Name : Gesang Cholinaning

Verdani
ID Number : 1906455683

MID TERM EXAM

SUBJECT : BUSINESS ENVIRONMENT

Class : B192
Date : Monday, March 30, 2020
Time : 120 Minutes, 19.00-21.00
Exam Status : Open Books and Computer
Lecturer :
: Sisdjiatmo K. Widhaningrat, SE, MSc (
sisdjiatmo@gmail.com ) : Dr. Ninasapti Triaswati. ( ntriaswati@gmail.com
)
: Dr. Willem. Makaliwe (wmakaliwe@gmail.com )
: Kahlil Rowter, MA (Kahlil.Rowter@prospera.or.id )
: Dr. Anton Wachidin Wijaya (antonwachidinwidjaja@yahoo.com )

Submit your answer typed in PDF format, and send it to your lecturer's address, cc: (email
akademik.mmui@gmail.com ). Your answer must be received within 30 minutes after the allocated
time. Any late submission without explanation will be given penalty or disqualified.

RULES:
1. Open books and computer
2. Student should work alone, if any similarity within the answer among students is detected, then
she/he will receive zero mark or “fail”
3. Midterm exam is fron 19.00-21.00 and it should be submitted directly to the lecture within 30
minutes (by 21.30). Late submission will be considered as “failure” and will receive mark “E”
4. If you send a file, please write the file name as follows: Class_Student Number_Lecture Name
(Ex: A192_83747130_Aswin)

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Question 1 (25%)
The Municipality of Temanggung has calculated that the equilibrium price for a city bus ticket is
Rp1.000, while the passenger each day is 10.800. They also calculated that short-run price elasticity of
demand is -0.60, and the short-run elasticity of supply is 1.0.
a. Estimate the short run supply and demand curves for bus tickets.
Answer:
From the question we notice that P (price) is 1000, Equilibrium quantity (Q) is 10.800, elasticity
demand is -0,6 while elasticity of supply is 1.0.
Ed = -b(P*/Q*)
-0,6= -b(1000/10800)
b = 6,48
Es = d(P*/Q*)
1,0 = d(1000/10800)
d = 10,8
To determine supply equation, 1,0 = c + 10,8*1000, so c = -10799
Supply Equation would be Qs = -10799 + 10,8P
To determine demand equation, -0,6 = a – bP = a – 6,48*1000, so a = 6479,4
Demand Equation would be Qd = 6479,4 – 6,48P
The Demand-Supply Curve would be like this:

b. If the demand for rises by 10%, what would be the new equilibrium price of bus tickets?
Answer: The new equillibriuim price will be = 10.800*1,1 (11880) = 6479,4 – 6,48P  P =
2833,24
c. If the Municipality refused the price increase, what ticket shortages would occur?
The bus company refuse to increase the supply since it can lead on the increase of its cost.
On the other hand, consumen still need the bus so the demand remain increasing. The shortage
will be occured because the rise in demand is not followed by the rise in supply. There are gaps
between supply and demand that bring the shortage out.

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d. Would the bus company have an incentive to increase the supply in the long run given the city
council's decision in (c) above? Explain your answer.
Eventhough in the short run what we said in c happens, the result can be different in the long
run. Supply and demand can be more elastic in the long run, given the natural increase in
productivity led by competition among industry. In the long run, the bus company will
gradually increase its supply to answer the market demand.

Question 2 (25%)
If you have a small business in the Food and Beverage industry and own a fried chicken restaurant.
a. What are the production inputs for your restaurant? Explain the relationship between production and
its inputs using a relevant formula and illustrate it in a relevant curve.
The production input for F&B industry including capital (such as relevant equipment (kitchen
tools, inventories etc) and labor.
The production formula is q = F(K,L) and the curve illustrated below:

b. Explain the business competition that you face. What is the type of market structure?
F & B industry, especially Fried Chicken restaurant, given the situation right now face
Oligopoly competition. Oligopoly is a kind of imperfect competition market. This kind of
market is overpowered by some of big companies (for fried chicken restaurant, we know
KFC, McDonald, Wendy’s are among of those dominant company) that offers certain kind
of product. This kind of market tend to have influence in the price formation.
Since fried chicken restaurant relatively produce identical product, we can say that this is a
Pure Oligopoly.

c. Explain whether you can influence the market price.

