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# ME BMFM32116_Group 13_ME Exam Format QUES STUD (3).pptx

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### ME BMFM32116_Group 13_ME Exam Format QUES STUD (3).pptx

1. 1. Group 13 Course Code: BMFM 32116 Subject Title: MANAGERIAL ECONOMICS Lecturer: MS BARATHY DORAISAMY NO. STUDENT’S NAME STUDENT’S ID NO. 1 CHIN WEN JIE B19080632 2 PANG JING WEN B19080631 3 SOO KAI HONG B19080598 4 HO RUI XIANG B19080622 5 LIM JIA SHENG B19080652 6 TANG SOO HEN B19080575 7 ROLLAND TEO KAI B19080592
2. 2. Question 1 Given that annual demand and supply for the E&E Electronics Company is given by: QD = 7,000 + 0.6I + 0.2A – 120P and QS = - 5,000 + 110P where Q is the quantity per year, P is price of the products, I is income per household, and A is advertising expenditure: a. Determine the function of demand curve if A = RM8000 and I = RM18,000, what is the demand curve. [1 Mark] When A= RM8,000 and I= RM18,000 QD= 7,000+ 0.6(RM18,000) + 0.2(RM8000)-120P =7000+10800+1600-120P =19400-120P
3. 3. b. Determine the equilibrium price and quantity. [2 Marks] QD=19400-120P QS = - 5,000 + 110P When price is equilibrium, QD=QS 19400-120P=-5000+110P 230P=24400 P=24400/230 =RM106.09 Thus, when P=RM106.09 QD= 19400-120(106.09) = 6669.57⋍6670 QS=-5000+110(106.09) =6669.9⋍6670
4. 4. c. Solve the equilibrium price and quantity if there is an increase in consumer income RM20,000 [Required to show all computations involved] [3 Marks] Increase in demand Supply constant QD=19400-120P +12000 =31400-120P When price is equilibrium, QD=QS 31400-120P=-5000+110P 230P=36400 P=36400/230 =RM158.26 Thus, when P=RM106.09 QD= 31400-120(158.26) = 12408.8⋍12409
5. 5. d. Based on your solution for question (c), provide the type of goods which might be involved with relevant reasons. [2 Marks] Soft drinks  Not a necessity, so a big increase in price would cause people to stop buying them or look for other brands.  A big decrease in price or increase in quantity demanded would attract more buyers.
6. 6. e. Evaluate the type of price elasticity of demand for this company. [2 Marks] Price Elasticity of Demand= [(12409-6670)/12409]x100%➗[(158.26-106.09)/158.26]x100% =46.24➗32.96 =1.40 Since Price elasticity of demand is greater than 1 Elastic
7. 7. Question 2 [Total 10 Marks] a.If a firm estimates its short-run production function to be Suppose the firm employs 16 units of capital. Determine the equation of Total Product (TP), Average Product (AP) and Marginal Product (MP) [3 Marks] TOTAL PRODUCT(TP) = Q = -0.008K3L3+11K2L2 = -0.008(16)3L3+11(16)2L2 = -32.768L3+2816L2 2 2 3 3 11 0008 . 0 L K L K Q    Average Product(AP) = 𝑸 𝑳 = 𝑨𝑳𝟐 + 𝑩𝑳 =-32.768L2+2816L ANSWER : Marginal Product(MP) = 𝜟𝑸 𝜟𝑳 = 𝟑𝑨𝑳𝟐 + 𝟐𝑩𝑳 = -98.304L2 + 5632L
8. 8. b.A perfectly competitive firm has total revenue and total cost curves given by: TC = 3,500 + 4Q + 0.3 Q2 i.Compute the average variable cost if the volume of sales is 190 units for the last cycle. [3 Marks] ANSWER : AVC = 𝑽𝑪 𝑸 = 𝟒𝑸+𝟎.𝟑𝑸𝟐 𝑸 = 4 + 0.3Q = 4 + 0.3(190) = RM 61
9. 9. ii. Determine the level of price that the firm should set for these few months if the sales volume is only 100 units due to lockdown. [4 Marks] Answer : When Q = 100 units TC = 3,500 + 4(100) + 0.3 (100)2 = 3,500 + 400 + 3,000 = 6,900 AC = TC/Q = 6,900 / 100 = RM69
10. 10. Question 3 [Total 10 Marks] Below is an average variable cost(AVC) and Average Revenue (AR) function estimated to be for a small firm AVC=500-0.03Q+0.001Q2 AR= 590 -0.03Q where AVC is measured in ringgit per unit. i. Based on the function given, extract the estimated marginal cost function. [2 Marks] ANS: TC = AVC * Q TC = [500-0.03Q + 0.001Q2]*Q = 500Q – 0.03Q2 + 0.001Q3 MC = 500 – 0.06Q + 0.003Q2
