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Business Economics bba

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Business Economics

 

Assignment A

 

Q1.         Discuss the nature and scope of Business Economics.

Q2.         How does the study of Business Economics help a business manager in decision-making? Illustrate your answer with the real world examples.

Q3.         What is the Opportunity Cost? How can it be calculated? What are the precautions to be kept in view while using the Opportunity Cost?

Q4.         Draw individual and market demand schedules. Discuss the difficulties in preparing a market demand schedule.

Q5.         Write short notes on:

  1. a) Demand forecasting
  2. b) Consumer Surplus
  3. c) Marginal Utility
  4. d) Gross price elasticity of demand
  5. e) Complementary goods

Q5a: Demand forecasting

Q5b): Consumer Surplus

Q5c): Marginal Utility

Q5d): Gross price elasticity of demand

Q5e): Complementary goods

 

Assignment B

 

Q1: Explain the law of Variable proportions. Which is the bet stage of production?

Q2: Explain Least Cost Combination of the factors.

Q3: Distinguish between Average and Marginal Cost and show by examples and diagrams that marginal cost is less than average cost if average cost is falling and marginal cost is more than average cost is rising.

 

Case Study

Two Wheeler Industries in India

The two wheeler category is steadily moving from a discretionary purchase to an essential purchase, especially among the burgeoning Indian middle-class households. Better quality and durability, higher fuel efficiency, new age styling, and features in conjunction with a slew of new product launches and greater finance availability have been the primary drivers of sales in the past years. India secures second-largest position in two wheeler production. Apart from the discussed facts, inadequacy and poor quality of public transport system in India have pushed the demand of two wheelers. In India, the two-wheeler industry is highly diversified in terms of presenting a versatile product line. Two-wheeler manufacturers produce different economic models for general public as well as some specific models to cater the different needs of high-income group. Two-wheelers contain scooters, mopeds, and motorcycles. Few years ago the market was dominated by scooter segment, but scenario changed in 1998-1999 when motorcycles took the edge and never looked back. Nowadays, Indian two-wheeler industry is dominated by the motorcycle segment. Hero Honda, Bajaj, TVS Motors, Kinetic Motors, and LML are some of the main players in the Indian two-wheeler industry.

 

Demand of two-wheelers is increasing day-by-day. In the year 1990-1991, the demand for the two-wheelers was 1.82 million units that grew to 3.83 million units in the year 2000-2001. The projected demand for the two-wheelers in the year 2014-2015 is estimated to reach 16 million units. This is no doubt a rosy picture for the growth of Indian two-wheeler industry. Table1 and Table2 present market segmentation and product variation of two-wheelers in India, respectively.

Table 1: Market segmentation for the two-wheeler industry in four regions of the country

Market segmentation

Segment              Share (%)

North                       32

East                            9

West                        27

South                      32

 

Table 2: Product wise market share for the two-wheeler industry in India

Product Variation

Type                           Share (%)

Motorcycles                  66

Scooters                        22

Mopeds                         11

 

Q1: Make a comprehensive analysis on two-wheeler demand in India.

 

Assignment C

 

  1. Average product is defined as–
  2. a) Total cost divided by the total units of input
  3. b) Total output divided by the total units of input
  4. c) Total cost divided by total output
  5. d) Total output divided by total cost of input

 

  1. To manufacture a PC, you require a keyboard and a monitor. If you measure keyboard on the X-axis and monitor on the Y-axis, the shape of the Isoquant will be–
  2. a) Convex to the origin
  3. b) Concave to the origin
  4. c) Downward sloping straight line
  5. d) Upward sloping straight line
  6. e) L-shaped

 

  1. When average product is highest?
  2. a) Total product is maximum
  3. b) Marginal product is maximum
  4. c) Marginal product is zero
  5. d) Marginal product is negative
  6. e) Marginal product is equal to average product

 

  1. The intersection of marginal product curve and average product curve characterizes the point of–
  2. a) Maximum profit
  3. b) Maximum total product
  4. c) Maximum average product
  5. d) Maximum marginal product

 

  1. The average total cost will be minimum at a point where–
  2. a) Marginal cost and average fixed cost curves intersect
  3. b) Marginal cost and average variable cost curves intersect
  4. c) Marginal cost and average cost curves intersect
  5. d) Marginal cost is minimum

