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SYLLABUS UNIT 1 Introduction: Circular flow of economic activity, Nature of firm, Concept of economic profit, Economics and decision making, Functional relationships and Economic Models; Total Average and Marginal functions; Money, Bank and Exchange. UNIT 2 Demand Analysis: Meaning of demand; Type of demand; Determinants of demand; Demand elasticities; Factors influencing demand UNIT 3 Production Function: Input-output relationship; Least cost combination of inputs; Factor productivities and Return to scale; Managerial uses of production function. UNIT 4 Cost Analysis: Economic concept of cost; Production and Cost; Cost functions. Market structure: Perfect Competition; Monopoly; Profit maximization price and output in short run and long run. UNIT 5 Pricing: Definitions; Determinants of price; Pricing under different market structures SUGGESTED READING: 1. Mote, VL, and Paul Samuel 2. Vasudevan, and Ghosh 3. Peterson, HC, and Lewis, WC 4. Dwivedi, DN

Managerial Economics Concepts and Cases Managerial Economics Managerial Economics Managerial Economics


000 Taxes 5. 11. Justify the statement "Bank is the nerve center of modern world..500 per month.000 Supplies 5.000 of his own money that has been in a bank account earning 7 percent in interest per year. The production department has proposed to use these by putting each one together with $6 worth of labor and other materials to produce a wristwatch that would be sold for $10. She has material for which she paid $5 per yard several years ago.000. 10.000 unique electronic chip originally purchased at $2. What do you understand by exchange of two commodities? What are the necessary conditions for exchange? Explain Barter exchange. their market value is now $ 5 each.000 Prepare two income statements. one using the traditional accounting approach and one using the opportunity cost approach to determine profit. 2. Discuss the problems associated with "Barter Exchange". She estimates that each dress would require four yard of materials and four hours of her time.Question Bank UNIT-I-INTRODUCTION 1. Should that proposal be implemented? Explain from the viewpoints of economic profit and opportunity costs. 8. 9.000 per year to start his own business. Define Money and further explain its types and functions. How might accounting practices be changed to make financial statements and reports more useful for managerial decision-making? Why is it important to state a managerial objective? Could the assumption that managers’ objective is profit maximization be useful even if their real objective is maximizing market share or their salaries? What might be the objective or objectives of each of the following nonprofit institutions? i) The engineering college at a major state university ii) A police department in a city iii) The emergency room of a hospital iv) A museum A recent engineering graduate turns down a job offer of $30.000 Employees’ salaries 40. could Sharon earn an economic profit by making and selling the dresses? Tempo Electronics. 4. The material has increased in value during that time and could be sold back to the local fabric shop for $15 per yard. Describe the difference between the accounting and the economic concept of profit. 7. If the dress could be sold for $90 a piece. Mention the Gold Standard and explain its advantages and disadvantages. He also plans to use a building he owns that has been rented to another business for $1. 6. Sharon Smith is a full-time homemaker and also is an excellent seamstress. He will invest $50. while expenses were: Advertising $ 5. Inc. . has an inventory of 5.50 each. 5. Define bank. which she values at $10 per hour. Explain how firms and individuals participate and interact in the product market and in the factor market. Explain in details about: (i) Retail Banks and Retail banking products (ii) Investment Banks and Business banking products 2 3. Revenue during the first year was $107. Sharon is considering the use of that material to make dresses that she would sell to her friends and neighbors.000 Rent 10.

30. 19. how many units would be supplied and how many would be demanded? d) If the demand increases to Q’D = 200 – 5P Determine the new equilibrium price and quantity. The projected income statement for the year as prepared by an accountant is as below Sales $90.12. Why do economists and managers use such models as part of the decision-making process? Explain the relationship among the total. 17. There are no other employees. Given the following demand equation Q = 20 – 0. 18.000 Less: Advertising 10.000 Less: Cost of Goods Sold 40. defined as implicit costs. and efficiency. Explain the concept of an economic model.000 Depreciation 10.2P & Qs = 2+ 4P. What are they? If you include them in the above statement will you show profit or loss? Illustrate with your own implicit costs.000 Gross Profit 50. Given the total cost function TC = 150 Q – 3Q2 + 0.000 Property Tax 2. Discuss nature of economic prices. sets a maximum price of $5 per unit. 16.000 Net Accounting Profit is 50. Given the following supply and demand equations QD = 100 – 5P QS = 10 + 5P a) Determine the equilibrium price and quantity.10P Complete the following table: Quantity 1 2 3 4 5 6 Price Total Revenue Average Revenue Marginal Revenue 15.000 Sub total 30.000 Miscellaneous Expenditure 5. Suppose that the demand and supply equations have been estimated and that the demand and supply curves are given by QD = 14 . how many units would be supplied and how many would be demanded? c) If the govt. opportunity costs.000 in a retail store that she would manage. Determine the equilibrium price and quantity. Intuitively explain why any intersection of the average and marginal function will occur at a maximum or a minimum point on the average function. 14.25Q3 3 .000 As an Economist you recognize other costs.000 = 20. 13.000 .000 Utilities 3. b) If the government sets a minimum price of $10 per unit. Consider an independent businessperson who has an MBA degree and is considering investing $100. average and marginal functions in the most generalized way.

