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SEMESTER SPRING 2012 Managerial Economics (ECO404) Assignment No. 01 Due Date: 26th April, 2012 Marks: 15

SEMESTER SPRING 2012
Managerial Economics (ECO404)
Assignment No. 01
Due Date: 26th April, 2012 Marks: 15

SEMESTER SPRING 2012
Managerial Economics (ECO404)
Assignment No. 01
Due Date: 26th April, 2012 Marks: 15
The Case:
Gujranwala is well known for the production and distribution of ceramics products. Ilyas
Sanitary firm is one of the major manufacturers of sanitary goods in Gujranwala. The firm
was started in 1978. This firm not only manufactures sanitary goods for Pakistan but also
exports its products to other countries. Suppose, this firm has 500 employees and it is paying
total amount of Rs. 7.5 million to these employees. The average salary of the employees is
Rs.15, 000. The firm is paying Rs. 2 million as interest payments to various banks. The
entrepreneur has a salary offer of Rs. 1.5 million annual from another company but he
refuses it for the sake of his own business. Further, firm is paying a total of Rs. 3 million as
operating lease of various plants. The firm is in the monopolistic competition where it has to
compete in the market with several other firms. The price elasticity of demand for the goods
of this company is -2.5. The firm is earning higher profit as its marginal revenue is equal to
the marginal cost. The marginal revenue and marginal cost of the firm is Rs. 240. The firm
wants to earn more profit by providing its products at lower rate.
Question # 01
From the information given above, calculate optimal level of price that firm should set to
obtain higher level of profit.
(Marks: 7)
Question # 02
The total cost function of the Illyas Sanitary firm is given as follows:
TC = 10+ 5Q+ 15Q2
From the above given equation, calculate:
A. Variable cost of the firm
B. Average total cost of the firm
C. Average variable cost of the firm
(Marks: A=2, B=3, C = 3)
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recommended text book.
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Replies to This Discussion

btw thanx alot malik shab .. its a great help nhi tu isa pass karna na-mumkin tha : )

ye question 1 ka answer he?

ye question 1 he to question 2 ka kahan he solution?

tahira wo previous page par ha check that

ap akatha sab ik hi jaga pe likh do na plzz...sab ghuma ghuma k likha hua he.

yaar..:( solution bata do .. i hate economics..:(

Assignment No 1: ECO04

(A)
TC = 10 + 5Q + 15Q2
TC = Fix Cost + Variable Cost
VC = 5Q + 15Q2 …………………… (2)
VC = 5(7.83) + 15(7.83) 2
VC = 39.15 + 919.63
VC = 958.78
Variable cost is 958.78
(B) Average Total Cost
ATC = TC / Q
ATC = 10 / 7.83 + 5(7.83) / 7.83 + 15(7.83)2 / 7.83
ATC = 1.28 + 5 + 117.45
ATC = 123.73

© Average Variable Cost (AVC)

AVC = VC / Q
AVC = 958.78 / 7.83
AVC = 122.45

ECO404+Assignment#1+Complete+Solutoin+Spring+2012

See the attached file

Attachments:

MR = MC = 240

Where as MR = MC = P / {1 + (1/E)}

P = MC / {1 + (1/E)}

P = 240 / {1+ (1/-2.5)}

P = 240 / {1+ (-0.4)}

P = 240/ 0.6

P = 400

The optimum level of price that should be set to get the maximum level of higher profit is

400.

TC   = 10 + 5Q + 15Q2

MC = dTC / dQ

MC = 5 + 30Q

240 = 5 + 30Q

Q = 7.83

Putting the value of Q in equation (2)

(A)

TC = 10 + 5Q + 15Q2

TC = Fix Cost + Variable Cost

VC = 5Q + 15Q2                 …………………… (2)

VC = 5(7.83) + 15(7.83) 2

VC = 958.78

Variable cost is 958.78

(B) Average Total Cost

ATC = TC / Q

ATC = 10 / 7.83 + 5(7.83) / 7.83 + 15(7.83)2 / 7.83

ATC = 1.28 + 5 + 117.45

ATC = 123.73

(C) Average Variable Cost (AVC)

AVC = VC / Q

AVC = 958.78 / 7.83

AVC = 122.45

solution is here

solution is here

Student ID: mc110202009

MBA

Assignment No.1

Managerial Economics

Course Code: Eco404

________________________________________________________________________

MR = MC = 240

Where as MR = MC = P / {1 + (1/E)}

P = MC / {1 + (1/E)}

P = 240 / {1+ (1/-2.5)}

P = 240 / {1+ (-0.4)}

P = 240/ 0.6

P = 400

The optimum level of price that should be set to get the maximum level of higher profit is

400.

TC   = 10 + 5Q + 15Q2

MC = dTC / dQ

MC = 5 + 30Q

240 = 5 + 30Q

Q = 7.83

Putting the value of Q in equation (2)

(A)

TC = 10 + 5Q + 15Q2

TC = Fix Cost + Variable Cost

VC = 5Q + 15Q2                 …………………… (2)

VC = 5(7.83) + 15(7.83) 2

VC = 958.78

Variable cost is 958.78

(B) Average Total Cost

ATC = TC / Q

ATC = 10 / 7.83 + 5(7.83) / 7.83 + 15(7.83)2 / 7.83

ATC = 1.28 + 5 + 117.45

ATC = 123.73

(C) Average Variable Cost (AVC)

AVC = VC / Q

AVC = 958.78 / 7.83

AVC = 122.45

Attachments: