MS-09 : MANAGERIAL ECONOMICS

JUNE 2003

Note: Attempt any five questions. All questions carry equal marks.

1 Discuss various concepts of costs which are relevant from the standpoint of production, planning and control. [20]

2(a) What do you understand by price discrimination? Explain briefly the conditions which make it possible and profitable. [10]

(b) Explain briefly the managerial uses of estimated cost function. [10]

3 What is cost-benefit analysis? How is it different from financial analysis? Discuss briefly the steps involved in social cost-benefit analysis of a project. [20]

4(a) A firm has the production function

X = LK (X = output, L = labour, K = capital); labour and capital prices are Rs. 8 and Rs. 10 per unit; and it desires to produce 32 units of output. What is the least cost combination of labour and capital? [10]

(b) Consider the production function

Q = 86 L0.61 K0.39

(i) Find the marginal products of labour and capital.

(ii) Find the marginal rate of technical substitution. [10]

5 “Pricing decisions are constrained by product-policy decisions and considerations of corporate planning.” Comment on the above statement by giving real world examples. [20]

6 “Firms may not maximise profit but they do have a profit policy.” Discuss the above by bringing out clearly the various facets of a profit-policy decision by a firm. [20]

7 State whether the following statements are true, false of uncertain and give reasons for your answer: [20]

(a) Profit will be either or minimum when marginal revenue equals marginal cost.

(b) Under perfect competition selling cost are not necessary.

(c) A shift in the demand curve for cigarettes is caused by a change in the price of cigarettes.

(d) The break-even point becomes indeterminate when price of the commodity is equal average variable cost.