Managerial Economics - Dronacharya College of Engineering

Roll No.:
DRONACHARYA COLLEGE OF ENGINEERING, GREATER NOIDA
SECOND SESSIONAL EXAMINATION 2010-11
Branch: MBA
Subject: Managerial Economics
Subject code: MBA 012
Time: 2 Hour
Note: 1. The question papers contains three parts.
2. All questions are compulsory.
Total Marks: 30
PART –I
Attempts all 12 parts of the following, each par carry 1/2 mark:
1/2x12
A. Which of the following statement(s) is/are false?
a. If the demand falls, the price will fall.
b. As the price rises the quantity demanded will fall.
c. If demand rises, the demand schedule shifts to the left.
d. Both (a) and (b) above.
e. Both (a) and (c) above.
B. The horizontal demand curve for a firm is one of the characteristic features of:
a. Oligopoly
b. Monopoly
c. Monopolistic competition
d. Perfect competition
e. Duopoly
C. Which of the following is not a source of market imperfection?
a. Technology
b. Size of the firm
c. Product differentiation
d. Availability of resources
e. Forces of supply and demand
D. The maximum profit condition for a monopoly firm is
a. Total cost should be minimum
b. Total revenue should be maximum
c. Marginal revenue is equal to marginal cost
d. Quantity should be maximum
e. Price should be maximum
E. A monopolist who faces a negatively sloped demand curve operates in the region
where the elasticity of demand is
a. Less than 1
b. Equal to 1
c. Greater than 1
d. between 0 and 1
e. 0
F. Which of the follow is false in a monopolistic competition?
a. Many buyers and sellers
b. Identical products
c. Easy entry and exit
d. Price of the competitor is the benchmark price
e. Each firm could be market leader in its product segment
G. The demand for most products varies directly with the change in consumer income.
Such products are known as
a)
Normal goods.
b)
Prestigious goods.
c)
Complementary goods.
d)
Inferior goods.
e)
Substitute goods.
H. Which of the following goods can be considered substitutes?
a)
Pen and Paper.
b)
Car and Petrol.
c)
Bread and Butter.
d)
Tea and Coffee.
e)
Keyboard and Monitor.
I. In the long run, a perfectly competitive firm earns only normal profits because of
a) Product homogeneity
b) Large number of seller and buyer in the industry’
c) Free entry and exit of industry
d) Both (a) and (b) above
e) Both (b) and (c) above
J. A perfectly competitive firm can increase its sales by
a) Reducing the price
b) Increasing the price
c) Increasing the production
d) Increasing the expenditure of advertisement
e) Increasing the sales force
K. For
a.
b.
c.
d.
e.
complementary goods, the cross elasticity of demand will be
Zero.
Infinity.
Positive, but less than infinity.
Negative.
None of the above.
L. Which of the following is common feature in both a monopolistic competitive market
and oligopoly market?
a) Product differentiation
b) Interdependence among member firms
c) Kinked demand curve
d) Limited number of sellers
e) Entries blocked
PART II
Attempt all the questions given at the end of the Case study. Each question
carries equal marks.
6
Shri Sidhhartha Roy, an Economist, Hindustan Lever Ltd., has estimated that if there is
one percent increase in the prices of textiles, the demand for textiles would come down
by 1.4%. Similarly, if the food prices go up by one percent, the demand for textiles
would decline by 0.98%. Finally, if there is one percent increase in the share of
agriculture in the national income, then the demand for textiles would go up by 0.3%.
Price elasticity is an area where active intervention by mills can contribute to the
expansion of demand.
The margin in textile business as shown by NCAER and Anubhai and Bijapurkar study
vary from 28% to 48% (this includes margins of manufacturer, wholesaler, semiwholesaler and retailer). If the distribution system could be rationalized so as to bring
down the final price of cloth, then by exploiting price elasticity alone, demand can go up.
Questions
I.
II.
III.
Identify the various types of demand elasticities relevant to textile demand in
India.
What the role has been visualized for price elasticity of demand for textiles in
India?
If price of cloth is reduced by 15%, how much will the demand increase?
PART –III
Attempt any three questions of the following:
6x3
1.
a)
b)
c)
Attempt any two parts of the following:
What is the role and functions of managerial economists in business?
How managerial economics helps managers for effective decision making?
Discuss the scope of managerial economics.
2.
a)
b)
c)
Attempt any two parts of the following:
Explain the various determinants of demand.
State law of demand.
What are exceptions of law of demand? explain
3.
a)
b)
c)
Attempt any two parts of the following:
Define law of supply.
