Question Details

Answered: - Dear Prof, Please help to answer this Part 1 - question 2.


Dear Prof, ?Please help to answer this Part 1 - question 2.4, Part 2 - question 2 and 3, Part 3 - All, Part 4 - Question 1. ??


BMME5103/JAN16/A-NK

 


 

ASSIGNMENT SUBMISSION AND ASSESSMENT

 

__________________________________________________________________________________

 

BMME5103

 

MANAGERIAL ECONOMICS

 

JANUARY 2016

 

__________________________________________________________________________________

 

INSTRUCTIONS TO STUDENTS

 

1. This assignment contains question that is set in English.

 

2. Answer in English.

 

3. Learners are to submit assignment only in MsWord (.docx) format unless specified otherwise.

 

Please refrain from converting text / phrases into picture format such as .gif / .jpeg / print

 

screen / etc.

 

4. Download the language version of the assignment template concerned from the myVLE for

 

preparation and submission of your assignment. Your assignment should be typed using 12

 

point Times New Roman font and 1.5 line spacing.

 

5. Your assignment should be between 3,000 to 5,000 words excluding references. The number

 

of words should be shown at the end of your assignment. Do not copy the assignment

 

question and instructions to your answer.

 

6. Submission of assignment:

 


 


 

Face-to-face Class Student:

 

You MUST submit a softcopy of your assignment online through myVLE and a hardcopy

 

to your facilitator.

 


 


 


 

Online student:

 

You MUST submit a softcopy of your assignment via myVLE and another softcopy to the

 

facilitator via e-mail.

 


 

7. You can submit your assignment ONCE only in a SINGLE file.

 

8. Your assignment must be submitted between 11th March 2016 until 13th March 2016.

 

9. Your assignment should be prepared individually. You should not copy another person?s

 

assignment. You should also not plagiarise another person?s work as your own.

 


 

1

 


 

BMME5103/JAN16/A-NK

 


 

10. Please ensure that you keep the RECEIPT issued upon submisson of your assignment as proof

 

of submission. Your assignment is considered as NOT submitted if you fail to produce the

 

submission receipt in any dispute arises concerning assignment submission.

 

EVALUATION

 

This assignment accounts for

 

the Rubrics attached.

 


 

60% of the total marks for the course and shall be assessed based on

 


 

You would be given feedback on the assignment before the Final Semester Examination commences.

 

PLAGIARISM: MARKS DEDUCTION

 

Warning: The submitted assignment will automatically undergo a similarity check. If plagiarism is

 

detected, marks would be deducted as follows:

 


 

No.

 


 

% Similarity Group

 


 

% of Mark Deduction

 


 

1

 

2

 

3

 

4

 


 

0 ? 30

 

30.01 ? 50

 

50.01 ? 70

 

70.01 ? 100

 


 

0

 

5

 

10

 

100

 


 

2

 


 

BMME5103/JAN16/A-NK

 


 

ASSIGNMENT QUESTION

 

PART 1

 

PURPOSE:

 

The purpose of PART 1 of this assignment is to enable students to understand fundamental economic

 

concepts such as expected returns, profits and prices; and to apply his / her knowledge on factors

 

affecting elasticity of demand and elasticity of supply of goods and services.

 

REQUIREMENT:

 

1. Two investments have the following expected returns (net present values) and standard

 

deviation of returns.

 

PROJECT

 

A

 

B

 


 

EXPECTED RETURNS

 

RM50,000

 

RM250,000

 


 

STANDARD DEVIATION

 

RM40,000

 

RM125,000

 


 

Which one has a higher risk? Justify your answer.

