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Principles Of Microeconomics Theory Question Paper

Principles Of Microeconomics Theory

Course:Bachelor Of Arts Economics

Institution: University Of Nairobi question papers

Exam Year:2011

SPECIAL/SUPPLEMENTARY EXAMINATIONS 2010/2011
FIRST YEAR EXAMINATIONS FOR THE DEGREE OF BACHELOR OF ECONOMICS,BACHELOR OF ARTS IN LAND ECONOMICS,BACHELOR OF ARTS IN QUANTITY SURVEY AND BACHELOR OF ARTS
XET/CEC/BLE/BQS 105/101; PRINCIPLES OF MICROECONOMICS THEORY
INSTRUCTIONS; ANSWER THREE QUESTIONS. ALL QUESTIONS CARRY EQUAL MARKS
Q.1 a) Explain how we can apply the concept o production possibility (PPF) to answer the main basic economic questions
b) Discuss the major characteristics of a free market economy
c) Assume that the price of meat in Kenya was Shs 300 per kg, while the government legislated price is Shs 260. What would elementary theory of price predict to happen in the market for meat? The legislation is meant to protect low income consumers in the country. Do you think the regulation benefits or hurts them? Explain your answer.
Q.2 The following schedule gives hypothetical demand and income of Mr. Wafula

Points Price of good X Price of good Y Quantity demanded of good X Quantity demanded of good Y
a
b
c
d
e
f 10
12
14
16
18
20 30
40
50
60
70
80 20
35
52
68
72
75 3500
3000
2500
2000
1500
1000

a) i) Calculate the price elasticity of demand for good X between points c and d
ii) Calculate the income elasticity of demand for good X between points c and d
iii) How would you classify good X. Explain
b) i) Calculate cross-price elasticity of demand for good X with respect to good Y between points c and d
ii) What is the relationship between good X and Y?
c) What is the economic importance of the measurement of elasticity of demand.
Q.3 a) explain with help of well illustrated diagrams the properties of indifference curves
b) With the help of a diagram explain how consumers’ equilibrium is established.
c) Explain what happens when you adjust the income if consumer assuming the prices of commodities in his consumer basket remains unchanged.
Q.4 a) What is a production function.
b) What do you understand by input variations by a firm in the short-run, long-run and a very long-run?
c) Using the data in the following table which shows variations in output of goods as labour increases, compute average and marginal products of labour.

Labour 0 1 2 3 4 5 6
Total Product 0 57 136 219 288 325 312

d) Present a sketch of the marginal and average product of labour and on it indicate the points of diminishing marginal and average returns
Q.5 a) Clearly explain the assumptions of perfect competition
b) Explain the behavioral rules of profit maximization.
c) With the help of a relevant diagram explain the case of a firm operating under perfect competition in the long-run.

Principles Of Microeconomics Theory Question Paper

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