CHANDIGARH UNIVERSITY

Gharuan, Mohali
Institute/Department:
USB Division: MBA
Subject Name: Managerial Economics
Subject Code: 22BAT-606

Assignment No.: 2
Max. Marks: 12

Date of Allotment: 17th Nov. 2022

Last date of Submission: 25th Nov. 2022

Course Outcomes:
Course Blooms Taxonomy
Description Level
Outcome
Develop ideas of the basic characteristics of the economy, its
1 Understand/Remember
potential on natural resources.
To understand the economic behaviour of individuals, firms and
2 markets. It is mainly to equip the students in a rigorous and Understand
comprehensive understanding with the various aspects of
consumer behaviour
To understand the types of markets and equilibrium of firm.
3 Understand
To assess the National Income and the impact on the economy
4 Assess
Understand classical theory of employment and Keynes objection
5 Remember
to the classical theory, demonstrate the principle of effective
demand and income determination.
Questions:
Targe
UID (Group) Topic of Assignment
t
CO
1. Examine the Venenzeula Crisis keeping in mind Theory of production
and cost. CO 1,
CO 4

Group -A

Odd UIDs

of Ques

1&2
 2. The development of a new product was much lengthier and more
expensive than the company’s management anticipated.
Consequently, the firm’s top accountants and financial managers
argue that the firm should raise the price of the product 10 percent
above its original target to help recoup some of these costs. Does
such a strategy make sense? Explain carefully

Even UIDs Ques 3. Does there exist any relationship between marginal and average
3&4 products? If there is one, what is the basis of this relationship?
Explain with the help of an example.

4. Government intervention In Germany in 2009 there was

considerable debate about the extent to which the government should CO 1,
be intervening in the economy. For example, its citizens were CO 4
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 becoming 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.
Questions
1. What are the possible benefits of a government intervening in an
economy?
2. What are the arguments against government intervention in an
economy?
3. What prompted greater intervention by the German government in
2009?
4. What would determine whether the German continued to intervene on this
scale in the future?
Group –B Even 1. For each of the following examples, draw a representative isoquant.
UIDs Ques 1&2 What can you say about the marginal rate of technical substitution in
each case?

a. A firm can hire only full-time employees to produce its output, or it can
hire some combination of fulltime and part-time employees. For each full-
time worker let go, the firm must hire an increasing number of temporary
employees to maintain the same level of output.
b. A firm finds that it can always trade two units of labor for one unit of
capital and still keep output constant.
c. A firm requires exactly two full-time workers to operate each piece of
machinery in the factory

2. In recent years, Chrysler Corporation initiated three-shift or nearly

continuous (21-hours-per-day) production at a number of its plants.
Explain why Chrysler’s decision might have been prompted by
movements in its wage costs or capital costs, or both. Why would
Chrysler have instituted this production change for its most popular
(and profitable) vehicles, its minivans and Jeep Cherokee? What
risks might such a plan pose?

Odd UIDs Ques 3. Firms in India are losing productivity because of Facebook. Office
3&4 staff are spending too long on the social networking site. According
to The Associated Chambers of Commerce and Industry (Assocham)
employees use Orkut, Facebook, Myspace, and Linkedin for
"romancing" and other purposes. On average, employees spend an
hour a day on sites like Facebook. This reduces productivity by
12.5%. Nearly half of office employees accessed Facebook during
work time. Some 83% saw nothing wrong in surfing at work during
office hours. In September 2009 Portsmouth City Council in
England banned staff from accessing Facebook on its computers
when it was discovered that they spent, on average, 400 hours on the
site every month.

Question 1. What is meant by productivity?

2. Analyze the impact on a fall in productivity on costs.
3. Analyze the possible consequences for businesses in India of banning
access to Facebook and other social networking sites.

4. Explain why the cost structure associated with many kinds of

information goods and services might imply a market supplied by a
small number of large firms. (At the same time, some Internet
businesses such as grocery home deliveries have continually suffered
steep losses regardless of scale. Explain why.) Could lower
transaction costs in e-commerce ever make it easier for small
suppliers to compete? As noted in Chapter 3, network externalities
are often an important aspect of demand for information goods and
services. (The benefits to customers of using software, participating
in electronic markets, or using instant messaging increase with the
number of other users.) How might network externalities affect firm
operating strategies (pricing, output, and advertising) and firm size?