 

(4 Marks)

 

2. The AIROD Aircraft Company manufacturers small, pleasure?use aircraft. Based on past

 

experience, sales volume appears to be affected by changes in the price of the planes and by the

 

state of the economy as measured by consumers? disposal personal income. The following data

 

pertaining to AIROD Aircraft Company sales, selling prices and consumers? personal income were

 

collected:

 

YEAR

 

2013

 

2014

 

2015

 


 

AIRCRAFT SALES

 

(UNITS)

 

8,000

 

10,000

 

8,000

 


 

AVERAGE PRICE

 

(RM MILLIONS)

 

100

 

89.50

 

109.5

 


 

DISPOSIBLE PERSONAL INCOME (IN

 

CONSTANT 2013 in RM BILLIONS)

 

650

 

610

 

590

 


 

1. Estimate the arc price elasticity of demand using the 2013 and 2014 data.

 

(4 Marks)

 


 

2. Estimate the arc income elasticity of demand using the 2013 and 2014 data.

 

(4 Marks)

 

3. Assuming that these estimates are expected to remain stable during 2015. Forecast 2015

 

levels for AIROD Aircraft Company assuming that its aircraft prices remain constant at 2014

 

level and that disposable personal income will increase by RM40 billion. Also assume that

 

arc income elasticity computed in (b) above is the best available estimate of income

 

elasticity.

 

(4 Marks)

 

4. Forecast 2015 sales for AIROD Aircraft Company given that its aircraft prices will increase by

 

RM20 from 2014 levels and that disposable personal income will increase by RM40 billion.

 

Assume that the price and income affects are independent and additive and that the arc

 


 

3

 


 

BMME5103/JAN16/A-NK

 


 

income and price elasticities computed in parts (a) and (b) are the best available estimates of

 

these elasticities to be used in making the forecast.

 

(4 Marks)

 

[TOTAL MARKS : 20]

 

PART 2

 

PURPOSE:

 

The purpose of PART 2 of this assignment is to enhance the analytical skill of the students on

 

production functions, cost minimisation, profits maximisation and to appreciate their usefulness in

 

the real world.

 

REQUIREMENT:

 

1. Data on Gross Domestic Product (GDP), Labour and Real Capital for Mexico from 1955-1974 is

 

shown in Table 1 below:

 

YEAR

 

1955

 

1956

 

1957

 

1958

 

1959

 

1960

 

1961

 

1962

 

1963

 

1964

 

1965

 

1966

 

1967

 

1968

 

1969

 

1970

 

1971

 

1972

 

1973

 

1974

 


 

Table 1: Real GDP, Labour and Real Capital for Mexico from 1955-1974

 

GDP (million of 1960

 

Labour

 

CAPITAL (million of 1960 Peso)

 

Peso)

 

(thousands of people)

 

114,043

 

8,310

 

182,113

 

120,410

 

8,529

 

193,749

 

129,187

 

8,738

 

205,192

 

134,705

 

8,952

 

215,130

 

139,960

 

9,171

 

225,021

 

150,511

 

9,569

 

237,026

 

157,897

 

9,527

 

248,897

 

165,286

 

9,662

 

260,661

 

178,491

 

10,334

 

275,466

 

199,457

 

10,981

 

295,378

 

212,323

 

11,746

 

315,715

 

226,977

 

11,521

 

337,642

 

241,194

 

11,540

 

363,599

 

260,881

 

12,066

 

391,847

 

277,498

 

12,297

 

422,382

 

296,530

 

12,955

 

455,049

 

306,712

 

13,338

 

484,677

 

329,030

 

13,738

 

520,553

 

354,057

 

15,924

 

561,531

 

374,977

 

14,154

 

609,825

 


 

1. Fit a regression equation using GDP as the dependent variable and Labour & Capital as the

 

independent variables. (Use logarithm for all variables)

 


 

(8 Marks)

 


 

2. Fit a regression equation using GDP/Labour as the dependent variable and GDP/Capital as the

 

independent variable. (Use logarithm for all variables)

 


 

(8 Marks)

 


 

3. Determine whether this production function exhibits increasing, decreasing or constant returns

 

to scale and show with suitable diagram.

 


 

(4 Marks)

 


 

4

 


 

BMME5103/JAN16/A-NK

 


 

[TOTAL MARKS : 20]

 


 

PART 3

 

PURPOSE:

 

The purpose of PART 3 of this assignment is to enable students to evaluate levels of competitiveness

 

in various market structures and to introduce the correct strategies in order to obtain competitive

 

edge in a selected market.

