UNIVERSITY OF DUBAI
MBA 600 - MANAGERIAL ECONOMICS
PROFESSOR AZZEDDINE AZZAM
GRADED ASSIGNMENT 2
(PLEASE HAND IN BY 6:30 PM ON WEDNESDAY 14 DECEMBER, 2011)
Course Learning Objectives:
2. Understand competitive markets and economic efficiency.
3. Use firm and industry cost curves for production and strategic decisions.
All answers (except graphs) must be typed in MS WORD in the designated boxes.Please do not remove the page breaks and use spell check. |
Name:ID Number: Grade______________________________
Question 1 (10 points).
Fill in the relevant cells in the following table assuming the government provides a subsidy such that 9 units are produced and consumed.
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Assume the industry is the only consumer of cement.
Which of the 2 figures below represents the industry and why?
Figure 1 Figure 2. | Write your answer here:Figure #2The cost of cement will increase because of the long run, in this cause the supply curve of cement must slope upwards.When the demand increase the price of inputs increaseIn this situation its opposite of electronic goods that the cost of the components drops eventually over the long term |
Question 3 (10 points).
Consider the following 2 shipping containers. The dimensions of each container are measured in meters and the total cost per trip of each container is measured in dollars.
Based on the above information, in which of the three segments (C, D, E) in the graph below are the two containers located? MAKE SURE YOU LABEL THE GRAPH.
| Write your answer here:2*5*2=20Cost per cubic meter =20/600=0.044*10*4=160Cost per cubic meter =160/4800= 0.04Both are in D section since the cost cubic meter remains the same despite the volume change |
Question 4 (10 points).
DubAin is an airline that has a daily flight between Dubai and Al Ain. The airline has the following costs associated with the daily flight:
Landing fee $1000
Plane daily depreciation $2000
Plane daily insurance $2000
The plane has an average of 40 passengers paying an average of $200 for the flight. From an economic perspective, do you the airline should be flying between the two cities in the long-run?
Daily fixed cost = 2000+2000= 40004000+1000+1000=6000 variable cost40*200=8000 per flightShort run Profit =8000-6000=2000 per flightDuring the long run it remains variable cost for all costsLong run total variable cost =4000+1000+1000+2000+2000=10,000Long run profit =8000-10000=-2000 loss10,000/40 = 250 200<250 the company should shutdown when the prices are at this levelWhen the price drops below average total cost the firm must stop producing in the long run |