ECO404 Managerial Economics Assignment No.01 Semester Fall 2011

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The Case:
In Pakistan, Sangla Fashions is one of the leading manufacturers of ladies shoes. This company
not only manufactures shoes for Pakistan but also exports to other countries. The company has
0.1 million employees and it is paying 5 million rupees to these employees. The company has
taken a loan of 50 million from Standard Chartered Bank and paying 0.75 million rupees as
interest. The company is spending 0.25 million on advertisement. Raw material costs 75
millions to the company. The marginal cost of producing a shoe in company is 100. The price
elasticity of demand for the shoes is -2.5.
Question # 01
According to you what price the Sangla Fashions should set?
(Marks: 05)
Question # 02
The total revenue and total cost functions of Sangla Fashions shoe manufacturing company is
given as follows:
TR = 500Q – 10Q2
TC = 200 + 100Q
From the above mentioned equations, find:
I- Fixed cost of the company.
II- Optimal level of quantity.
III- Variable cost of the company.
IV-Total amount of profit that company can earn.
(Marks: 2, 3, 2, 3)