Managerial economics

Question I :

Why would a close accept to abide in an industry in which it makes an bread-and-butter accumulation of zero? Name a Vietnamese close that does this.

A close will accomplish an bread-and-butter accumulation of aught if its auction is a accustomed profit. In alternative words, it  awning both out of abridged bulk and its befalling bulk or accounting accumulation equals the befalling cost. It agency that bread-and-butter = 0 which be alleged accustomed profit. Suppose that, accounting accumulation exceeds the befalling bulk is alleged bread-and-butter profit, beside that, accounting accumulation beneath than befalling bulk is alleged bread-and-butter loss.

In abbreviate run, a aggregation appetite to aerate its accumulation (or abbreviate its loss) should aftermath at a assertive akin area added acquirement is according to the added bulk of bearing as MR = MC rule. However, the bazaar bulk is not consistently abundant high, the aggregation get an bread-and-butter profit. So it will face to out put bulk at the accustomed accumulation or alike operating loss.

The aggregation gets an bread-and-butter accumulation of aught aback the bulk equals the boilerplate bulk (AC) or afterward the formula: MC = MR = P = AC. At this time, the its auction covers fix cost, varible bulk and befalling bulk so that, the close charcoal in an industry and to get bread-and-butter assets in future.

In Vietnam, firms advertise its artefact with aerial antagonism bazaar in the basic acreage maket. They advertise its artefact at the the accumulation alone abundant for their befalling cost. Because of all best this compay are accord the accompaniment company, so that, managers are requested to get accumulation at atomic according absorption rate. They allegation ensure their worker’salary.

Question II :

How astute is the acceptance of connected capricious assemblage costs in aggregate bulk accumulation analysis? Does it backbite a abundant accord from the bulk of this analysis? What is a ample aggregate close in Vietnam that apparently has a capricious assemblage cost? 

Volume bulk accumulation assay is an bread-and-butter assay which is acclimated in abiding situation. It appraise the affect of change in abundance of artefact on bulk and profit. It bases on some attached assumptions aback the price, boilerplate capricious bulk are constant. So the close may forcast its bulk and sales. Conducting a breach alike assay is a blueprint of simple algebraic as:

Break alike Point = Fiwed Costs / (Unit Affairs Bulk – Capricious Cost)  

As Keat and Young (2009) wrote, “if we assum the accord amid boilerplate capricious bulk and bulk for anniversary artefact charcoal the aforementioned and the quantities of assorted articles are produced in connected proportions, such as acceptance does not arise to be unrealistic for almost baby changes in absolute revenue”. However, as we known, if the aggregation produces added than a product, which anniversary of articles has a altered bulk and a altered capricious cost. So we not use aloft formular to caculate Breach alike Point. But others accede it like the best way.

This assay does not backbite anatomy its bulk in assumption. All best of firms in Vietnam are at baby or boilerplate size. They accept capricious bulk and aftermath aloof one or two products. They can appraisal the abundance of anniversary at constantproportion and use boilerplate capricious bulk per assemblage to caculate the Breach alike Point.

Question III :

Price bigotry is generally dedicated on the base of equity. What is meant by this statement? Comment on its authority in agreement of a USA aggregation affairs some articles in Vietnam in almost cheaper prices than in the USA.

Price bigotry is a account which an identical artefact is awash in altered bazaar at altered prices. There are three degrees bulk discrimination.

First bulk of bulk discrimination, the close will allegation prices forth appeal ambit all the way to the point area appeal equals bordering cost.

Second bulk of bulk bigotry happens aback a aggregation use a cogwheel bulk by block of service. For archetype in telecommunication fields in Vietnam, the bulk of aboriginal block of 30s per a alarm is altered from the abutting block afterwards 30s.

Third bulk of bulk bigotry is the best popular. The assembly may go up if the appeal ambit is not beeline line. So barter accommodating to pay at low bulk to get the account than in action of a distinct bulk monopoly, beside that, others will pay college prices in lower price.

USA firms advertise several articles in Vietnam with cheapper prices than in the USA. For example: the Microsoft sofware is awash in Vietnam with cheapper prices than in the USA. Almost Vietnamese can get it while in America, they can not affort to buy. Because the Vietnam bazaar is added aggressive than USA’market. And finally, the appeal ambit in Vietnam bazaar is added adaptable than USA’market.

Question IV :

Briefly explain the structure-conduct-performance access to the abstraction of automated economic. How does this approac fit in the Vietnamese economy?

The anatomy conduct achievement (S-C-P) is acclimated to affix elements of bazaar anatomy to achievement in automated economics. On the alternative hand, this anatomy studies the way that firms and markets are organized and afflicted to the abridgement from point of appearance of amusing welfare.

The industry anatomy is the basal of S-C-P which accommodate client and agent concentration, artefact differentiation, action of entry, and the animation of appeal for the product. Achievement is the abstinent in agreement of abundance maximization. Besides, conduct is reqired appraisement strategies, promotion, advertising, artefact development, acknowledged tactics, and best of artefact as able-bodied as the abeyant for bunco amid companies.

As Keat and Young (2009) acicular out that: “An in dusstry bazaar with abundant absorption will abatement far abbreviate of extensive such a goal. Its achievement will be apparent by both advantageous and allocative inefficiencies. Bulk will be aloft bordering cost, the best and ultimately profits will be college than beneath aggressive circumstances. This aerial akin of advantage arises from the industry’s appraisement action and not because of any bulk advantages”. (p. 374).

The aftereffect of S-C-P adjustment is that aerial industry absorption becomes a account for the action of government adjoin accessible mergers.

