# ECONOMICS FOR MANAGERS

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AMITY (Assignment)
MBA
Semester 1

ECONOMICS FOR MANAGERS
1st Block Assessment
.
Case Study
Assume that you have been given a free ticket with no resale value to the holiday on Ice Show at Madison Square Garden featuring Michelle Kwan. At the same time, the Yankees are playing the Red Sox in New York which is your second best alternative activity. Tickets to the game cost is \$ 38. You would be willing to pay \$ 45 to attend the game. There is no additional costs of attending either event.

Question 1
What is the least amount of money you would have to value seeing Kwan in
order for you to choose the holiday on Ice Show?
\$7
\$38
\$48
\$0

Question 2
Basic concept used under this study is :
Incremental Cost
Marginalism
None of the above
Opportunity Cost

Question 3
Benefits of the opportunity cost approach to individual decision making:
“Opportunity costs are subjective, existing in the minds of decision makers.”
“Economic profit would be total revenue minus all costs, including both explicit costs of purchased inputs and implicit (opportunity) costs of owner provided resources. ”
All of the above
focuses on the economic ramifications of choices and expresses what is given up (a net benefit) by making a choice.

Question 4
“If the production possibilities frontier is not bowed out but is a line, indicates there is”
Scarcity
Constant opportunity cost
Unemployment
Increasing Opportunity Cost

Question 5
Which one of the following does measure risk?
Standard Deviation
Expected value
All of the above
Coefficient of variation

Question 6
“If a person’s utility doubles when their income doubles, then that person is
risk”
None of the above
seeking
averse
neutral

Question 7
Strategy A has an expected value of 10 and a standard deviation of 3.
Strategy B has an expected value of 10 and a standard deviation of 5.
Strategy C has an expected value of 15 and a standard deviation of 10.
Which one of the following statements is true?
“A risk averse decision maker will always prefer A to B, but may prefer C to A”
All of the above are correct
A risk neutral decision maker will always prefer C to A or B
A risk seeking decision maker will always prefer C to A or B

Question 8
A situation in which a decision maker must choose between strategies that have more than one possible outcome when the probability of each outcome is unknown is referred to as:
diversification
Uncertainty
risk
certainty

Question 9
Circumstances that influence the profitability of a decision are referred to as
states of nature
strategies
marginal utility of money
payoff matrix

Question 10
“If a decision maker is risk averse, then the best strategy to select is the one that yields the”
highest expected payoff
lowest standard deviation
lowest coefficient of variation
highest expected utility

Quiz Score: 100 out of 100

2nd Block Assessments
Case Study
Firm A and Firm B are in a duopoly game, so they can either comply with a cartel argument or cheat on the
agreement. The cartel agreement calls for each firm to boost its price and restrict the amount it produces.
Strategies A’s Strategies
Cheat Comply
B’s
strategies
Cheat (0,0) (3,-1)
Comply (-1,3) (2,2)

Question 1
“If firm A cheats on the cartel and firm B complies with the agreement, Firm A’s profit is ”
\$ 3 million
(-) \$ 1 million
\$ 2 million
Zero

Question 2
“If firm A cheats on the cartel and firm B complies with the agreement, firm
B’s profit is ”
Zero
\$ 3 million
\$ 2 million
(-) \$ 1 million

Question 3
“If this game is played only once, ”
both firms A and B will cheat
neither Firm A nor Firm B will cheat
Firm A will not cheat and Firm B will cheat
Firm A will cheat and Firm B will not cheat

Question 4
The equilibrium in the previous question is called
Nash Equilibrium
Cooperative equilibrium
Duopoly Equilibrium
Credible strategy equilibrium

Question 5
If this game is played repeatedly and both firms adopt trigger strategies so that the cooperative equilibrium emerges
both firms A and B will cheat
neither Firm A nor Firm B will cheat
Firm A will not cheat and Firm B will cheat
Firm A will cheat and Firm B will not cheat

Question 6
Which one of the following is a part of every game theory model?
Strategies
Players
Payoffs
Probabilities

Question 7
“In game theory, a choice that is optimal for a firm no matter what its competitors do is referred to as”
dominant strategy
a gonzo selection
game-winning choice
Super optimal

Question 8
A prisoners’ dilemma is a game with all of the following characteristics except one. Which one is present in a prisoners’ dilemma?
Both players have a dominant strategy.
Both players would be better off if neither chose their dominant strategy.
The payoff from a strategy depends on the choice made by the other player.
Players cooperate in arriving at their strategies.

