Question1. Sam Witwicky, a computer programmer with the salary of Rs 1,200,000 per year is thinking of opening a restaurant in a commercial building he owns. While yearly revenue is estimated to be Rs 5 m, yearly total cost will amount to Rs 3.6 m. The rent income of Rs 50, 000 per month on the commercial building will have to be foregone if it is employed for the restaurant. Must Azad start the restaurant?
Question2. Wonder T-shirts ltd plans to invest in machine costing Rs 500,000 having a useful life of 4 years. The new machine will lead to cost diminutions of Rs 100,000 in year 1 and year 2 and Rs 200, 000 in Year 3 and Year 4. Given the rate of return is 10%, must the company invest in this machine?
Question3. FastJet and SuperJet are both planning to invest in the production of new plane which will be faster than conventional planes. Given that a huge investment is required; both firms have decided to put their investment decision on hold. If one firm invest in the new plane, it will be capable to generate an increase of profit of Rs100m next year while the non investing firm will have a reduction of profit of Rs 50m, if both firms don’t invest they will both have an raise of profits of Rs 50 m while if both firms do invest in the plane, they will both have a diminution of profit of Rs 25 m. Draw the pay-off matrix of FastJet and SuperJet. Would the two companies invest in new plane?
Question4. Explain how managers use the concepts of agent–principal problem and incentives to motivate workers.
Question5. Appraise competitive strategies employed by firms’ operating in monopolistic competition market structure.