Managerial Economics

Final Assignment

LATE ASSIGNMENT SUBMISSION POLICY

Any student submitting their assignments 2 days after the designated deadline will be considered as a Late Assignment Submission which will incur a penalty.

The penalty amount will be automatically added to your subsequent month’s Course Fee.

NOTE: The first page of each assignment must include the following declaration:

I certify that this assignment is my own work, based on my personal study and/or research, and that I have acknowledged all material and sources used in the preparation of this assignment whether they be books, articles, reports, lecture notes, any other kind of document, electronic or personal communication.

I also certify that the assignment has not previously been submitted for assessment in any other course or at any other time in this Course, unless by negotiation, and that I have not copied in part or whole or otherwise plagiarised the work of other students and/or persons. I have read the policy on plagiarism and understand its implications.

Assignments that do not include the above declaration will not be marked.

MARKING RUBRIC
You are requested to strictly follow the sequence of the Rubric.
Required content for each part of the Rubric must be written under its relevant heading.
Content found in irrelevant headings will not be considered for grading.
Few headings and Information are required to be written twice during the sequence of the Rubric. If you have not written it twice, it will not be considered for marking.

PLAGIARISM

Plagiarism is a form of cheating, by representing someone else’s work as your own or using someone else’s work (another student or author) without acknowledging it with a reference. This is a serious breach of the Academic Regulations and will be dealt with accordingly.

Plagiarism occurs whenever you do any of the following things without acknowledging the original source:
• Copy information from any source (including the study guide, books, newspapers, the internet)
• Use another person’s concepts or ideas
• Summarize or paraphrase another person’s work.

How do I avoid plagiarism?

To ensure you are not plagiarizing, you must acknowledge with a reference whenever you:
• Use another person’s ideas, opinions or theory
• Include any statistics, graphs or images that have been compiled or created by another person or organization
• Paraphrase another’s written or spoken word

You are required to use the below mentioned referencing system:

The Harvard Referencing System; e.g. ‘Smith (1985) listed five key factors’

INSTRUCTIONS TO STUDENT

1. In Part A, there are a total of 6 Questions. Answer the Two Compulsory questions and choose two other Questions between Questions 3, 4, 5 and 6.

2. In Part B, there are a total of 6 Questions. Answer the Two Compulsory questions and choose two other Questions between Questions 3, 4, 5 and 6.

3. Before writing your answers, read the questions and prepare suitable notes to assist you to write succinct and accurate answers. The quality of your answers will be determined on the basis of the completeness of your answer.

4. All Questions are worth 15 marks each. Your task is to answer the questions as completely as you can.

5. Assignment must be completed before the deadline mentioned in the email and submitted as a Word file format to assignmentksa@gbsge.com

COMPULSORY QUESTIONS:
The first two (2) Questions are compulsory and must be answered.

Question 1 (15 marks)

A. Why is LRATC curve U shaped? Describe the influence of economies & diseconomies of scale on the LRATC curve. (7.5 Marks)

B. Crude oil is an important global commodity. Its use is indispensable in the production and distribution of almost all products used in day-to-day life. Hence drastic fluctuations in the price of oil can have a cascading effect on the price of every other product or service. Recently the price of crude oil crossed the $100 per barrel mark, throwing the international economy out of gear. Many countries are struggling under the pressure of double digit inflation and economic recession – a situation referred to as ‘stagflation’ in economics. In your opinion, what are the major reasons underlying this fluctuation in the prices of crude oil? How do the laws of demand & supply explain this fluctuation? (7.5 Marks)

Question 2 (15 marks)

Read the case study below and answer the discussion questions. Each question carries 5 marks.

In Germany in 2009 there was considerable debate about the extent to which the government should be intervening in the economy. For example, its citizens were worried about the future of Opel, a German car brand that was part of the ailing General Motors. Some wanted the government to make sure jobs were saved no matter what. Others, however, were more hesitant and worried about the government becoming too interventionist. Traditionally since the Second World War the German government has seen itself as a referee in market issues and has avoided trying to control parts of the economy. It would regulate anti-competitive behaviour, for example, but not try to run many industries. However in the recession of 2009 when the economy was shrinking the government was forced to spend more to stimulate demand and had to intervene heavily to save the banking sector from collapse. The government also had to offer aid to businesses to keep them alive.

a. What are the possible benefits of a government intervening in an economy?

b. What are the arguments against government intervention in an economy?

c. What prompted greater intervention by the German government in 2009?

You must answer any Two (2) Questions from 3 through 6.

