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Master of Business Administration- MBA Semester 1
MB0042–Managerial Economics-4 Credits
(Book ID: B1625)
Assignment (60 Marks)
Note: Answer all questions (with 300 to 400 words each) must be written
within 6-8 pages. Each Question carries 10 marks 6 X 10=60
Q1. What is production function and its uses? Explain the two types of
production functions.
Answer: Production function and its uses:
Production function relates physical output of a production process to physical
inputs or factors of production. The production function is one of the key concepts of
mainstream neoclassical theories, used to define marginal product and to
distinguish allocate efficiency, the defining focus of economics. The primary purpose
of the production function is to address allocate efficiency in the use of factor inputs
in production and the resulting distribution of income to those factors, while
abstracting away from the technological
Q2. Consumers' interview method is a survey method used for estimating
the demand for new products. This method is very important with regard
to collect the relevant information directly from the consumers with
regard to their future purchase plans. Opinion surveys and direct
interview method are the two important techniques among all. Describe
these two methods in detail.
Answer. Interviews are a far more personal form of research than questionnaires.
In the personal interview, the interviewer works directly with the respondent. Unlike
with mail surveys, the interviewer has the opportunity to probe or ask follow-up
questions. And, interviews are generally easier for the respondent, especially if what
is sought is opinions or impressions. Interviews can be very time consuming and

Q3. A cost-schedule is a statement of variations in costs resulting from
variations in the levels of output and it shows the response of costs to
changes in output. If we represent the relationship between changes in
the level of output and costs of production, we get different types of cost
curves in the short run. Define the kinds of cost concepts like TFC, TVC,
TC, AFC, AVC, AC and MC and its corresponding curves with suitable
diagrams for each.
Answer: Total fixed cost and output:
TFC refers to total money expenses incurred on fixed inputs like plant, machinery,
tools & equipments in the short run. Total fixed cost corresponds to the fixed inputs
in the short run production function. TFC remains the same at all levels of output in
the short run. It is the same when output is nil. It indicates that whatever may be
Q4. Inflation is a global Phenomenon which is associated with high price
causes decline in the value for money. It exists when the amount of money
in the country is in excess of the physical volume of goods and services.
Explain the reasons for this monetary phenomenon.
Answer. Inflation
Inflation has become a global phenomenon in recent years. Development economics
is very much associated with inflation. An in-depth study of inflation is of paramount
importance to a student of managerial economics. The term inflation is used in
many senses and hence it is very difficult to give a generally accepted, universally
Q5. Discuss the practical application of Price elasticity and Income
elasticity of demand.
Answer. Practical application of price elasticity of demand
Few examples on the practical application of price elasticity of demand are as
1. Production planning – It helps a producer to decide about the volume of
production. If the demand for his products is inelastic, specific quantities can be
produced while he has to produce different quantities, if the demand is elastic.
Q6. Define revenue. Explain the types of revenue and the relationship
between TR, AR and MR with an example of a hypothetical revenue
Answer. Revenue is the total amount received by a business or recognized as
earned when the business sells something, usually services and goods. In modern

accountancy, revenue is recorded when it is earned not when the cash is received
from customers. For example when a phone service provider records revenue

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