1. What do you mean by managerial economics? Explain the nature and scope of managerial economics....

Transcribed Image Text:

1. What do you mean by managerial economics? Explain the nature and scope of managerial economics. 2. A close relationship between management and economics has led to the development of managerial economics." Explain this statement. 3. Briefly describe the different decision making units in the economy and their inter-linkage in the market. Draw a four sectors circular-flow diagram. 4. What is demand forecasting? Discuss the role of Demand Estimation and Demand Forecasting in the success of a Business Firm. Explain the techniques of demand forecasting. 5. During demand forecasting, the better the forecasts, the better, all else equal, will be the decisions made. A little improvement in forecast accuracy can easily translate into substantial gain in profits. Identify the conditions necessary for any good forecast 6. Suppose a company concludes that the demand function for its product X is Qx =2300 -0.3Px + 0.1Py+ 0.14L. Where Q is the quantity demanded of the product X, Px is the price of product X, Py is the price of related product, and L is per capita disposable income. If at present, Px=350 birr, Py = 610 birr and L= 9,000 birr. a. Calculate the quantity of the product demanded. b. Calculate the price elasticity of demand and interpret your result. c. Calculate the income elasticity of demand and interpret your result. d. Estimate the cross price elasticity of demand and determine whether the goods X and Y are substitutes or complements. 7. Assume supply and demand for TECNO phones are: P=1600 -0.5Qs and P=100-0.4Qd a. Calculate the equilibrium price and quantity and illustrate your answer on a diagram b. Assume the government decides to impose birr 100 unit tax on TECNO phones sales by stores. i. How would this affect the supply and demand functions? ii. Solve for the new quantity, prices for buyers and sellers, tax revenue iii. Show with diagrams that bears the burden of the tax? 8. If the production function of a firm is given by Q = K2L, and the input prices are r = Birr 8 per unit and w = Birr 2 per unit. Find the levels of labor and capital that maximize the level of output for a total outlay of Birr 240. Calculate and interpret it 9. A firm has fixed costs of $60 and variable costs as indicated in the table below. a. Complete the table below b. Graph total fixed cost, total variable cost, and total cost. Explain how the law of diminishing returns influences the shapes of the variable-cost and total-cost curves. c. Graph AFC, AVC, ATC, and MC. Explain the derivation and shape of each of these four curves and their relationships to one another. Specifically, explain in non- technical terms why the MC curve intersects both the AVC and the ATC curves at their minimum points. Total Product Total Fixed cost Total Total variable cost Cost Average fixed cost Average variable cost Average total cost Marginal cost 0 $ 1 $ 0 45. $ $ $ $ $ 1. What do you mean by managerial economics? Explain the nature and scope of managerial economics. 2. A close relationship between management and economics has led to the development of managerial economics." Explain this statement. 3. Briefly describe the different decision making units in the economy and their inter-linkage in the market. Draw a four sectors circular-flow diagram. 4. What is demand forecasting? Discuss the role of Demand Estimation and Demand Forecasting in the success of a Business Firm. Explain the techniques of demand forecasting. 5. During demand forecasting, the better the forecasts, the better, all else equal, will be the decisions made. A little improvement in forecast accuracy can easily translate into substantial gain in profits. Identify the conditions necessary for any good forecast 6. Suppose a company concludes that the demand function for its product X is Qx =2300 -0.3Px + 0.1Py+ 0.14L. Where Q is the quantity demanded of the product X, Px is the price of product X, Py is the price of related product, and L is per capita disposable income. If at present, Px=350 birr, Py = 610 birr and L= 9,000 birr. a. Calculate the quantity of the product demanded. b. Calculate the price elasticity of demand and interpret your result. c. Calculate the income elasticity of demand and interpret your result. d. Estimate the cross price elasticity of demand and determine whether the goods X and Y are substitutes or complements. 7. Assume supply and demand for TECNO phones are: P=1600 -0.5Qs and P=100-0.4Qd a. Calculate the equilibrium price and quantity and illustrate your answer on a diagram b. Assume the government decides to impose birr 100 unit tax on TECNO phones sales by stores. i. How would this affect the supply and demand functions? ii. Solve for the new quantity, prices for buyers and sellers, tax revenue iii. Show with diagrams that bears the burden of the tax? 8. If the production function of a firm is given by Q = K2L, and the input prices are r = Birr 8 per unit and w = Birr 2 per unit. Find the levels of labor and capital that maximize the level of output for a total outlay of Birr 240. Calculate and interpret it 9. A firm has fixed costs of $60 and variable costs as indicated in the table below. a. Complete the table below b. Graph total fixed cost, total variable cost, and total cost. Explain how the law of diminishing returns influences the shapes of the variable-cost and total-cost curves. c. Graph AFC, AVC, ATC, and MC. Explain the derivation and shape of each of these four curves and their relationships to one another. Specifically, explain in non- technical terms why the MC curve intersects both the AVC and the ATC curves at their minimum points. Total Product Total Fixed cost Total Total variable cost Cost Average fixed cost Average variable cost Average total cost Marginal cost 0 $ 1 $ 0 45. $ $ $ $ $