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Send your semester & Specialization name to our mail id :
“ help.mbaassignments@gmail.com ”
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ASSIGNMENT
Course Code : MS-09
Course Title : Managerial Economics
Assignment Code : MS-09/TMA/SEM-I/2015
Coverage : All Blocks
Note : Attempt all the questions and submit this assignment on or before 30th April, 2015 to the
coordinator of your study centre.
Q. 1. “The opportunity cost of anything isthe return that can be had from the nextbest alternative
use.” Explain this statement with reference to gun-versus-butter debate.
Answer:The opportunitycostof a choice isthe value of the bestalternative forgone,inasituation in
which a choice needs to be made between several mutually exclusive alternatives given limited
resources. Assuming the best choice is made, it is the "cost" incurred by not enjoying the benefit
that wouldbe hadby takingthe secondbestchoice available. The New Oxford American Dictionary
defines it as "the loss of potential gain from other alternatives when one alternative is chosen".
Opportunity cost is a key concept in economics,
Q. 2. Describe each of the variables of demand function separately with the help of examples.
Answer:Economists are interested in examining types of relationships. For example an economist
may look at the amount of money a person earns and the amount that person chooses to spend.
This is a consumption relationship or function. As another example an economist may look at the
amountof moneyabusinessfirmhasandthe amountitchoosesto spendonnew equipment.Thisis
an investment relationship or investment function
Q. 3. Break-even production of a firm is 4,000 units, its total fixed cost is Rs. 40,000 and the
variable cost per unit is Rs. 20.
(a) Find out the price of the product.
(b) What should be the firm’s output to earn profit contribution of Rs. 20,000?
Answer: CVP Analysis uses Variable Costing concepts. We will divide ALL costs into one of two
categories:VariableorFixed.We refer to this as "cost behavior." In CVP Analysis cost behavior will
be discussed on BOTH a total

2. Q. 4. “Price discrimination refers to the situation where a monopoly firm charges different prices
for exactly the same product. Explain giving an example.
Answer: Price discriminationreferstothe situationwherea monopoly firm charges different prices
for exactly the same product. The monopoly firm (a single seller in the market) can discriminate
betweendifferentbuyersbychargingthemdifferentpricesbecause ithasthe powertocontrol price
by changing its output. The buyers of its product have no choice but to buy from it as the product
has no close substitutes.
Q. 5. “The increase in competitionhas not only increased the market size for telecom, but has also
resulted in substantial tariff declines.” Elaborate this statement with the help of an example.
Answer: The phenomenal growthof the Indiantelecomindustryduringthe past few years has been
backed by a confluence of factors such as progressive regulatory regime, favourable demographic
features and conducive business environment. The size of the telecom industry in terms of
subscriber base has grown by more than 5 times in a span of last five years. The subscriber base
increased from 77.64 mn by end of FY04 to 429.72 mn by end of FY09, at an annual average growth
of 41%. The robust monthlynetadditionstothe subscriberbase are an indicationof the exponential
growth in the telecom sector. Around 14.25 mn net
Q. 6. Write short notes on the following:
(a) The Invisible Hand:In economics, the invisible hand is a metaphor used by Adam Smith to
describe unintended social benefits resulting from individual actions. The phrase is employed by
Smith with respect to income distribution (1759) and production (1776). The exact phrase is used
just three times in Smith's writings, but has come to capture his notion that individuals' efforts to
pursue their own interest may frequently benefit society more than if their actions were directly
intending to benefit society. Smith may have come up with the two meanings of the phrase from
Richard Cantillon who developed both economic applications in his model of the isolated estate.
(b) Envelope Curve: In geometry, an envelope of a family of curves in the plane is a curve that is
tangent to each member of the family at some point. Classically, a point on the envelope can be
thoughtof as the intersectionof two"adjacent"curves,meaningthe limitof intersections of nearby
curves. This idea can be generalized to an envelope of surfaces in space, and so on to higher
dimensions.
(c) EconomiesofScope: Economiesof scope are "efficiencies wrought by variety, not volume" (the
latterconcept is "economies of scale"). For example, many corporate diversification plans assume
that economiesof scope willbe achieved.Itisaneconomictheorystating that the average total cost
of production decreases as a result
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