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Ms-9 Dec 2010

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MS-9   Dec, 2010

MS-9 : Managerial economics

1. (a) Discuss the relation between the average product, marginal product and total product in the short run.

(b) How do these support the application of the law of variable proportion to the firm ? Give example.

2. (a) Why is the long run average cost curve called an "envelope curve" ?

(b) Business Managers say that the firm plans in the long run and operates in the short run. Elucidate.

3. (a) Identify the differences between price elasticity and income elasticity. Illustrate with the help of examples.

(b) Discuss the determinants of price elasticity. Give examples.

4. Write notes on any four of the following :

(a) Opportunity cost

(b) Incremental concept

(c) Barriers to entry

(d) Effect of advertisement on demand of a product

(e) Delphi technique

5. Write five important characteristics of perfect competition. Establish the profit 20

maximising output of a perfectly competitive firm in the short run.

6. State True or False and give reasons :

(a) If total profit is at a maximum, marginal profit is zero.

(b) If a good is normal, then both the substitution effect and the income effect cause quantity demanded to change in the same direction.

(c) If price elasticity of demand for a firm's output becomes more elastic, then the firm's marginal revenue will increase.

(d) If the price elasticity of demand for a firm's output is inelastic then the firm could increase its revenue by reducing price.

(e) Economies of scale is a short run concept.

7.Case study questions

(a) What is the difference in a shift in the demand curve and a movement along the

demand curve ?

(b) Discuss factors which cause the demand curve to shift upwards ?


(d) Will "price" and "income" have a similar effect on demand of vegetables ?


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