GUIDELINES:- DEFINE MANAGERIAL ECONOMIC, NATURE OF MANAGERIAL ECONOMIC AND SCOPE.- GIVE EXAMPLE, GRAPHICAL EXPLAINATION

1. WHAT IS THE MAXIMUM AMOUNT YOU WOULD PAY FOR AN ASSET THAT GENERATES AN INCOME OF $150,000 AT THE END OF EACH YEAR IF THE OPPORTUNITY COST OF USING THE FUND IS 9 PERCENT? (5 marks) 2. SUPPOSE THAT THE TOTAL BENEFIT AND TOTAL COST FROM AN ACTIVITY ARE, RESPECTIVELY, GIVEN BY THE FOLLOWING EQUATIONS: (15 marks) B(Q) = 150 + 28Q - 502 C(Q) = 100 + 8Q NOTE : MB(Q) = 28 - 10Q MC(Q) = 8 A. WRITE OUT THE EQUATION FOR THE NET BENEFIT. B. WHAT ARE THE NET BENEFIT WHEN Q = 1? AND WHEN Q = 5? C. WRITE OUT THE MARGINAL NET BENEFITS. D. WHAT ARE THE MARGINAL NET BENEFIT WHEN Q= 1 AND WHEN Q = 5? E. WHAT LEVEL Q MAXIMIZES NET BENEFIT? 3. A FIRM'S CURRENT PROFIT ARE $550,000. THESE PROFITS ARE EXPECTED TO GROW INDEFINITELY AT A CONSTANT RATE OF 5 PERCENT. IF THE FIRM'S OPPORTUNITY COST OF FUND IS 8 PERCENT, DETERMINE THE VALUE OF THE FIRM. (10 MARKS) SECTION B. ESSAY 4. INCOME ELASTICITY OF DEMAND HAS VARIOUS APPLICATION. EXPLAIN EACH APPLICATION WITH THE HELP OF AN EXAMPLE. (30 marks) 5. EXPLAIN THE NATURE AND SCOPE OF MANAGERIAL ECONOMIC (20 marks)