Question 9
“Which of the following legal restrictions, if enforced effectively, would be likely to solve a prisoners’ dilemma type of problem for the firms involved?”
All of the above would be likely to solve a prisoners’ dilemma for the firms.
A law that prohibits firms in an industry from advertising their services.
A law that makes it illegal for oligopolists to engage in collusion.
A law that prevents a cartel from enforcing rules against cheating.

Question 10
“Until recently, medical doctors and lawyers have been prohibited from engaging in competitive advertising. If the prisoners’ dilemma applies to this situation, then the presence of this restriction would be likely to”
have no effect on the profits earned by individuals in these professions.
increase profits earned by individuals in these professions.
reduce profits earned by individuals in these professions.
increase the profits of some and reduce the profits of other individuals in these professions.

Quiz Score: 100 out of 100

3rd Block Assessments
Case Study
Consider the following equations: Qd = 31 – 3P and Qs = 6 + 2P,
where Qd = quantity demanded and Qs = quantity supplied, P =
price
Demand Schedule
Price
Quantity
demanded
\$250 1500
\$200 2100
\$150 2700
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Question 1
market – clearing price and qunatity using simultaneous equations will be:
“P = 4, Q = 6”
“P = 5, Q = 16”
“P = 3, Q = 2”
“P = 6, Q= 4”

Question 2
Suppose P = 7. Calculate the ecess. Is it a shortage or surplus.
“8, Surplus”
“10, Surplus”
“8, shortage”
“10, shortage”

Question 3
Suppose P = 2. Calculate the ecess. Is it a shortage or surplus.
“6, shortage”
“6, surplus”
“15, shortage”
“15, surplus”

Question 4
“If price falls from \$250 to \$200, what is the elasticity of demand over this
range?”
-1.5
-0.08
-0.67
-1

Question 5
“As output increases from 2,100 to 2,700 what is marginal revenue?”
50
(-) \$300
(-) \$ 25
25

Question 6
“If price falls from \$250 to \$200,”
an arrow representing the price effect points down and is shorter than an arrow for the quantity effect
arrows representing the price and quantity effects both point down
arrows representing the price and quantity effects both point up
an arrow representing the price effect points down and is longer than an arrow for the quantity effect

Question 7
If price falls from \$200 to \$150
total revenue moves in the same direction as the arrow representing the price effect
total revenue moves in the same direction as the arrow representing the quantity effect
an arrow representing the price effect points down and is shorter than an arrow for the quantity effect
arrows representing the price and quantity effects both point down

Question 8
“If the own-price elasticity of demand for a good is -0.6 and quantity demanded decreases by 30%, price must have”
decreased by 18%
increased by 50%
decreased by 0.6%
increased by 20%

Question 9
Which of the following would tend to DECREASE the elasticity of demand for good X?
Consumers begin spending a smaller percentage of their income on X
both b and c
New substitutes for X become available from other firms
The cost of producing X declines

Question 10
Which of the following would tend to INCREASE the elasticity of demand for good X?
both b and c
“a new product, Y, which can be used in place of X, is introduced”
the percentage of a consumer’s income spent on good X increases.
a new discovery allows firms to produce X at a much lower cost.

Quiz Score: 100 out of 100

4th Block Assessments
Case Study
Magnificient Blooms is a florist specializing in floral arrangements for weddings,
graduation and other events. Magnificient Blooms has a fixed cost associated
with space and equipment of \$100 per day. Each worker is paid \$50 per day. The
daily production function for magnificient Blooms is shown in the table.
Quantity of labor (Workers)
Quantity of floral
arrangement
0 0
1 5
2 9
3 12
4 14
5 15

Question 1
Calculate marginal product of each workers.
“7,6,5,4,3,2”
“6,5,4,3,2,1”
“5,4,3,2,1”
“0,1,2,3,4,5”

Question 2
Calculate the marginal cost of each level of output
“10, 13.5 , 17.67, 30, 55”
“10, 12.5, 16.67, 25, 50”
“48, 13, 12, 10.9, 3, 1”
“10, 15.5, 20.25, 40, 60”

Question 3
“If all resources used in the production of a product are increased by 20 percent and output increases by 20 percent, then there must be: ”
diseconomies of scale
increasing average total costs
economies of scale
constant returns to scale

