MANAGERIAL ECONOMICS

MBAZC416

MANAGERIAL ECONOMICS Assignment

By

Rayaprolu Sai Bhaskar Pranai

(2023MB21197)
1. Answer: a. He ignored the hockey-stick nature of marginal costs and how Average Total Cost
declines first and then rises. His first quotation was based on the lower Average Total Costs
during the phase of operation where MC was below ATC.

2. Answer: d. a & c

3. Answer: c. Mr. Singh's business operates in a monopolistic competition that affects the market
prices and costs so that no firm would make super-normal profits in the long run.

4. Answer: b. The Marginal Rate of Technical Substitution (MRTS) decreases as we start substituting
more labor with capital.

5. Answer: d. The Chinese locks were priced below the unit variable cost of locks manufactured by
Mr. Singh. The business had reached the shut-down point.

6. Answer: a. Both Assertion 1 and Assertion 2 are correct and sufficiently explain the fruit seller's
point.

7. Answer: a. The seller had erred in understanding economies of scale.

8. Answer: c. Both a & b are correct.

9. Answer: a. The shop rent pushed up the fixed costs of his juice venture and significantly
increased the break-even point.

10. Answer: c. Both a & b

11. Answer: a. The Long Run Average Cost curve illustrates a scale at which a firm operates at the
lowest cost in any business. The firms need to work at this point to remain cost–competitive.

12. Answer: a. The total profit curve stays above the horizontal axis between two break-even points.
At the first point, the revenue catches up with costs; at the second, the costs rise to meet the
revenues.

13. Answer: d. A and B are substitute products, and the increase in the price of one would increase
the demand for the other.

14. Answer: b. The price of diesel will increase if the supply of crude is constant. The increase in
demand would mean less crude would be available for diesel production. The reduction in supply
would push up the prices.

15. Answer: a. The law of equi-marginality leads to the equation MUx /Px = MUy / Py, where MU and
P represent the marginal utilities and prices associated with two goods, X and Y.