Section – A 1.

The whole MBA Tuition Fee – 20,000

Books fee- 2000

Transport -500

Explicit cost of Mr. Rahim – 22500 RM

Current salary – 2500 per month

Course duration – 18

The salary he will earn for 18 months- 2500*18= 45000 RM

Implicit cost- 45000

Financial Cost – 22500 RM

Economic cost = Explicit cost + Implicit cost

= 22500+ 45000

= 67500 RM

2.0

The cost function and revenue of a firm.

TR=60 Q-Q2

TC =Q 2+30Q+30

TR =60 Q-Q2

TC=1/2 Q2 + 30 Q +30

100+60Q = 0.5Q2 +60Q

100=0.5Q2

0.5Q2=100

Q2 =100/0.5

Q2=200

Q=√200

Q=14
MR=MC So,

MR = αTC/αQ

= 1/2Q2 + 30Q + 30

14

=( 1/2 x 142) + ( 30 x14 ) +30

14

= ( 1/2x28) + 420 +30

14

= 14+420+30

14

= 464

14

MR= 33.14

Based on this calculation, we can see that if the number is 14, we can get a maximum profit of 33.14.

If you continue to sell at this rate, you can expect a small profit. To maximize profits, we must find better
ways to generate long-term profits.

3.0

Optimal sales price=Marginal cost* (Price elasticity/Price elasticity+ 1)

OP =M* (PED /PED+1)

= 200* -3/(-3+1)

=200* (-3/-2)

=200* 1.5= 300

The optimal sales price must be 300 when the price elasticity is -3 and Marginal cost is 200 RM.

4.0
Price discrimination is the method of setting different prices for the same goods or services, and those goods
or services are sold to you at a reasonable and possible price. This includes the same products sold
individually or in groups to different buyers at different prices. Price discrimination can be divided into three
types: first price discrimination, second price discrimination, third price discrimination.

Degree of Price Discrimination

Price discrimination was once the least common practice. There are strict and rare information requirements.
The purpose of the first level of price discrimination is to deduct from each customer's total consumer
surplus. Second-level price discrimination is different than first-level price discrimination. Our goal is not to
organize the sale and sale of each product or service at once, but to organize the packages to maximize
profit. This happens when different consumer groups for similar products or services have different pricing
levels.

Influencing factors on Airline industry

Through price discrimination, companies can decide to use their products in the market. The market can be
divided according to period, distance, or the nature of the use of the goods. If you meet certain conditions,
the above price difference may occur.

First, companies need to be in imperfect competition, such as perfect competition, and it is impossible for
producers to control prices. Some level of monopoly power is required to allow producers to set prices, not
prices. Pricing discriminatory strategies mainly apply to many industries, such as hotels and tourism, as well
as the aviation, entertainment and pharmaceutical industries. They give regular customers and special
discounts. Many passengers prefer to fly on weekends when they get home. Therefore, weekend ticket prices
are higher than weekday ticket prices.

Therefore, timing is key to price fluctuations in the aviation industry. A passenger who wants to travel
during peak season plans to buy at a low price a few months ago.

As a result, airlines can target both "price-sensitive" and "price-insensitive" consumers using a
mechanism called "time-of-day pricing". This is a form of price discrimination, especially on low cost
airlines. As AirAsia said:

For travelers, airline tickets and hotel costs increase daily during vacations, which is really annoying. If
these seats are sold, the airline will begin to increase the price of the remaining seats. Ticket prices vary
from month to month. Especially in the countryside of Myanmar, high school students and university
students spend their summer vacation from March to May. In particular, April is the water festival, the
longest and most important traditional festival in Myanmar. Recently, people tend to go home and travel
abroad. Another time is Tadin Yut, a lighting festival. During this time, the need for domestic aircraft to
return to Japan instead of going abroad is increasing. Billing high charges during periods of high demand is
called peak load charges.

Airlines also use a form of price discrimination called version control to categorize the quality of
transportation services they offer. For Business Class, flight dates are flexible and you can even cancel
without paying a fine.

