Managerial Economics

Answer all the Questions.
Total: (50 Marks) Word count: 1000-1100 words
I. Explain how the reopening of the economy after the Covid-19 lockdowns and then the war
in Ukraine has impacted the supply and demand of petrol. Using a business sector of activity
(e.g. technology, transportation, retail, …) of your choice as an example, further explain the
consequences of these changes on price, consumption and economic profitability for
consumers and companies.
Tips: You must consider the impact on supply and demand in a first step, then how this impacts
the economy. Reference is required in this question with a goal of 10 unique
academic/professional references. Structure this response as an essay with an introduction and
conclusion. A graph or two can be included.
II.1. The Peto Company manufactures pet food cans. Fixed costs are $100 to run the business.
Fill in for fixed cost (FC), total cost (TC), average variable cost (AVC), average total cost
(ATC), marginal cost (MC).
Qty VC FC TC AVC ATC MC
0
100 $100
200 $300
300 $500
400 $700
500 $800
600 $120
(10 Marks)
II.2. Explain the characteristics of perfect competition in terms of demand, price, quantity and profits at equilibrium. Why does perfect competition achieve productive and allocative efficiency? What are the limitations that prevent this market structure from developing in real life?
(15 Marks) Word count: 200-250

II.3. Critically evaluate and explain:
a. A firm in a perfectly competitive market should always shut when its marginal revenue is below its average cost (equivalent to average total cost).
b. The intersection of marginal revenue and marginal cost determines the quantity at which a business in a perfectly competitive market is profitable.
(15 Marks) Wordcount: 200-250