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Managerial Economics-AU-Feb 14

Managerial Economics-AU-Feb 14

Solution 2 Set only

1. Why is it important to state a managerial objective? Could the assumption that manager’s objective is profit maximization be useful even if their real objective is maximizing market share (or) their salaries?

2. Why would smaller firms be content to let a large firm practice dominant firm price leadership in an industry?

3. Why is there no unique input price and quantity of input hired in the bilateral monopoly case? What factors will play a role in determining that price and quantity?

4. In a three sector economy with firms, households and Government show with a circular income flow model that the sum of private investment and government expenditure equals the sum of saving and taxes.

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