21. and marginal costs associated with each quantity indicated.0. Given the total revenue function TR = 50Q . What do you understand by demand function? Explain Linear demand function Non-linear demand function Shift in demand curve 26. average. Smith Corporation is a publisher of novels. Explain clearly the meaning of demand. Which of the following pairs of goods are substitutes and which are complements? Razor and Razor blades Hot dogs and tomato ketchup Television and videocassette recorder Rice and potatoes 27. Differentiate clearly between: i) demand function and demand schedule ii) demand for normal and inferior goods iii) autonomous and derived demand iv) demand for durable and non-durable goods. Explain the law of demand and its importance. the analyst tells the company that the demand for the firm's novels (Qx) is given by the following equation: 4 . After months of hard work.J. Explain the various exceptions to the law of demand. R. 28. Define and distinguish between: a) Arc elasticity and point elasticity b) Price elasticity and cross elasticity c) Income elasticity and price elasticity 24. What are the various types of demands? Explain with the suitable examples the individuals & market demand for a commodity.001Q3 Find the marginal revenue and the marginal cost functions. The Corporation hires an economist to determine the demand for its product. How do the changes in following factories affect the demand for a commodity: a) Price b) Income c) Advertisement d) Population e) Price of the substitute 23. Quantity 1 2 3 4 5 6 Total Cost Average Cost Marginal Cost UNIT-II-DEMAND ANALYSIS 20.Complete the following table by computing the total.2Q2 + 0. What do you mean by determinants of demand. 25.0. 22. Explain Income Elasticity and Cross Elasticity.5 Q2 and the total cost function TC = 2000 + 200Q .

i) What will be the quantity demanded if price is zero? ii) Write an equation for quantity demanded as a function of price. manufactures and sells sailboards. has accumulated an impressive file of tests during his college career. 5 . The book is initially priced at $30: i) Compute the point price elasticity of demand at P= $30.50 – 1. Using this information the board of directors want you to (a) Determine what effect a price increase would have on total revenues. what is the arc price elasticity? 30.50 – 0. (c) Assess the probable impact if competing publishers raise their prices. boards are priced at $500 and the quantity demanded is 10. Max determines that their individual demand equations are as follows: Q1 = 30. iii) Write an equation that expresses price as function of quantity. It is known that quantity demanded decreases by 2 units for each $1 increase in price. 32. What is the market demand equation for Max’s tests.000Px + 5I + 500Pc Where Px is the price charged for the R. what will be the effect on total revenue? What does this imply about price elasticity? 34.000 . The demand equation faced by DuMont Electronics for its personal computers is given by P == 10. Suppose the market demand for playing cards is given by the equation Q = 6. I is income per capita and P c is the price of books from competing publishers. a graduating senior. For a price increase from $2 to $3 per deck.000 – 300P.000 – 1.000. how many sailboards will the company be able to sell each year? (b) How much will total revenue change as a result of the price increase? 35.000. (a) Write the marginal revenue equation.000 per year. quantity demanded is 10 units.000. (b) At what price and quantity will marginal revenue be zero? (c) At what price and quantity will total revenue be maximized? (d) If price is increased from $6.000 and $6 respectively.75P Q3 = 37. But now he needs to sell his test collection to obtain money for his impending marriage. Their demanded equations are Q1 = 16. A market consists of two individuals. $10.4P and Q2 = 20 –2P. What is the market demand equation? At a price of $2.0. and how many more tests can he sell for each 1-dollar decrease in price? If he has a file of 60 tests. respectively.00P Q2 = 22.5. what is the point price elasticity for each person and for the market? 33. Max.25P Where the quantity subscripts denote each of the three friends and price is measured in dollars per test. (b) Evaluate how sales of the novels would change during a period of rising incomes. At a price of $5. 29.00 – 1. Demand for a managerial economics text is given by Q = 20.000 – 4Q.000P where Q is the number of decks of cards demanded each year and P is the price in dollars. Management believes that the price elasticity of demand is – 3. iv) Write an equation for total revenue.Qx = 12. Pc and I are $5.000 to $7. Sailright Inc. Smith novels. Three wealthy friends express interest in buying some of the tests. (a) If the price is increased to $600. what price should he charge to sell his entire collection? 31. Currently. Assume initial values of Px.J.