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5.0 a

The law of marginal profit reduction stipulates that using additional production factors will eventually lead
to a relatively small increase in production. This situation only occurs in a short period of time, such as
modifying the lowest factor of production, so adding variable elements will interfere with redundant workers
and reduce productivity. When a company hires employees to maximize productivity, production increases
and the company can continually appoint new employees. After rising to some extent, it remains constant
and begins to fall. Although the company continues to increase headcount, fixed costs (such as furniture,
office assets, and other non-labor assets) are still considered fixed costs.
Data and curve

Employee Output/ Total product Marginal product Average

product
0 0 O
1 6 6 6 Increasing returns
2 14 8 7
3 21 7 7 Diminishing returns
4 24 3 6
5 22 -2 4.4 Negative returns
 Diminishing rates
Negative rates

Increasing rates
Total Output

Labor

In this graph, productivity first tripled when two employers were appointed. When the fifth employee is
added, both the total product and the marginal product are reduced. Employees with the same efficiencies
and skills are of the same quality, but fixed costs remain the same when variable costs change, so production
has declined. In the short term, use this decreasing marginal profit rule. If workers can maximize
productivity and companies can minimize costs, the workforce is a major variable cost of the company. But
as the company's marginal profit begins to decline, productivity falls and the cost of additional output units
begins to rise.

The diagram above shows the relationship between costs, productivity and short-term costs, and how costs
are adjusted through the law of reduced marginal profit. For example, using a small amount of fertilizer on a
farm will dramatically increase production. However, heavy fertilizer does not increase the yield.

5.0 (b)

Economies of scale is the situation when the output quality of particular goods go up, per unit of the goods’
price go down. As a result, the average cost of small factory is larger than larger factory. On the other hand,
the larger factories produce goods in smaller average cost than smaller factories. As it can be changed in
production It’s a long-run cost curve as it is able to accept changes in production factors.

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On the other hand, fixed costs remain the same, only variable costs can be changed in the short-term cost
curve. Large companies are more efficient than small ones, so their efficiency depends on their size.
However, if the company is large, there will be economies of scale. Most companies are expanding their
businesses to achieve long-term success. This expansion is obtained by looking at the average cost change at
each manufacturing stage. There are two ways companies can grow. One is internal growth (also called
internal growth) and the other is integration (also called external growth). External growth means a merger
or acquisition with another company. While working hard on the development, the company sought to
reduce average costs and gain a competitive advantage. The cost reduction process for business expansion is
called economies of scale.

As the business begins to grow, the long-term curve shows what is happening at average cost. The figure
below illustrates the long-term and short-term cost curves and cut points.

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All costs are variable, so the long-term curve can be used with any average cost curve. The longest cost
curve is the cheapest at any power level. Therefore, companies can substitute other, relatively low-cost
inputs to minimize costs.

5.0 (C)

Economic globalization refers to the international flow of people, capital, technology, goods and services.
This also relates to the situation of integrated countries in the world economy. It shows how different
countries and regions of the world depend on each other. In addition to GDP growth, life expectancy and
literacy rate, there are three economic developments.

Globalization of the economy has developed rapidly over the last two to thirty years, in connection with the
General Agreement on Tariffs and Trade and the World Trade Organization. Many countries are filling trade
barriers as quickly as possible, opening their capital and current account balances. Today, the automotive
industry around the world manufactures automotive parts and assembles them in many integrated areas.
Over the past 20 years, auto parts production in these regions has increased dramatically.

With this production integration, the world economy has grown rapidly. Some are done through foreign
direct investment, while others are done through cross-border immigrants, which can reduce a country's
trade barriers.

In the European Union, there is an open movement of services, capital, goods and labor across the continent.
According to the United Nations motto, economic globalization is a result of growth rates of goods and
services, widespread use of technology in cross-border trade, and international capital flows, resulting in
global economic interdependence. Represents an increase in In addition, the UN said the rapid development
of science and technology was the main reason for the rapid growth of the world economy in the last decade.
Electronic communication devices and internet connectivity allow you to explore and visit people from all
over the world, so you can collaborate with people from all over the world. Technology helps reduce trade,
transportation and communication costs. What's more, you don't have to have a branch in that country,
which makes trade in other countries/regions smoother. Many people are hired for outsourcing and offshore
services because of technology. This is one of the main drivers of economic growth.

