SEMESTER SPRING 2013 MICROECONOMICS (ECO402) ASSIGNMENT NO. 02

SEMESTER SPRING 2013 
MICROECONOMICS (ECO402) 
ASSIGNMENT NO. 02
DUE DATE: 24
TH
JUNE, 2013
MARKS: 30
ASSIGNMENT: 
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. 
IMPORTANT: 
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. 
OTHER IMPORTANT INSTRUCTIONS: 
DEADLINE: 
 Make sure to upload the solution file before the due date on VULMS. 
 Any submission made via email after the due date will not be accepted. 
FORMATTING GUIDELINES: 
 Use the font style “Times New Roman” or “Arial” and font size “12”. 
 It is advised to compose your document in MS-Word format. 
 You may also compose your assignment in Open Office format. 
 Use black and blue font colors only. 
RULES FOR MARKING
Please note that your assignment will not be graded or graded as Zero (0), if: 
 It is submitted after the due date. 
 The file you uploaded does not open or is corrupt. 
 It is in any format other than MS-Word or Open Office; e.g. Excel, 
PowerPoint, PDF etc. 
 It is cheated or copied from other students, internet, books, journals etc. 
Note related to load shedding: Please be proactive 
Dear students! 
As you know that Pre Mid‐Term semester activities have started 
and  load  shedding  problem  is  also  prevailing  in  our  country. 
Keeping in view the fact, you all are advised to post your activities 
as early as possible without waiting for the due date. For your 
convenience;  activity  schedule  has  already  been  uploaded  on 
VULMS  for  the  current  semester,  therefore  no  excuse  will  be 
entertained after due date of assignments, quizzes or GDBs.