 

  1. Which of the following curves is called envelope curve?
  2. a) Long run total cost curve
  3. b) Long run average total cost curve
  4. c) Long run marginal cost curve
  5. d) Long run average variable cost curve

 

  1. Average fixed cost–
  2. a) Always declines as the output increases
  3. b) Is U-shaped, if there are increasing returns to scale
  4. c) Is U-shaped, if there are decreasing returns to scale
  5. d) Is intersected by marginal cost at its minimum point
  6. e) None of the above

 

  1. Which of the following cost curves is also called planning curve?
  2. a) Long run total cost curve
  3. b) Long run average cost curve
  4. c) Long run marginal cost curve
  5. d) Total fixed cost curve

 

  1. Economic profit is–
  2. a) Accounting profit + Implicit cost
  3. b) Accounting profit + Implicit cost+ Explicit cost
  4. c) Accounting profit – Implicit cost
  5. d) Accounting profit -Indirect costs

 

  1. The intersection of the marginal cost curve and the average cost curve characterizes the point of–
  2. a) Maximum profit
  3. b) Minimum average cost
  4. c) Minimum marginal cost
  5. d) Minimum opportunity cost

 

  1. Which of the following costs remain constant as the output increases?
  2. a) Marginal cost
  3. b) Average variable cost
  4. c) Average fixed cost
  5. d) Total variable cost
  6. e) None of the above

 

  1. Increasing marginal costs with increase of output implies–
  2. a) Decreasing average returns
  3. b) Decreasing average fixed costs
  4. c) Decreasing average variable costs
  5. d) Decreasing total costs

 

  1. Which of the following cost curves is not ‘U’ shaped?
  2. a) Long run average cost curve
  3. b) Long run marginal cost curve
  4. c) Short run average cost curve
  5. d) Average variable cost curve
  6. e) Average fixed cost curve

 

  1. What would be the shape of the total cost curve when a manufacturing unit is experiencing economies of scale?
  2. a) Upward sloping
  3. b) Rectangular hyperbola
  4. c) U-shaped
  5. d) Inverted U-shaped

 

  1. In perfect competition, a firm maximizing its profit will set its output at that level where–
  2. a) Average variable cost = price
  3. b) Marginal cost= price
  4. c) Fixed cost= price
  5. d) Average fixed cost= price

 

  1. It is advisable for a firm operating under perfect competition to shut down in the short run when the price of the product falls below the–
  2. a) Total cost
  3. b) Fixed cost
  4. c) Average variable cost
  5. d) Semi-fixed cost

 

  1. Which of the following is not a feature of perfect competition?
  2. a) Large number of sellers and buyers
  3. b) No one is large enough to influence the market price
  4. c) Homogenous product
  5. d) A horizontal demand curve
  6. e) Low Price(?) (Low price is not an assumption in the perfect competition, all the remaining are the assumptions under perfect competition. So correct answer is “Low Price”)

 

  1. In the long run, a perfectly competitive firm earns only normal profits because of —
  2. a) Product homogeneity in the industry
  3. b) Larger number of sellers and buyers in the industry
  4. c) Free entry and exit of firms in the industry
  5. d) Both (a) and (b) above

 

  1. The doctrine of invisible-hand applies to economies in which all the markets are–
  2. a) Demand specific
  3. b) Supply specific
  4. c) Imperfectly competitive
  5. d) Perfectly competitive

 

  1. The horizontal demand curve for a firm is one of the characteristic features of-
  2. a) Oligopoly
  3. b) Monopoly
  4. c) Monopolistic competition
  5. d) Perfect competition

 

  1. A perfectly competitive firm can increase its sales revenue by–
  2. a) Reducing the price
  3. b) Increasing the price
  4. c) Increasing the production
  5. d) Increasing the expenditure on advertising

 

  1. If a perfectly competitive industry is an increasing cost industry, the demand curve faced by a firm will be–
  2. a) Upward sloping
  3. b) Downward sloping
  4. c) A horizontal straight line
  5. d) A vertical straight line

 

