Managerial Economics Paper

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Examination Paper Semester I: Managerial Economics IIBM Institute of Business Management Semester-1 Examination Paper Managerial Economics Section A: Objective Type (30 marks) • • • This section consists of multiple choices & Short notes type questions. Answer all the questions. Part one carries 1 mark each & Part two carries 5 marks each. MM.100

Part one: Multiple choices: 1. It is a study of economy as a whole a. Macroeconomics b. Microeconomics c. Recession d. Inflation 2. A comprehensive formulation which specifies the factors that influence the demand for the product a. Market demand b. Demand schedule c. Demand function d. Income effect 3. It is computed when the data is discrete and therefore incremental changes is measurable a. Substitution effect b. Arc elasticity c. Point elasticity d. Derived demand 4. Goods & services used for final consumption is called a. Demand b. Consumer goods c. Producer goods d. Perishable goods 5. The curve at which satisfaction is equal at each point a. Marginal utility b. Cardinal measure of utility c. The Indifference Curve d. Budget line

IIBM Institute of Business Management

Examination Paper Semester I: Managerial Economics 6. Costs that are reasonably expected to be incurred in some future period or periods a. Future costs b. Past costs c. Incremental costs d. Sunk costs 7. Condition when the firm has no tendency either to increase or to contract its output a. Monopoly b. Profit c. Equilibrium d. Market 8. Total market value of all finished goods & services produced in a year by a country’s residents is known as a. National income b. Gross national product c. Gross domestic product d. Real GDP 9. The sum of net value of goods & services produced at market prices a. Government expenditure b. Product approach c. Income approach d. Expenditure approach 10. The market value of all the final goods & services made within the borders of a nation in an year a. Globalization b. Subsidies c. GDP d. GNP

Part Two: 1. Define ‘Arc Elasticity’. 2. Explain the law of ‘Diminishing marginal returns’. 3. What is ‘Prisoner’s Dilemma’, of non cooperative game? 4. What is ‘Third degree Discrimation’?

END OF SECTION A

IIBM Institute of Business Management

Examination Paper Semester I: Managerial Economics Section B: Case lets (40 marks) • • • • This section consists of Case lets. Answer all the questions. Each Case let carries 20 marks. Detailed information should form the part of your answer (Word limit 150 to 200 words). Case let 1 The war on drugs is an expensive battle, as a great deal of resources go into catching those who buy or sell illegal drugs on the black market, prosecuting them in court, and housing them in jail. These costs seem particularly exorbitant when dealing with the drug marijuana, as it is widely used, and is likely no more harmful than currently legal drugs such as tobacco and alcohol. There's another cost to the war on drugs, however, which is the revenue lost by governments who cannot collect taxes on illegal drugs. In a recent study for the Fraser Institute, Canada, Economist Stephen T. Easton attempted to calculate how much tax revenue the government of the country could gain by legalizing marijuana. The study estimates that the average price of 0.5 grams (a unit) of marijuana sold for $8.60 on the street, while its cost of production was only $1.70. In a free market, a $6.90 profit for a unit of marijuana would not last for long. Entrepreneurs noticing the great profits to be made in the marijuana market would start their own grow operations, increasing the supply of marijuana on the street, which would cause the street price of the drug to fall to a level much closer to the cost of production. Of course, this doesn't happen because the product is illegal; the prospect of jail time deters many entrepreneurs and the occasional drug bust ensures that the supply stays relatively low. We can consider much of this $6.90 per unit of marijuana profit a...
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