Instruction: Discussion Questions

Questions Category 1:Answer

any Two of your choicesfrom the
questions provided belon
Each question carries 5 marks.
1. When we study about
managerial economies, the
following terms about poft
revenue maximization and value
maximization are essential for
decision-making. Discuss and
differentiate the terms profit
maximization, sales revenue
maximization and valve maxation
2. Describe briefly the concept of
managerial economics and the
major principles of managerial
3. What does theory of the firm
states? Also, list down the key
characteristics of managerial
economics
Questions Category 2:Answer
any TWO of your choices from
the questions provided
below a question carries 5
marks.
4. Describe the law of Demand
and supply. What is market
demand and market supply
Show graphically how market
equilibrium is established and
what does the market clearing
price mean.
5. The market price adjustments
bring equilibrium. But for some
reason, the price in a wake dow
adjust. So there are different
mechanisms to adjust price in
the market Among many, Price
Ceiling and Price Floor by
government are the basic tools.
Please discuss the two concepts
with practical examp
 6. Discuss about the economic
concept of elasticity of demand
for a commodity. What does the
income elasticity of demand with
negative and positive values
imply? Discuss the factors that
determine the income elasticity
of demand.
7. At a price of $25, the quantity
demanded
of good X is 500 units. Suppose
that the price elasticity of
demand is -1.85. If the price of
the good increases to $26, what
will be the new quantity down of
this good?
Category 3:
Answer any One of your choices
from the questions provided
below question carries 5 marks.
List and discuss about the three
types Decision Making
environments. What do you think
will a consequence of the
decision? If you are manager of
one of cement factory what do
you want correcting the problem?
List and discuss the three
managerial attitudes toward risk.
Explain the concept ofTheory.

Questions Category 4:
Answer any Two of your choices
from the questions provided
below. Each
carries 5 marks.
10. Describe the law of variable
proportions in production. Also,
explain why average variable
cost
considered as shut down point.
Justify your result with example.
11. Describe how the equilibrium
condition for the short run
production conditions is
determined? Show the short run
production function graphically.
12. Kebede is the owner of a
small grocery store in a busy
section of Addis Ababa, Ethiopia.
Kebede's annual revenue is
$200,000 and his total explicit
cost (Kebede pays himself an
annual salary of $30,000) is
$180,000 per year. A
supermarket chain wants to hire
Adam as its general manager for
$60,000 per year.
A. What is the opportunity cost to
Kebede of owning and managing
the grocery store?
B. What is Kebede's accounting
profit? Explain the result
C. What is Kebede's economic
profit?Explain the result
13. Suppose the production
function of a firm is given as Q-
2L^(1/2) K^(1/2) prices of labor
and capital are given as Br 10
and Br 20 respectively, and the
firm has a constant cost of Br
400.
A. Find the combination of labor
and capital that maximizes the
firm's output
B. Calculate the maximum output
Questions Category 5:
Answer anyTWO of your
choicesfrom the questions
provided below. Each question
carries 5 marks.
14. List the main conditions or
characteristics for monopolistic
competition market
structure.Give examples that
resemble these market
structures in Ethiopia. How profit
is
maximized in each of the market
structure?
15. List at least three strategic
barriers for new entrants to join
oligopoly market. Give examples
that resemble these market
structures in Ethiopia. How profit
is maximized in each of the
market structure?
16. Compare and
contrastMonopolymarket
structure withperfect
competitionmarket structures
Give examples that resemble
these market structures in
Ethiopia. How profit is maximized
in each of the market structure?
17. A monopolist's demand
function is P-1624-4Q, and its
total cost function is TC-
22,000+24Q- 4Q2+1/3 Q3,
where Q is output produced and
sold.
A) At what level of output and
sales (Q) and price (P) will total
profits be maximized? B) At what
level of output and sales (Q) and
price (P)-will total revenue be
maximized? C) At what price (P)
should the monopolist shut
down?

Category 6: Workout (5 marks)