6 (a)

Perfect competition refers to the situation where many buyers and sellers in the market buy and sell
homogeneous products. Furthermore, there is no technical, social or legal impediment to the full competition
of existing or new participants. Therefore, buyers and sellers cannot play the game at higher or lower prices.
In this case the price is not fixed. Market power: The price is determined mainly by considering the supply
and demand of the market. In fact, supply and demand jobs are related to determining market prices.

In perfect competition, the product is homogeneous. That is, sellers sell the same goods or services, all
business sectors of the market have equal access to key production factors, and many buyers and sellers.
New sellers can easily enter and leave the market.

Demand curve under Perfect Competition:

In this case, buyers want to buy more products cheaper and cheaper, and the higher the price, the less
quantity they buy. Therefore, the demand may change depending on the price.

The demand curve under perfect competition:

In this figure, consumers want to buy more quantities at lower prices

Q&A: When the price goes up, the purchase goes down. Therefore, in this perfect competition, the demand
curve shows a downward trend. Therefore, under perfect competition, the demand curve slopes downward.
Supply under Perfect Competition:
Unlike demand, sellers want to sell more quantities at higher prices and less quantities at lower prices.
The supply curve under perfect competition:

n this situation, at cheaper and lower price, buyers want to buy more quantities and when at a higher price, they are
willing to buy less quantities. Thus, demand can change according to price .

Equilibrium under Perfect Competition:

As mentioned earlier, in full competition, product prices are determined at the intersection of demand and
supply curves.

The equilibrium under perfect competition:

n In Figure 3, we can see that supply exceeds demand. Similarly, if the price is OP2, the demand will be
greater than the supply. Therefore, the point that satisfies the supply and demand curve is the equilibrium
point, the equilibrium price is OP, and the equilibrium quantity is OQ.

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6.0 (b)

Pricing Determination under Oligopoly Market | Economics

Meaning
Oligopoly is a market situation in which some companies sell similar or differentiated products. There are
three, four, or five companies. There are several companies on the market, so the behavior of a particular
company affects the other person.

Price Determination under Oligopoly:

The IT department believes that if oligarchy lowers prices, its competitors will also adjust prices. Otherwise,
you will lose customers. Therefore, if the company lowers the price, the demand will not increase and the
demand curve will appear inelastic. On the contrary, oligarchy politicians raise prices without changing
competitors. In this case, the demand curve looks more flexible. However, in the oligopolistic industry, very
few companies have close replacements for other companies. There is no big difference between products of
the same quality. These products do not cost a lot of advertising. Each seller responds to the behavior of
their competitors. Therefore, other sellers offset each seller's attempt to raise or lower prices in order to
catch up. If Seller A raises the price, Seller A will withdraw from the market as no other seller will follow
and sell at the current market price. In this case, the marginal cost curve intersects the dashed line of the
marginal return curve.
Reasons for Price Stability and rigidity in Oligopoly market
- Oligopolistic sellers prefer price stability because they are experienced and have experienced price
wars.
- Be happy with the current price to avoid unnecessary uncertainty and risk.
- Sticking to the current prices can make it difficult for new companies to enter the industry.
- Non-price competition is better than price competition, so instead of lowering the promotion price,
you can increase your promotional activity at the current price.
- You can do business with or without worrying that other sellers will not be disrupted by the price
war.
- Autocratic sellers want to stabilize their prices, but they can affect the quality and quantity of their
products.

 Collusive Oligopoly
When companies in a certain industry unite as a single company, increase profits and negotiate with each
other in the market, a conspiracy oligarchy is formed. However, price leadership is not perfect in an
oligopolistic market as all companies follow large farm leadership. Price changes will be notified to all
companies.

