ECO404 Managerial Economics Assignment No.2 Fall Semester 2013

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ECO404 Managerial Economics Assignment No.2 Fall Semester 2013


SEMESTER FALL 2012
MANAGERIAL ECONOMICS (ECO404)
ASSIGNMENT NO. 02
DUE DATE: 22ND JANUARY 2013
MARKS: 25
ASSIGNMENT:
The Case:
Pakistan Telecommunication Company Limited (PTCL) is a mega corporation
and a leading telecommunication authority of Pakistan. The corporation is the
backbone for country's telecommunication infrastructure despite arrival of a
dozen other telecommunication corporations, including Telenor Corps and China
Mobile Ltd. In addition to wire line operations, PTCL also provides fixed line
service through its countrywide CDMA based WLL (Wireless Local Loop)
network, under the VFone brand name and cellular service under Ufone brand
name. PTCL Group’s profit after tax was Rs.11.5 billion in year 2012 which was
36% higher compared to the profit achieved last year. Despite high inflation,
devaluation of Pakistani currency, increased prices of fuel and power, and salary
increments were main factors to increase the overall operating expenses by 7%
compared to last year, PTCL has maintained its monopoly in providing land line
service over other emerging telecommunication companies. It has the largest
Copper infrastructure spread over every city, town and village of Pakistan with
over million installed lines. Suppose total revenue function of PTCL was
TR=500+750Q-0.5Q2 whereas total cost function was TC=6000+200Q+0.125Q2
for the year 2012. Further, quantity demanded and quantity supplied function for
the same year was Qd = 1200-200P and Qs = 120+400P respectively.
Requirement:
Part A:
Keeping in view the above information, calculate:
a) Competitive level of quantity (millions) and price (per minute) of land line
service provided by PTCL.
b) Monopolist level of quantity (millions) and price (per minute) of land line
service provided by PTCL.
Part B:
Graph all the above findings and calculate welfare loss from monopoly faced by
society in terms of producer welfare loss and consumer welfare loss with the help
of graph.
Marking Scheme:
Part A: (Marks: 6+6)
Part B: (Marks: 13)
Note:
 Provide step wise calculation where required with the help of formulas.
 Graphs are very important in Economics courses. This assignment will
enhance your skill of drawing graph. A complete procedure of “How to
draw graphs in MS-Word” is uploaded on announcement page of LMS.
Get help from that uploaded file to solve your assignment.
 Draw graph by yourself. Do NOT copy from any source. NO need to write
irrelevant material. Properly label the graph where required. Labeling also
contains marks.
IMPORTANT:
24 hours extra / grace period after the due date is usually available to overcome
uploading difficulties. This extra time should only be used to meet the
emergencies and above mentioned due dates should always be treated as final
to avoid any inconvenience.
IMPORTANT INSTRUCTIONS/ SOLUTION GUIDELINES/ SPECIAL
INSTRUCTIONS
OTHER IMPORTANT INSTRUCTIONS:
DEADLINE:
 Make sure to upload the solution file before the due date on VULMS.
 Any submission made via email after the due date will not be accepted.
FORMATTING GUIDELINES:
 Use the font style “Times New Roman” or “Arial” and font size “12”.
 It is advised to compose your document in MS-Word format.
 You may also compose your assignment in Open Office format.
 Use black and blue font colors only.
RULES FOR MARKING
Please note that your assignment will not be graded or graded as Zero (0), if:
 It is submitted after the due date.
 The file you uploaded does not open or is corrupt.
 It is in any format other than MS-Word or Open Office; e.g. Excel,
PowerPoint, PDF etc.
 It is cheated or copied from other students, internet, books, journals etc.
Note related to load shedding: Please be proactive
Dear students!
As you know that Post Mid‐Term semester activities have been
started and load shedding problem is also prevailing in our
country now a days. Keeping in view the fact, you all are advised
to post your activities as early as possible without waiting for the
due date. For your convenience; activity schedule has already
been uploaded on VULMS for the current semester, therefore no
excuse will be entertained after due date of assignments, quizzes
or GDBs.
Best of Luck!