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Roll Number:
Thapar Institute of Engineering and Technology
(Deemed to be University)
School of I Iumanities & Social Sciences
End Semester Examination
B. E. (Fourth Year): Semester-VII Course Code: UHU-081
(MEE,ELE and MPE) Course Name: Engineering Economics

December 15, 2017 Friday, 09.00— 12.00 Hrs

Time: 3 Hours, M. Marks: 100 Name of Faculty: SCB,RKS,ANS & SC
Instruction: Attempt all question in proper sequence. Assume missing data (if any).
Q.1 In a year number of cars sold decreased by 20% during the year, prices of cars increased (9)
by 5%, per capita income declined by 2% and price of petrol increased by 10% income
elasticity of demand for cars is estimated to be +1.5 and cross price elasticity of petrol and
cars is estimated to be —0.30.
i. What will be the impact of decline in per capita income on the demand for cars?
ii. What will be the impact of increase in price of petrol on the demand for cars?
iii. If sales decline because of increase in petrol and decrease in income are 3% and
3% respectively, then what will be price electricity of demand for cars?
Q.2 What is inflation? Discuss the main causes of demand pull and cost push inflation? Briefly (8)
discuss necessary measures to control inflation.
Q.3 What are the different methods to measure GDP? Distinguish between real GDP and (8)
nominal GDP.
Q.4 A company has to choose one of the following two mutually exclusive projects. Both the (3+3+4)
projects have been depreciated on a straight line basis. The firm cost of capital is 10% and
tax rate is 35%. After tax cash flows are:
Projects CO Cl C2 C3 C4 C5
X -40000 8400 9600 14000 16000 5000
Y -30000 8400 9000 8000 10,000 4000
Which project should the firm accept if the following criteria are used: (a) Payback period
(b) NPV (c) IRR
Q.5 Aveer Enterprises is a small vendor of ink pen. The total cost function a manufacturer is: (9)
TC = 200 + 5Q — 0.4Q2 + 0.001Q3.

i. What is the fixed cost?

ii. How much units Aveer Enterprise has to produce to minimize average total cost?
iii. What will be average total cost and marginal cost when enterprise produces units
which minimize average total cost?
iv. How much units Aveer Enterprises has to produce to minimize marginal cost and
what will be the marginal and average total cost at that output?
Q.6 Ricoh Team Works has the following production function Q = 8L2 + 12K2 — 2LK (8)
Where,
Q = output
L = input of labor
K = input of capital
Budget constraint of the firm is Rs.1600, the market going wage rate, w = Rs 4 and cost of
Capital, r = Rs.8.
i. Compute the optimum combinations of labour and capital
ii. Compute the Optimum output?

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Q.7 A firm's books of accounts provide the following data regarding sales and cost: (8)
Estimated Sales are 2000 units
Estimated Cost:
Material cost (variable) Rs 6.00 per unit
Labour Cost (variable) Rs 4.00 per unit
Factory Expenses (variable) Rs 4.00 per unit
Legal and Audit Charges (fixed) Rs 8000 per annum
Selling Expenses (fixed) Rs.6000 per annum
Profit is 20% on sales value ,
You are to calculate:
i. Selling Price of the Product.

i Breakeven sales in terms of Rupees and units.

iii.If company plan to sell 30,000 units than what will be the profit or loss?

iv. If company desires for profit of Rs. 15000 than how much units company need to
sell?

Q.8 (a) Monopolistically competitive firms are similar to monopolies in that they are able to (8)
earn economic profits in the long run. Do you agree with this statement? If not, then why
not?
(b) Demand functions of a monopolist in two effectively segmented markets are: (8)
Qa = 1,000 — 50Pa
Qb = 800 — 25Pb
Total Cost function of the monopolist is TC = 500 + 10Q.
i. If the monopolist does not practice price discrimination than what will be sales
maximization price?
ii. If the monopolist does not practice price discrimination than what will be profit
maximization price?
iii. If the monopolist practices price discrimination, than what will be profit
maximization price?
Q. 9 What is oligopoly market? Briefly discuss the different characteristics of oligopoly market. (8)
How it differs from monopoly and monopolistic market?
Q.10 (a) Suppose an economic research centre has published data on GDP and demand for (8)
refrigerators is given below:
Year 2010 2011 2012 2013 2014 2015 2016
GDP ( Billion Rs) 20 22 25 27 30 33 35
Refrigerators 50 60 80 80 90 100 120

i.Estimate Regression equations refrigerators to GDP & GDP to refrigerators.

ii.Forecast the demand for refrigerators in the year 2017 and 2018. The research
centre has projected GDP for 2017 as 40 billion and for 2018 as Rs 45 billion
respectively.
(b) Vijaya Ltd. is operating in a perfectly competitive industry. The Total Cost function of (8)
the firm is given by TC = 25000 + 150Q + 3Qz.
i. If the industry is in long run equilibrium what is the price of the Vijaya Stores
product?
ii. What is the profit maximizing output for the firm?
iii. In long run at what price firm would like to shut down its business?
.END

Note: Evaluated Answer Sheets will be shown on 22nd December, 2017(Friday)

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