The low-cost Price

The way of this leadership is that A's price is lower than other companies, and other companies follow him.
Therefore, Company A is the price leader.

The Dominant Firm Price Leadership

This type of price reader is a typical company, with large companies setting prices and small companies
following. Large companies set prices, followed by SMEs.
3. The Barometric Price Leadership:
There is no leader in the price of this leadership, but the wisest manager leader announces the price change.

Non-Price Competition in Oligopoly:

In the oligopoly market, prices are uniform. They tend to compete for product quality, style, credit sales,
installments and packaging.

7.0
a. The supply curve shifts to the left due to the cost of oil production increases and it makes a large sum of
cost to dig oil from the ground.

b. The demand curve shifts to the left due to the other substitution fuels are available in the market.

c. Demand curve shift to the left when there is a war in oil producing country and it can’t supply as before.

Section -B
1.0

Decision making is very important to businesses because it can have a serious business impact. Regional
factors that derive from macroeconomics, national and international issues, and trends are also important
factors to consider when making business decisions. Macroeconomics includes general economic variables
related to national income, number of employees, government intervention, business cycles, consumption
and investment issues. The company is small, but it reacts reliably to the external environment. If the
unemployment rate is high, consumers spend less on purchasing goods. This will reduce the need to invest
in the company. Therefore, companies try to reduce productivity, which also affects the employment sector.

Local trends, or sound decision making, also play an important role. Therefore, investigating your
environment and your business environment can have a significant impact on your business. The outbreak of
Covic 19 is currently having a major impact on China's exports and other business areas. Lower interest
rates can also impact business activity and buyer habits. Buyers want to borrow at low interest rates, so
demand for their products is increasing.

If government spending is high, they will receive higher taxes. At the same time, consumers' incomes are
low.[CITATION Cha16 \l 1033 ]

All companies have relationships and interactions with government policies and macroeconomics. There are
many factors that affect business, including legal, social, technical, government policy, and political factors. [
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2.0

Total demand represents the total demand for final services and goods in the economy. It is measured by
total spend on goods and services, and can be defined as the total amount spent on households, governments,
and businesses when buying services or goods.

It can be thought of as the total spending a business has to spend on buying the goods or services it needs.
Obviously, total demand corresponds to cost and investment.

The main components of total demand are household spending on goods and services, the value of total
capital spending and stock volatility, government spending on public services, exports of goods and
services, and imports of goods and services. These are all AD = C + I + G.

However, this does not include the purchase of existing shares or securities. The intended production does
not represent the current production level, but we plan to expand production capacity in the future.
Investment needs are focused on machinery. The relationship between interest rates and investment demand
is called the investment demand function.
Of these spending, household spending is the largest component of spending, also known as personal
spending. This investment will increase production. If market interest rates are high, investment spending
will decrease. The business environment can change depending on national income, government investment,
business cycles and interest rates. Low interest rates increase the demand for investment as interest rates
reduce investment costs.

3.0

Inflation and interest rates, as well as exchange rates, are one of the key factors in a country's trade. The
higher the currency value, the lower the import value and the higher the export value. Higher exchange rates
can aggravate a country's trade balance. On the other hand, the lower the exchange rate, the better the trade
balance.

3.1 Differentials in inflation

Generally, countries with low inflation have more purchasing power and therefore greater currency value.
Countries with higher inflation are facing declines with higher interest rates.

3.2 Differentials in Interest Rates

Exchange rates, inflation and interest rates are interrelating each other. Central banks dominant over
exchange rates and inflation which have impact on currency values and inflation. Higher interest rate makes
the exchange rate high and attracts capital of foreign investment.

3.3 Public Debt

Of these spending, household spending is the largest component of spending, also known as personal
spending. This investment will increase production. If market interest rates are high, investment spending
will decrease. The business environment can change depending on national income, government investment,
business cycles and interest rates. Low interest rates increase the demand for investment because interest
rates reduce investment costs.

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components-economics/721 \l 1033 ]