Question 1

Question 1 [16] 1.1. Explain the following concepts: 1.1.1. Managerial economics 1.1.2. Profit maximisation hypothesis 1.1.3. Kinked demand curve 1.1.4. The firm's short-run supply curve 1.1.5. The firm's long-run average cost curve 1.2. Explain the three basic economic questions from the perspective of a country against the perspective of a company. (6) 1.3. Suppose a firm has the following demand equation: Q = 1 000 - 3P +10A with Q = quantity demanded P = product price (in dollars) A = advertising expenditure (in dollars) Assume the following: P = $3 and A = $200 1.3.1. Suppose the firm reduced the price to $2.50. Would this be beneficial? Explain. (2) 1.3.2. What is the price elasticity of demand of the firm? (2) Question 2 [32]