EXAMINATION PAPER

FACULTY : BUSINESS AND ACCOUNTANCY

COURSE : MASTERS OF BUSINESS ADMINISTRATION (MBA)

YEAR/SEMESTER : FIRST YEAR / SEMESTER ONE

MODULE TITLE : BUSINESS ECONOMICS

CODE : ECO 501

DATE : 18- FEB, 2019 MONDAY

TIME ALLOWED : 3 HOURS

START : 1:00 PM FINISH : 4:00 PM

Instruction to candidates
1. This question paper has TWO (2) Sections.

2. Answer 6 questions in Section A, CAQ.

3. Answer 2 questions in Section B, LAQ.

4. No scripts or answer sheets are to be taken out of the Examination Hall.

Do not open this question paper until instructed

(Candidates are required to give their answers in their own words as far as practicable)

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 SECTION A
Comprehensive Answers Questions
Answer any six (6) questions out of eight (8) questions (6*10=60)

1. Elaborate business economics with its applications in managerial decision making.

2. A company has following demand function; P = 10000 – 4Q. Derive the marginal
revenue function of the company and also find what price the company should
charge in order to maximize sales revenue?

3. Explain the Kinked Demand Curve model of oligopoly market.

4. “Presence of negative externalities creates more than socially optimum output in

the economy.”Justify this statement and suggest ways to correct negative
externalities.

5. Briefly explain how different types of pricing are useful in pricing of goods with
some examples.

6. Explain about the necessary steps in demand forecasting. Highlight the purpose of
demand forecasting in business decision making. (5+5)

7. Discuss how is the decision regarding optimal employment of two inputs is made.

8. Explain the laws of returns to scale with illustrations.

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 SECTION B
Long Answer Questions
Attempt any two (2) questions but question no. one (1) is Compulsory (2*20=40)

1. Study the given case carefully and answer the questions asked at the end.

Rishav and Jackie are good friends since their childhood. Though they are good
friends, they have competitive insight in terms of study, profession, career and
leadership. However, their interest of becoming the entrepreneurs encouraged them to
pursue higher studies in management. Consequently, they preferred professional
degree of Master of Business Administration (MBA) and accomplished successfully
with excellent grade in 2008. After few years of experience in the reputed firms in
Australia, they thought of materializing their dream of becoming entrepreneurs in
Nepal. Both of them invested in Coffee House in 2013. Rishav named his brand as
Everest and Jackie named his brand as Kanchanjanga. As a matter of fact, both brands
became popular in Nepalese Market. They also succeeded to establish their business
ventures in Gulf countries targeting Nepali consumers in 2016. Due to tremendous
success, they are encouraged to introduce new brands, Makalu by Rishav and Lantang
by Jackie in 2018. But they are in dilemma in choosing an appropriate method of
forecasting the demand for new brands. They were operating their business with profit
maximization model. In this context, they decided to follow same model again for
new ventures in 2018. However, Rishav focused on accounting profit, while Jackie
opted for economic profit. However, it is observed that the prices of both products
remained constant since 2013 to till now. They adopted advertising strategy to build
brand image and position rather than pricing. It is tremendous success for both. But
they did not share each other’s brand secret. They are working independently.

Questions:

a. Among the entrepreneurs, who is comparatively more skillful in formulating

profit policies for 2018? Give your critical comment with suitable examples.
(5)
b. Suggest the methods that will be more appropriate to forecast the demand for
Makalu and Lantang brands of Coffee with proper justifications. (5)
c. In your opinion, which pricing model is practiced in Coffee market? Give your
arguments with proper reasons. (5)
d. Elucidate major operational and environmental issues that both Makalu and
Lantang brand are likely to face. (5)

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2. A firm has the following short run function Q = 100 K1/2 L,1/2r = Rs 50, W = Rs
40, P = Rs 2 and C = Rs 1000, calculate:
a. Marginal productivities of both inputs. ( MPL& MPK) (7)
b. Sketch expansion path of output. (7)
c. Explore the equilibrium level of capital and labor. (6)

3. Describe different types of market failure. How does government regulate the
market failure? Explain. (12+8)

****BEST OF LUCK****