Microeconomics: Questions

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PGPM 2008 Term I Microeconomics End Term Full marks 30 Time 2 hours 1. This question contains two parts a. In era of hyperinflation, what would be the appropriate strategy for firms in the airlines and automobile sector to cope up with both competitiveness in the market and rising cost 5 b. Read the following answer the following questions Textbook publishers evaluate market size, the degree of competition, expected revenues, and costs for each prospective new title. With these data in mind, they estimate the probability that a given book will reach or exceed the breakeven point. If the publisher estimates that a book will not exceed the breakeven point based upon standard assumptions, they may consider cutting production costs by reducing the number of illustrations, doing only light copy editing, using a lower grade of paper, or negotiating with the author to reduce the royalty rate. To illustrate the process, consider the following data 122 Cost Category Dollar Amount Fixed Costs Copyediting and other editorial costs 15,750 Illustrations 32,750 Typesetting 51,500 Total fixed costs 100,000 Variable Costs Printing, binding and paper

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