INTERMEDIATE BUSINESS ECONOMICS/ MANAGERIAL ECONOMICS QUESTION BANK

PART ONE Unit 1 1. Define managerial economics? State its scope. 2. What do you mean by managerial economics? Discuss the role played by it in a business? 3. Define managerial economics? Show the difference between managerial economics and economics? 4. Define firm? Discus its different objectives? 5. Explain the concept of profit maximization of a business? 6. Profit maximization is not the only objective of a business? Explain the statement? 7. What do you understand by demand? Discuss the different types of demand? 8. Explain the law of demand? What are the exceptions to this law? 9. Define the elasticity of demand? Discuss the importance of elasticity of demand? 10. What is elasticity of demand? How can it be measured? 11. What is demand forecasting/ discuss the factors involved in the process of demand forecasting? 12. What is demand forecasting? Discuss the purposes of forecasting demand? 13. What is importance of Demand Forecasting? Explain any two ways in which demand is generally forecasted. 14. Explain in brief the various types of survey methods of demand forecasting? How are survey methods superior to statistical methods? 15. Discuss in brief different statistical methods of forecasting demand and point out their merits and limitations? 16. Write short notes on: i. Law of demand ii. A firm iii. Marginal cost curve 17. Write short notes on: iv. Derived and autonomous demand

v. Income elasticity of demand vi. Delphi method of forecasting demand 18. Write short notes on: vii. Cross elasticity of demand viii. Giffen goods ix. Barometric technique 19. Write short notes on: x. Direct and indirect demand xi. Trend projection method xii. Concept of elasticity. 20. Discuss the meaning, nature and scope of managerial economics? 21. Managerial economics is applied economics , Explain 22. Managerial economics in the discipline which deals with the application of economic theory to business management, Comment? 23. Discuss various constraint of a business firm? 24. The demand and supply conditions of a product are represented by the following equations: Aggregate Demand: Q = 15-0.3P Aggregate Supply : Q = 5- 0.1P Calculate the equilibrium price. 25. Write short notes on a) The Opportunity Cost Principle b) Arc Price Elasticity c) Law of Diminishing Marginal Returns d). Incremental principle e) Discounting principle

UNIT II 1. What is production function? Explain with the help of an example. 2. What do you understand by return to scale? Why increasing return to scale occurs. Explain with the help of diagram. 3. Short notesi) Constant returns to scale.

ii) Decreasing return to scale. 4. What is Cobb-Douglas production function? State its properties. 5. What are Isoquants and Isocost? Explain graphically the criteria for lease cost combination of inputs. 5. Explain the least-cost combination of factors with a suitable diagram? 6. Distinguish between i) Fixed cost and variable cost ii) Economic cost and accounting cost iii) Explicit cost and implicit cost iv) Marginal cost and average cost v) Short run cost and long run cost 7. Explain with a diagram the relation ship between cost and output in short run? 8. Explain the relationship between MC, AC, AVC, AFC and TC with the help of diagrams. 8. Explain the relationship between cost and output in the long run? 9. State and explain different types of cost functions? 10. Write short notes on: i) Short run cost function ii) Long run cost function 11. What do you mean by internal economies? Describe different types of internal economies? 12. State and explain the Sargant Florence principle of economies of scale? 13. Write short notes on: i) Internal diseconomies ii) Learning curve iii) External diseconomies 14. The Equi-Marginal Principle can be applied to both consumption as well as
production. Discuss this statement with the help of an example.

15. Decide whether the following statements are true or false and explain why. (i) A decision maker must always use the historical cost of raw materials in making an economic decision. (ii) The marginal cost curve always intersects the average cost curve at the average cost's lowest point.

(iii) Marginal cost is relevant only in short-run analysis of the firm. (iv) The rational firm will try to operate most efficiently by producing at the point where its average cost is minimized. 16. Define and compare the following types of cost:
(a) (b) (c)

sunk cost versus incremental cost fixed cost versus variable cost opportunity cost versus out-of-pocket cost

17. Assume firms in the short-run are earning above-normal profits. Explain what will happen to these profits in the long-run for the following markets: (i) pure monopoly (ii) oligopoly (iii) monopolistic competition (iv) perfect competition 18. (a) What are the main characteristics of a perfectly competitive market that cause buyers and sellers to be price takers? Explain. (b) Indicate whether each of the following statements is true or false, and explain why. (i) A competitive firm that is incurring a loss should immediately cease operations. (ii) A pure monopoly does not have to worry about suffering losses because it has the power to set its prices at any level it desires. (iii) In the long run, firms operating in perfect competition and monopolistic competition will tend to earn normal profits. (iv) Assuming a linear demand curve, a firm that wants to maximize its revenue will charge lower price than a firm that wants to maximize its profits. (v) In an oligopoly, the firm that has the largest market share will also be the price leader. (vi) The demand curve facing a firm in a monopolistically competitive market is more elastic than one facing a pure monopoly. UNIT III

