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Econ 110: Introduction To Microeconomics December 2009 Question Paper

Econ 110: Introduction To Microeconomics December 2009

Course:Bachelor Of Science In Economics And Mathematics

Institution: Kabarak University question papers

Exam Year:2009

COURSE CODE: ECON 110
COURSE TITLE: INTRODUCTION TO MICROECONOMICS
STREAM: Y1S1

INSTRUCTIONS:
1. This paper contains Five (5) questions.
2. Answer question one (1) and any two (2) questions.
3. Question One carries Thirty (30) marks and all other questions carry (twenty (20)
marks each.
4. Where necessary use appropriate diagrams to illustrate your answer.

QUESTION ONE (30 MARKS)
(a) The total cost function of a factory for a given commodity is given as follows:-
C = 1,000 + 100Q – 15Q2
+Q3
Where C is total cost in shillings and Q is output measured in kilogrammes.
(i) Define fixed and variable costs and show each of them in the total cost function.
(4mks)
(ii) Define total average cost and derive the average variable cost function for the
factory. (4mks)
(iii) Define marginal cost and derive the marginal cost function for the factory.
(4mks)
(iv) If the demand function of the same factory for the commodity is given as
Q = 25 – 5P
Where P is the price of the commodity.
Show the equation for the profit maximizing output of the factory and obtain the
output value. (10mks)
(b) Explain and illustrate the conditions under which a firm under perfect competition
may continue in production while making losses. (8mks)
QUESTION TWO
(a) Define arc elasticity of demand and explain the determinants of price elasticity of
demand. (10mks)
(b) Optional allocation of resources in achieved under perfect competition market
structure than under monopoly. Do you support this statement? Explain.
(10mks)
QUESTION THREE
(a) Distinguish between stable and unstable market equilibrium (2mks)
(b) What will be the effect of change in supply of a commodity on its equilibrium
position, price and quantity assuming stable market equilibrium. (8mks)
(c) Explain the difference between the demand curve faced by a firm under perfect
competition and the one under monopoly. (4mks)
(d) Which market type between perfect competition and monopoly represents optimal use
of resources? Explain your answer. (6mks)
QUESTION FOUR
With the help of appropriate diagrams explain the following pairs of economic concepts:-
(a) Marginal rate of substitution and marginal rate of technical substitution. (5mks)
(b) Change in quantity supplied and change in supply. (5mks)
(c) Production isoquant and isocost line. (5mks)
(d) Income consumption curve and the firm’s expansion path. (5mks)
QUESTION FIVE
(a) Define an indifference curve and explain its properties. (8mks)
(b) Explain the term “economic problem” (2mks)
(c) What are some of the common features of perfect competition and monopolistic
competition market structures? (8mks)
(d) Explain the term marginal utility. (8mks)
END.

Econ 110: Introduction To Microeconomics December 2009 Question Paper

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