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Managerial Economics Question Paper

Managerial Economics

Course:Master Of Business Administration

Institution: Kenyatta University question papers

Exam Year:2009

KENYATTA UNIVERSITY
UNIVERSITY EXAMINATIONS 2008/2009
INSTITUTE OF OPEN LEARNING

EXAMINATION FOR DEGREE OF MASTER OF BUSINESS ADMINISTRATION

BBA 501 :
MANAGERIAL ECONOMICS

DATE: THURSDAY 13TH AUGUST 2009
TIME: 9.00 A.M. – 12.00 NOON

INSTRUCTIONS:
Answer any 4 (Four) questions.

Q.1
a)
State and explain the shareholders wealth maximization model. (8 marks)
b)
How will managers react to the following changes if they are profit maximizers on one hand and sales maximizers on the other.
i)
An increase in demand. (3 marks)
ii)
A fall in demand. (3 marks)
iii)
An increase in fixed costs (3 marks)
iv)
An increase in Variable costs. (3 marks)

Q.2
Using the following data calculate the expected value, the standard deviation and the coefficient of variation for each of the projects. Which project is the least risky and which is the most risky? Which project would a risk-averse individual and risk- loving individual choose?

Project
Outcome Probability
A
200
0.2
400
0.6
200
0.2

B
-200
0.3
600
0.5
1200
0.2

C
100
0.1
500
0.7
1000
0.2
(Total marks 20)

Q.3
A firm’s demand curve in period 1 is Q=25-P. fixed costs are 20 and marginal costs per unit are 5.
a)
Derive equation for total revenue and marginal revenue. (4 marks)
b)
At what output will marginal revenue be zero. (4 marks)
c)
At what price will total revenue be maximized. (4 marks)
d)
At what price and output will profit be maximized and hence the maximum profit. (8 marks)

Q.4
The short-run cost function of the firm is TC = 300 + 50Q – 10 Q2 + Q3.
a)
What is the value of fixed cost. (2 marks)
b)
Write the expressions for average total costs, total variable cost, average variable costs and marginal cost. (6 marks)
c)
Calculate the output at which average total costs re minimized. (4 marks)
d)
Distinguish between
i)
Explicit and implicit costs. (4 marks)
ii)
Economics and Diseconomies of scale. (4 marks)

Q.5
a)
Compare and contrast the pricing outcomes in perfect and monopolistic competition. (10 marks)
b)
In what ways does a firm acquire market power in a monopolistic market? (10 marks)

Managerial Economics Question Paper

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