Programme
Cohort
BSc (Hons) Management
BMAN/10/FT (1/2) Aug
(Batch 1/Batch 2)
General/Law/
General/Law/Marketing/Finance
Marketing/Finance
BSc (Hons) Management with
Specialisation in Law
BMAN/10/PT Mar
Examinations for 2011– 2012 Semester I/
2011 Semester II
MODULE: MANAGERIAL ECONOMICS
MODULE CODE: ECON2102
Duration: 2 Hours
Reading time: 10 Minutes
Instructions to Candidates:
1.
This question paper consists of SIX (6) questions.
2.
Answer any four questions.
3.
Always start a new question on a fresh page.
4.
Total Marks: 100.
This question paper contains 6 questions and 6 pages.
Page 1 of 6
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ANSWER ANY FOUR QUESTIONS
QUESTION 1: (25 MARKS)
Either
Assuming that you are the marketing manager of a textile company, highlight
the importance of a knowledge of elasticities of demand and supply in your
business decision-making.
Or
a) Explain the main steps in estimating a demand function using regression
analysis .
(5 marks)
b) The demand function for a firm is as follows :
Qdx=20000-4Px- 5Py- 1M+ Ax
Where Qdx is the quantity demanded for good X , Px is the price of good X ,
Py is the price of good Y , M is income and Ax represents the amount of
advertising spent on good X.
Suppose good X sells at Rs 200 per unit , good Y sells at Rs 100 per unit ,
the company spend Rs 2000 on advertising and consumer income is
Rs 10,000.
i)
ii)
How much of good X does consumer purchase ?
(2 marks)
Are goods X and Y substitutes or complements ? Justify your answer.
(4 marks)
iii)
Is good X a normal or an inferior good ? Justify your answer .
(4 marks)
c) Explain how a manager can use the concept of Price elasticity of demand to
maximize total revenue.
(10 marks)
Page 2 of 6
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QUESTION 2: (25 MARKS)
a) Explain clearly the meaning of the short run and long run period giving
appropriate examples.
(5 marks)
b) The production department of a firm reported the following information for the
month of October 2011:
Rs.
Wage Bill
20,000
Value of raw materials
60,000
Interest
Fuel Consumption
Rent
6,000
10,000
4,000
Units of output produced 2,000
Calculate:
(i)
Fixed cost
(1 marks)
(ii)
Average cost
(2 marks)
(ii)
Average variable cost
(2 marks)
c) What are economies of scale and how do they arise?
(7 marks)
d) Explain how the concept of diminishing returns to factors explains the U
shape of the AC and MC curves.
(8 marks)
Page 3 of 6
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QUESTION 3: (25 MARKS)
Either
a) Explain why the profit maximization output is at MC=MR?
(5 marks)
b) A firm has the following cost function TC = 2Q2 + 4Q + 20 .Given that
MR= 20, calculate the profit maximizing output.
(5 marks)
c) A firm faces the following demand curve Q=20 -2P. Given that MC = 10,
calculate the profit maximizing output.
(5 marks)
d) What competitive strategies would you recommend if your firm is operating in
a monopolistic competition type market structure?
(10 marks)
Or
Compare and contrast perfect and imperfect competition in terms of
economic efficiency and profitability.
QUESTION 4: (25 MARKS)
Either
a) What are barriers to entry and how can a company raise such barriers in the
industry they are operating?
(5 marks)
b) A monopoly firm does not need to innovate. Discuss.
(5 marks)
c) How do oligopolistic firms compete?
(7 marks)
d) Explain the role proper incentives play in reducing the agent-principal
problem.
(8 marks)
Or
Analyse the different pricing techniques used in business activities.
Page 4 of 6
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QUESTION 5: (25 MARKS)
Either
a) Discuss the main assumptions of the classical theory of firm.
(10 marks)
b) To what extent the classical theory of the firm can be used to explain the
business objectives and business models today.
(15 marks)
Or
a) Differentiate between Accounting and Economic Profits.
(5 marks)
b) Kevin a programmer earning Rs 240,000 per year is contemplating setting up
a restaurant in a commercial building he owns. While sales are estimated to
be Rs 1.8 m, total cost will amount to Rs 1.5 m. Alternatively, Kevin can put
the commercial building on rent at Rs 100 000 per year. Should Kevin start
the restaurant?
(5 marks)
c) The Manager of ABC manufacturing ltd wants to invest in a new machinery
costing Rs 300 000 and has a useful life of 5 years. The machine will yield
year end cost reductions of Rs 50 000 in year 1, Rs 60, 000 in year 2,
Rs 75, 000 in year 3 and Rs 90 0000 in year 4 and 5. What is the present
value of the cost savings of the machine if the interest rate is 8%. Should the
manager purchase the machine?
(7 marks)
d) Marginal thinking is an important managerial decision making tool. Using
appropriate examples, explain this concept.
(8 marks)
Page 5 of 6
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QUESTION 6: (25 MARKS)
Either
Discuss the various techniques which can be used in the tourism hotel industry in
order to forecast demand.
Or
Write short notes on four of the following giving appropriate examples:
i.
Game Theory / Prisoners Dilema
ii.
Information asymmetry and market failure
iii.
Porter’s Five Forces Model
iv.
Competition policy
v.
Production Functions
vi.
Price discriminating monopoly and consumer surplus
vii.
Income differentials
viii.
Moral Hazards and Signaling
ix.
Porter’s Generic Strategies
***END OF QUESTION PAPER***
Page 6 of 6
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