20 reduction in the price of aluminum? 39. i) Is rice an inferior good.000 – 1. the price is set at $71. 37. or a luxury? Explain. I is income per capita. (a) How much steel will be demanded at the initial prices and income? (b) What is the point income elasticity at the initial values? (c) What is the point cross elasticity between steel and aluminum? Are steel and aluminum substitute or complements? (d) If the objective is to maintain the quantity of steel demanded as computed in part (a). Economics majors in the club estimate that total revenue from sales of books is given by the equation TR = 120Q – 0. At a price of $0. a necessity.500. 36. the demand for rice is 50 million tons per year.4 and the income elasticity is 0. ii) At what price is demand unitary elastic? 41.1I + 100Pa Where Qs is steel demand in thousands of tons per year. 42. what reduction in steel prices will be necessary to compensate for a $0. and the price of mouthwash is $2 per bottle. i) At what output is demand unitary elastic? ii) Over what range of output is demand is elastic? iii) At the current price. which expose the private lives of many of the professors on campus. approximately what will be the quantity demanded rice? 38.000. For what values of I and P is the good a necessity? Explain. i) Write an equation for the point price elasticity. iii) Compute the arc price elasticity for a price decrease from $30 to $20. 40. income per capita is $20. Management estimates that the demand for the company’s steel is given by the equation: Qs = 5.If the objective is to increase total revenue. To maximize total revenue. For what values of I and P demand is unitary elastic? Explain. Ps is the price of steel in dollars per pound. 8 units are demanded each period. ii) If per capita income increases to $20. and Pa is the price of aluminum in dollars per pound. Initially. should the price be increased or decreased? Explain.000.40 per pound and a per capita income of $20. should the price be increased or decreased? Explain. An individual has an income of $9. the price of steel is $1 per pound. iv) Compute the arc price elasticity for a price decrease from $20 to $15. The price elasticity for rice is estimated to be –0. where I is income and P is price. and the price of aluminum is $0. The McNight Company is a major producer of steel. ii) Write an equation for the point income elasticity. The demand equation for a product is given by Q = (20I) / (P). The demand equation for a product is given by P = 30 – 0.000Ps + 0. the price of deodorant is $3 per bottle. ii) What is the slope of the budget constraint? 6 ii) . If the objective is to increase total revenue.80 per pound. should the price be increased or decreased? Explain. where the equation for the budget constraint.1Q2 i) Write an equation for the point elasticity as a function of quantity. A consultant estimates the price-quantity relationship for New World Pizza to be P = 50 – 5Q. The Inquiry Club at Jefferson University has compiled a book.8. Consider a world in which there are only two goods.1Q3 i) Over what output range is demanded elastic? ii) Initially. i) Expressing deodorant as the dependent variable.60.000.

