Hbc2104:Introduction To Micro Economics Question Paper
Hbc2104:Introduction To Micro Economics
Course:Bachelor Of Commerce
Institution: Meru University Of Science And Technology question papers
Exam Year:2013
QUESTION ONE (30 MARKS)
a) Clearly distinguish between the following terms as used in economics. Use diagrams where necessary i. Engel curve and expansion path (2 Marks) ii. Giffen goods and Veblen goods. (2 Marks) iii. Positive economics and normative economics. (2 Marks) iv. Economies of scale and diseconomies of scale. (2 Marks) v. Monopolistic and Duopolistic competition. (2 Marks) b) Distinguish between a centrally planned economic system and a free enterprise economic system. (6 Marks) c) Demand for a product A is a function of its own price PA, price of the substitute PB and the income of the consumer Y. It is given as follows = 1000 7 + 0.7 + 1.25
Determine the own price elasticity, cross price elasticity and income elasticity of demand at a point of time when: = 120 = 100 = 5,000 (6 Marks) d) Explain the factors that influence the price elasticity of demand. (6 Marks)
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e) Explain the concepts of scarcity and choice. (2 Marks)
QUESTION TWO (20 MARKS)
a) With the aid of diagrams, show and explain the short run and long run equilibrium position of the firm under perfect competition. (10 Marks) b) A firm under perfect competitive market has a demand function given by = 20 10 and a cost function given by = 50 + 40. Compute the firms equilibrium price, quantity and profits. (10 Marks)
QUESTION THREE (20 MARKS)
a) Explain the stages of the law of variable proportions. (8 Marks) b) Distinguish between marginal rate of technical substitution and marginal rate of transformation. (6 Marks) c) Distinguish between a price ceiling and a price floor. (6 Marks)
QUESTION FOUR (20 MARKS)
a) Distinguish between cardinal utility and ordinal utility. (4 Marks) b) Consider the following equations 2 20 = 1 2 1 4 + 1 2 = 24 i. Identify with reasons which of the above equations represent demand and supply functions. (4 Marks) ii. Calculate the equilibrium price and quantities and interpret your results. (6 Marks) c) With the aid of a diagram explain the least cost combination of inputs. (6 Marks)
QUESTION FIVE (20 MARKS)
a) Given the cost function = 150 + 142 + 53 104
Where C = total cost
Q= level of output
i. Determine the variable cost function. (1 Mark) ii. Determine the average total cost. (1 Mark) iii. Determine the average variable cost. (1 Mark) iv. Determine the average fixed cost. (1 Mark) v. Determine the marginal cost. (2 Marks) b) The following table show a schedule of individual demand
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Px Py Qx 4 2 10 6 5 8 8 8 6 10 11 4
i. Calculate cross price elasticity of demand when the price of goods Y changes from 2 to 8. (6 Marks) ii. Using the result in (i) comment on the relationship between good X and goody. (3 Marks)
c) Explain the application of the theory of elasticity in economics. (6 Marks)
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