Question 3 (15 Marks)
a. The following events occur during the period of one year; the price of crude oil rises, the price of a car rises, all speed limits on highways are abolished, and robots cut car production costs. Explain the effects of each of these events on the market for gasoline. (7.5 marks)
b. What are economic profits? Does a firm in a competitive industry earn long-run economic profits? (7.5 marks)

Question 4 (15 Marks)
a. “Market demand curves are downward sloping”. Give your opinion on this statement with appropriate examples and illustrate the curves. (7.5 marks)

b. Explain why the price elasticity of demand for many primary commodities (such as crude oil and iron ore) has a relatively low value, whilst the demand for manufactured products has a relatively high PED value. (7.5 marks)

Question 5 (15 Marks)
a. In 2013, the price of corn fell and some corn farmers switched from growing corn in 2014 to growing soybeans. Does this fact illustrate the law of demand or the law of supply? Explain your answer. Why would a corn farmer grow soybeans? (7.5 marks)
b. Identify and describe the two types of goods that are determined by the income elasticity. (7.5 marks)

Question 6 (15 Marks)
a. “A perfectly competitive firms faces a demand curve that is horizontal at the market price”. Justify this statement and illustrate with a diagram. (7.5 marks)

b. In December, the price of Christmas trees rises and the quantity of trees sold also rises. Is this a violation of the law of demand? Why or why not? (7.5 marks)

PART B

COMPULSORY QUESTIONS:
The first two (2) Questions are compulsory and must be answered.

Question 1: (7.5 marks each) (15 Marks)

A firm has the following output and total cost in a perfectly competitive market.

Output (units) Total cost ($)
0 40
15 90
18 140
30 230
40 325
45 420
50 550

The prevailing market price is $20 per unit.

(a) What is the firm’s profit maximizing output level?
(b) Is the industry in long-run equilibrium? Justify your answer.

Question 2: (Part a – 6 marks, Parts b,c,d – 3 marks each) (15 Marks)

Consider the following data for wheat production in Lebanon in the table below and answer the following questions:

Year Production (in Tons)
2008 7
2009 8
2010 6
2011 8
2012 4
2013 3
2014 4
2015 5
2016 8
2017 5

a. Plot the data in a time series graph highlighting the legend and axis label
b. What is the mean quantity of wheat Lebanon produced from 2008 to 2010?
c. In percentage terms, how much has the 2011 production changed over the mean of previous years?
d. In your opinion, what happened in year 2011 and 2012?

OPTIONAL QUESTIONS:
You must answer any Two (2) Questions 3 through 6.

Question 3: (Parts a & b -7.5 Marks each) (15 Marks)

Consider the following data in the table below and answer the following questions:

DEMAND-1 Price USD Quantity of Tickets Purchased DEMAND-2 Price USD Quantity of Tickets Purchased
January 9 18 9 27
February 10 17 10 23
March 12 14 12 20
April 15 7 15 13
May 16 6 16 12
June 20 2 20 8

a- Draw a Graph for the data given above highlighting the legend and axis label.
b- In your opinion, can you please elaborate what happened in that graph?

Question 4: (Parts A to E – 3 Marks each) (15 Marks)

Use the supply and demand information in the table below to answer the following questions.

Price QS QD
0.50 100 175
1.00 150 150
1.50 200 125
2.00 250 100

A. Draw the demand and the supply curves.

B. What is the equilibrium price and quantity? Explain your answer.

C. Determine the excess and short supply.

D. At equilibrium, what is the total revenue of the suppliers?

E. What is equilibrium price and quantity with a $0.75 per-unit tax levied on suppliers? Explain your answer

Question 5: (Parts a & b – 7.5 marks each) (15 Marks)

a. Please review the graph below, describe its slope, analyse it and suggest a potential example for such a relationship.

b. Please review the graph below, describe its slope, analyse it and suggest a potential example for such a relationship.

Question 6: (Part A – 7 marks, Parts B1 & B2 – 4 marks each)
(15 Marks)

A. A sporting goods store observes that as they reduce the price of squash balls from $5 to $4, their quantity demanded rises from 200 to 220. Rounding to the nearest tenth, Compute the elasticity of demand of Squash balls based on the midpoint method.

B. 1. According to the table below, using the midpoint method, what is the income elasticity of good Y?

Income Quantity of Good X
Purchased Quantity of Good y
Purchased
$30,000 2 20
$40,000 5 10

B. 2. Based on your answer above (Part B 1), determine whether the good Y is inferior or normal. Explain why?