Economics for Managers

Assignment A

1.    Discuss the fundamental nature of Management Economies with respect to the three choice problems of the economy.     

2.     The demand function of a product is given as Q = 500-5P. Find out the point price elasticity demand when

a) P = Rs. 15 and Q = 200

a) P = Rs. 50 and Q = 200

What inferences do you draw from the results when the price of a commodity increases from Rs. 15 to Rs. 50, the quantity demanded remaining constant?     

3.     Distinguish between accounting costs and Economics costs. Explain giving suitable examples.     

4.     Explain the functional forms of cost function giving illustration.     

5.     "It is believed that a firm under a perfect competition is a price-taker and not a price-maker." Explain giving examples.     

6.     What are the various factors which may influence the demand for intermediate goods like cables? Explain the most appropriate method of forecasting the demand for such an item.     

7.     State the assumption underlying the economists' theory of firm. Develop a critique of the theory and suggest the need for alternative models.     

8.     'Price leadership is an alternative cooperative method used to avoid tough competition'.

Assignment B

CASE STUDY
In early 1991, there was a sharp increase in the price of newsprint, the paper used by the newspapers. Since newsprint is the largest expense for India newspapers (after salaries) publishers were concerned about the price hike. Suppose that the demand for newsprint can be represented as follows:

Qi = 17-3 – 0-0092 p +0-0067

Where Q. equals the quantity demanded (in kilograms per capital), P is the price of newsprint (in Rs. Per metric ton) and I is the income per capita (in Rs.),

Question

Q1. If there are 1 million people in the market, and if per capita income equals Rs. 10,000 what is the demand curve for newsprint?

Q 2. Under these circumstances, what is the price elasticity of demand if the price of newsprint equals Rs. 400 per metric ton? 

Q3.  According to a study, the demand curve for newsprint in India is:
                 Q2 = 2672 -- 0-51 p
Where, Q2 is the number of metrix tons of newsprint demanded (in thousand). What is the price elasticity of demand for newsprint in India if price equals Rs. 500 per metric ton?

Assignment C

Question 1. Economics is the study of

production technology

consumption decisions

" how society decides what, how, and for whom to produce"

the best way to run society

Question 2. The opportunity cost of a good is

the time lost in finding it

the quantity of other goods sacrificed to get another unit of that good

the expenditure on the good

the loss of interest in using savings

Question 3. A market can accurately be described as

a place to buy things

a place to sell things

the process by which prices adjust to reconcile the allocation of resources

a place where buyers and sellers meet

Question 4. In a free market __________ ___________

governments intervene

governments plan production

governments interfere

prices adjust to reconcile scarcity and desires

Question 5. In the mixed economy

economic problems are solved by the government and market

economic decisions are made by the private sector and free market

economic allocation is achieved by the invisible hand

economic questions are solved by government departments

Question 6. Normative economics forms ___________ based on _____________

"positive statements, facts"

"opinions, personal values"

"positive statements, values"

"opinions, facts"

Question 7. Microeconomics is concerned with

the economy as a whole

the electronics industry

the study of individual economic behaviour

the interactions within the entire economy

Question 8. Macroeconomics is the study of ___________________

individual building blocks in the economy

the relationship between different sectors of the economy

household purchase decisions

the economy as a whole

Question 9. Data are important in economics because __________ and __________

" they suggest relationships for explanation, allow testing of hypotheses"

" they can be used for tables, they can be graphed"

"they can be used in computers, governments use them"

"they provide interesting information, can be summarised"

Question 10. Time series data show information

about the same point in time over different places

about different points in time over the same variable

about different variables over different places

about different points in time over different places

Question No.  11    Marks - 10
The retail price index is used to ______________    
 
Options    
construct price lists    
compare shop prices    
measure changes in the cost of living    
none of the above

Question No.  12    Marks - 10
A real value can be derived from a nominal value by    
 
Options    
adjusting for changes over time    
adjusting for data collection errors    
adjusting for population changes    
adjusting for changes in prices    

Question No.  13    Marks - 10
If your income during one year is £10,000 and the following year it is £12,000, then it has grown by    
 
Options    
20%    
2%    
12%    
16%    

Question No.  14    Marks - 10
A straight-line diagram can be drawn knowing the ______ and _________    
 
Options    
vertical axis and horizontal axis    
intercept and slope    
scale and slope    
intercept and scale

Question No.  15    Marks - 10
On a graph, a positive linear relationship    
 
Options    
moves down to the right    
moves up to the left    
moves up to the right    
moves down to the left

Question No.  16    Marks - 10
If the diagram of a line shows that lower values on the vertical scale are associated with higher values on the horizontal scale, this is an example of _____________    
 
Options    
a nonlinear relationship    
a positive linear relationship    
a scatter diagram    
a negative linear relationship

