GRAND BUSINESS COLLEGE

Department Of Management
Degree Of Master Of Business Administration

Instruction: Attempt all the following questions in your group and you are expected to submit on final exam
date(30 % marks)

Worksheet for managerial economics

1. Define managerial economics. Discuss how economics science is applicable in managerial

decision making of a business firm. What are the economic principles of managers?
Managerial economics is the study of how to direct scarce resources in the way that most
efficiently achieves a managerial goal. It is the use of economic analysis to make business
decisions involving the best use (allocation) of an organization’s scarce resources, i.e how to
produce ,what to produce and for whom to produce.(the economic principle of mangers are
(1.role of mangers to make decisions i.e mangers must decide how the resource are
deployed.2.decisions always among alternatives.3.decision alternatives have always cost and
benefits.4.anticipeted objective of managements is to increase the firms value.5.firms value is
measured by its expected profits(time value of money and discount rates)6.the firm must
minimize cost for each level of production.7.the firms growth depends on rational investment
decisions(capital budgeting decision).8.successful firms deal rationally and ethically with laws
and regulations.
2. Why firms are viewed as a confluence of contractual relationships? What does it imply?
3. Explain the Porter’s forces framework of categories of forces that impacts profitability of the
firm
4. What are the determinants of demand for a given good or service in a market? What is the
difference between change in demand and change in quantity demanded?
5. Discuss with graph the concepts of consumer surplus and producer surplus and their application
in managerial decision making
6. What is Market Equilibrium? Discuss the demand and supply situation in relation to price below
and above market equilibrium in the context of managerial decision making.
7. What are the exceptions to th e law of demand and why they are exceptions? Why relevant to
consider such issues in the context of managerial decision making
8. Why demand Sensitivity Analysis is important in managerial decision making? Discuss the major
types of demand sensitivity analysis for goods and services in the market.
9. Given the demand function as: Q = 200 – 2P; Calculate the price elasticity of demand at P=10
and Q= 150. And interpret the result in the context of marketing managerial decision making.
10. Discuss the price elasticity of demand in relation to Total revenue (TR), Marginal Revenue (MR)
and Average Revenue (AR). What are the implications of these from managerial decision making
point of view?
11. Why is demand forecasting important in managerial decision making? List the objectives of
demand forecasting. Discuss the techniques of demand forecasting.
12. Explain by supporting with graph the relationship among Average total cost, fixed average cost,
average variable cost, and Marginal cost in the cost structure of a business firm. Why cost
analysis is relevant for managerial decision making
13. Discuss by using graph the relationship among Total product, Average product, and Marginal
Product in production of goods and services. Why such analysis is relevant for managerial
decision making. Discuss the laws of production returns both in the short run and long run.
14. What are the different forms of market structures? Why market structure analysis is relevant for
managerial decision making process?
15. What is the concept of pricing, pricing objectives and steps in pricing goods and services? What
factors should be Considered when Setting Prices.
16. Explain the concepts of market penetration and market skimming pricing strategies of goods and
services
17. Discuss the implications of macroeconomic issues in business decisions by the help of examples.
18. If MR is Birr 20 and if price elasticity is 30%, find the optimal price that the business firm
charges.