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Econ 110: Introduction To Microeconomics March 2009 Question Paper

Econ 110: Introduction To Microeconomics March 2009

Course:Bachelor Of Commerce

Institution: Kabarak University question papers

Exam Year:2009

COURSE CODE: ECON 110
COURSE TITLE: INTRODUCTION TO
MICROECONOMICS
STREAM: Y1S1
INSTRUCTIONS:
1. Question ONE is compulsory.
2. Attempt any other TWO questions.
3. Demonstration of accurate, concise and unambiguous answers is encouraged.
QUESTION ONE
a) Write concise notes on each of the following terms:
i) Economic good (1mk)
ii) Complimentary good (1mk)
iii) Economies of scale (1mk)
iv) Elasticity of factor substitution (1mk)
v) Inferior good (1mk)
b) Distinguish between the following paired concepts:
i) Budget line and isocost line (3mks)
ii) Offer curve and engel curve (3mks)
c) i) Distinguish between scarcity, choice and opportunity cost. (3mks)
ii) Show that indifference curves do not intersect. (2mks)
iii) Provide an application of indifference curves. (4mks)
d) Using appropriate diagrams show how the equilibrium condition is obtained in
ordinal utility theory. (10mks)
QUESTION TWO
a) Distinguish between point elasticity of demand and arc elasticity of demand.
(4mks)
b) What factors effect the price elasticity of demand? (5mks)
c) With reasons state the likely price elasticity of the following commodities:
i) Food (1mk)
ii) Beer (1mk)
iii) Water (1mk)
iv) Aspirin (1mk)
v) Privately sponsored Bachelor of Commerce Degree at Kabarak University.
(1mk)
vi) Khat (“Miraa”) (1mk)
d) In what ways does the concept of elasticity find practical use? (5mks)
QUESTION THREE
Define Pareto optimality and use indifference curves theory to show that trade between two
countries can lead to Pareto optimality. Assume that the two countries are Japan and Kenya
while the two commodities are automobiles and tea. (20mks)
QUESTION FOUR
a) What do you understand by the term production isoquant? (3mks)
b) Show how production isoquants can be used to explain:
i) Constant returns to scale (4mks)
ii) Decreasing returns to scale (4mks)
iii) Increasing returns to scale (4mks)
c) What is a firm’s equilibrium? (5mks)
QUESTION FIVE
a) Briefly discuss the major differences between a perfectly competitive market and
pure monopoly in terms of:
i) The demand curve facing each firm (5mks)
ii) Utilization of resources (5mks)
iii) Management decisions (5mks)
b) Which of the above market systems would you prefer? Justify your answer.
(5mks)

Econ 110: Introduction To Microeconomics March 2009 Question Paper

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