Vels Institute of Science, Technology & Advanced Studies (VISTAS)

School of Management Studies

QUESTION BANK
II SEMESTER
M.B.A - Logistics & Shipping Management
16CMBL22 Subject: Maritime Economics

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PART-A
[5 MARKS QUESTIONS]

Unit-1

1) Give 5 examples of scarce resources used in production.

2) What are the 3 primary theories of Managerial Economics?
3) Explain the theory of firm.
4) Explain the theory of consumer behavior.
5) Explain the theory of market structure and pricing.
6) Explain the principle of opportunity cost with an example.
7) What is equi-marginal principle?
8) What is a “Flow in an Economy”?
9) What are the determinants of Demand?
10) Explain the elasticity of demand.

Unit-2

11) Explain the law of supply.

12) Explain market equilibrium with a suitable graph.

13) Discuss the role of technology on supply.

14) What are the 3 stages of production?

15) What is MRTS?

16) Explain the concept of isoquants.

17) What is a short run cost schedule in case of a firm?

18) What are dis-economies of scale?

19) What are the various types of market structures?

20) Explain the role of Government intervention in shipping.

Unit-3
21) Why “Ton miles” is a better indicator of shipping demand?

22) Why shipping demand is referred as “derived demand”?

23) What are effects of freight rate on international trade?

24) Why liner shipping is considered as an oligopoly?

25) List 5 examples of fixed costs of a shipping company operating container ships.

26) List 5 examples of variable costs of a shipping company operating bulk carriers.

27) What are the 4 shipping markets?

28) Why “Sale & Purchase market” is a “zero sum game”?

29) Name 5 important ship building nations.

30) What are the important centres of ship recycling?

Unit-4

31) Explain the link between economic growth and ship supply?

32) Explain the concept of “Active Fleet”?

33) What is “surplus tonnage”?

34) Discuss the economic impact of “slow steaming”?

35) What is the effect of “increase in the price of steel” in ship supply?

36) Explain elasticity of supply in shipping?

37) What is the economic impact of “port congestion”?

38) What are the characteristics of “recovery stage” of a shipping cycle?

39) What are the characteristics of “peak stage” of a shipping cycle?

40) What is a “ship-building” business cycle?

Unit-5

41) Discuss the pricing aspects of a liner conference?

42) Discuss the economic aspects of a FAK Tariff?
43) How the equilibrium in shipping is different for different types of ships?
44) What are the characteristics of a best prediction?
45) List any 5 forecasting techniques?
46) Identify problems in forecasting?
47) Explain seaborne trade as a function.
48) What is “Average Haul Forecast”?
49) How the forecasting of supply is made in the shipping industry?
50) What is a FFA?
PART-B
[10 MARKS QUESTIONS]

Unit-1

1) What are the various contributions of a Managerial Economist to a firm?

2) Explain any 4 principles of managerial economics?
3) Explain the law of demand with a demand schedule and a demand curve.
4) Explain the difference between change in demand and change in quantity demanded with a
suitable graph.
5) Explain the 3 types of Price elasticity with a suitable graph.

Unit-2

6) Explain the difference between change in supply and change in quantity supplied with a suitable
graph.
7) Explain the Cobb-Douglas production function with an illustration.
8) Draw the average, variable and fixed cost curves and explain the relationship among them?
9) Explain the 3 types of returns to scale graphically?
10) Explain the concept of economies and diseconomies of scale?

Unit-3

11) What are the various components of the shipping market? Explain the relationships among the
markets?

12) Discuss the factors affecting the demand for shipping.

13) Explain the elasticity of demand for shipping services.

14) Discuss the link between the shipping cycle and the ship building cycle for Containerised Liner
Shipping industry?

15) Explain the stages and the characteristics of shipping cycles.

Unit-4

16) Discuss the factors affecting the supply of shipping?

17) What are the short run and long run strategies for increasing the supply of ships?
18) What is the effect of freight market on the ship building industry?

19) Explain the concept of measuring ship productivity and its effect on the efficiency of the shipping
company?

20) Discuss the ship scrapping trends in a rising as well as falling freight markets.

Unit-5

21) What is the “Contestable Markets thesis”?

22) What are the competitive pressures in Liner Shipping?

23) Explain the price discrimination in liner shipping.

24) Discuss the forecasting methods used in the shipping industry.

25) Discuss the operation of Forward Freight Agreements in shipping.

PART-C

[20 MARKS QUESTIONS]

1. The Theory of “Economies of Scale” is widely applied in the shipping industry. Explain the
principles of the theory and discuss how it is applied in a) the tanker shipping, b) the liner
industry and c) the shipbuilding industry.

2. Chennai Bulker has a Bulk carrier, Chennai Veeram, which is acquired at a price of USD 60 million
is having the following fixed costs for the year 2016 :

 Interest : 8%

 Officers / Crew wages and other related items : USD 900,000

 Hull & Machinery insurance : 1 % of ship’s value

 P & I Club Insurance : USD 300,000

 Lubricants & spare parts : USD 400,000

 Dry docking, flag registration & classification survey: USD 300,000

 Administrative overheads : USD 500,000

What should be the minimum Time Charter rate required if Chennai Bulker wants a 15 % Return
on Investment?

3. “Without scrapping vessels, we can reduce the supply”. Do you agree with this statement?
Explain your answer with examples from any three segments of the shipping industry.

4. Two types of market structures exist in shipping industry. Explain the nature of both the market
structures and the salient features of the companies operating in them?
5. The market structure for Dry Bulk carriers is referred as perfectly competitive in nature? Discuss
the validity of this statement?

6. Read the following situation and answer the question given at the end.

Chennai Bulker (CB), the owner of a 3 year old Cape size Bulk carrier, MV Chennai Jeyam, is in a
dilemma whether to operate the vessel or not. CB placed the order for the vessel at a cost USD
120 million in December 2007 and got the vessel delivered by January 2008. CB took a 20 year
loan for 90 % of the vessel’s price at 10 % interest from IOB Chennai promising the banker that
the vessel is capable of earning USD 200,000 per day. Ship owning is a new venture for the
promoters of CB, who are traditionally from the textile industry background. Mr. Jaya Kumar (JK),
the Director of CB, convinced his family that big money can be made in shipping and as a result,
they ventured to for CB with bank finance. When the daily hire for capasize vessel dropped to
USD 195,000 per day during November 2007, JK told his board of directors that it is natural for a
plus or minus 10 % change in shipping market. On 16th January 2008, the day JK was taking
delivery of Chennai Jeyam, capesize vessels were fixed in Baltic exchange for USD 108,126 per
day. Since then, the earning potential of the vessel has been erratic. The market rate went up in
June 2008 to USD 223,000 per day and crashed to USD 5,500 per day. 2009 started with USD
6,000 in Jan and the average for the year was USD 34,792. The average rate for 2015 was USD
16,542. During the first two months of 2016, the rate was USD 8,750 per day.

CB has given the vessel for technical management and crew management with Fleet
Management co. (FMC). The following annual costs have been given by FMC for the year 2016.

Officers / Crew wages and other related items : USD 900,000

Hull & Machinery insurance : 1 % of ship’s value

P & I Club Insurance : USD 300,000

Lubricants & spare parts : USD 400,000

Dry docking, flag registration & classification survey : USD 300,000

CB has estimated that annual administrative overheads is USD 500,000.

You are required to analyse the above and give your recommendation to JK.

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