50. while the annual salary of a bookkeeper is $18. 53. iii) Where would the utility-maximizing point have been if the indifference curves had a constant slope of –6? UNIT-III. explain why.6 L0. where Q1 and Q2 represent quantities of two goods. write the new equation for the budget constraint.000. The revenue department of a state government employs certified public accountants (CPAs) to audit corporate tax returns and bookkeepers to audit individual returns. What is meant by optimum combination of inputs? What are the technical conditions of optimal combinations of inputs? 47. What are isoquant curves? What are the properties of isoquants? 49. 7 . it takes six to nine months to increase the capital stock. and the wage rate (w) is $2 per unit. For each of the following production functions.200 per year. In contrast. CPAs are paid $31. the firm is using 100 units of capital and 121 units of labor. 45. 43. i) Graph the budget constraint (with Q1 on the vertical axis).e. Using map of isoquants and isocosts show the role of relative input prices and relative productivities in the determination of least cost combination. Distinguish between laws of returns and laws of returns to scale. Assume that the budget constraint is given by the equation Q1 = 1. is the firm operating efficiently in the short run? If not. 5 Currently. 46. If the price of labor is $10 per unit and the price of output is $2 per unit. i) Q = 2k + 3L + KL ii) Q = 20 K0. or increasing. If the price of output (P) is $6 per unit. How will you define economics of scale? What are the sources of internal and external economics? 51. Suppose that a firm has the production function Q = 2K1/2 L1/2 Assume that the capital stock is fixed at 9 units (i. The marginal product of labor function for Central Milling Inc. ii) Draw in a set of indifference curves and label the utility-maximizing point. What do you understand by the law of diminishing return? What are its various applications? 48. What labor-input rate is optimal if the wage rate increased to $3 per unit? 52. the bookkeepers only achieve additional tax collection of $41. Where a+ b = 1 v) Q = K/L 54. Given the current staff of CPAs and bookkeepers. constant. K = 9).PRODUCTION FUNCTIONS 44.200. determine the optimal or profit-maximizing rate of labor to be hired.5 iii) Q = 100 + 3K + 2L iv) Q = 5Ka Lb. indifference curves are convex to the origin. Given the very specialized nature of the capital equipment. but the rate of labor input can be varied daily. a study made by the department’s economist shows that devoting one-year of a CPAs time to auditing corporate returns results in an average additional tax collection of $52.000 – 5Q2. determine whether returns to scale are decreasing. Normally. but assume in this case that they are linear with a constant slope of –2.iii) If the price of mouthwash increases to $4. is given by the equation MPL = 10 (K/L) 0.600 per year of a bookkeeper’s time. Define production function and describe the underlying assumptions. and determine the optimal rate of labor input.

i) What are the marginal product of capital and the marginal product of labor based on the input rates specified? ii) If the price of capital was $20 per unit.5 with marginal product functions MPK = 10 (L/K) 0. a small producer of automobile tires.and 200-units of output. determine the path for the firm. labor and land. Given the production function Q = 30 K0. If the firm maintains efficient production. what input rate of capital will be used? 61. determine the efficient input combination for producing an output rate of 200. and decreasing. constant. 56. iii) If the price of labor falls from $10 per unit to $8 per unit determine the new $500 isocost line and plot it on the same diagram used in part (b).. has the following production function: Q = 100 K0. For the production function Q = 20 K0. ii) If the present mix of CPAs and bookkeepers is not optimal. the firm operated efficiently and used input rates of 100 and 25 capital and labor. labor. should the department hire more CPAs and fewer bookkeepers or vice-versa? 55. determine the expansion path. Given the production function Q = A Kα Lβ Nγ where Q is the rate of output and K. 25. is Q = 20K 0..5 and input prices r = 20 and w = 30.and 200-unit isoquants. A production process uses only one input. and is described by the following production function: Q = 25 L2 – (L3 / 3) (Note: This function is applicable only for labor input rates between 0 and 75. i) Use this information to determine the isocost equations corresponding to a total cost of $200 and $500. is the present mix CPAs and bookkeepers optimal? Explain. 58. ii) Plot these two isocost lines on a graph. The firm currently is producing 200 units of output per period using input rates of L = 4 and K = 25. respectively. Plot these points on a graph and use them to sketch the 100. Is this an efficient input combination? Why or why not? If not. what was the wage rate? iii) For the next production period.5 L0.i) If the department’s objective is to maximize tax revenue collected.5 L 0.5 determine four combinations of capital and labor that will produce 100. and negative? 60. Suppose the price of labor is 10 and the price of capital is 2.5 During the last production period.) Over what output ranges are marginal returns increasing.5 and MPL = 10(K/L) 0. the price per unit of capital is expected to increase to $25 while the wage rate and the labor input will remain unchanged under the terms of the labor contract with the United Rubber Worker Local No. Inc. Squaretire. That is. respectively.5 L0. 59. 8 . The production function for Superlite Sailboats. and N represent inputs of capital.5 If the price of capital is $5 per unit and the price of labor is $4 per unit. explain what reallocation should be made. determine: i) The specific conditions under which returns to scale would be increasing. Inc. L. ii) The equation for the marginal product function for each input.5. decreasing (but still positive). 57.7 L0.