As the new comer in Fried Chicken restaurant industry, it seems like it will be hard to
influence the market price. To enter oligopoly market is already hard because this market
already has some dominant companies with more powerful condition. Usually, these
dominant companies are the one who act as the price maker.
d. Explain the cost structure for your restaurant. Write down the formula and draw it in a relevant
curve.
The Cost Structure usually consist of Fixed Cost (FC) and Variable Cost (VC). These two
costs accumulated as Total Cost (TC). For the short-run, most of my costs will be fixed
cost. But along with the increasing of my restaurants condition (hopefully), the costs will be
variable cost in the long run. This is the curve of TC, FC, and VC:

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e. Explain the condition of your business profit due to the Corona global pandemic, describe it in a
relevant curve which clearly shows the equilibrium condition before and after the pandemic.
Corona Pandemic bring my business stability down. There are plenty of customers didn’t
come again because they required to stay #dirumahaja. As for my business, I still have to
spend money for the fixed cost (FC) eventhough I have decrease the variable cost (VC) such
as materials (chickens, flours, seasonings, etc). This is what happen to the equilibrium
before and after the pandemic situation:

Question 3 (25%)
Based on your understanding about the market structure of Hotel industry, answer the following
questions :
1) Explain the market structure of Big Hotels (Indonesia). And then compare with Small Hotels.
The market structure can be defined by three key elements: market share, market
concentration and barrier to entry. From the situation, it seems that Big Hotels tend to
formed oligopoly market, while the small hotels tend to be in competitive market industry,

As far as I know, there are some of hotel amongst the biggest hotel in Indonesia, for
example Aston, Accors hotel, Swiss-Belhotel, Santika, etc. To enter the Big Hotels market
is not quite easy, since all of them have build their reputations for years, and all of them
have loyal customers. On the other hand, there are plenty of small hotels, and as far as I
know, the quantity still emerges these days. For example, OYO, one of the franchises of
small hotels that appear everywhere these days.

b. Explain how Big and Smalll Hotels (Indonesia) will maximize their profits ? Provide graphical
illustration.
Similar to any situation faced by oligopolistic industry, big hotel have to consider its rival’s
price to determine its price. It is called Nash Equillibrium. Like any other industry, the
maximization of profits occurred when MC = MR. Eventhough MR move vertically, the
price is stay still. It is hard to change the price. This is the example of the curve:

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 On the other hand, small hotel face competitive market. Profit maximization can be defined
in P1PAB orange area below. Price formed when MC cut MR curve, in A point. Total
revenue is all the area below P1A. And the cost is Area below PB.

Explain the Key Success Factors to manage Big Hotels in Indonesia.

To be successful in managing Big Hotels in Indonesia, you cannot focus on price
competition. It will be failure to do so since this is an oligopolistic competition. Rather, we
can go with non-price competition, such as giving value and rise the brand name and loyalty.
This is some strategy for this industry:
1) Advertisement
2) Loyalty program (i.e: after sales service, upgrading service, loyalty card, etc)

d. Explain the Competitive Advantages of Small Hotels in Indonesia.

Despite the size, Small Hotels have their own competitive advantage. Such as low price, and we can
find it everywhere. Big Hotels usually only in big cities, but we can find small hotel everywhere.
Question 4 (25%)
a. Antitrust (anti-monopoly) law is a regulation to prevent market failure in an
industry. Explain the meaning of market failure. Give your argument regarding
the relevance of regulation to market failure.
Market failure happens when market mechanism become dysfunctional in the way alocate
economic source. In order to prevent monopolistic market for public goods, it is important
for the government to do the antitrust law. One of the way it happen in Indonesia, is, we
cannot find cartels in this country.

b. MR = MC is a formula to find maximum profit in a firm. Is this formula part of the

market failure?
MR = MC can be a market failure in a monopolistic competition market. The company will
produce based on maximum profitability, when MC = MR, and only provide Q quantity. In this
case, Q is way too small to fulfill the market demand.
c. Asymmetric information problems cause market failure. Give one case as an
example and explain how the solution.
The example of this market failure is when person buy used cars. If we buy used car, as the
buyer, we have less information about the car’s quality. The seller have way more information

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in this case. Buyer cannot determine the quality and distrust the seller. As a result, the price for
the used cars falls, and this way, a high-quality used cars are driven out of the market.

===000===

LAMPIRAN

SURAT PERNYATAAN KEJUJURAN AKADEMIK

Dalam ujian mata kuliah ini (Lingkungan Bisnis/Makroekonomi),

Nama : Gesang Cholinaning Verdani

NPM : 1906455683

Saya menyatakan dengan sejujurnya bahwa:

1. Saya tidak menerima dan atau tidak memberikan bantuan dalam bentuk apapun kepada
mahasiswa lain dalam mengerjakan soal ujian.
2. Saya tidak melakukan plagiasi atas pekerjaan orang lain dan mengakui nya sebagai
pekerjaan saya
3. Saya memahami bahwa segala tindakan kecurangan akan mendapatkan hukuman sesuai
dengan aturan akademik yang berlaku pada Fakultas Ekonomi dan Bisnis Universitas
Indonesia

Tangerang Selatan, 30/03/2020

Gesang Cholinaning Verdani

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