Test Papers / Previous Question Papers of IGNOU MS9 Managerial Economics June 2005

MANAGEMENT PROGRAMME
Term-End Examination

June, 2005

MS9 : MANAGERIAL ECONOMICS

Time: 3 hours
Maximum Marks: 100
(Weightage 70%)

SECTION A

1. (a) Distinguish between perfect competition and imperfect competition, giving examples.

(b) Classify market structure based on
(i) product type
(ii) number of buyers and sellers
(iii) entry barriers
giving suitable examples.

2. Define the law of demand. Briefly explain factors that cause a shift on the demand curve.

3. Explain the following :
(a) Equi-Marginal Principle
(b) Value Maximisation of a Firm
(c) Opportunity Cost Principle
(d) Invisible Hand

4. (a) Why are MC, AVC and AC curves U-shaped ?

(c) Why does the MC curve intersect the AVC and the AC curves at their respective minimum points. (4+8+8)

5. Describe the production function with one variable input. Establish the relationship between TP, MP and AP curves and the three stages of production.

SECTION B

1. Discuss the fundamental nature of Managerial Economics with respect to the three choice problems of the economy.

2. The demand function of a product is given as Q = 500 - 5P. Find out the point price elasticity of demand when
(a) P = Rs. 15 and Q = 200 units
(b) P = Rs. 50 and Q = 200 units
What inferences do you draw from the results when the price of a commodity increases from Rs. 15 to Rs. 50, the quantity demanded remaining constant ?

3. Distinguish between Accounting costs and Economic costs. Explain giving suitable examples.

4. Explain the functional forms of cost function giving illustrations.

5. "lt is believed that a firm under a perfect competition is a price-taker and not a price-maker." Explain giving examples.

SECTION C

6. (a) The following table gives the information regarding the units produced, TR and TC of production of a North Indian Tools factory. Complete the table :

(i) Determine the profit maximising output level.
(ii) Is profit maximum at the output where marginal profit equals zero ? Is this always the case or is this unique to this particular problem ?
(iii) Is profit maximum where total revenue equals total cost ? Explain. (20)

(b) Case :

Price Cutting at the Times of India

The Times of lndia, is one of the leading newspapers in India. In September 1972, it lowered its price from 45 paise to 30 paise while prices of its rivals remained unchanged. The number of newspapers sold by TOI and its rivals was as follows :

(i) Based on the figures, find the price elasticity of demand for TOI.
(ii) Was the cross elasticity of demand between Statesman and TOI positive or negative ?
(iii) Would you expect it to be positive or negative ? Why ? (20)