  1. A perfectly competitive firm earns abnormal profits when its–
  2. a) Average cost curve lies above its demand curve
  3. b) Average revenue curve is tangent to average cost curve
  4. c) Demand curve lies above the average cost curve
  5. d) Marginal revenue curve lies above the average cost curve
  6. e) Both (c) and (d) above. (?) (Note: A perfectly competitive firm earns abnormal profits when its demand curve and marginal revenue curve lies above the average cost curve as the demand curve and marginal revenue curve is the same for a perfectly competitive firm. Answer (c) and (d) above, a perfectly competitive firm earns abnormal profits)

 

  1. Which of the following is not a source of market imperfection?
  2. a) Technology
  3. b) Size of the firm
  4. c) Product of the differentiation
  5. d) Availability of resources
  6. e) Forces of supply and demand(?) (Note: Forces of supply and demand are not sources of market imperfection)

 

  1. Which of the following is not a barrier to entry?
  2. a) High costs of production
  3. b) Government regulations
  4. c) Production differentiation
  5. d) Tax sops to new firms

 

  1. The maximum profit condition for a monopoly firm is–
  2. a) Total cost should be minimum
  3. b) Total revenue should be maximum
  4. c) Marginal revenue = Marginal cost
  5. d) Quantity should be maximum

 

  1. ‘Four-Firm concentration’ refers to–
  2. a) The number of firms in an industry
  3. b) The four largest firms in four different and important industries in an economy
  4. c) The number of industries in an economy which have only four firms
  5. d) The percent of the total industry output that is accounted for by the largest four firms
  6. e) The percent of the total industry output that is accounted for by the largest four firms. (?) (Note: Correct answers (e) because the degree by which an industry is dominated by a few large firms is measured by concentration ratios. The four firm concentration ratio is the percentage of total industry sales made by the four (or sometimes eight) largest firms of an industry.)

 

  1. Market inefficiencies can come from–
  2. a) Externalities
  3. b) Monopolies
  4. c) Imperfect information
  5. d) All of the above

 

  1. A monopolist who faces a negatively sloped demand curve operates in the region where the elasticity of demand is–
  2. a) Less than one
  3. b) Equal to one
  4. c) Greater than one
  5. d) Zero

 

  1. An entrepreneur in order to maximize the profits, without affecting the price, should produce an output where–
  2. a) Average cost is minimum
  3. b) Average variable cost is minimum
  4. c) Average fixed cost is minimum
  5. d) Marginal cost is equal to the average variable cost

 

  1. Macroeconomics is concerned with–
  2. a) The level of output of goods and services
  3. b) The general level of prices
  4. c) The growth of real output
  5. d) None of the above.
  6. e) All of the above (?) (Note: All 1st three options are correct)

 

  1. Real GNP increases–
  2. a) When there is an increase in the price level
  3. b) When there is an increase in the output of goods and services
  4. c) When there is an increase in the price level and/or the output of goods and services
  5. d) None of the above

 

  1. Personal income includes all of the following except–
  2. a) Transfer payments
  3. b) Undistributed corporate profits
  4. c) Personal income taxes
  5. d) Personal savings

 

  1. NDP does not include–
  2. a) Payments made for income taxes
  3. b) Depreciation allowances
  4. c) Undistributed profits
  5. d) The value added from intermediate goods

 

  1. National income is–
  2. a) NDP at market prices
  3. b) NNP at market prices
  4. c) NDP at factor cost
  5. d) GNP at market prices

 

  1. The difference between personal disposable income and personal income is–
  2. a) Residential investment
  3. b) Indirect taxes
  4. c) Subsidies
  5. d) Personal taxes

 

  1. The net factor income earned within the domestic territory of a country must be equal to —
  2. a) Net Domestic Product at factor cost
  3. b) Net Domestic Product at market price
  4. c) Net National product at factor cost
  5. d) Personal income

 

  1. The ratio of the change in equilibrium output to the change in autonomous spending that causes change in output is called–
  2. a) Marginal propensity to consume
  3. b) Marginal propensity to save
  4. c) Average propensity to save
  5. d) Average propensity to consume
  6. e) Multiplier(?) (Note: Correct Answer should = Multiplier)

 

  1. When planned saving is greater than planned investment–
  2. a) Output should increase
  3. b) Output should decrease
  4. c) Output should not change
  5. d) None of the above

 

  1. An autonomous increase in investment–
  2. a) Does not affect the IS curve
  3. b) Shifts the LM curve to the left
  4. c) Shifts the IS curve to the left
  5. d) Shifts the IS curve to the right

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