Automobile industry if fixed cost

Maruti Udyog Ltd. (MUL) has become Suzuki Motor Corporation’s R&D hub for Asia outside Japan. Maruti introduced upgraded versions of the Esteem, Maruti 800 and Omni, completely designed and styled inhouse. This followed the upgradation of WagonR and Zen models, done inhouse only a year before. Maruti engineers also worked with their counterparts in Suzuki Motor Corporation in the design and development of its new model, Swift.

The company launched superior Bharat Stage III versions of most of its models, well before the Government deadline. Maruti also set up a Centre for Excellence with a corpus or Rs. 100 million. This was done in collaboration with suppliers, who contributed an additional Rs. 50 million. The Centre provides consultancy and training support to Maruti’s Suppliers and Sales Network to enable them to achieve standards in Quality, Cost, Service and Technology Orientation.

Maruti has embarked upon this new project in collaboration with SMC for the manufacture of diesel engines, petrol engines and transmission assemblies for four wheeled vehicles. The project is being implemented in the existing Joint Venture Company viz. Suzuki Metal India Limited (renamed Suzuki Powertrain India Limited).

Questions

1)      Explain in automobile industry if fixed cost or variable cost if important to take managerial decision.

2)      If Maruti Udyog is assumed to work in perfectly competitive market, then draw the graph of losses and also explain the features of perfectly competitive market.

3)      P = 35 - 0.005Q

TC= 5,000+2Q+0.0005Q²

a.                  Find  equation of MR and MC (2) Marks

b.                  Determine profit ( 2marks)

c.                   What effect profit will have if a firm will be operating in monopoly and monopolistic competition?