What is perfect competition? State its features? Explain the short run equilibrium of a firm under perfect competition Explain the long run equilibrium of a firm under perfect competition What is monopoly? Explain the nature of demand and marginal revenue curves under monopoly? 5. What are the essential features of monopoly? Can a monopolist incur losses in the short run? Why does a monopolist produce sub-optimal output in the long run? Is monopoly socially desirable in India? 6. How price is determined in a perfectly competitive market? 7. How price is determined in monopoly, when a firm can maximize profit? 8. Explain the equilibrium of monopoly firm? How that price fixed by the monopolist is less than the marginal cost of production? 9. What do you mean by monopolistic competition? State its features? 10. Discuss about the nature of demand and marginal revenue curve under monopolistic competition? 11. State and explain the price output equilibrium of a firm in the long-run under monopolistic competition? 12. What is oligopoly? State its characteristics. Can price and output is determined in oligopoly? 13. What is capital budgeting? Why it is important for a managing? 14. Discuss the nature of capital budgeting problem? 1. 2. 3. 4. 14. Explain various methods of capital budgeting in nut-shell 15. Short notes on: i) Pay back period ii) Internal rate of return iii) Present value method 16. Besides profitability what are the other factor that are taken into accounting before going for an investment? 17. State various internal sources of capital? 18. Examine various external sources of capital?

19. What is cost of capital? How would you calculate cost of preferable share capital? 20. Write short note on : i) Cost of debt ii) Cost of equity capital iii) Cost of retained earnings iv) Average cost of capital

PART TWO MODULE 1: SECTION A: 2MARKS QUESTIONS 1. What is managerial economics? 2. Define Opportunity cost 3. What do you know about Marginalism? 4. State the basic business problems in decision making. 5. What is meant by endogenous variable? SECTION B: 8 MARKS QUESTIONS 1. Managerial economics is the integration of economic theory, decision science and business management-Comment 2. Discuss the significance of Managerial economics. 3. What are the steps involved in scientific approach of managerial economic analysis? SECTION C: 12 MARKS QUESTIONS 1. Explain the basic economic theories applied to managerial decision making. MODULE 2:

SECTION A: 2MARKS QUESTIONS 1. State the important determinants of demand 2. What do you understand by change in demand? 3. Are there any exceptions to the law of demand? 4. Distinguish between autonomous demand and derived demand 5. Distinguish between short-run demand and long-run demand 6. What is elasticity of demand? 7. Define Cross elasticity of demand 8. What are the important methods of demand forecasting? 9. Distinguish between market survey and experiments SECTION B: 8 MARKS QUESTIONS 1. Explain the assumption underlying the law of demand 2. Explain the reasons for change in demand 3. Explain the law of demand with suitable illustrations SECTION C: 12 MARKS QUESTION 1. Critically examine the various methods of demand forecasting. 2. Explain the types of demand and its usefulness 3. Examine the role of price elasticity in business decisions MODULE 3: SECTION A: 2MARKS QUESTIONS 1. Define Production function? 2. What do you know about returns to scale? 3. Distinguish between equal product curve and indifference curve

4. What is Iso-quant? 5. State the properties of Iso-quant? SECTION B: 8 MARKS QUESTIONS 1. Explain the laws of returns to scale? 2. Explain Cobb-Douglas production function and its properties 3. How do you arrive optimum factor combination by SECTION C: 12 MARKS QUESTIONS 1. Explain the law of variable proportions with suitable illustrations 2. Give a detail note on the various empirical productions MODULE 4: SECTION A: 2MARKS QUESTIONS 1. Define Prime cost 2. State the importance of Opportunity cost 3. Why is short run average cost curve U-shaped? 4. Differentiate marginal cost with average cost 5. What is envelope curve? 6. What is meant by economies of scale? 7. What are the major types of external economies? 8. What do you know about the term Cost control? 9. State the areas of cost control 10.Differentiate cost control with cost reduction 11.What is break-even analysis? SECTION B: 8 MARKS QUESTIONS 1. Explain AFC, AVC, ATC and marginal cost and their interrelationship.

2. Discuss the various types of internal economies available to a firm 3. Discuss the cost output relationship in long-run. 4. Marginal cost curves are variable-Do you agree? SECTION C: 12 MARKS QUESTIONS 1. Explain the different cost concepts available to managerial decision making 2. Discuss the economies of scale into an expanding software firm in Bangalore. 3. Explain and illustrate break-even chart and point out its usefulness. MODULE 5: SECTION A: 2 MARKS QUESTIONS 1. Define Monopoly 2. Distinguish between firm demand and industry demand 3. Trace the relationship between price and revenues under monopoly 4. How do you classify the market? 5. What are the necessary and sufficient conditions for equilibrium of the firm under perfect competition 6. What makes a monopoly? 7. Compare monopoly with perfect competition. 8. What is meant by price discrimination? 9. When is price discrimination profitable? 10.What is dumping? 11. What is product differentiation? 12. Define Kinked demand curve (price rigidity) 13. What is transfer pricing?

