MANAGERIAL ECONOMICS

SBS – MBA / MSc

Assignment – Al Ain 2019

STUDENT ID

UNIT TITLE : ______________________________________________________

NAME (in Full): ______________________________________________________

GENERAL INSTRUCTIONS

● All assignments are to be submitted 14th November 2019 on to

examinationboard@atmsedu.org and cc to afatima@atmsedu.org.
● Hardcopy submissions to be done 15th November 2019
● If assignment is not submitted on date, will follow with penalty of 10% deduction of marks
for every day.
● If any extension request, has to come 5 days before the submission date with valid reasons
& supported document to afatima@atmsedu.org
● Similarity between students work is strictly not accepted, any student found with similar
work will be graded Zero and fail for the course. However, Plagiarism is an academic
offence and will not be tolerated under SBS
● Assignment once submitted to exam board is final for marking.
● Total mark will be converted to 90 & class participation of 10 marks.
Total 100 marks

GUIDELINES FOR ASSIGNMENT

1. If assignment is Question & Answer based then.
 Introduction is needed for each question.
 Question has to be answered based on the mark allotted for each question with
references if any idea or information is taken from other source.
2. If assignment is case based then,
 Executive summary
 Table of content
 Body of assignment (questions related to case need to be answered)
 Conclusion / Recommendation if any
 References (in-text + citation) to be used.

Total Marks _____________ 90

©Al Tareeqah Management Studies - 2019

PLAGIARISM

Plagiarism is a form of cheating, by representing someone else's work as your own or using
someone else's work (another student or author) without acknowledging it with a reference. This is
a serious breach of the Academic Regulations and will be dealt with accordingly. Students found to
have plagiarised can be excluded from the program.

Plagiarism occurs whenever you do any of the following things without acknowledging the original
source:

 Copy information from any source (including the study guide, books, newspapers, the internet)
 Use another person's concepts or ideas
 Summarise or paraphrase another person's work.

How do I avoid plagiarism?

To ensure you are not plagiarising, you must acknowledge with a reference whenever you:
 Use another person's ideas, opinions or theory
 Include any statistics, graphs or images that have been compiled or created by another person
or organization
 Paraphrase another's written or spoken word.

What are the penalties?

The penalties for plagiarism are:

 Deduction of marks,
 A mark of zero for the assignment or the unit, or
 Exclusion from the program.
Plagiarism is dealt with on a case-by-case basis and the penalties will reflect the seriousness of the
breach.

Please note: claiming that you were not aware of need to reference is no excuse.

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 SECTION “A”

Answer the below questions. Each question carry 10 marks.

1. What is the concept of Market failure? Explain any four tools available for government
interventions to deal with the market failures and which one will be applicable in the given
situation.
a. China remains the world’s largest aluminum producing country accounting for more than
half of the global output. As part of the aluminum production there is a toxic by product
Red Mud that is produced. To get rid of this unwanted by - product, the owners of one of
the factories built a pipe out the back of the plant and dumped the red mud into the river
behind the factory. The red mud produced is directly proportional to the production of
aluminum; each additional unit of aluminum creates one more unit of red mud as well.

2. If the demand and supply curve for Computers is D=100-6P and S=28+3P respectively where
P is the price per Computer and Q is the number of Computers sold during a month.
a. What are the equilibrium price and quantity for Computers? Illustrate your answer
graphically.
b. What is the consumer surplus at the equilibrium in part (a)? Indicate the area of consumer
surplus in the diagram from part (a).
c. What is the producer surplus at the equilibrium in part (a)? Indicate the area of consumer
surplus in the diagram from part (a).
d. In the context of the problem, provide three reasons why the demand for Computers might
increase.
e. In the context of the problem, provide three reasons why the supply of Computers might
decrease.

3. The UAE Government has recently announced that effective 1st December, 2019, excise tax
will be imposed on sugary drinks. This is being done to discourage the consumption of such
drinks that is harmful for health. Now think about the markets for other drinks available in the
market such as Flavored Sparkling water and fresh squeezed mint lemonade.
a. Are these goods substitutes or complements for sugary drinks?
b. Using a supply-and-demand diagram, show what happens in the markets for sparkling water
and lemonade if the tax on sugary drinks is imposed.
c. If the government wanted to reduce total sugary drinks consumption, what policies could they
combine with the excise tax?

©Al Tareeqah Management Studies - 2019 3

4. Explain the main differences between Perfect competition and Monopolistic competition.
Depict graphically how the Demand curves under each category will look like.

5. The Organization of Petroleum Exporting Countries (OPEC) raised the price of crude oil in
world oil markets. Because crude oil is the major input used to make gasoline, the higher oil
prices reduced the supply of gasoline. Long lines at gas stations became commonplace, and
motorists often had to wait for hours to buy only a few gallons of gas.
a. What was responsible for the long gas lines? Most people blame OPEC. Surely, if OPEC
had not raised the price of crude oil, the shortage of gasoline would not have occurred. Yet
economists blame government regulations that limited the price oil companies could charge
for gasoline.

SECTION “B”
Answer the below questions. Each question carry 20 marks.

1. In a small college town, Carey’s Bookstore has a monopoly in selling textbooks. Carey’s fixed
costs are $300, and her total costs are shown in table given below
a. Complete Table by computing average total cost, marginal cost, Total Revenue, and
Marginal Revenue.
b. Lists points on the demand curve facing Carey’s Bookstore.
c. What is Carey’s profit-maximizing quantity of output? At what price will she sell her
books? What is her total economic profit?
d. Show the equilibrium output and price. On your diagram, illustrate the area that equals
Carey’s economic profit.

Quantity of Price
Total Average Marginal
Books (per (dollars TR MR
Cost Cost Cost
hour) per book)
9 247 27.44 9.00 57 47
10 256 56
11 267 55
12 280 54
13 295 53
14 312 52
15 331 51
16 352 50
17 375 49
18 400 48
19 427 47
20 456 46
21 487 45
©Al Tareeqah Management Studies - 2019 4
2. Suppose there are 2,000 Shawarma outlets operating in the city of Dubai. Each outlet has the
usual U-shaped average-total-cost curve. The market demand curve for shawarmas slopes
downward and the market for shawarmas is in long-run competitive equilibrium.
a. Draw the current equilibrium, using graphs for the entire market and for an individual
shawarma outlet.
b. Due to strict hygiene standards set by Dubai Municipality, about 500 Shawarma outlets will
need to close down as they do not adhere to the standards. What effect will this action have
on the market and on an individual outlet that is still operating? Use graphs to illustrate your
answer.
c. Further, the Municipality decides to increase the annual license fees for the existing 1500
outlets. How will this affect the number of shawarmas sold by an individual outlet and its
profit? The Municipality wants to raise as much revenue as possible and also wants to ensure
that the 1500 outlets remain in the city. By how much should it increase the license fee?
Show the answer on your graph.

©Al Tareeqah Management Studies - 2019 5