Use the following data to write equation for total cost. Why is concrete sold in local markets. How is the dead weight loss from monopoly affected by the slope of the demand curve? 71.01Q2 To maximize total profit. 70. average variable cost. how many pizzas should be produced each month? In the short run. Based on a consulting economist’s report.COST ANALYSIS AND MARKET STRUCTURE 62.56 66. Explain the relationship between the average product and average cost functions and between the marginal product and marginal cost functions. The owner of the Fredrico’s estimates that monthly total costs. Basically. while cement powder is sold in a national market 68. because of large number of pizza sellers. total variable cost. perfectly competitive firms and monopolists use the same rule to determine the profit-maximizing output.00 1. You have been directed to do the following: i) Determine the level of fixed cost (if any) and equation for average total cost. Inc. Production Period 1 2 3 4 5 Rate of Output (Q) 10 0 4 2 7 Total Cost (TC) 1. iii) If fixed costs increase to $500.R. The firm’s total costs are given by the equation TVC = 150Q – 20Q2 + Q3 Below what price should the firm shut down operations? 73. Fredrico’s opens in New York City. Explain why short run average cost can never be less than long run average cost.04Q2 + 0. total fixed cost. average fixed cost and marginal cost to determine equations for all of the relevant total and per unit cost functions. 63. average total cost. and sunk cost? 64. A new pizza place. 69. average variable cost. and average fixed cost. Suppose that the total cost equation (TC) for a monopolist is given by TC = 500 + 20Q2 Let the demand equation be given by P = 400 – 20Q What are the profit-maximizing price and quantity? 9 .32 1. what output rate results in minimum average variable cost? 67.UNIT-IV. A bicycle manufacturer faces a horizontal demand curve. determines that knowing only this equation is inadequate for decision-making. True or False? Explain. president of the company. What is meant by each of the following terms: marginal cost. 65. Does product differentiation always refer to real differences between products? Use an example to explain your answer.16 1. how much economic profit the business will earn each month? 72. this price will not be affected by the new entrant in the market. ii) Determine the rate of output that results in minimum average variable cost. incremental cost.80 1. Swensen. The average price of a medium pizza in New York is $10 and.001Q3 P. including a normal profit will be TC = 1000 + 2Q + 0. the total cost function for Advance Electronics. is TC = 200 + 5Q –0.

Write a short note on: (i) Ramsey Pricing (ii) Pricing of Multiple products (iii) Price Discrimination 76. 78. The demand for pelts is given by Pp = 2.PRICING 75. The business is considering hiring a photographer who would take pictures of customers after they had their 10 . The two goods are assumed to be jointly produced in fixed proportions. An automobile manufacturer estimates that total variable costs will be $500 million and total fixed costs will be $1 billion in the next year. i) What are the profit-maximizing prices and quantities of pelts and rabbit’s feet? ii) If the demand for rabbit’s feet is PF = 1. If prices are set on a cost-plus basis. Does this mean that competitive firms can produce at a lower average cost than the monopolist? Explain. A firm sells in two markets and has constant marginal costs of production equal to $2 per unit.00 per haircut. what prices should be charged for each automobile? 79. Why should goods produced in fixed proportions be regarded as a product package in developing production and pricing strategies? 81.001QF.001Qp and the demand for rabbit’s feet is given by PF = 1.000 per month. The common costs of operating the store are $12.000 hair cuts each month at average price of $5. The demand and marginal revenue equations for two markets are as follows: MARKET I MARKET II P1 = 14 – 2Q1 PII = 10 – QII MRI = 14 – 4QI MRII = 10 – 2QII Using third-degree price discrimination. A small firm traps rabbits for their fur and feet. the long run profit maximizing output for a monopolist will not be at point of minimum average cost. Mike’s shear Shop provides 4.74. The target rate of return is 10 percent.001QF The marginal cost of trapping and processing each rabbit is $0.000 vehicle per year capacity. In setting price it is assumed that sales will be 80 percent of the firm’s 125. what are the profitmaximizing prices and rates of output? 82. The marginal cost equation for the beef-hide product package is given by MC = 30 + 5Q The demand and marginal revenue equations for the two products are: BEEF P = 60 – 1Q MR = 60 – 2Q HIDES P = 80 – 4Q MR = 80 – 4Q What prices should be charged for beef and hides? How many units of the product package should be produced? 77. Each rabbit yield one pelt and two feet (only the hind feet are used to make good-luck charms). However.00 – 0. which is to be earned on an investment of $2 billion. In the long run.00 – 0.60 – 0.000 units. UNIT-V. Propose a pricing strategy that would allow the firm to maximize its profit on the two goods. firms in a perfectly market produce at the minimum point on their average cost curves. 80. Macmillan Manufacturing produces razor blades and razors. or 100.60. A rancher sells hides and beef. what are the profit maximizing prices and quantities in each marker? Show that greater profits results from price discrimination than would be obtained if a uniform price were used. Explain.