14.What are the objectives of pricing policy? 15. Define Administered prices 16.What is normal profit? SECTION B: 8 MARKS QUESTIONS 1. Explain the features of perfect competition 2. Do firms normally equate their MC with MR in practice 3. Explain how an individual firm attains equilibrium in long-run under perfect competition. 4. Explain briefly the benefits of the monopoly 5. How does a monopoly firm attain equilibrium under different cost conditions? 6. Explain the essential condition for price discrimination 7. Describe the main features of Oligopoly 8. Discuss the major factors involved in pricing 9. Explain the method of cost plus pricing SECTION C: 12 MARKS QUESTIONS 1. Monopoly price need not necessarily be high. Examine this statement. 2. Examine how a discriminating monopolist will distribute his total output among different markets. 3. Show how an individual firm will attain equilibrium under monopolistic competition. 4. Explain how prices and output decisions are made in a Oligopolistic market. 5. Discuss the major factors involved in pricing policy

6. Describe the important pricing methods MODULE 6: SECTION A: 2 MARKS QUESTIONS 1. State the objectives of firms of modern business 2. Define Profit 3. Distinguish between insurable and non-insurable risks 4. Trace the relationship between innovation and profit 5. State the sources of profit 6. Distinguish between product innovations and market innovations SECTION B: 8MARKS QUESTIONS 1. Outline Baumols model of sales maximization 2. Explain the multiple objectives of a business firm SECTION C: 12 MARKS QUESTIONS 1. Critically examine the modern theory of profit 2. Discuss why profit maximization is not the sole aim of a business firm

PART THREE UNIT A 1. Define managerial economics and discuss its scope. 2. How can a managerial economist best serve the management? 3. Explain the relationships between price elasticity of demand, average revenue and marginal revenue.

4. State and explain the law of demand. What are the exceptions to the law of demand? 5. Show how production functions can help in output decision making of a firm. 6. Write a note on technical progress. 7. Distinguish between cost and production functions. 8. Give an account of empirical cost functions. 9. Examine the relationship between monopolists profit and elasticity of demand. 10. In what ways the modern theories of firms differ from neo-classical theory of firm. 11. Why does the demand curve slope downwards? 12. Explain the concept of price elasticity of demand. 13. State the main criteria for good forecasting 14. Explain the properties of Iso quant. 15. How does a producer maximizes output subject to the given level of budget? 16. Explain the main features of monopoly. 17. Explain the main classes of price discrimination. 18. Explain the responsibilities of Managerial Economics. 19. Explain the nature and scope of Managerial Economics. 20. Distinguish between increase in demand and extension in demand. 21. How is direct demand different from derived demand? Give examples. 22. Explain the nature and managerial use of production Function. 23. How is a least cost combination arrived at with the help of iso product and iso cost curves? 24. Explain cost output relationship in the short run. 25. Explain the various economies of scale. 26. Explain the main features of monopolistic competition. 27. What are the conditions necessary for price leadership 28. Examine profit as the central concept in managerial economics 29. State the relationship between Managerial Economics and decision making. 30. Explain the techniques of demand forecasting. 31. Explain Production Function. 32. State the role of technology in production. 33. Explain the relationship between total, average and marginal costs. 34. Distinguish between fixed costs and variable costs. 35. How is price determined under discriminating monopoly? 36. State the features of Oligopoly. 37. Explain Cobb Douglas Production.

38. Write a note on Expansion Path. 39. Distinguish between return to a factor and returns to scale. 40. Distinguish between short run and long run. 41. Discuss briefly different cost concepts relevant to managerial decision of planning and control. 42. Why long run average cost curve is likely to be L shaped? 43. Explain the concept of break-even in profit planning. 44. State and explain the Ricardian theory of rent. 45. Interest is a monetary Phenomenon. Discuss this in the context of Liquidity theory of interest. 46. Interest is the price for parting with liquidity. Discuss. 47. State and explain the Loan able Funds Theory of Interest. 48. Write a note on quasi rent. 49. What is product variation? W does a firm attain equilibrium with product variation. 50. Explain group equilibrium under monopolistic competition. UNIT B 1. Discuss the scope and application of managerial economics. 2. Enumerate the role, functions and responsibilities of managerial economists. 3. Explain the various types of elasticity of demand. 4. What is market research? Discuss the different methods of market research. 5. Explain Cobb- Douglas Production Function. 6. Explain CES Production Function. 7. State the role of cost analysis in decision making. 8. Examine the technique of cost control. 9. Explain Marshallian time element analysis in price fixation. 10. How is price determined under oligopoly? 11. Managerial Economics is predominantly micro-economic theory. Discuss. 12. State and prove the properties of Cobb-Douglas production function. 13. State and explain the different methods of demand forecasting. 14. Explain the Law of returns to scale. 15. How are price and output determined under monopolistic competition? 16. Do you advocate price discrimination? Give reasons. 17. Discuss the usefulness of basic economic theory to the practical problems of a business firm. 18. Examine the techniques of forecasting. How would you choose amongst various demand forecasts?

19. Why is it useful for a business firm to classify its expenses as variable and nonvariable? What are the main problems in making this classification? 20. Critically examine the profit policies of business firms. 21. Explain the methods of estimating cost functions and point out the problems in the estimation by using economic data. 22. Discuss the different bases for classifying an oligopoly situation. 23. Explain how price is determined under monopoly. 24. State and explain the marginal Productivity theory of wages. 25. Explain the classical theory of interest.