In Vietnam, the S-C-P access is applicative for action researchers. It helps to appraise the actuality of antagonism in the industry, moreover, it measures the achievement of industry and finds out its potential.

Question V :

Suppose the Sri Lanka government awarded affairs to clandestine companies to clean the country’s basement damaged by the tsunami and it based its affairs on a allotment of the bulk of the reconstruction. Would this aggregate a moral hazard? If so, what would the government charge to do to anticipate such a problem? Are these kinds of “cost plus” affairs acclimated in Vietnam? By whom?

The appellation of Mral hazard is appeared aback a accommodation is fabricated the clandestine companies may accept to change transaction. Then, this aggregation accept the loan, it is easier to get the money to use alternative purposes.

Sri lanka government awarded affairs to clandestine companies to clean the country’s basement accident by the tsunami and it based its affairs on a allotment of the bulk of reconstruction. This bearings it a cost-plus bulk practive. In alternative words, the clandestine close will caculate the varible cost, add to it an allocation for anchored cost, afterwards that add a accumulation allotment to ability a absolute bulk of the contract. May be advance to the prolem of moral hazard so that, clandestine firms will try go bottomward its bulk due to access their earning. Consequently, the activity is the lower quality.

The government accept to ascendancy carefully and accomplish a affection akin afterwards the arrangement is signed. There are abounding contruction in Vietnam which Vietnamese government awards affairs to body such as: buildings, bridges and highways. They additionally acclimated the cost-plus appraisement in contracts. However, to abstain the botheration of moral hazard, the government may accept celebrated companies and administer o action to ascendancy bigger affection of projects.

Question VI :

How is the company’s optimal basic account determined? Does the controlling action in this case resemble the action acclimated in bent the bulk and abundance of output? How?

The key of optimal basic bubget bent is the evaluating account of advance projects. It agency that basic activity allegation be acclimated accurately the banknote breeze and the time bulk of money. There are two methods which are advised as: the aftereffect adjustment and the accounting bulk of acknowledgment method.

The aftereffect adjustment account the aeon of time about to get aback the aboriginal investment.

The accounting bulk of acknowledgment adjustment is aftereffect (percentage) from boilerplate anniversary profits. These methods abatement banknote flows to the net present bulk (NPV), centralized bulk of acknowledgment (IRR) and advantage basis (PI).

There is a basic allotment archetypal which companies should use to optimize basic allotment plan. Every activity will be acclimated centralized bulk of acknowledgment (IRR) due to analyze with bordering bulk of basic (MCC) to chase the optimal point on the graph.(with the vertical arbor is IRR and MCC, the accumbent arbor is the advance capital) area the basic allotment of the close is optimixed.

When IRR = MCC, at that time, that is the point of the optimal advance budget.

In addition, it additionally agnate the action acclimated in determing the bulk and quatity of out put, the aggregation should accomplish a accommodation area the bordering acquirement (MR) equas the maginal bulk (MC), MR = MC.

More importantly, firms should do the bulk of the investments at the point area the centralized bulk of acknowledgment (IRR) equals the bordering bulk of basic (MCC), IRR = MCC.

Question VII :

Explain the aberration amid the Affective Averrage access and Exponential cutting access to forecasting. Which do you anticipate would be bigger for your company? Why?

The affective boilerplate access and exponential cutting access is additionally alleged cutting method. This adjustment use an averrage of accomplished ascertainment to anticipation approaching if we accede that the approaching is the absorption of several of accomplished result.

Acctually, the accomplished ascertainment to anticipation one aeon advanced . the blueprint is following:

E t+1 = ( Xt + Xt-1 +…+ Xt-N+1 ) / N

Where: E t+1 = Abutting (t+1) anticipation period

Xt , Xt-1 = Absolute valual at their corresponding times

N = Number of ascertainment included in average

Exponential cutting adjustment is altered the affective boilerplate method. We can see its amusement all the accomplished ascertainment as the aforementioned bulk of important. However, the diviner would belive the earlier accomplished aftereffect the bottom acceptable to approaching trend. So that, the exponential cutting adjustment the abate belief agency for earlier accomplished after-effects in the following:

E t+1 = wXt + (1-w)Et

Where: w is the weight assigned to an absolute ascertainment at aeon t.

Making forecast, the ahead alembic no charge accession antecedent aftereffect as abounding as affective boilerplate adjustment needs. Added importantly, the w bulk is determined.

In summary, both these forecasting methods accept several advantages and disadvantages. The advantage is the artlessness of method. So two methods should be acclimated aloof for abbreviate appellation estimates.

Question VIII :

A close is authoritative a long-run planning decision. It wants to adjudge on the optimal admeasurement of bulb and activity force. It is because architecture a medium-sized bulb and hiring 100 workers. Engineering estimates advance that at those levels, the bordering artefact of basic will be 100 and the bordering artefact of activity will be 75. If the allowance bulk is $5 and the rental bulk on basic is $10, is the firmmaking appropriate decision? Support your aswer.

We have: MPL = 75, MPK = 100 with (L = labor: capricious input; K = Capital: varible input)

To aerate its profit, the close allegation use two inputs (labor and capital) to accommodated the denmand of bordering acquirement of K and L input.

Wage bulk of labor: w = $5

Rental bulk on capital: r = $10

Leading to:  MPL  / w = 75/5 = 15 (1)

MPK  / r = 100/10 = 10 (2)

From (1) & (2), we can see that the close is not authoritative the appropriate accommodation or they should appoint added activity and abate basic rental value. 

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