B.Com Managerial Economics Question paper

[ganeshbala]

2007 Gauhati University B.Com Managerial Economics Question paper

(Managerial Economics)
Full Marks: 80
Time: 3 hours

The figures in the margin indicate full marks for the questions
PART-A
Answer all questions

1. Indicate the most appropriate answer from the multiple choices given below each
question: 2×5=10
(a) Opportunity cost is a term which describes
(i) a bargain price for a factor of production
(ii) costs related to an optimum level of production
(iii) average variable cost
(iv) None of the- above

(b) According to 'profit maximisation theory' of the firm, management decides
(i) output level which maximises revenue
(ii) output level which minimizes cost
(iii) output level which maximises the difference between revenue and cost
(iv) None of the above

(c) Demand for a product should have the following prerequisite
(i) Desire for the commodity
(ii) Ability to buy
(iii) Willingness to pay
(iv) All of the above

(d) The Cobb-Douglas production function assumes that the elasticity of substitution is
(i) one
(ii) two
(iii) three
(iv) None of the above

(e) Shut-down point is one where a firm
(i) cannot reach a no-profit-no-loss position
(ii) can cover only the fixed cost
(iii) cannot cover the variable cost
(iv) cannot cover the fixed cost

2. Write short notes on any four: 3×4=12
(a) Incremental cost
(b) Cross-elasticity of demand
(c) Sunk cost
(d) Economic order quantity
(e) Cost-plus pricing

3. Answer any two questions: 5×2=10
(a) Distinguish between Economic profit and Accounting profit.
(b) What are the limitations of pay-back period method of investment appraisal?
(c) Distinguish between Autonomous demand and Derived demand.

PART-B
Answer any three questions
4. "Managerial economics bridges the gap between economic theory and business
practises." Discuss. 16

5. Why is demand analysis important for successful production planning and capital
expansion? Discuss. 16

6. Explain the concept of production function and give its economic significance.
12+4=16

7. What are the determinants of cost behaviour? Enumerate the different approaches for
estimating cost functions. 6+10= 16

8. Is 'perfect competition' a possible market situation in any of the economies of the
world? Give reason in support of your answer. 16

9. The initial investment of a project is Rs1,00,000 and it generates cash in flows as
follows .
Rs
1st year 40,000
2nd " 30,000
3rd " 50,000
4th " 20,000
5th " 15,000
You are required to-
(a) find out the pay-back period;
(b) calculate the accounting rate of return;
(c) calculate the net present value at. 10% discount. 4+4+8= 16

[surela]

1. Which of the following is a
characteristic of a perfectly competitive
market?
a. Firms are price setters.
b. There are few sellers in the market.
c. Firms can exit and enter the market freely.
d. All of the above are correct.

2. If a perfectly competitive firm
currently produces where price is greater
than marginal cost it
a. will increase its profits by producing more.
b. will increase its profits by producing less.
c. is making positive economic profits.
d. is making negative economic profits.

3. When a perfectly competitive firm
makes a decision to shut down, it is most
likely that
a. price is below the minimum of average
variable cost.
b. fixed costs exceed variable costs.
c. average fixed costs are rising.
d. marginal cost is above average variable
cost.

4. In the long run, a profit-maximizing
firm will choose to exit a market when
a. fixed costs exceed sunk costs.
b. average fixed cost is rising.
c. revenue from production is less than total
costs.
d. marginal cost exceeds marginal revenue at
the current level of production.

5. When firms have an incentive to exit a
competitive market, their exit will
a. drive down market prices.
b. drive down profits of existing firms in the
market.
c. decrease the quantity of goods supplied in
the market.
d. All of the above are correct.

6. In a perfectly competitive market, the
process of entry or exit ends when
a. firms are operating with excess capacity.
b. firms are making zero economic profit.
c. firms experience decreasing marginal
revenue.
d. price is equal to marginal cost.