CONCEPTUAL AND COMPUTATIONAL QUESTIONS

By:Jayson Repolido
To: Ms. Edelyn Donio

1. BENCH paid Php 46,532 for a 110-year old pair of Bench Jeans – the oldest known
pair of blue jeans – by outbidding several other bidders in an eBay Internet auction.
Does this situation best represent producer-producer rivalry, consumer-consumer
rivalry or producer-consumer rivalry? Explain.

Answer: Consumer-consumer rivalry, because there is a limited quantity of Bench Jeans

which is the reason of competition between bidders, and BENCH is one of these
bidders/consumer who is competing and willing to pay highest price for the commodity.

2. What is the maximum amount you would pay for an asset that generates an
income of Php 150,000 at the end of each five years if the opportunity cost of
using funds is 9 percent?

Answer:
FV where as,
Maximum Amount (PV) = n
(1+i) FV= future value
i=rate
= 150,000/ (1+0.09)5 n=time(no. of years)
= 150,000/(1.09)5
= 150,000/ 1.54
=Php 97,402.60

3. It is estimated that over 90,000 students will apply to the top 30 Masters in
Business Administration (MBA) programs in the Philippines this year.

a. Using the concept of net present value and opportunity cost, explain when it is
rational for an individual to pursue MBA degree.

Answer: It is reasonable for an individual to pursue MBA degree if only if the Net Present
value is positive; and the future value that can be obtained after pursuing MBA degree, is
greater than the current cost, and opportunity cost that lost or had sacrificed.

b. What would you expect to happen to the number of applicants if the starting
salaries of managers with MBA degrees remained constant but salaries of
managers without such degrees increased by 15 percent? Why?

Answer: Ceteris Paribus, the number of applicants for MBA Degree will decrease. Because,
as what I have read in the module, it’s stated that the higher the interest rate the lower the
Present Value, then The higher the future Value. The more time that passes, or the more
interest gathered per period of a manager without degree, the higher the FV will be, if only if
the PV is constant.
For example:
Constant present value = 10,000
Standard Rating = 5 percent
n = 2 years
MBA Managers without degrees
FV= PV (1+r )n FV= PV (1+r )n
FV=10,000(1+.05)2 FV=10,000 ¿ ¿
FV=10,000(1.05)2 FV=10,000(1.20)2
FV = Php 11, 025 FV = Php 14, 400

4. Geryl spends Php 20,000 per year on painting supplies and storage space. She
recently received two job offers from a famous marketing firm – one offer was for
Php 100,000 per year, and the other was for Php 90,000. However, she turned
both jobs down to continue painting career. If Geryl sells 20 paintings per year at
a price of Php 10,000 each:

a. What are her accounting Sales Revenue per year: (Php 10,000 x 20)
profits? (Price x Quantity) Php 200,000
Formula: Explicit Expenses:
*Accounting Profits = (COGS/ Supplies and Php 20,000
Sales Revenue – Explicit Materials)
Expenses PROFIT: (Sales – expenses) Php 180,000

b. What are her economic profits?

Formula: Economic Profits= Sales Revenue – (Explicit + Implicit Expenses)

Sales Revenue per year: (Php 10,000 x 20) (Php 10,000 x 20)
(Price x Quantity) Php 200,000 Php 200,000
Explicit Expenses:
(COGS/ Supplies and Materials) Php 20,000 Php 20,000
Implicit Expenses:
(Opportunity Costs) Php 100,000 Php 90,000
Total Expenses: Php 120,000 Php 110,000
PROFIT: (Sales – total expenses) Php 80,000 Php 90,000
5. Complete the following table and answer the accompanying questions.
 (2) (3) (4) (5) (6) (7)
Total Total Net Marginal Marginal Marginal
Benefits Costs Benefits Benefit Cost Net Benefit
B(Q) C(Q) N(Q) MB(Q) MC(Q) MNB(Q)
(TC=TC1 + MC) (NB=TB-TC) (MB=∆TB) (MNB=∆NB) OR
OR (MNB=MB-MC)
TC= TB-NB

100 1200 950 (1200-950) 210 40 210-40= 170

=250
101 1400 (1400-1000) (1400-1200) 50 200-50=150
(950+50)=1000
=200
L

=400
102 1590 (1000+60)=1060 (1590-1060) (1590-1400) 60 190-60=130
=530 =190
103 1770 (1060+70)=1130 (1200-950) (1770-1590) 70 180-70=110
=640 =180
104 1940 (1130+80)=1210 (1940-1210) (1940-1770) 80 170-80=90
=730 =170
105 2100 (1210+90)=1300 (2100-1300) (2100-1940) 90 160-90=70
=800 =160
106 2250 (1300+100)=140 (2250-1400) (2250-2100) 100 150-100=50
0 =850 =150
107 2390 (1140+110)=151 (2390-1510) (2390-2250) 110 140-110=30
=880 =140
0

108 2520 (1510+120)=163 (2520-1630) (2520-2390) 120 130-120=10

0 =890 =130
109 2640 (1630+130)=176 (2640-1760) (2640-2520) 130 120-130=-10
0 =880 =120
110 2750 (1760+140)=190 (2750-1900) (2750-2640) 140 110-140=-30
0 =850 =110