Question 4
“If the output levels at which short-run marginal and average cost curves reach a minimum are listed in order from smallest to greatest, then the order would be”
“AVC, ATC, MC”
” MC, AVC, ATC”
“ATC, AVC, MC”
“AVC, MC, ATC ”

Question 5
“If an input is owned and used by a firm, then its”
explicit cost is zero
opportunity cost is zero
economic cost is zero
implicit cost is zero

Question 6
Short – run marginal cost is:
the change in total variable cost divided by the change in output
the cost per unit of the variable input divided by the marginal product of the variable input
the change in total cost divided by the change in output
all of the above

Question 7
One reason that a firm may experience increasing returns to scale is that greater levels of output make it possible for the firm to
All of the above are correct
obtain bulk purchase discounts
employ more specialized machinery
employ a greater division of labor

Question 8
Breakeven analysis identifies the
All of the above are correct
level of output where marginal revenue is equal to marginal cost
level of output where economic profit is equal to zero
profit-maximizing level of output

Question 9
The responsiveness or sensitivity of a firm’s profits to changes in output is measured by a firm’s
degree of operating leverage
operating leverage
contribution margin per unit
returns to scale

Question 10
“If a linear short-run variable cost function is estimated using cross-sectional data, then the corresponding marginal cost function will be”
U-shaped
Horizontal
Upward sloping
Downward Sloping

Quiz Score: 100 out of 100

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5th Block Assessments
Case Study
Inflation can occur in an open economy with fixed exchange rates as a result of monetary, fiscal or Wicksell-Keynes forces in other countries. Inflation that originates abroad is often called “imported inflation.” Three mechanisms transmitting imported inflation are distinguished in the country studies that follow. One operates by changing the expenditure function. Exports rise. A second operates by changing the relative prices of imported and domestic goods. An increase in the price of foreign substitutes raises the price of domestic production. The analysis of an increase in exports or of an increase in domestic substitutes for foreign goods is similar to the analysis of a Wicksell-Keynes inflation. The third mechanism transmitting inflation is a change in the monetary base. This mechanism operates whenever a balance of trade surplus or a surplus on capital account induces an increase in the foreign reserves of the central bank. Any increase in the base increases the money stock and starts a monetary inflation.

Question 1
A cause of inflation
decrease in money supply and fall in production
Fall in production
increase in money supply and a fall in production
Increase in money supply

Question 2
Inflation brings more benefit to which one of the following?
Debtors
Creditors
Government pensioners
Savings Bank Account Holders

Question 3
Inflation is mostly harmful to which one of the following?
Holder of real assets
Debtors
Creditors

Question 4
Increasing unemployment and inflation is a situation of:
Stagflation
Hyperinflation
Galloping inflation
Reflation

Question 5
Who among the following are not protected against inflation?
Salaried class
Agricultural farmers
Pensioners
Industrial workers

Question 6
“The period of high inflation, low economic growth and high unemployment rate is termed as: ”
Stagflation
None of the above
Take – off stage in economy
Stagnation

Question 7
“Deficit financing aims to put more money into the economy by creating additional paper currency to fill the gap between expenditure and revenue. The device aims at economic development but if it fails, it generates”
Inflation
Deflation
Demonitisation
Devaluation

Question 8
A steady increase in the general level of prices as a result the aggregate demand is increasing in unsustainable rate as compared to aggregate supply is termed as
Demand – pull inflation
Cost push inflation
Structural Inflation
Stagflation

Question 9
Which is correct in respect to inflation?
rise in general price index
rise in money supply
rise in budget deficits
rise in price of consumer goods

Question 10
Which of the following is not a reason for inflation?
Increase in cost of capital
None of these
More dependence on indirect taxes for revenue

Quiz Score: 100 out of 100

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Full Syllabus Assessment
Case Study
Scenario – 1
Bob’s Bakery has two locations. The bakery decides to experiment with
charging different prices at the two bakeries, to find out which price will bring in
higher total revenues. The results of the experiment are shown in the graph
below.

