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Roll Number:
Thapar University, Patiala
School of Humanities & Social Sciences
End Semester Examination
B. E. (Fourth Year): Semester-VIII Course Code: UHU-081
(CIE,CHE & BT) Course Name: Engineering Economics
BE (Third Year): Semester-VI
BE (Second Year): Semester-II
May 14, 2016 Saturday, 9.00 - 12.00 Hrs
Time: 3 Hours, M. Marks: 100 Name Of Faculty: SCB,RKS,ANS & KW

Instruction: Attempt all question in proper sequence.

Q.1 a) Distinguish between change in .quantity supplied & change in supply. (5)
' World Solutions, Inc., has designed a manual water pump that attains a flow rate of 5 gallons per
,,b) (6)
minute using 1 manpower. If the diameter of the pump were increased by 1 inch, throughput would
increase 4 gallons per minute. Alternatively, throughput could be increased by an additional 8
gallons per minute using the original pump diameter with one hydraulic chamber.

i. Estimate the marginal rate of technical substitution between hydraulic chambers and
pump diameter.
ii. Assuming the cost of additional hydraulic chamber size is $5 per chamber and the cost
of a larger pump diameter is $2.50 per inch, does the original design exhibit the property
required for optimal input combinations? If so, why? If not, why not?

(a) "Rapid innovation in the development, assembly, and delivery of personal computers has led to (5)
a sharply downward sloping market demand curve for Dell, Inc." Discuss this statement.
(b) A number of empirical studies of automobile demand in a country have observed that the price (4)
elasticity is approx. -1.2 and the income elasticity is + 2.8. The current sales amount to 8 million
units. If the price rises by 10% and income rises 5% next year, how many cars are expected to be
(c) Assume that the average price of a new car in Mumbai is Rs.2, 60,000 and 90000 cars are sold (4)
at this price in a year. If the price elasticity of demand for new cars is 1.7 what will be the effect
on annual sales when the average price of a new car declines to Rs.2,45,000.
(a) Explain the difference between GDP &GNP. (5)
(b) What is inflation? Discuss the various types of inflations. What are the causes of inflation? (8)
(a) Isoquants can be convex, linear, or L-shaped. What does each of these shapes tell you about the (7)
nature of the production function? What does each of these shapes tell you about the MRTS?
(b) Pyxes Team Works has the following production function Q = 4L2 + 6K2 — 2LK (5)
Q = output
L = input of labor
K = input of capital
Budget constraint of the firm is Rs.720, the market going wage rate, w = Rs.10 and cost of capital,
r = Rs.10.
i. How much labour and capital shall be used for producing optimum output?
ii. What is the optimum output?
Q.5 A manufacturer sells his product at Rs. 5 each. Variable costs are Rs. 2 per unit and the fixed costs (6)
amount to Rs. 60,000. Find the following:

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000 after spending Rs.00 a. What is its optimal output level? ii. maximizing activity level. 3.m. i. i. iii.00 a.m. i.005Q2 Marginal costs are stable at $100 per unit.00 p. iv.m. (5) Q-6 (a) What is IRR and how is it calculated? Discuss the problem associated with IRR (b) A company has to choose one of the following two mutually exclusive projects. After tax cash flows are: C1 C2 C3 C4 C5 Projects CO 4200 4800 7000 8000 2000 X -20000 4200 4500 4000 5000 1000 -15000 Which project should the firm accept if the following criteria are used: (a) NPV & (b) IRR (a) Compare and contrast the assumptions of monopolistic competition with perfect competition (6) . 4MEE+BT-11.$0. If the firm is a perfectly competitive firm and is selling its goods at Rs.. 8 (a) What is oligopoly? Discuss the important features of it? Why price and output are indeterminate in oligopoly? (b) The Total Cost function of Ananda Corporation is TC = 200 + 4Q + 2Q2 (where TC is the Total (6) Cost in Rupees and Q is the quantity).to 12.000 units. The BEP if the firm spends Rs. What is the per unit cost at optimal output level iii. and profits at the profit- . Page 2 of 2 . The break-even point.00 a.000 for advertisement. The profit if the firm sells 30. (6) (b) What do you mean by economies & diseconomies of scale? Discuss the different types of economies & diseconomies.24. The firm cost of capital is 10% and tax rate is 35%. i otai (6) and marginal revenue relations for small business customers are: TR = $280Q .00 to 10. As a monopoly. 3C0E-10. If the output produced and sold by the firm is 5 units.30 to 1. 2016 in following timings: 2ECE. enjoys pricing power in the Daytona Beach market for tax preparation services. what is the profits earned by the firm Note: Evaluated answer sheets will be shown on 24th May.000 on advertising. ii. The sale of manufacturer to make a profit of Rs.00 to 12.m.7 and monopoly.30 p. (b) Tax.00 to 11. What price and profit levels would prevail based on the assumption that perfectly competitive pricing emerges in the local market? (6) Q. Both the (10) projects have been depreciated on a straight line basis .00 noon 4C1E-12. 4CHE-12. ii.9. Inc. All other costs have been fully amortized. 30.m. 3. calculate Quick Tax's output. price.