Group Assignment for Managerial Economics Course

Instructor: Abate Yesigat (PhD) E-mail: abatetaye2000@gmail.com

General Instructions: Clearly show the necessary steps, write your answers clearly and coping
is strictly forbidden.

1. Discuss the scope of managerial economics and relate it with different disciplines.
2. What is price elasticity of demand, income elasticity of demand, and cross price elasticity of
demand? What is the relation between the total revenue, marginal revenue and price elasticity
of demand? Examine?
3. Consider a profit maximizing firm that produces two products, X and Y, on the same
assembly line. The firms profit function is given by the equation π(X,Y)=200X-5XY+100Y
a) Using the Lagrangian multiplier method, determine the profit maximizing output levels
of X and Y subject to the production requirement that the total output equal 50 units.
b) Calculate the firm’s profits.
4. Suppose it is late in the semester and you have two exams left. You must decide how to
allocate your working time during the study period. After eating, sleeping, exercising and
maintaining some human contact, you have 12 hours each day in which to study for your
exams. You have figured out that your grade point average, GPA, from your two courses,

Mathematical Methods and Literary Methods, takes the form , where

m is the number of hours per day spent studying for Mathematical Methods and L is the
number of hours per day spent studying for Literary Methods. What is the optimal number
of hours per day spent studying for each course? If you follow this strategy what will your
GPA be?
5. A firm operating in a perfectly competitive market faces the following Total cost function,
2
TC= Q3 −9 Q2 +80 Q+12
3 . From this:
a) Find an expression for AC in terms of Q
b) Find an expression for MC in terms of Q
c) Calculate the output level at which AVC reaches its minimum point.
d) If the market price of a commodity which is produced by the firm is Birr 80, how much
should the firm produce & sale to be at equilibrium
6. Suppose profit maximizing monopolist with a total cost function TC=3Q 2 +5 Q+15 , and sale
its output in two markets where the demand for the two market is given by :
1 1
q1 = (125−P1 ) q 2= (100−P2 )
2 & 3 ( where Q=q1 +q2)
Find the profit maximizing equilibrium levels of (q 1, q2, p1, p2, & Q) that maximizes the firm’s
profit?