(3 marks)
(b)
The price of a product changes from $24 to $36 per unit. Calculate the point
and arc price elasticities of demand for the product if its market demand is
represented by the equation Qx = 240 – 0.25Px; where Qx is the market
demand and Px is the market price.
(10 marks)
(c)
(i)
(ii)
Distinguish between demand estimation and demand forecasting.
(3 marks)
Explain Delphi Technique as a demand forecasting technique. (4 marks)
[Total: 20 marks]
Managerial Economics: Intermediate Diploma: Pilot Examination Question Paper
Page 2
Question 4
(a)
(b)
Distinguish between:
(i)
Direct and indirect cost.
(ii)
Opportunity and historical costs.
(4 marks)
A firm has purchased a plant to manufacture a new product. The cost data is
given below:
Item
Estimated annual sales
Estimated costs (material)
Direct Labour
Overheads
Administrative costs
Selling (Distribution) costs
value
24 000 units
$4/unit
$0.50/unit
$24 000
$28 000
$6 000
Required:
i)
Calculate the selling price if the profit per unit is $1.00.
ii)
Find the break-even output level.
(c)
(10 marks)
Explain any four factors that influence cost estimation and forecasting.
(6 marks)
[Total: 20 mark]
Question 5
(a)
(b)
Explain any three of the following pricing approaches:
i)
Full-cost-plus pricing.
ii)
Target return pricing.
iii)
Competition-oriented pricing.
iv)
Sealed bid Pricing.
(10 marks)
In relation to the Product Life Cycle concept, explain the application of any
three of the following:
(i)
Skimming price.
(ii)
Penetration price.
(iii)
Product line price.
(iv)
Price positioning.
(10 marks)
[Total: 20 marks]
Managerial Economics: Intermediate Diploma: Pilot Examination Question Paper
Page 3
Question 6
(a)
(b)
(c)
With the aid of demand equation, explain the marginal cost pricing principle.
(10 marks)
Outline and explain the steps involved in capital budgeting.
(5 marks)
Explain the mutual exclusivity of a firm’s project from the “economic problem”
point of view.
(5 marks)
[Total: 20 marks]
Question 7
(a)
Compare and contrast the discounting and non-discounting capital budgeting
techniques.
(8 marks)
(b)
A firm has to select from amongst three projects. The data in the table below
shows the initial cost outlays for the three projects as $21 000, $22 000 and
$19 000 for project A, B and C respectively:
Cash flow ($) per project
A
B
Year
0
1
2
3
4
5
($21 000)
8 000
7 000
7 000
10 000
-
($22 000)
13 000
10 000
5 000
2 000
C
($19 000)
3 000
5 000
10 000
10 000
Required:
Given the cost of capital as 10% per annum, advise on the ranking of the three
projects using:
(i)
Net Present Value technique.
(ii)
Pay-back technique .
(12 marks)
[Total: 20 marks]
Managerial Economics: Intermediate Diploma: Pilot Examination Question Paper
Page 4
Question 8
(a)
Discuss the extent to which the ZIMASSET can be viewed as an adequate
development agenda for the Zimbabwean economy.
(10 marks)
(b)
Evaluate the potential of any three of the following in respect of the
developmental needs of the Zimbabwe economy;
(i)
Growth points strategy.
(ii)
Special Economic Zones and Export Processing Zones.
(iii)
The Informal Sector.
(iv)
Regional Integration .
(10 marks)
[Total: 20 marks]
END OF EXAMINATION QUESTION PAPER
Managerial Economics: Intermediate Diploma: Pilot Examination Question Paper
Page 5