QUESTION 1

Mr. Rahim is planning to pursue MBA studies. Initial inquiry shows that he will have to pay USD20,000 as tuition fee, buy books for USD2,000, and pay for transport USD500. The MBA study programme will extend over 18 months. Mr Rahim is working now with a salary of USD2,500 per month. Being a full time student, he will have to forego the income from his present job for the period of study.

Work out the (a) Financial cost, and (b) the Economic Cost of doing MBA (Hint: Identify implicit costs and explicit costs)

[10 marks]

QUESTION 2

A firm has the following revenue and cost functions.

TR = 60 Q - Q2

TC = 12 Q2 +30 Q + 30

Determine the quantity level at which the firm maximizes its total profit.

(Hint: use marginal revenue = marginal cost rule)

[10 Marks]

QUESTION 3

Explain the term price elasticity of demand? How is it measured? What factors influence market demand for products? If the price elasticity is -3 and USD200 is the marginal cost of product X, what should be the optimal sale price?

(Hint: apply the mark-up rule)

[10 Marks]

QUESTION 4

What is meant by price discrimination? What are the conditions to make price discrimination effective? Discuss your answers with examples from the Airline Industry.

[10 Marks]

QUESTION 5

ASSIGNMENT MEC604 MANAGERIAL ECONOMICS 3

Write short notes on:

a. Law of diminishing returns and the short-run cost curve

b. Economies of Scale and the long run cost curve

c. New Economies of Globalization

[10 marks]

QUESTION 6

Briefly explain how firms compete/set price under -

a. Perfect competition

b. Oligopoly