Answer any ONE of your choices
from the questions provided to
Assume you are making
business decision on alternative
two new prod
success and failure. Given the
following probability of the risks
and estimated ales
Product:
vene
riske fone
A. Calculate the expected sales
revenue you could get under
vach risk probabilities for the
product types alternatives.
B. Which product do you select
based on the expected sales
revenue?
C. What will be the decision of
risk loving/taking manager?
Why?
Expected sales
Possible conditions. Higher
success
Probability
Outcome Sales
03
1950
Average success
0.4
2700
Failure
0.3
5500
Expected Sales revenue
Higher success
0.3
2900
Average success Failure
0.4
3700
0.3
3550
Expected Sales revenue
2. Suppose that the total cost
function of a firm is given as
TC= 1,000+1002
A. Determine the output level
that minimizes average total cost
(ATC). At this output level, what
is TC? ATC? MC? Verify that at
this output level MC = ATC, and
that ATC intersects MC from
below.
B. Determine the output level
that minimizes average variable
cost (AVC). At this output level,
what is TC? AVC? MC?
C. Diagram your answers to
parts A and B.
3. Suppose a monopolist faces a
market demand curve given by
P=200-5Q and its total costs of
production given by TC-500-
20Q+5Q2
A. Determine the profit
maximizing price and output B.
Calculate the maximum profit
Instruction: Discussion Questions
Questions Category 1:Answer
any Two of your choicesfrom the
questions provided belon
Each question carries 5 marks.
1. When we study about
managerial economies, the
following terms about poft
revenue maximization and value
maximization are essential for
decision-making. Discuss and
differentiate the terms profit
maximization, sales revenue
maximization and valve maxation
2. Describe briefly the concept of
managerial economics and the
major principles of managerial
3. What does theory of the firm
states? Also, list down the key
characteristics of managerial
economics
Questions Category 2:Answer
any TWO of your choices from
the questions provided
below a question carries 5
marks.
4. Describe the law of Demand
and supply. What is market
demand and market supply
Show graphically how market
equilibrium is established and
what does the market clearing
price mean.
5. The market price adjustments
bring equilibrium. But for some
reason, the price in a wake dow
adjust. So there are different
mechanisms to adjust price in
the market Among many, Price
Ceiling and Price Floor by
government are the basic tools.
Please discuss the two concepts
with practical examp
 6. Discuss about the economic
concept of elasticity of demand
for a commodity. What does the
income elasticity of demand with
negative and positive values
imply? Discuss the factors that
determine the income elasticity
of demand.
7. At a price of $25, the quantity
demanded
of good X is 500 units. Suppose
that the price elasticity of
demand is -1.85. If the price of
the good increases to $26, what
will be the new quantity down of
this good?
Category 3:
Answer any One of your choices
from the questions provided
below question carries 5 marks.
List and discuss about the three
types Decision Making
environments. What do you think
will a consequence of the
decision? If you are manager of
one of cement factory what do
you want correcting the problem?
List and discuss the three
managerial attitudes toward risk.
Explain the concept ofTheory.

Questions Category 4:
Answer any Two of your choices
from the questions provided
below. Each
carries 5 marks.
10. Describe the law of variable
proportions in production. Also,
explain why average variable
cost
considered as shut down point.
Justify your result with example.
11. Describe how the equilibrium
condition for the short run
production conditions is
determined? Show the short run
production function graphically.
12. Kebede is the owner of a
small grocery store in a busy
section of Addis Ababa, Ethiopia.
Kebede's annual revenue is
$200,000 and his total explicit
cost (Kebede pays himself an
annual salary of $30,000) is
$180,000 per year. A
supermarket chain wants to hire
Adam as its general manager for
$60,000 per year.
A. What is the opportunity cost to
Kebede of owning and managing
the grocery store?
B. What is Kebede's accounting
profit? Explain the result
C. What is Kebede's economic
profit?Explain the result
13. Suppose the production
function of a firm is given as Q-
2L^(1/2) K^(1/2) prices of labor
and capital are given as Br 10
and Br 20 respectively, and the
firm has a constant cost of Br
400.
A. Find the combination of labor
and capital that maximizes the
firm's output
B. Calculate the maximum output
Questions Category 5:
Answer anyTWO of your
choicesfrom the questions
provided below. Each question
carries 5 marks.
14. List the main conditions or
characteristics for monopolistic
competition market
structure.Give examples that
resemble these market
structures in Ethiopia. How profit
is
maximized in each of the market
structure?
15. List at least three strategic
barriers for new entrants to join
oligopoly market. Give examples
that resemble these market
structures in Ethiopia. How profit
is maximized in each of the
market structure?
16. Compare and
contrastMonopolymarket
structure withperfect
competitionmarket structures
Give examples that resemble
these market structures in
Ethiopia. How profit is maximized
in each of the market structure?
17. A monopolist's demand
function is P-1624-4Q, and its
total cost function is TC-
22,000+24Q- 4Q2+1/3 Q3,
where Q is output produced and
sold.
A) At what level of output and
sales (Q) and price (P) will total
profits be maximized? B) At what
level of output and sales (Q) and
price (P)-will total revenue be
maximized? C) At what price (P)
should the monopolist shut
down?

Category 6: Workout (5 marks)

Answer any ONE of your choices
from the questions provided to
Assume you are making
business decision on alternative
two new prod
success and failure. Given the
following probability of the risks
and estimated ales
Product:
vene
riske fone
A. Calculate the expected sales
revenue you could get under
vach risk probabilities for the
product types alternatives.
B. Which product do you select
based on the expected sales
revenue?
C. What will be the decision of
risk loving/taking manager?
Why?
Expected sales
Possible conditions. Higher
success
Probability
Outcome Sales
03
1950
Average success
0.4
2700
Failure
0.3
5500
Expected Sales revenue
Higher success
0.3
2900
Average success Failure
0.4
3700
0.3
3550
Expected Sales revenue
2. Suppose that the total cost
function of a firm is given as
TC= 1,000+1002
A. Determine the output level
that minimizes average total cost
(ATC). At this output level, what
is TC? ATC? MC? Verify that at
this output level MC = ATC, and
that ATC intersects MC from
below.
B. Determine the output level
that minimizes average variable
cost (AVC). At this output level,
what is TC? AVC? MC?
C. Diagram your answers to
parts A and B.
3. Suppose a monopolist faces a
market demand curve given by
P=200-5Q and its total costs of
production given by TC-500-
20Q+5Q2
A. Determine the profit
maximizing price and output B.
Calculate the maximum profit