11. 11. Determine the profit-maximizing level of output and price. [4 Marks] Ans Profit Maximizing level of output occurs when MR = MC TR = AR * Q TR = [590 - 0.03Q]*Q TR = 590Q – 0.03 Q2 MR = 590 – 0.06Q At profit maximizing level of output MR = MC 590 – 0.06Q = 500 – 0.06Q + 0.003Q2 590 – 500 = 0.06Q – 0.06Q + 0.003Q2 90 = 0.003Q2 Q= 173.21 TR = P * Q Q2= 90 / 0.003 = 30000 TR = 590 (173.21) – 0.03( 173..21)2 101203.85 = P * Q Q= 173.21 = 102193.9 –900.05 101203.85 / 173.21 = P = 101203.85 584.28= P
12. 12. Determine the firm's expected profit or loss, if total fixed cost is expected to be RM5 million. [4 Marks] TR = 102193.9 –900.05 = 101203.85 Q= 173.21 Total Cost= 500Q – 0.03Q2 + 0.001Q3 = 500(173.21) - 0.03 (173.21)2 + 0.001(173.21)3 = 86605 – 900.05 + 5196.59 = 90901.54 + 5,000,000 = 5,090,901.54 101,203.85 – 5,090,901.54 = -4,989,697.69 #
13. 13. Question 4 [Total 10 Marks] A monopolist’s Demand function is P = 1546 - 4Q, and its Total Cost function is TC = 21,000 + 22Q -3Q2 + ⅓Q3, where Q is output produced and sold. Based on the demand and total cost function above, compute the level of output and price that maximized profit and hence determine the level of profit. [10 Marks] TR = P(Q) =1546 – 4Q(Q) =1546Q – 4Q2 MR = d(TR)/dq = d (1546Q – 4Q2) / d(Q) = 1546Q1-1 – 2(4)Q2-1 = 1546 – 8Q MC = d(TR)/dq = d(21,000 + 22Q – 3Q2 + ⅓Q3) / d(Q) = 22Q1-1 – 2(3)Q2-1 +3 (⅓)Q3-1 = 22 – 6Q + Q2
14. 14. MR = MC 1546 – 8Q = 22 – 6Q + Q2 Q2 = – 8Q + 6Q – 22 + 1546 Q2 = –2Q + 1524 Q2 + 2Q – 1524 = 0 𝒙 = −𝟐 ± 𝟐𝟐 − 𝟒(𝟏)(−𝟏𝟓𝟐𝟒) 𝟐(𝟏) 𝒙 = −𝟐 ± 𝟒 + 𝟔𝟎𝟗𝟔 𝟐 𝒙 = −𝟐 ± 𝟔𝟏𝟎𝟎 𝟐
15. 15. X= 38.05 X= -40.0512 Q = 38 units P = 1546 – 4(38) =1546 – 152 =RM 1394
16. 16. Q 5a. The practice of price discrimination in an economy is always relate to unethical in the field of business. Evaluate the statement above with relevant examples. • What is price discrimination The practice of selling the same product while charging different prices to different customers. Example: Airline tickets will be sold much expensive to travellers during the holidays where people are willling to travel during holidays while during normal weekdays prices are set to lower.
17. 17. Why it’s Unethical It’s consider unfair Companies can create unfair price where they sell their products at a higher price to a certain types of group of people base on their race, gender or income level. Lower product choices Monopoly companies can take advantage of price discrimination to capture a greater market share and establish a high barrier to entry. In addition, lower-income consumers may not be able to afford the high prices charged by the companies.
18. 18. Why it’s Unethical Reduces consumer surplus Price discrimination transfers the surplus from consumer to producer, thus reducing the benefit consumers can receive. Adminstration costs Business have to pay for adminstration cost when they carry out price discrimination.
19. 19. b.Explain the usefulness of production function in the analysis of the firm’s production. Helps in making short-term and long term decisions in such as finding the optimum level of output and deciding the production level. Helps in calculating the least cost combination of various factor inputs at a given level of output. Gives logical reasons for making decisions. For example, if price of one input falls, one can easily shift to other inputs.