Problem 1 Dutch Lady Sees High Sales Growth Dutch Lady Milk Industries BHD expects its sales to grow double-digit this year. For its nine months ended September 30, 2001, the company posted a net profit of RM11.3 million on a turnover of RM253.2 million. Despite a rise in global prices for raw materials, the company had no intention of passing on any substantial price increase to the consumers. The robust Malaysia economy, with the consumer's insatiable demand for new products, would continue to spur milk sales. The company intends to spend RM1.5 million over a five-week period on a communications program to support its launch of Dutch Lady 123 and Dutch Lady 456, both of which have been upgraded. Prior to this, it had spent more than RM500,000 on consumer research on the products. To date, as the clear leader of the market, Dutch Lady 123 commands a total 27% of the market share and it is hoped that Dutch Lady 456 would be the same. The company's current RM15 million renovations of its production area would allow Dutch Lady to easily expand its product range in the future. Source: Adapted from The Star, Fen 2, 2022. Question: 1. According to economic theories, how would an increase in the global prices for raw materials affect the market for Dutch Lady products? (2m) 2. "Despite a rise in global prices for raw materials, the company had no intention of passing on any substantial price increase to the consumers:' How would this possible? Explain. (3) 3. In your opinion, in the market structure to which Dutch Lady belongs to, is advertising important? Why? (3m) 4. What is marginal cost? Explain why, as a rational producer, you would not accept a price below marginal cost. (4m) 5. Which is the most important factor in the short run production decision: fixed cost or marginal cost? Give your reason. (3m)