SEMESTER FALL 2011
Economics (ECO401)
Assignment No. 2
Due Date: 27-12-2011 Marks: 30
Assignment:
The case:
Gandhara Nissan (GN) is an Automobile Company working under the structure of imperfect competition. Recently, the Economic Coordination Committee (ECC) has imposed ban on import of Compressed Natural Gas (CNG) cylinder kit and sales of car with factory fitted CNG. This decision has been taken to overcome the prevailing shortage of gas in the country. Gandhara Nissan has hired Mr. Umer, an economist to analyze the impact of this ban on the company’s sales. Mr. Umer estimated that quantity sold will decrease and price will increase in upcoming years. The data on price and quantity sold by the GN company for the last five years and estimated data for the year 2012 is given under.
Requirements:
Use the above information collected by Mr.Umer and:
A. Calculate average cost and average revenue of GN for each year.
B. Calculate at each level whether GN is operating at profit or loss.
C. Determine the quantity sold and price level at which the total profit for GN is maximized.
D. As a student of Economics, analyze how this incident will affect the overall automobile industry?
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.
• 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. 14 to lecture no. 25 and reading handouts as well as recommended text book.
