Business Economics

Question# 1

Consider Sadeem and Khloud grocery stores in the city of Dammam. Each store must decide

whether it will remain open on Friday or whether it will close on that day. Monthly payoffs

for each strategy pair are as shown in the table below. The payoffs for the upper part on each

triangle is for Sadeem and the lower part is for Khloud e.g Open on Friday for both (16, 000

is for Sadeem store while 8,000 is for Khloud Store)

a. Which store is the most profitable in this market?

b. Does any of the store (or two of them) has a dominant strategy, which of them?

c. What should this store do? Explain your answer (relate this to Nash Equilibrium and at

the same time determine the strategy that the two stores would engage in at last.

Question# 2

The results of the demand forecast of Shawarma is presented to you for analysis. As a

new business manager of the company, you are required to provide an explanation for

this forecast given your knowledge of business economics so that the company would

know what to concentrate on and how to plan for the future.

Y= 1.1 – 2.0P + 0.5S + 0.8X + 1.5T

(3.2) (9.3) (1.2) (2.6)

R 2 is 0.78; Probability value (F-statistic) is 0.02; t-statistics are the values in the

bracket above

Whereby Y is the Quantity demand for Sharwama

P is the price of Sharwamaa (in riyal)

S is the demand for Soft drink (in number of quantity)

X is the income of people in the market surveyed (in 1,000 riyal).

T is the taste of the consumers for Sharwama in that area

Question# 3

Suppose that a Ulcer Patient and Flu patient have the following demand for Drug CCC.

Price (SAR) Qd-Ulcer Patient Qd- Flu Patient

750 2900 500

800 2800 200

a) As the price of the Drug CCC rises from SAR750 to SAR800, what is the price elasticity of demand for

i. Ulcer patient (Show your workings)

ii. Flu patient (Show your workings)

b. Why might Ulcer patients have different elasticity than Flu patients?

Question 4:

A) Carefully choose a firm in a particular sector in Saudi Arabia and describes the nature and

characteristics of the market structure of such company, and what the company can do to

improve itself among its competitors in its business environment (Maximum of 500 words)

B) Given the demand and the cost curves below:

P = 170 – 10Q

TC = 40 + 50Q + 5Q 2

i. Calculate the monopolist’s profit-maximizing quantity and price if the above is for

a monopolist.

ii. Calculate the monopolist’s profit.

iii. Calculate the perfectly competitive firm’s quantity and price if the above is for a

perfectly competitive firm

iv. Determine the perfectly competitive firm’s profit

v. Compare the price, output and profit of both monopolist and perfectly competitive

firm, and state your views

Question# 5

Analyze the macroeconomic environment of Saudi Arabia in the last 10

years using the basic macroeconomic variables, and reference the source

of your data (Hint: Obtain information on economic growth rate,

inflation, unemployment rate and balance of payment)