managerial economics

Note: Answer the following questions. Questions (1 to 17)*2-34 marks Q.1. It is an assumption of perfect competition that, in the long run, no firm makes supernormal profits, only normal profit. Does that mean that all firms in perfect competition make the same level of profit? Q.2 "Costs play a key role in determining theoretically the optimum level of production". Explain the statement. Q.3 Show that normal goods have a positive value of income elasticity of demand and inferior goods have a negative value of income elasticity of demand? Q.4 'Given that the future is unknown, the best we can do is to estimate the likelihood of future events and then use expected profit as the decision criterion.' Discuss Q.5 "Break-Even analysis is a useful method of profit planning". Do you agree? Discuss. Q.6 Does the petroleum as an energy source have good substitutes? How is this reflected in the shape of the iso-quant for petroleum versus other energy sources? Q.7 Where will you see more price discrimination: In monopoly-type markets with just a few firms or in competitive markets with many firms? Q.8 Why must a multiple product firm take into consideration demand inter-relationships in its pricing and output decision? Q.9 How should the auto manufacturers respond to the increasing price of gasoline? Q.10 Soap industry is characterized by which market competition? Elucidate your answer Q.11 Are lower airline fares at midweek an example of third degree price discrimination? And under what conditions would it not be useful to charge different prices in different markets (i.e., practice third degree price discrimination) even if possible? Q.12 Can a monopolist incur losses in the short run? Why? Q.13 Is persistent dumping good or bad for the receiving country? Q.14 What happens to the firm's iso-cost line if the wage rate increases or decreases? Q.15 It is always better to hire a more qualified and productive worker than a less qualified and productive one regardless of cost. True or false? Explain. Q.16 The U shapes of the short run and long run average cost curves are both based on the operation of the Law of diminishing returns. True or false? Explain, Q.17 Use the concepts of economies and diseconomies of scale to explain the shape of a firm's long- run ATC curve. Also give some possible reason of economies and diseconomies of scale. Q.18 Discuss the role of Break even analysis in decision making with the help of suitable diagram. (5marks) Q.19 The generalized demand function for good A is Qd - 600 - 4PA -0.03M -12P. +15T +6P. +1.5N Where, Qd = Quantity demanded of good A each month, PA= price of good A, M =Average household income, Pa= Price of related good B, T= a consumer taste index ranging in value from 0 to 10, P. = price consumers expect to pay next month for good A, and N= number of buyers in the market for good A. a. Interpret the intercept parameter in the generalized demand function? b. What is the value of slope parameter for the price of good A? Does it have the correct algebraic sign? c. Interpret the slope parameter of income. Is good A normal or inferior? Why? d. Are goods A and B substitutes or Compliments? Explain. e. Are the algebraic signs on the slope parameters for T, P. and N correct?(6marks) Q.20 Distinguish between short-run production function and long-run production function. The law of diminishing returns is sometimes known as the law of variable proportions. How? Explain the law with example and figure. (6marks)