Write-Right. The marginal cost of turntables is $20 and the marginal cost of speakers is $10. If there is no external market for the paper.000. The marginal cost of each cassette is $2.001Q where Q is the quantity of tablets. The firm has fixed costs of $100.000 QB0.5 and TRN = 2. i) If the decision is to be based on incremental revenue and incremental cost. The demand for tables is given by PT = 1. what will be the profit-maximizing price and quantity in each market? How much economic profit will the firm earn? ii) If the firm charges the same price in both markets. should the service be offered? Explain. i) Are the two goods substitutes or complements? ii) What is the profit-maximizing rate of output for each good? iii) What would be the profit-maximizing rate of output if there were no demand interdependence between the two goods? 89. What is the profit-maximizing price? 87.000 units per year and at that rate of output.5 11 . Smith Distributing sells videocassettes in two separable markets.000 customers would purchase the service each month.10 to make the paper into a writing tablet. a vertically integrated firm produces both paper and writing tablets. what transfer price should top management set for the paper? 84. total variable costs will be $50.000 QN0. The cost of a bicycle to the store is $80.000. The price of the photographs would be $2. Management expects to sell 2. The total revenue equation for sales the two products is given by TR = QT – 6QT2 + 100 QS – 4QS2 + QTQS where QT and QS are quantities of turntables and speakers. Monthly total revenue are given by TRB = 1. what will be the profit-maximizing rate of output? How much economic profit will the firm earn? ii) What will be the profit-maximizing rate of output if the firm does not discriminate and sets one price for all customers? How much economic profit will the firm earn in this case? 85. A firm has found a way of using first-degree price cut.000 in monthly common costs is to be apportioned based on the revenues from haircuts and photo sold each month. where Q is the number of photographs sold.000 per year. demand is given by Q1 = 20 . Culture Extravaganza produce ballets in Boston and New York. Demand for its product is given by P = 20 – 2Q Marginal cost is constant and equal to $6.5P1 The demand equation for the second market is Q2 = 20 – 2P2 i) If the firm uses third-degree price discrimination. respectively. The firm uses cost-plus pricing to earn target rate of return on an investment of $200. what is the target rate of return? 88. The manager estimates that the price elasticity of demand is –3.000 + 1Q per month. For the first market. what will be the profit-maximizing price and total quantity? How much economic profit will the firm earn? 86. If the price is set at $100. The manager of a sporting goods store uses cost-plus pricing to determine the profitmaximizing price of bicycles.20 + 0. The marginal cost of producing the paper necessary for tablet is MCP = 0.00 – 0.001Q It costs the firm $0.50 and it estimated that 2. makes a product used to trim lawns. should the new service be offered? Why or not? 83. Grass-cutter Inc. i) With first-degree discrimination. ii) If the decision is to be made on the basis of fully distributed costs and if the $12. The House of Music sells low cost turntables and speakers. The total extra cost of the photographic service is 1.

90.where QB is the monthly number of Boston patrons and QN is the monthly number of New York ballet attendees. what will be the profit-maximizing prices and rates of output in each city? ii) Will the firm earn more profit using price discrimination than if a uniform price is set? Explain. Explain the following in relation to the theory of price determination(a) Price determination under perfect competition (b) Price determination under monopoly. Does the consideration of period affect the price policy? 12 . Salaries of the performers are based on attendance and the firm estimates that the marginal cost is $10 per attendee in each city. What do you understand by pricing? What are the objectives of firms and various market models for analyzing pricing theory? 91. i) If Culture Extravaganza attempts to practice third-degree price discrimination. Distinguish between market period short run and long run. 92.