Answer ALL questions

1.Elasticity of Demand

BU-MBA-Co, the online e-commerce platform, wants to increase its total revenue. One strategy is to offer a ten percent discount on every transaction it sells. From the experience, BU-MBA-Co. knows that its customers can be divided into two distinct groups, students and professors, according to their likely responses to the discount. The accompanying table shows how the two groups respond to the discount.

unit: sales per week

	Students	Professors
Volume of sales before the ten percent discount	2,000	2,200
Volume of sales after the ten percent discount	2,400	2,400

1.1 Calculate arc price elasticity of demand for students

1.2 Calculate arc price elasticity of demand for professor

2. Production Economics

2.1 Discuss differences between 'economies of scale' and 'economies of scope'

2.2 "In a short run, where capita (K) is fixed, a firm should operate its business until its marginal revenue product is greater than or equal to its marginal factor cost of labour since it will bring about maximum profit."

Do you agree with this statement? Explain.

3. Profit Maximization

BUBABU is going to launch a new business campaign. BUBABU has a demand function and a cost equation as follows:

P = 66,000 - 50Q

TC = 90,000 + 6,000Q + 10Q²

3.1 Calculate quantity (Q), price (P), total revenue (TR) and total profit () for the profit maximizing level of output.

3.2 Calculate quantity (Q), price (P), total revenue (TR) and total profit () for the revenue maximizing level of output.

3.3 If the total cost function of BUBABU changes to TC = 90,000 + 6,000Q + 10Q² (i.e. in a perfect competition market), find quantity (Q), price (P), total revenue (TR) and total profit () for the cost minimizing level of output.

4. Risk and Uncertainty

There are three decisions as follows:

Decision	Probability	Profit
A	1	$4,500
B	x	$6,000
1-x	$1,500
C	y	$20,000
y	$15,000
1-2y	$2,500

4.1 Find x that makes a certainty equivalent between Decisions A and B

4.2 Find y that makes a certainty equivalent between Decisions A and C

4.3 From 4.1, what should a firm make a decision if x = 0.5

4.4 From 4.2, what should a firm make a decision if y = 0.05

5 . The Market

Company A, Company B, and Company C are pharmaceutical companies which are dominant in the industry. These three companies have completed their intensive R&D and launched COVID-19 (new gen) vaccines to the market. The products have different levels of efficacy but have indifferent demand. The demand for these three vaccines is extremely high.

Today, news has been released from reliable sources that Company D (which is not related to Company A, Company B, and Company C) is about to launch COVID-19 (new gen) anti-viral pills. The approval process is expected to complete by the first quarter of 2023 and the pill will be sold in the market in the late 2023.

You are a consultant for Company A.

5.1 Analyze a demand for the vaccine of Company A. The analysis should cover the periods (i) when the approval process of the anti-viral pills is not yet completed, and (ii) when the anti-viral pills are in the market for sale.

5.2 What would you recommend to a manager of Company A under these two scenarios?

5.3 What would you recommend to a manager of Company A if a usage of anti-viral pills is not approved and the process will delay for at least five years?