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Seat No.: Enrolment
GUJARAT TECHNOLOGICAL UNIVERSITY
MBA SEMESTER 1 EXAMINATION WINTER 2018
Subject Code: 3519202 Date: 26/12/2018
Subject Name: Economics For Manager
Time: 10:30 am to 30 pm Total Marks: 70
Instructions:
1. Attempt all questions.
2. Make suitable assumptions wherever necessary.
3. Figures to the right indicate full marks.
Q. No. Marks
Q.1 Definitions
Equilibrium price and quantity with diagram
Income elasticity
Marginal productivity of labour
Efficient scale of production
Total surplus
Economies of scale
Shutdown and exit
14
Q.2 List and explain the three reasons the aggregate demand curve slopes
downwards.
07
Reliance Jio gave its WIFI router which allows only Jio sim to be
operational. Is it an example of Tying? Justify your answer.
07
OR
Assuming a two-party electoral system, a lot of election expenses can
be reduced if both the parties don't opt for advertising. Is this
possible, explain with the concept of prisoner's dilemma.
07
Q.3 List four components of GDP. Give an example of each. 07
Indian banks offer an interest rate on the money deposited by the
account holders to maintain the value of the money over time.
Considering nominal and real exchange rate and current inflation, is
the value of money maintained? Justify.
07
OR
Q.3 Explain the costs of inflation 07
If only pav bhaji and vadapav are available in the economy, mention
the steps to calculate CPI with base year of 2016. Assume data where
necessary.
07
Q.4 Explain reasons for aggregate supply to slope upwards 07
Mention the various tools of fiscal policy 07
OR
Q.4 If unemployment is to be reduced, then inflation increases in short
run. Explain with graph.
07
RBI is reluctant to reduce the interest rates, despite the meeting with
the Prime minister. Explain this in context to the monetary policy
(Hint: CRR, SLR impact on loan rates and consumer spending)
07
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Q.5
CASE STUDY:
According to analysis, prices are determined quite differently in
monopolized markets from the way they are in competitive markets.
A natural place to test this theory is the market for pharmaceutical
drugs because this market takes on both market structures. When a
firm discovers a new drug, patent laws give the firm a monopoly on
the sale of that drug. However, eventually the firm's patent runs out,
and any company can make and sell the drug. At that time, the market
switches from being monopolist to being competitive.
What should happen to the price of a drug when the patent runs out
During the life of the patent, the monopoly firm maximizes profit by
producing the quantity at which marginal revenue equals marginal
cost and charging a price well above marginal cost. Nevertheless, when
the patent runs out, the profit from making the drug should encourage
new firms to enter the market. As the market becomes more
competitive, the price should fall to equal marginal cost. Experience
is, in fact, consistent with the theory. When the patent on a drug
expires, other companies quickly enter and begin selling so-called
generic products that are chemically identical to the former
monopolist's brand-name product. Moreover, just as the analysis
predicts, the price of the competitively produced generic drug is well
below the price that the monopolist was charging.
The expiration of a patent, however, does not cause the monopolist to
lose all its market power. Some consumers remain loyal to the brandname
drug, perhaps out of fear that the new generic drugs are not
actually the same as the drug they have been using for years. As a
result, the former monopolist can continue to charge a price at least
somewhat above the price charged by its new competitors.
Draw a graph depicting the demand curve, marginal revenue curve,
marginal cost curve, profit maximizing quantity and efficient
quantity.
07
In above situation, Demand: P 1000 10Q, Total revenue: TR
1000Q- 10Q2, Marginal revenue: MR 1000 20Q and Marginal
cost: MC 100 10Q, find price quantity that maximizes social
welfare with its graph.
07
OR
Q.5 If Demand: P 10 Marginal revenue: MR 10 2Q, Total cost:
TC 3 Q +0.5Q2 and Marginal cost: MC 1 Find price,
quantity and monopoly profit in this situation with its graph
07
Explain the theoretical concept of dead weight loss in the above
situation.
07