ECO 5000, S3 2017: Assignment 1 Questions/Problems and Instructions
Three Short Answer Questions/Problems
Content Coverage: Module 1 & part of Module 2 (Chapters 1-6) (Week 1-3)
Due: Tuesday 5 December 2017 at 12 midnight (USQ time)
A cover page will go at the front of your assignment submission. It must contain the following information at a minimum: Name (in full), USQ student number.
The answer to each question shall have a maximum length of one (1) A4 page, font size 12. Content which goes over the one page limit per question will not be marked.
Each question shall be marked out of five (5) — content 4.5, research, presentation, grammar, spelling etc 0.5
Maximum length of your submission shall therefore be four (4) pages.
References (if needed and up to a maximum of three) should be placed at the end of your answer to each question.
Files extensions that can be submitted are: doc, docx, rtf.
Title your file with your surname.
Submission is through the Assignment 1 portal which will be on the front page of the study desk.
Suppose you are a manager of a business firm. You have taken a decision which is considered by the management as a bad decision. Give the example of this bad decision (outside of textbook example), and explain why it is proved as a bad decision. How can this problem be fixed? (5 marks)
Prescott Pharmaceuticals makes a number of generic versions of drugs. When Cymbalta (Duloxetine) lost its patent, Prescott invested $500,000 to obtain FDA approval and $100,000 to certify one of its production lines for its production. Production of the drug will cost $2,000,000. Marginal costs for the tablet are $0.10 and they sell for $0.40 per tablet. But many firms have entered and now make Duloxetine causing sales to fall off. Prescott anticipates that it could use this production line for other drugs losing patent protection shortly. If forecasted sales are 5 million tablets, what is the breakeven price? Should Prescott discontinue selling this product? (5 marks)
The Doug's Delicious Diner faces a demand curve for its daily special in which there are an equal number of potential buyers at every $0.20 price point between $8.00 and $6.00. If the marginal cost is $6.35, what price maximizes profits? Doug notices that at this price the unserved portion of demand are all senior citizens. If it offered a senior discount, how much should it be? (3+2 = 5 marks).