MB0042 – Managerial Economics

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MBA- Semester 1

Assignment - Marks 60 (6X10=60)

MB0042 – Managerial Economics - 4 Credits

Subject Code- MB0042

Note: Each question carries 10 Marks. Answer all the questions.

(Please type the answers in the same sheet one after another and upload the soft copy on EduNxt for evaluation)

Q1.         Explain the importance of managerial economics.

Answer : Introduction

Economics is a growing subject. Many new branches have been developed by various economists from time to time to meet the requirements of the Time. One such new addition is Managerial Economics. It is interesting to study the reasons for the emergence of this new branch of economics. In the last few decades all over the world business has expanded and diversified ate fast rate. Variety of goods and services unheard of so far have been

Q2.         Discuss the determinants of price elasticity of demand.

Answer : Determinants of Price Elasticity of Demand

 1. Number of close substitutes within the market – The more (and closer) substitutes available in the market the more elastic demand will be in response to a change in price. In this case, the substitution effect will be quite strong.

2. Percentages of income spent on a good – It may be the case that

Q3.         Explain trend projection method of demand forecasting with illustration.

Answer : rend projection method is a classical method of business forecasting. This method is essentially concerned with the study of movement of variable through time. The use of this method requires a long and reliable time series data. The

Q4.         Define Perfect Competition. Also explain its features in brief.

Answer :  What is Perfect Competition ?

Perfect Competition is a market structure where there is a perfect degree of competition and single price prevails.

Nothing is 100% perfect in this world. So, this states that perfect competition is only a theoretical possibility and it does not exist in reality.

Main Features of

Q5.         Explain how a product would reach equilibrium position with the help  of –iso-quants and is-cost curve.

Answer : When producing a good or service, how do suppliers determine the quantity of factors to hire? Below, we work through an example where a representative producer answers this question. Let‘s begin by making some assumptions. First, we shall assume that our producer chooses varying amounts of two factors, capital (K) and labor (L). Each factor was a price that does not vary with output. That is, the price of each unit of labor (w) and

Q6.         Explain cost output relationship with reference to:

a.            Total fixed cost and output

Answer : Total fixed cost and output:

TFC refers to total money expenses incurred on fixed inputs like plant, machinery, tools & equipments in the short run. Total fixed cost corresponds to the fixed inputs in the short run production function. TFC remains the same at all levels of output in the short run. It is the same when output is nil. It indicates that whatever may be the quantity of output, whether 1 to 6 units, TFC remains constant. The TFC curve is horizontal

b.            Total variable cost  and output

Answer : Total variable cost and output:

TVC refers to total money expenses incurred on the variable factor inputs like raw materials, power, fuel, water, transport and communication etc, in the short run. Total variable cost corresponds to variable inputs in the short run production function. It is obtained by summing up the production of quantities of variable inputs multiplied by their prices. The formula to calculate TVC is as follows. TVC = TC-TFC. TVC = f (Q) i.e. TVC is an increasing function

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Master of Business Administration- MBA Semester 1 Fall 2012

MB0042 – Managerial Economics - 4 Credits

(Book ID: B1625)

Assignment Set - 2 (60 Marks)

Note: Each question carries 10 Marks. Answer all the questions.

Q1. Write a note on Marris growth maximising model.

Answer : Profit maximization is traditional objective of a firm. Sales maximization objective is explained biro. Bokmal. On similar lines, Prof. Marries has developed another alternative growth maximization model in recent years. It is a common factor to observe that each firm aims at maximizing its growth rate as this goal would answer many of the objectives of a firm. Marries points out that a firm has to maximize its balanced growth rate over a period of time.

Q2. Explain in brief the relationship between TR, AR and MR under perfect market conditions.

Answer :  : Revenue is the income received by the firm. There are three concepts of revenue – Total revenue, Average revenue and Marginal revenue.

1. Total revenue (TR)

Unit 7 Total revenue refers to the total amount of money that the firm receives from the sale of its products, i.e. .gross revenue.

In other words, it is the total sales receipts earned

Q3. What is perfect competition? Explain the equilibrium of a firm under perfect competition in the long run.

Answer :  

·         Definition of 'Perfect Competition'

A market structure in which the following five criteria are met:

1. All firms sell an identical product.

Q4. What is oligopoly? Explain the features of oligopoly market.

Answer :  An oligopoly is a market form in which a market or industry is dominated by a small number of sellers (oligopolists). The word is derived from the Greek for a few over many. Because there are few participants in this type of market, each oligopolistic is aware of the actions of the others. The decisions of one firm influence, and are influenced by the decisions of other firms. Strategic planning by oligopolists always involves taking into account the likely responses of the other market participants. This causes

Q5. Explain wholesale price index with suitable illustration.

Answer :  The Wholesale Price Index (WPI) is also known as the Producer’s Price Index (PPI). It measures the prices of goods at the wholesale price before goods are distributed in the retail market.  This statistic is released monthly and it shows the average price changes of goods in bulk selling in a month.  It is used also as a measure of inflation or deflation to show how wholesale prices went up or down relative from the previous

Q6. What is investment function? Discuss the various factors that determine the investment function.

Answer : Investment is the second important component of effective demand. In Keynesian economics, the term investment has a different meaning.

In the ordinary language, it refers to financial investment. It means purchase of stocks, shares, debentures, bonds etc.

In this case, there is only transfer of rights or

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