Solutions Available: Yes
1. "The Opportunity Cost of a product is the return that can be had from the next best alterative use." Explain this statement using Production Possibility Curve.
Answer. Opportunity cost is the cost of any activity measured in terms of the value of the next best alternative forgone (that is not chosen). It is the sacrifice related to the second best choice available...... A production–possibility curve is a graph that compares the production rates of two ....
2. Define demand function and explain the impact of price of complements and price of substitutes on demand function.
Answer. Demand function relates price and quantity. It tells how many units of a good ....... Demand function is a comprehensive formulation which specifies the factors ..... Substitute goods are goods which, as a result of changed conditions, may .....
3.Compare and contrast Economies of Scale and Economies of Scope. Explain why it is important for managers to understand Economies of Scale.
Answer. Economies of scale are the cost advantages that enterprises obtain due to size .... economies of scale can occur for a number of reasons .... Economies of scope brings benefits by producing a wide variety of products
4. Consider a monopolist facing the following demand and cost curves.
P = 50 - 2Q C = 25+10Q
(Hint: Total demand at any point P will be the summation of two quantities)
Suppose the firm is able to separate its customers in two distinct markets with the following demand functions.
P1 = 40 - 2.5Q1 P2 = 90 - 10Q2
From the above equation calculate the following:
i) Total demand
ii) Marginal Revenue
iii) Marginal Cost
5. Do you think Monopoly is undesirable? Take any real life example of monopoly in India and state its advantages and disadvantages.
Answer. If a certain firm is the only one that can produce a certain good .... If a firm has exclusive ownership of a scarce resource .... Monopoly is undesirable because ....
6. Suppose you are working as a marketing head for an organization producing soft drinks. The company is planning to float a new juice which is blue in color. What lessons from the concept of price elasticity can you draw while fixing the price for this new product?
Answer. Price elasticity of demand is a measure used in economics to show .... Pricing strategies for products or services encompass three main ways to improve ..... As the company wants to launch a new juice .....