Scenario – 2
Calculate from the following data:
Factor income from NDP accruing to private sector 300
Income from entrepreneurship and property
Accruing to govt administrative departmental 70
Savings of non-departmental enterprises 60
Consumption of fixed capital 35
Current transfer from rest of the world 15
Corporation taxes 25
Current transfer from govt governmental admi depart 40
Direct taxes paid by house hold 20
National dept interest 5
saving of private corporate sector 80

Question 1
The revenue earned at Downtown Bakery is equal to
area A
area C
area B
area A+ B

Question 2
Area A is bigger than area C. This means that
Demand for chocolate cake is highly price elastic
The quantity supplied of chocolate cake exceeds the quantity demanded.
The quantity demanded of chocolate cake exceeds the quantity supplied
Demand for chocolate cake is price inelastic

Question 3
Which of the following statements is true?
“A single, straight-line demand curve can be elastic in one region and inelastic in another”
“When demand is unit elastic, revenue is strongly affected by price changes.”
Perfectly inelastic demand can be represented by a horizontal line
Elasticity is identical to the slope of the demand curve.

Question 4
Suppose a 50% increase in the price of a drug results in no change in the
quantity demanded. What is the price elasticity of the drug?
0
0.5
1
0.05

Question 5
Which one of the following goods is most likely to have a perfectly elastic demand?
a particular brand of butter
Shoes
Rice in a developing country
Cigrattes

Question 6
“A population subsists largely on potatoes, plus small amounts of dairy products and vegetables. The price of potatoes rises, driving many poor families deeper into poverty. As a result, these families are forced to eliminate dairy products and vegetables from their daily diet and start eating even more potatoes than they did before. In this example potatoes are”
Giffen goods
inferior goods
both b and c
normal goods

Question 7
Calculate private income
390 crores
355 crores
350 crores
325 crores

Question 8
Calculate national income
280 crores
460 crores
660 crores
245 crores

Question 9
Calculate personal disposable income
225 crores
305 crores
320 crores
315 crores

Question 10
The financial year in India is
January 1 to December 31
March 16 to March 15
April 1 to March 31
March 1 to April 31

Quiz Score: 100 out of 100

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Live Interactive Session Test

Question 1
What is Scarcity?
Relationship between limited resources and unlimited wants
Relationship between limited wants and limited resources
Relationship between unlimited resources and limited wants
None of the above

Question 2
How much to expand a firm
How much to invest
In which to invest
All of the above

Question 3
Indifference is
Concave to the origin
Convex to the origin
horizontal parallel to x-axis
None of the above

Question 4
MRTS is equal to ratio of commodity prices which known as
Consumer equilibrium
Indifference curve
Consumer surplus
Demand Elasticity

Question 5
Budget Constraint refers to
Combination of goods a consumer can purchase with income as a constraint
Combination of only two goods a consumer can purchase with income as a constraint
Combination of goods and services a consumer can purchase with income as a constraint
None of the above

Question 6
Total fixed costs remain ________ as output increases
Constant
upward sloping
downward sloping
None of the above

Question 7
“In second stage of production, TP increases but _____ than proportionate to increase in labor”
More
Less
Equal
None of the above

Question 8
Price discrimination in which seller charges different prices for different classes for buyers is classified as
fourth-degree discrimination
second-degree price discrimination
first-degree price discrimination
third-degree discrimination

Question 9
“Image pricing, location pricing, channel pricing and time pricing are all types of price discrimination of”
First degree
Second degree
Third degree
Fourth degree

Question 10
“Price discrimination in which seller charges less to customer’s, who buy in large volumes is classified as”
First degree
Second degree
Third degree
Fourth degree

Question 11
Scarcity implies that the allocation scheme chosen by society can
Not make more of any one good
Typically make more of a good but at the expense of making less of another
Always make more of all goods simultaneously
None of the above

Question 12
The short run is a time period in which:
all resources are fixed
the level of output is fixed
the size of the production plant is variable.
some resources are fixed and others are variable.

Question 13
Variable costs are:
sunk costs.
multiplied by fixed costs.
costs that change with the level of production
defined as the change in total cost resulting from the production of an

Question 14
When marginal product reaches its maximum, what can be said of total product?
total product must be at its maximum
total product starts to decline even if marginal product is positive
total product is increasing if marginal product is still positive
total product levels off

Question 15
The marginal product of labor curve shows the change in total product resulting from a:
one-unit increase in the quantity of a particular resource used, letting other resources vary.
one-unit increase in the quantity of a particular resource used, holding constant other resources.
change in the cost of a variable resource.
change in the cost of a fixed resource.

Quiz Score: 150 out of 150
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