Infolink College

Assignmentfor Managerial Economics Course

Instructor: Abate Yesigat (PhD)

Instruction: To be attempted by each of the student individually and coping is strictly forbidden

Last submission date: October 31/2020

1. Explain how the price elasticity for a product is likely to change during the product life-
cycle.

2. By consider short-run cost of production

a) Show graphically the graphical relationship between short-run AVC, ATC, and MC curves.
b) Why ATC reaches its minimum point after AVC reaches its minimum point?
3. A firm operating in a perfectly competitive market faces the following Total cost function,

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TC= Q3 −9 Q2 +80 Q+12
3 . From this:

a) If the market price of a commodity which is produced by the firm is Birr 40, how much should
the firm produce & sale to be at equilibrium.
b) Calculate the output level at which AVC reaches its minimum point.
c) What you advise the firm at the existing market price? Why?
4. Suppose you own a farm that produces two types of wheat, type X and type Y, The production
function of a firm is given by Q=4L ½ K ½. Suppose the cost of labor is birr 40 per unit and
the cost of using capital is Birr 10 per unit. Determine the amount of labor and capital that
should be used in order to minimize the cost to product 40 units of output.
5. Assume there is a tendency of moving from competitive to monopoly market structure. If the demand
and total functions are Q=100-2P and TC=14Q+2Q2, respectively

a. Determine Price ,output of competitive and price and output of monopolistic competitive
b. Show the equilibrium Q and P you obtained in (a) above graphically.
c. Calculate the CS (consumer surplus) and PS (producer surplus) under perfect competitive
and monopoly market structure.
6. Explain why it is important for managers to know the principles of price discrimination.
7. What is the main macroeconomic impact of COVID- 19 in the Ethiopian Economy?
8. What is demonetization? What are its objectives? We know that our countrydemonetized its
currency notes recently and gave three months window to people to exchange old currency notes
from the banks, sohow will it impact the economy?