Assignment
Q1. Given the following TR and TC functions of a firm, determine the
output (Q) at which the firm will achieve Break even (i.e. zero
economic profit).
TR=51Q- Q2
TC= 625+Q
Q.2 . Given the following equations:
TR= 72Q- 2 Q2
TC= 10+12 Q+ 4 Q2
Calculate the output (Q) at which he maximizes his profit.
3. A perfectly competitive firm has the following cost Schedule
Q 0 1 2 3 4 5 6 7 8 9 10
TC 9 20 30 39 47 54 60 67 77 90 109
i) If the market price is 13, what output the firm would choose to produce to
maximize Profit. What is the maximum profit?
ii) Suppose the market price falls to 6. How much will the firm choose to produce
now and what will be its profit?
Q3. Coke estimates that monthly total costs including a normal profit will be:
TC= 1000+2Q+0.01 Q2
To maximize profit how many bottles of coca cola should be produced each
month? In short run how much economic profit will the business earn each
month? Assume that each bottle sells for Rs. 10.
Q4. The demand schedule for an industry in a purely competitive firm is given as
follows.
Q=500-3P
The short run supply schedule of the industry is summarized as follows:
Q= -3+ 8P
a) What are the equilibrium price and quantity in the market?
b) How much are consumers spending?
c) What is the total revenue of the firms?
Q5. Suppose the Rent of a firm is Rs. 60000 whereas Average Variable cost is
Rs. 10 as against the price of Rs. 20. Find out the Break even quantity of sales.
Q6. Demand function of a firm is: Qd= 12-P
Find out Price, Demand, TR and MR schedule.
Q6. Suppose a firm is monopoly firm. The following information is given
regarding the firm.
2
MR= 1000-20Q. TR=1000Q-10Q
MC=100+10Q
How many units of the good produced by the firm would be sold and at what
price.?
Q7. The demand for cereal..............
The majority of cereals are sold through supermarkets.
In UK, over 90 per cent of sales are through stores
such as Tesco and Sainsbury. This gives the
supermarkets a lot of power over the manufacturers. To
increase demand, cereal manufacturers, such as
Kellogg and Cereal Partners, are always looking for
new ways of getting their products to the market.
Recent efforts have included vending machines in
schools and sports clubs. Also, in the USA, the fast-
food chain Cereality has begun enabling customers to
mix and match their cereals to tailor their own
products.Cereal companies have also stressed the health
benefits of eating cereal in an attempt to boost demand.
They highlight the vitamins in the cereal and the low
level of calories. In the case of cereals, demand is
influenced by both parents and children. The parents
often make the final decision. The children influence
this decision by making clear what they want; they are
often influenced by gifts or promotional offers.The
demand for a product should not be taken as given.
Marketing managers have to respond to such changes.
For example, many cereal manufacturers have moved
into producing snack cereal bars or offering cereals in
vending machines to be sold at work.
Questions
Qa.Derive the demand function for cereals with
determinants.
Qb.Cereals tends to be eaten mainly by children rather
than people in their 20s and 30s. Why do you think this
is and what could you do, if you were the marketing
manager of a cereal manufacturer, to boost sales to
these older age groups.
Multiple Choice...........3 marks
1. Income elasticity of demond for cereals will be
a.>1
b.<1
c.=0
d.infinity
8.steel and cars are examples of
a. replacement and recurring demand
b.short term and long term demand
c.consumer durables
d.derived demand and direct demand
9.Movement along the same demand curve is due to
a.contraction or expansion of quantity demanded
b.change in income
c.change in price
Answer any two from below........3 marks
Q10.Managerial economics is the integration of
economic theory with business practice for the purpose
of facilitating decision making and forward planning by
management?. Justify
Q11.Consider the firm that wants to enter into the
mobile phone industry. How will it use the demand
forecasting techniques for ascertaining its demand for
mobiles?
Q12.You have recently joined Procter and Gamble as a
Management Trainee where you have been asked to
use your knowledge of managerial economics to
ascertain elasticity of demand for some of its products
like Ivory soap and Pampers. How will you ascertain
ei,ep, eced (cross elasticity) for all the three products .
