MS-9 Managerial Economics

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ASSIGNMENT

Course Code                       :             MS-9

Course Title                       :             Managerial Economics

Assignment No.                    :             9/TMA/SEM-II/2017

Coverage                          :             All blocks

Note: Attempt all the questions and submit this assignment on or before 31st October, 2017 to the coordinator of your study center.

Question. 1. “The production possibility curve reflects the different combination of goods, which an economy can produce, given its state of technology and total resources.” With reference to statement given above explain the guns-versus-butter debate.

Answer: An economy’s factors of production are scarce; they cannot produce an unlimited quantity of goods and services. A production possibilities curve is a graphical representation of the alternative combinations of goods and services an economy can produce. It illustrates the production possibilities model. In drawing the production possibilities curve, we shall assume that the economy can produce only two goods and that the quantities of factors of production and the technology available to the economy are fixed.

Question. 2. Explain the marketing approach to demand measurement. Briefly discuss the three important sources of data used in demand forecasting.

Answer: Demand forecasting is the art and science of forecasting customer demand to drive holistic execution of such demand by corporate supply chain and business management. Demand forecasting involves techniques including both informal methods, such as educated guesses, and quantitative methods, such as the use of historical sales data and statistical techniques or current data from test markets. Demand forecasting may be

Question. 3. How is Accounting Costs different from Economic Costs? Explain with the help of an example how an income statement prepared by accountant is different from income statement prepared by economist?

Answer: Accounting costs account only for the explicit costs incurred in conducting a business and not the implicit costs. The explicit costs include the direct costs to the company, such as employee wages, utility bills (water, electricity, etc.), raw material cost, premises cost, transportation and storage costs, etc. Since these are expenses for which bills or receipts are available, such costs can be objectively verified. In fact, accountants only account for accounting costs in the financial...

Question. 4. Differentiate between Isocost and Isoquants. Analyse graphically how an optimal combination of inputs can be arrived in the long run using Isocost and Isoquants?

Answer: A firm’s bank objective is profit maximisation. If, in the short run, its total output remains fixed (due to capacity constraint) and if it is a price-taker (i.e., cannot fix the price or change price on its own as in a purely competitive market) its total revenue will also remain fixed. Therefore, the only way to maximise profit is to minimise cost. Thus, profit maximisation and cost minimisation are the two sides of the same coin.

Moreover, supply depends on cost of production. The decision to supply an extra unit depends on the marginal cost of producing that unit. Perhaps the

Question. 5. State how is pure bundling different from mixed bundling and typing? Explain giving examples.

Answer: In marketing, product bundling is offering several products for sale as one combined product. It is a common feature in many imperfectly competitive product markets. Industries engaged in the practice include telecommunications, financial services, health care, and information. A software bundle might include a word processor, spreadsheet, and presentation program into a single office suite. The cable television industry often bundles channels into a single tier. The fast food industry combines separate food items into a

Question. 6. Write short notes on the following-

(a) Value Maximization

Answer: Shareholder value is a business term, sometimes phrased as shareholder value maximization or as the shareholder value model, which implies that the ultimate measure of a company's success is the extent to which it enriches shareholders. It became popular during the 1980s, and is particularly associated with former CEO of General Electric, Jack Welch.

The term can be used to refer to:

·       The market capitalization of a company

·       The concept that the primary goal for a company is to increase the wealth of its shareholders (owners) by paying dividends and/or causing the stock price to increase

·       The more specific concept that planned actions by management and the returns to shareholders should outperform certain

(c) Strategic barriers to entry

Answer: In theories of competition in economics, a barrier to entry, or an economic barrier to entry, is a cost that must be incurred by a new entrant into a market that incumbents do not have or have not had to incur.

Because barriers to entry protect incumbent firms and restrict competition in a market, they can contribute to distortionary prices and are therefore most important when discussing antitrust policy. Barriers to entry often cause or aid the existence of

(d) Barometric Forecasting

Answer: A barometer is a scientific instrument used in meteorology to measure atmospheric pressure. Pressure tendency can forecast short term changes in the weather. Numerous measurements of air pressure are used within surface weather analysis to help find surface troughs, high pressure systems and frontal boundaries.

Barometers and pressure altimeters (the most basic and common type of altimeter) are essentially the same instrument, but used for different purposes. An altimeter is intended to be transported from place to place matching the atmospheric

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