What is meant of elasticity of supply?
What is the use of Elasticity of demand in managerial decision making?
4.
a)
b)
c)
Attempt any two parts of the following:
Explain the main feature of monopoly.
How the price is determined under monopoly?
Difference between the Monopoly and monopolistic competition.
Roll No.:
DRONACHARYA COLLEGE OF ENGINEERING, GREATER NOIDA
SECOND SESSIONAL EXAMINATION 2010-11
Branch: MBA
Subject: Managerial Economics
Subject code: MBA 012
Time: 2 Hour
Note: 1. The question papers contains three parts.
2. All questions are compulsory.
Total Marks: 30
PART - I
1. Attempts all 12 parts of the following, each par carry 1/2 mark.
A. Inflation refers to :
a) Raising prices
b) Reduced Money supply
c) Increased demand
d) Increased supply
B. An excessive fall in prices leads to :
a) inflation
b) Deflation
c) Recession
d) Stagnation of Economy
C. For maximization of profit in the short run is :
a) AR = AC
b) MR = MC
c) MR = AR
d) MC = AC
D. In case of oligopoly, number of firms are :
a) Large
b) Infinite
c) One
d) Few
E. In case of perfect competition, elasticity will be:
a) 0
b) 2
c) 3
d) Infinity
F. Which type of competition leads to exploitation of consumer?
a) Oligopoly
b) Monopolistic competition
c) Monopoly
d) All of above
G. Kinked demand curve explains to :
a) Price rigidity
b) Price flexibility
c) Demand rigidity
d) Demand flexibility
H. Which of the following curve is not U shaped :
a) AVC
b) AFC
c) AC
d) MC
12x1/2
I. If demand curve confronting an individual firm is perfectly elastic, then firm is :
a) Price taker
b) Adjust output
c) Adjust price
d) All of these
J. Generally, the demand curve slopes :
a) Upwards
b) Downwards
c) Remain constant
d) None of these
K. The profit which the firm must earn if they are to remain in the industry is called
:
a) Marginal Profit
b) Normal profit
c) Equi-marginal profit
d) None of these
L. Cross elasticity of demand between tea and sugar is :
a) Positive
b) Negative
c) Zero
d) Infinity
PART II
2. Attempt all the questions given at the end of the Case study. Each question
carries equal marks.
6
Ratan Sethi opened a petrol pump cum retail store on Delhi-Agra Highway; about two
hour drive from Delhi, his store sells typical items needed by highway travelers like fast
foods, cold drink, chocolates, hot coffee, children’s toys, etc. He charges higher price
compared to the sellers in ‘Delhi, yet he is able to maintain brisk sale – particularly of
“Yours special Pack” (YSP) consisting of soft drink in a disposable plastic bottle and a
packet of light snacks. The Highway travelers prefer to stop at his store because, while
their cars wait for petrol filling, they in the meantime can enjoy Yours Special Pack (and,
in some cases would help themselves with some other items in the store). Each year he
could substantially enhance his sales by providing Special Summer Price on YSP which is
almost half of its regular price.
Last year while returning from Delhi, Ratan found that a new, big and modern grocery
shop has come up 15 kms from Delhi on ht National Highways. It has affected his sales
but only marginally. But last month another large convenience store has opened just 5
km away from his store. He knows that the challenge has come to his doorsteps and he
expects to be adversely affected by the existence of these two stores. He needs to meet
this challenge and decides to use the pricing strategy which he has been using quite
effectively till recently. He now permanently reduces the prices of YSP to half to its
existing price. But at the end of the year Ratan finds that his sales in general and of YSP
in particular have declined by 20 percent.
Questions
a) Where has Ratan Sethi gone wrong?
b) If he was a managerial economist, how do you think he would have
handled the situation?
PART – III
Attempt any three questions of the following:
6x3
1. Explain with examples any two of the following concepts separately.
a) Income elasticity of demand
b) Price elasticity of demand
c) Cross elasticity of demand
2. Attempt
a)
b)
c)
any two parts of the following:
Discuss briefly different cost concepts.
Also define the short-run cost curve and long-run cost curve.
Why long- run average cost curve is U Shaped?
3. Attempt
a)
b)
c)
any two parts of the following:
Explain the main feature of monopolistic competition and
How does the firm adjust it price policy under monopolistic competition.
Differentiate between the Monopoly and monopolistic competition.
4. Attempt any two parts of the following:
a) What are the main features of the perfect competition?
b) How does the firm adjust it price policy under the perfect competition
market?
c) Difference between the perfect competition and imperfect competition.

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