QUESTION 1 (CLOZ) (20 MARKS) (a) You have been appointed as the business analyst of Firm ABC. The rm wants you to decide whether to continue or shut down the business. The production of 300 units of outputs per day requires 70 workers, employed at $100 the daily wage per worker. The price of the output produced is given as $30 per output. You are given the information that the marginal cost to produce the last unit is $30 and the costs of variable inputs is $500 daily while the information on the fixed cost is not given. What is your recommendation? Should the firm continue or shut down its business? Please support your answers with some calculations. (4 Marks) (b) According to economic theory, the market works best when there is complete freedom (C) of choice. If consumers have the freedom to choose among many goods, producers will compete to provide goods that best meet oonsumers' needs. However, under different circumstances, competition can be good or bad. Through government created monopoly, the government has created laws to protect the monopolies. A good example is the electricity service provider such as TNB in Peninsular Malaysia and SEE in Sarawak. (6 Marks) (i) Do you think THE or SEB is an example of monopoly? Explain. (3 Marks) (ii) Does a monopoly have a positive effect on society? Discuss briey. (3 Marks) Explain the statements: (10 Marks) (i) Burger King has introduced new strategy by reducing the price of its Whopper by 75 percent if customers also purchased m fries and a soft drink. Nevertheless, the sales dropped within two weeks. Based on your knowledge on game theory, what do you think had happened? (2.5 Marks) (ii) The Edge magazine columnist, Jack Sparrow reported the recent findings of two academic political scientists. These scholars found out that voters are not happy with \"negative campaigns\" of politicians. However, the political scientists suggested it is pointless for candidates to stay positive. The damage from staying positive is heaviest when the opponent is attacking. Explain the dilemma. ( 2.5 Marks) (i) Airlines practice price discrimination by charging leisure travelers and business travelers different prices. Why do you think by charging different prices; the airline companies will maximize their prots? Discuss briey. (2.5 Marks) (ii) STYLO Inc. manufactures face mask for front liners, commercial and consumer markets. To serve their customers better, the company offers its face mask in four different quality lines and price ranges: occasional use, moderate and professional use. Under what circumstances could offering multiple qualities of a product be price discrimination? What form of price discrimination might this representrst, second, or third-degree price discrimination? Explain your answers. _|{2. 5 Marks)