Question No.  17    Marks - 10
When we know the quantity of a product that buyers wish to purchase at each possible price, we know    
 
Options    
Demand    
Supply    
Excess demand    
Excess supply

Question No.  18    Marks - 10
The equilibrium price clears the market; it is the price at which ________ _________    
 
Options    
Everything is sold    
Quantity demanded equals quantity supplied    
Excess demand is zero    
b & c

Question No.  19    Marks - 10
When a market is in equilibrium    
 
Options    
Quantity demanded equals quantity supplied    
Excess demand and excess supply are zero    
The market is cleared by the equilibrium price    
All of the above    

Question No.  20    Marks - 10
________ and ________ do not directly affect the demand curve    
 
Options    
the price of related goods, consumer incomes    
consumer incomes, tastes    
the costs of production, bank opening hours    
the price of related goods, preferences    

Question No.  21    Marks - 10
A demand curve can shift because of changing    
 
Options    
incomes    
prices of related goods    
tastes    
all of the above

Question No.  22    Marks - 10
A supply curve is directly affected by    
 
Options    
technology    
input costs    
government regulation    
all of the above

Question No.  23    Marks - 10
If a price increase of good A increases the quantity demanded of good B, then good B is a    
 
Options    
substitute good    
complementary good    
bargain    
inferior good

Question No.  24    Marks - 10
An increase in consumer income will increase demand for a _______ but decrease demand for a _________    
 
Options    
substitute good, inferior good    
normal good, inferior good    
inferior good, normal good    
normal good, complementary good
Question No.  25    Marks - 10
The price elasticity of demand measures ________________    
 
Options    
the responsiveness of quantity demanded to a change in price    
how far a demand curve shifts    
a change in price    
a change in quantity demanded

Question No.  26    Marks - 10
If demand is ___________ then price cuts will __________ spending    
 
Options    
inelastic, increase    
elastic, increase    
elastic, decrease    
none of the above

Question No.  27    Marks - 10
Positive cross-elasticities suggest that goods are _________ and negative cross-elasticities that goods are __________    
 
Options    
substitutes, inferior    
normal, complements    
substitutes, complements    
normal, inferior

Question No.  28    Marks - 10
A measurement showing how quantity demanded varies with income is the    
 
Options    
price elasticity of demand    
cross-price elasticity of demand    
budget elasticity of demand    
income elasticity of demand

Question No.  29    Marks - 10
Inferior goods have ___________ and luxury goods have ____________    
 
Options    
negative income elasticities, income elasticities greater than 1    
income elasticities greater than 1, negative income elasticities    
positive income elasticities, negative income elasticities    
none of the above
Question No.  30    Marks - 10
If your income doubles and the prices of the goods you buy double, then your demand for these goods will likely ________    
 
Options    
increase    
not change    
decrease    
shift

Question No.  31    Marks - 10
The income effect of a price increase of a normal good is to __________ of that good and the substitution effect is to _______ of that good    
 
Options    
increase quantity demanded, reduce quantity demanded    
increase quantity demanded, increase quantity demanded    
reduce quantity demanded, reduce quantity demanded    
reduce quantity demanded, increase quantity demanded

Question No.  32    Marks - 10
The opportunity cost of a student is    
 
Options    
Course fees and rent    
A loan from the bank    
What the student could have earned in the best job available by not studying    
What the student will earn after graduation

Question No.  33    Marks - 10
Economics assumes that people consume goods and services to achieve    
 
Options    
Status    
Prestige    
Utility    
Self-esteem

Question No.  34    Marks - 10
The extra utility from consuming one more unit of a good is called    
 
Options    
Marginal utility    
Additional utility    
Surplus utility    
Bonus utility

Question No.  35    Marks - 10
Adding up the quantities demanded of a good by different people facing the same price gives us the    
 
Options    
Supply curve    
Market demand curve    
Demand curve    
Market supply curve

Question No.  36    Marks - 10
Firms are assumed to _________ costs and to _________ profits    
 
Options    
incur, desire    
pay, make    
charge, earn    
minimize, maximize    

Question No.  37    Marks - 10
The increase in total cost when one more unit is produced is known as    
 
Options    
marginal cost    
opportunity cost    
limited cost    
average cost

Question No.  38    Marks - 10
Marginal revenue is the _________ when output is ____________    
 
Options    
change in average revenue, increased    
change in total revenue, increased by one unit    
change in average revenue, increased by one unit    
change in total revenue, increased

Question No.  39    Marks - 10
Profits are maximized when _________________    
 
Options    
costs are minimized    
revenue is maximized    
average cost is less than average revenue    
marginal cost equals marginal revenue

Question No.  40    Marks - 10
If a firm's wage costs increase this will cause __________ and ________    
 
Options    
marginal cost to increase, output to fall    
marginal revenue to increase, output to fall    
opportunity cost to increase, the firm will close    
average cost will rise, output will increase