Download MANAGERIAL ECONOMICS EXAM DATE

PAN AFRICA CHRISTIAN UNIVERSITY
MASTER OF BUSINESS ADMINISTRATION
END OF SEMESTER EXAMINATION
DEPARTMENT: BUSINESS
COURSE CODE: MBA501 – ROYSAMBU DAY
COURSE TITLE: MANAGERIAL ECONOMICS
EXAM DATE: THURSDAY 31st MARCH 2016
TIME: 1400HRS-1700HRS
INSTRUCTIONS
Attempt ALL questions in section A and any other THREE in section B.
SECTION A: Answer ALL questions in this section (40 Marks)
QUESTION ONE
i.
ii.
Define demand and discuss the factors that determine the demand of a commodity
10 marks
Highlight any four types of markets and explain any four characteristics of competitive
market structure
10 marks
QUESTION TWO
i.
Although there are some aspects of monopolies which are favourable, monopolies are
usually hated mainly because their practice of consumer. Identify and explain any four
weaknesses of monopolies.
8 marks
ii.
Briefly explain the four main economic goals in any country regardless of whatever
political party
8 marks
Explain the law of diminishing marginal utility
4 marks
iii.
SECTION B: Answer any THREE questions in this section (60 Marks)
QUESTION THREE
i) Let us consider a two-commodity market model in which the two commodities are
related to each other. Let us assume the functions for both commodities are linear. The
two commodities are complementary commodities say (cars (c ) and petrol (P). The
functions representing the commodities are as follows:
Qdc = 820 – 10 Pc – 4Pp
Qdp = 590 – 2Pc – 6Pp
Qsc = -120 + 6Pc
Qsp = - 240 + 4Pp
Determine the equilibrium price and quantity demanded for each commodity
10 Marks
ii.
Define the law of supply and explain the factors that determine the supply of a
commodity 10 marks
QUESTION FOUR
i) Clearly differentiate between economies of scale and diseconomies of scale 4 marks
ii) Assume that a monopolist is faced with the following demand functions:
Q1 = 48 – 0.4 P1
Q2 = 20 – 0.1 P2
Where TC = 70 + 80 Q
We can compute the prices that the monopolist will charge in the different markets. 6 marks
iii.
The consumption function is the relationship [expressed in mathematical or
diagrammatic form] between planned consumption and other independent variables,
Discuss the factors that determine consumption.
10 marks
QUESTION FIVE
a) The marginal revenue (MR) and marginal cost (MC) functions for a certain firm are
given as:
MR = 200 - 4q
MC = 8q - 400
Determine the following
i)
Total revenue, total cost and profit functions
(6 Marks)
ii)
Profit maximizing output for the firm
(4 Marks)
b) Explain and illustrate the price and output determination for a profit making monopolist
in the short run. In what aspects is the monopolist’s short run equilibrium different from
that of a perfect competitor?
(10 Marks)
QUESTION SIX
Explain and give the algebraic expression of income elasticity of demand. Briefly outline
its relevance in decision making
(7 Marks)
Briefly explain three reasons explaining the existence of economic profits to a business
organization
6 marks
Two firms are in the chocolate market. Each can choose to go for the high end of the market
(high quality) or the low end (low quality). Resulting profits are given by the following
payoff matrix:
Firm A
Firm B
High quality
Low quality
High quality
200
,
200
300
,
180
Low quality
180
,
300
250
,
250
What outcome, if any, is the pure-strategy Nash Equilibrium? Does this outcome (if there
is) maximize the firms’ joint profit? Justify your answer.
(7 Marks)