 

REQUIREMENT:

 


 

1. Micheal Porter developed a conceptual framework for identifying the competitive advantage

 


 

from FIVE (5) forces of competition in a relevant market. Using a suitable diagram, critically

 

explain the Porter?s Five Forces Strategic Framework.

 

(10 Marks)

 


 

2. Alchem (L)is a price leader in the polyglue market. All 10 other manufacturers (follower [F] firms)

 

sell polyglue at the same price as Alchem. Alchem allows the other firms to sell as much as they

 

wish at the establised price and supplies the remainder of the demand itself. Total demand for

 

polyglue is given by the following function ( Q T = QL + QF):

 

P = 10,000 ? 10QT

 

Alchem?s marginal cost function for manufacturing and selling polyglue is:

 

MCL = 100 + 3QL

 

The aggregate marginal cost function for the other manufacturers of polyglue is:

 

?MCF= 50 + 2QF

 


 

a) To maximise profits, how much polyglue should Alchem produce and what price should it

 

charge?

 


 

(6 Marks)

 

b) What is the total market demand for polyglue at the price established by Alchem in Part (a)?

 

How much of total demand do the follower firms supply?

 

(4 Marks)

 

[TOTAL MARKS : 20]

 


 

5

 


 

BMME5103/JAN16/A-NK

 


 

PART 4 :

 

PURPOSE:

 

The purpose of PART 4 of this assignment is to ensure that the students are able to apply their

 

knowledge on market theories in assesing current events in the competitive real world.

 

REQUIREMENT:

 

DRAM Chipmakers Pay Enormous Fines for Forming A Global CARTEL

 

The world?s top for manufacturers on inexpensive random access memory chips, a key component of

 

all consumer electronic devices, agreed to fines and jail terms for several executive because of 19992002 price fixing. The criminal conspiracy raised prices 400 per cent in a six-month period from US$1

 

to US$4 per 100 megabits and then orchestrated maintaining the price at US$3. DRAM chips are

 

generic and easily substitutable between suppliers. As a result, a CARTEL agreement to limit

 

production is necessary to maintain price above competitive levels. SAMSUNG and HYNIX, two

 

KOREA firms that produce the majority of the chips, paid US$300 million and US$185 million fines,

 

respectively. Infineon Technologies or Germany paid a US$160 million fine, and four executives went

 

to jail for several months and paid individual fines of US$250,000. Micron Technology of Boise, Idaho,

 

received immunity for cooperating with the prosecutors and complainants DELL and HP in making

 

the case.

 

Source : Based on `SAMSUNG to pay?, Wall Street Journal (October 14, 2005). pp 43. and `Hynix Pleads Guilty ?, Wall Street

 

Journal (April 22, 2004). pp.86.

 


 

Please read the article above and answer the following questions:

 

1. Use a suitable diagram to explain the price-output determination for a TWO (2) -firm Cartel

 

profit maximisation and the allocation of restricted output respectively.

 

(10 Marks)

 

2. Suppose TWO (2) KOREA electronics companies, SAMSUNG (firm S) and HYNIX (firm T), jointly

 

hold a patent in a component used on DRAM. Demand for the component is given by the

 

following function:

 

P = 1,000 ? QS ? QT

 

where QS and QT are the quantities sold by the respective firms and P is the (market) selling

 

price. The total cost functions of manufacturing and selling the component for the respective

 

firms are:

 

TCs = 70,000 + 5QS+ 0.252S

 

TCt = 110,000 + 5QT = 0.152T

 


 

i.

 


 

Suppose that the TWO (2) firms act independently, determine the optimal output and price

 

with each firm seeking to maximize its own total profit from the sale of the components.

 

(15 Marks)

 


 

6

 


 

BMME5103/JAN16/A-NK

 


 

ii.

 


 

Suppose that the TWO (2) firms decide to form a CARTEL and act as a monopolist to

 

maximise total profits from the production and sales of the components. Determine the

 

optimal output, market share and company total profit when the CARTEL is occurs.

 

(15 Marks)

 

[TOTAL MARKS: 40]

 


 

7

 


 

 


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