MS-9   Dec, 2009

MS-9 : Managerial economics

1. Distinguish between profit maximisation and value maximisation giving examples.

2 (a) Briefly explain the concept of price elasticity of demand giving suitable examples.

(b) What are the determinants of price elasticity ? Explain giving examples.

3. Write short notes on the following giving suitable examples :

a) Breakeven output level

b) Profit contribution analysis

(c) Operating leverage

4. Critically comment on the factors which determine the nature of competition giving suitable examples.

5 (a) Why will managers prefer to operate in a cartel type environment as opposed to

competition ? Explain.

(b) Sustaining collusion is difficult for firms. Explain why, with reference to the prisoners dilemma.

6.You are given to understand that the existing firm in a market drives 80% of its revenues from 20% of its customers. Your boss wants you to develop a strategy to enter this market to compete with the existing firm (incumbent). Your answer should focus on :

a)How you would target existing customers ?

b) How you would seek to attract new customers ?

c) It is possible that the incumbent will also change his strategy following your decision

to enter. How according to you will the incumbent react ?

d) What will be your counter strategy to combat the incumbent ?

7. What do you understand by 'laws of production ?   Explain the production function with one variable input highlighting the law of diminishing marginal returns and the stages of production