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Thread: ECO402 Microeconomics Assignment No.2 Solution Spring Semester 2013

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    18 ECO402 Microeconomics Assignment No.2 Solution Spring Semester 2013

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    ECO402 Microeconomics Assignment No.2 Solution Spring Semester 2013

    SEMESTER
    SPRING
    2013
    MICROECONOMICS
    (ECO402)
    ASSIGNMENT
    NO.
    02
    D
    UE
    D
    ATE
    :
    24
    TH
    J
    UNE
    ,
    2013
    M
    ARKS
    :
    30
    A
    SSIGNMENT
    :
    The case:
    Dewan Farooque Motors Limited (DFML) is a Pakistani manufacturer of automobiles
    under license to Hyundai Motor Company and Kia Motors Corporation since 1998. The
    company is a subsidiary of Dewan Mushtaq Group, headquartered in Karachi with an
    assembly plant located in Sujawal. According to Budget 2013-2014, Hybrid cars up to
    1200cc will not have any duty, sales tax or income tax. Further, duty on Hybrid Vehicles
    of 1201cc to 1800cc has been reduced by 50 percent and from 1801cc to 2500cc to be
    reduced by 25 percent. To analyze the impact of this tax release on its sales, Dewan
    Farooque Motors Limited analyzed company’s facts and figures of past years and
    estimated its data for year 2013. Hypothetical data on price, quantity and total cost of the
    company has been given below:
    Year Price Unit sold
    (Q)
    Total Cost
    (TC)
    2008 325 150 29000
    2009 350 140 35000
    2010 425 130 49000
    2011 510 125 56000
    2012 630 100 60000
    Estimated
    2013
    720 80 65000
    Requirements:
    Use the above information and:
    A.
    Calculate average cost and average revenue of Dewan Farooque Motors Limited
    for each year.
    B.
    Calculate for each year whether company is operating at profit or loss.
    C.
    Determine the quantity sold and price level at which the total profit for company is
    maximized.
    D.
    Suppose Dewan Farooque Motors Limited has hired you as an Economist to
    analyze the impact of this tax release on its sales. Discuss how this decision will
    affect the sales of this company?
    Marks: (A=6+6), (B=6+6), (C=3), (D=3)
    Instructions:

    Please read the following instructions carefully before preparing the assignment solution:

    Solution of Part A and Part B should be in the following tabulated format.
    Part A
    Part B
    AC
    AR
    TR
    Profit/Loss

    Calculate to the point where calculation is being required. NO need to write
    irrelevant material or extra interpretation.

    This Assignment can be best attempted from the knowledge acquired after
    watching video lecture no. 16 to lecture no. 26 and reading handouts as well as
    recommended text book.
    I
    MPORTANT
    :
    24 hours extra / grace period after the due date is usually available to overcome
    uploading difficulties. This extra time should only be used to meet the
    emergencies and above mentioned due dates should always be treated as final
    to avoid any inconvenience.
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