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Master in Business Administration: Managerial Economics (MPME 7113) Assignment 1

This document outlines an assignment for a Managerial Economics course. It provides instructions for completing 6 tasks related to economics concepts. Students are to answer all questions individually based on readings. Plagiarism is prohibited. Assignments are due by a specified date, with marks deducted for late submissions.

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Mohamad Nazrin Shah Mohd Zulkifli
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202 views5 pages

Master in Business Administration: Managerial Economics (MPME 7113) Assignment 1

This document outlines an assignment for a Managerial Economics course. It provides instructions for completing 6 tasks related to economics concepts. Students are to answer all questions individually based on readings. Plagiarism is prohibited. Assignments are due by a specified date, with marks deducted for late submissions.

Uploaded by

Mohamad Nazrin Shah Mohd Zulkifli
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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MASTER IN BUSINESS ADMINISTRATION

MANAGERIAL ECONOMICS
(MPME 7113)
ASSIGNMENT 1

PREPARED FOR
DR NOR SAIDI BIN MOHAMED NASIR

PREPARED BY
[STUDENT NAME]
[STUDENT ID]

SUBMISSION DATE
15TH August 2021
MANUAL OF ASSIGNMENT

MPME 7113 – ASSIGNMENT 1

WRITING FORMAT
1. This assignment is to be completed INDIVIDUALLY.
2. This assignment is according to the chapters in the syllabus.
3. Answer ALL questions.
4. Please be noted that those questions are to be answered after accomplishment of
every chapters. Reading and revising of slides, books and internet will help you to
answer those questions.
5. NO PLAGIARISM - will be checked through Turn It In. Marks will be deducted
6. Submission: Upload into LMS

REMINDER: TOTAL MARKS 30% will be given upon completion and submission.
1% per day will be deducted for the late submission.
Task

1. You are the human resources manager for a famous retailer and are trying to
convince the president of the company to change the structure of employee
compensation. Currently, the company’s retail sales staff is paid a flat hourly wage of
$20 per hour for each eight-hour shift worked. You propose a new pay structure
whereby each salesperson in a store would be compensated $10 per hour, plus 1
percent of that store’s daily profits. Assume that, when run efficiently, each store’s
maximum daily profits are $25,000. Outline the arguments that support your proposed
plan.

2. You are the manager of an organization in America that distributes blood to hospitals
in all 50 states and the District of Columbia. A recent report indicates that nearly 50
Americans contract HIV each year through blood transfusions. Although every pint of
blood donated in the United States undergoes a battery of nine different tests, existing
screening methods can detect only the antibodies produced by the body’s immune
system—not foreign agents in the blood. Since it takes weeks or even months for these
antibodies to build up in the blood, newly infected HIV donors can pass along the virus
through blood that has passed existing screening tests. Happily, researchers have
developed a series of new tests aimed at detecting and removing infections from
donated blood before it is used in transfusions. The obvious benefit of these tests is the
reduced incidence of infection through blood transfusions. The report indicates that the
current price of decontaminated blood is $60 per pint. However, if the new screening
methods are adopted, the demand and supply for decontaminated blood will change to
Qd = 210 − 1.5P and Qs = 2.5P − 150. What price do you expect to prevail if the new
screening methods are adopted? How many units of blood will be used in the United
States? What is the level of consumer and producer surplus? Illustrate your findings in a
graph.
3. Seventy-two percent of the members of the United Food and Commercial Workers
Local 655 voted to strike against Stop ’n Shop in the St. Louis area. In fear of similar
union responses, two of Stop ’n Shop’s larger rivals in the St. Louis market—Dierberg’s
and Schnuck’s—decided to lock out their union employees. The actions of these
supermarkets, not surprisingly, caused Local 655 union members to picket and boycott
each of the supermarkets’ locations. While the manager of Mid Towne IGA—one of
many smaller competing grocers—viewed the strike as unfortunate for both sides, he
was quick to point out that the strike provided an opportunity for his store to increase
market share. To take advantage of the strike, the manager of Mid Towne IGA
increased newspaper advertising by pointing out that Mid Towne employed Local 655
union members and that it operated under a different contract than “other” grocers in the
area. Use a graph to describe the expected impact of advertising on Mid Towne IGA
(how the equilibrium price and quantity change). Identify the type of advertising in which
Mid Towne IGA engaged. Do you believe the impact of advertising will be permanent?
Explain.

4. Recently, the Boeing Commercial Airline Group (BCAG) recorded orders for more
than 15,000 jetliners and delivered more than 13,000 airplanes. To maintain its output
volume, this Boeing division combines efforts of capital and more than 90,000 workers.
Suppose the European company Airbus enjoys a similar production technology and
produces a similar number of aircraft but that labor costs (including fringe benefits) are
higher in Europe than in the United States. Would you expect workers at Airbus to have
the same marginal product as workers at Boeing? Explain carefully.

5. It is common for supermarkets to carry both generic (store-label) and brand-name


(producer-label) varieties of sugar and other products. Many consumers view these
products as perfect substitutes, meaning that consumers are always willing to substitute
a constant proportion of the store brand for the producer brand. Consider a consumer
who is always willing to substitute four pounds of a generic store-brand sugar for two
pounds of a brand-name sugar. Do these preferences exhibit a diminishing marginal
rate of substitution between store-brand and producer-brand sugar? Assume that this
consumer has $24 of income to spend on sugar, and the price of store-brand sugar is
$1 per pound and the price of producer-brand sugar is $3 per pound. How much of each
type of sugar will be purchased? How would your answer change if the price of store-
brand sugar was $2 per pound and the price of producer-brand sugar was $3 per pound?

6. The manager of your company’s pension fund is compensated based entirely on fund
performance; he earned over $1.2 million last year. As a result, the fund is
contemplating a proposal to cap the compensation of fund managers at $100,000.
Provide an argument against the proposal.

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