1. This question paper consists of two (2) parts: PART A (6 Questions)
PART B (3 Questions)
2. Answer five (5) questions from PART A and ALL questions from PART B in the Answer
Booklet. Start each answer on a new page.
3. Do not bring any material into the examination room unless permission is given by the
Please check to make sure that this examination pack consists of:
i) the Question Paper
ii) an Answer Booklet - provided by the Faculty

There are only three manufacturers of Product X in the country and the demand functions
faced by each manufacturer for Product X are as follows:
Manufacturer 1: Pi = 800-0.75Qi
Manufacturer 2: P2 = 500 - 1.4Q2
Manufacturers: P3 = 600-0.4Q3
Where P = price of Product X and Q = quantity demanded for Product X
a) If the price of Product X is set by the government at RM200 per unit, calculate the
total revenue earned by Manufacturer 1.
(2 marks)
b) If Manufacturer 3 wants to sell 300 units of Product X, what should be the price
(1 Vz marks)
c) Calculate the revenue maximizing output for Manufacturer 2.
(2 marks)
d) Determine the market demand curve function for Product X
(21/4 marks)
The estimated market demand for Suny TV is given as:
Qs = 6216 - 4.6PS - 3.4PX
Qs = quantity demanded for Suny TV
Ps = price of Suny TV (RM800)
Px = price of good X (RM400)
a) Calculate the price elasticity of demand for Suny TV.
(2 marks)

b) Interpret the above price elasticity of demand for Suny TV. Give one (1) factor that
influence the price elasticity of demand.
(2 marks)
c) Calculate the cross price elasticity of demand.
(2 marks)
d) Define income elasticity of demand.
(2 marks)
Given the following short run production function (Q):
Q = 10L2-0.5L3
Q = units of output
L = units of labour
a) Derive the functions for:
i) marginal product of labour (MPL)
(1 mark)
ii) average product of labour (APL)
(1 mark)
b) How many units of labour should the firm hire in order to maximize total product?
(1 14 marks)
c) Calculate the most efficient range of values for labour that the firm should hire.
(21/2 marks)
d) Sketch the marginal product and average product functions in a diagram. Show the
most efficient range of labour in the diagram.
(2 marks)

a) Given the following total cost function:
TC = 600 + 400Q - 48Q2 + 0.4Q3
i) What is the level of output where marginal cost is minimised?
(2 marks)
ii) At what output level does marginal cost intersect with average variable cost?
(2 marks)
b) Nordin has RM50.000 in his savings account. He is thinking of using this savings to
pursue a one-year MBA programme at a private college. The tuition fee for the
programme is RM10,000. He has to incur monthly costs of RM200 for
accommodation and meals. He also estimates that the total cost for books and other
supplies will be RM700 for the whole year.
He could have earned RM25,000 per year by getting a job instead of going to the
private college. Currently the banks' interest rate on savings account is 4%. Calculate
Nordin's explicit costs and implicit costs.
(4 marks)
The market supply (Qs) and demand curves (QD) for a product traded in a perfectly
competitive market are given below:
Qs = 80 + 30P
QD = 280 - 20P
a) Calculate the market equilibrium price in the industry.
(1 mark)
b) If a firm's total cost function is given as:
TC = 10 + 4Q + 3Q2-0.2Q3
what is the profit-maximizing price and quantity for this firm?
(3 marks)
c) How much is the total maximum profit for the firm? State the type of profit earned by
the firm.
(2 marks)
d) Should the firm shut down or continue operation? Justify your answer.
(2 marks)

Goldie & Co. a company that produces two types of burgers: chicken burger (C) and beef
burger (B). The average cost (AC) function is:
AC = 5C2 - 6CB - 3C + 8B2 - 2B - 120
a) Goldie & Co. expects the total order for both the chicken and beef burgers to be 10
boxes. Using the Lagrangian technique, determine the number of boxes of beef
burger and chicken burger that the company has to produce in order to minimize the
average cost.
(6 marks)
b) Calculate the minimum average cost.
(2 marks)

The estimated demand function below is for Brand T shoes:
QT = 30205 - 50.4PT + 34.8PZ - 13.6Y + 0.4A
(-2.6) (3.9) (-2.98) (1.9)
QT = quantity demanded of Brand T shoes
PT = price of Brand T shoes
Pz = price of competitor's Brand Z shoes
Y = consumers income
A = advertisement expenditure
Assume that PT = RM90 per pair, Pz = RM130 per pair, Y = RM2100, A = RM1200
Coefficient of determination (R2) = 0.76
Standard error of estimation = 62.56
The values in parentheses are the t-statistics for each coefficient.
(The critical t-value at 95% confidence interval is 1.96)
Based on the above regression results:
a) Derive the demand and marginal revenue curve functions of Brand T shoes.
(3 marks)
b) Calculate the income elasticity of demand for Brand T shoes. Interpret your answer.
(3 marks)
c) Do you think that an increase in the advertisement expenditure is advisable to the
seller? Why?
(2 marks)
d) What should be the price charged for Brand T shoes if the producer wants to
maximize total revenue?
(2 marks)
e) At the total revenue-maximizing price, what range of quantity output would you
expect at 95% confidence interval?
(2 marks)

f) What would be the effect on quantity demanded for Brand T shoes if the price of
Brand Z increases by 20%? (Answer in percent)
(3 marks)
g) What is the range of price where demand for Brand T shoes is elastic?
(2 marks)
h) Identify the variables that are statistically significant at 95% confidence interval.
(2 marks)
i) Interpret the coefficient of determination (R2).
(1 mark)
a) The production function of Dahlia Bakery is given as:
Q = 6.5L06K08
Q = quantity of bread
L = labour input
K = capital input
The price of labour is RM20 per person and capital is RM18 per unit. Currently it
employs 25 units of labour and 15 units of capital.
i) How much is the total cost incurred by Dahlia Bakery based on the current
inputs used?
(1 !4 marks)
ii) Determine the current output level of Dahlia Bakery.
(1 V* marks)
iii) Derive the expansion path equation for Dahlia Bakery.
(4 marks)

iv) What should be the optimal combination of labour and capital to produce the
current output level?
(4 marks)
v) Show that the average cost using the optimal input mix is lower as compared
to the current input mix.
(3 marks)
b) Define 'economies of scale' and 'diseconomies of scale'. How do they influence the
shape of the long-run average cost curve?
(6 marks)
a) Krunchmore Co. is a keropok manufacturer selling its product in 2 countries;
Malaysia and Thailand. The demand functions for the two markets are:
Malaysia: QM = 200 - 4PM
Thailand: QT = 100 - PT
The total cost function is: TC = 150 + 5Q
Advise whether Krunchmore Co. should practice price discrimination or should it
charge a uniform price, in order to get maximum profit (show your working).
(12 marks)
b) The market demand curve for a product sold by a seller is given as Q = 120 - 4P and
its total cost function is TC = 300 + 1.5Q2
i) What is the type of market structure for this seller? Give your reason.
(2 marks)
ii) Calculate the price and quantity that maximizes its profit.
(3 marks)
iii) Calculate and define the type of profit earned?
(3 marks)

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