(Paper) IGNOU EMBA Paper - C5: Economic Environment of Business (June 2007)

Paper : IGNOU EMBA Paper - C5: Economic Environment of Business (June 2007)

Term-End Examination

C5: Economic Environment of Business

Time : 3 hours
Maximum Marks : 100 (Weightage 70%)

Note : Attempt any three questions from Section A and all four question from Section B.

June, 2007


1. How are business decisions affected by economic environment ? As the manager of a firm, what economic choice(s) would you like to exercise for managing your business? 20 2. Discuss the three stages of production. How do average and marginal product curves help in selecting the appropriate stage of production ? 20 3. Differentiate between the market forms of monopolistic competition and oligopoly. Discuss the underlying considerations of price fixation in these two market forms. 20 4. What does the Phillips curve signify ? Explain with suitable diagram. 20 5. Describe the mechanism of aggregate demand and aggregate supply determining price level and real output (GDP) . 20 SECTION B 6. (a) The following table shows the output levels produced by one unit of labour in home and foreign countries for wheat and cloth. Using the prescriptions of comparative advantage theory, find the commodities to be exported by the countries.

  Wheat Cloth
Home 12 6
Foreign 1 12

(b) Use the following information to calculate the rate of inflation between the years (5+5)
(i) 2000 and 2005.
(ii) 2004 and 2005.

Year GDP Deflator
2000 100
2001 L02
2002 103
2004 104
2005 108

7. (a) Find the break-even output and contribution to margin if you are given the total revenue (TR) and total cost (TC) as TR=50q and TC= 100+ 25q

(b) If price and quantity dernanded of a product X are given as:

Price Quantity demanded
1 6
2 5
3 4
4 3
5 2

determine the revenue maximizing output. 5+5

8. (a) Write short notes on the following:
(i) Learning curve
(ii) Deadweight loss

(b) For a particular combination of labour and capital, the marginal productivity of capital is 6 and marginal rate of technical substitution is 2. Find the marginal productivity of labour. 5+5

9. (a) Suppose that the price of Y is reduced from $20 to $15 leading to a change in quantity demanded of the product X from 100 to 80 units. Get the cross-elasticity between products X and Y.

(b) For a cost function TC=53 + 0.5Q + 0.2 Q2, find out (i) fixed cost, and (ii) marginal cost . (5+5)