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Some Important Questions For The Paper Managerial Economics'

This document contains 20 questions related to the topic of managerial economics. The questions cover a range of concepts including market demand, price elasticity, costs of production, perfect competition, oligopoly price leadership, and profit maximization. Specifically, questions ask about calculating market demand from individual demands, price elasticities, isoquants and isocost curves, returns to scale, and using demand and supply models to find market equilibrium prices and quantities under different market structures.

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Amit Vshneyar
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98 views3 pages

Some Important Questions For The Paper Managerial Economics'

This document contains 20 questions related to the topic of managerial economics. The questions cover a range of concepts including market demand, price elasticity, costs of production, perfect competition, oligopoly price leadership, and profit maximization. Specifically, questions ask about calculating market demand from individual demands, price elasticities, isoquants and isocost curves, returns to scale, and using demand and supply models to find market equilibrium prices and quantities under different market structures.

Uploaded by

Amit Vshneyar
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Some Important questions for the paper ‘Managerial Economics’

Q. 1. (a) Suppose that the total market demand for Coca-cola comprises the demand
of three individuals with identical demand equations.
Q1 = Q2 = Q3 = 50 – 25P
1. What is the market demand equation for this product? Illustrate the
market demand curve for Coca-cola graphically.
2. How many more Coca-cola bottles can firm sell for each rupees
reduction in price?
3. If firm has total 500 bottles in all as in its stock, what price should it
charge to sell its entire stock.
Q.2. Examine the relationship between Average Product and Marginal Product. Show
graphically.
Q. 3 Give the demand equation Q = 90 -3P, at what price would no one willing to buy any
of the commodities? If the price is reduced by one rupee, how much will the quantity
demanded change? (Ans. Rs. 30 and 3)
Q. 3. (a) What is price elasticity of demand? How is point-elasticity of demand different
from the arc-elasticity of demand? Illustrate your answer using hypothetical price
and quantity demanded data of good X along a demand curve.
(b) Define income elasticity and cross-elasticity of demand using examples.
Q. 4 What is an isoquant and isocost curves? Explain the slopes of the two. Show in graphs.
Q. 5 Show the relationship between TR, AR, MR and Price Elasticity of Demand.
Q.6 Using graphical illustration, show the relationship between TPL, APL and MPL. Also,
state the law of diminishing returns and show that the rational producer will produce in
the relevant stage of the TPL curve and why?
Q. 7 What are Ridge Lines. Show in a diagram why a firm would operate only in the
economic region of production.
Q.8 Show how a firm decides about the optimal use of a variable input in the short run.
Write its condition and draw diagram.
Q. 9 The daily demand for Bata shoes is estimated to be:
Qb = 100 – 3Pb + 4Pc – .01M + 2Ab
Where Pb is the price of Bata shoes, Pc is the price of Cooper shoes
(C), M is average income, Ab represents the amount of advertising spent on Bata
shoes. Suppose Bata shoes sells at $25 a pair, good C sells at $35, the company
utilizes 50 units of advertising, and average consumer income is $20,000.
Calculate and interpret the own-price, cross-price, and income
elasticity of demand.
(Ans. Own price elasticity = -1.15., Cross Price elasticity =
2.15,income elasticity of demand = -3.08)

Q.10 What do you mean by returns to scale? Describe the various returns to scale
graphically.
Q.11 What is price floor and price ceiling? Evaluate this statement ‘Imposition of price floor
generally results in loss of efficiency’.
Q.12 Demand and Supply equations for an industry in perfect competition is as follows:
Qd = 40 -2P and Qs = 20 + 4P
1. What is the market equilibrium price and quantity?
2. Suppose the government impose a price ceiling at Price Rs. 2, how much will be the
excess supply or excess demand. Show in a graph.
Q.13 What is price discrimination? Explain third degree price discrimination. What are the
conditions necessary for the price discrimination to work.
Q. 14 what are main four assumptions of perfect completion? Show the condition of
equilibrium price and quantity which determined in perfect completion from MC and MR
curves.
Q. 15 Explain different kinds of costs:
1. Explicit Cost 2. Implicit Cost 3. Sunk Cost 4. Accounting Cost 5. Economic
Costs
Q. 16. What relationship AVC and MC bear with AC? Show diagrammatically. Can the MC
rise when the AC is increasing?
Q. 17 A company sells a product in two separable markets. The MC of each product is Rs.
2. Demand Function is as follows.
Q1 = 20 -5P1 Q2 = 20 – 2P2
a. If the firm uses third-degree price discrimination, what will be the profit-maximizing
price and quantity in each market? How much economic profit will the firm earn?
b. If the firm charges the same price in both markets, what will be the profit-
maximizing price and total quantity? How much economic profit will the firm earn.

Q. 18 Suppose in a firm :

Fixed Cost (FC) = 10,000, P = Rs. 20, AVC = Rs. 15

1. How much of the output firm must sell at break- even point?
2. What is the break-even revenue?
3. If firm sells 5,000 packets last year. What was its profit?
4. Next year Fixed Cost is expected to rise to Rs.12,000, what will be the break even
quantity?

Q. 19 Briefly explain the Baumol’s Sales maximization Model. How it is different than the
profit maximization model.
Q.20 Explain the price leadership model of oligopoly in case when a firm is leader as it has
the dominant share in the market.
Note: In addition to this practice the questions/numerical which we have covered in the
class as well as in the class test and class assignments.

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