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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:2011

QUESTION ONE (30 MARKS)
a) Briefly explain the following terms as used in economics (use example) (i) Scarcity and choice (2 Marks) (ii) Opportunity cost (2 Marks) (iii) Production possibility frontier (2 Marks)
b) (i) A study found out that the quantity demanded of good X is directly related to price of good Y. What is the relation between the two goods? (2 Marks) (ii) Differentiate between inferior and giffen goods. ( 2 Marks) c) (i) Define the term income elasticities of demand. Explain how the value of income elasticities is used in establishing whether a good is a normal good or inferior good. (4 Marks) (ii) Use the data in the table below to compute income elasticities through the arc elasticity method. Quantity Income(Ksh) Price(Kshs) 100 5,000 16 120 6,000 16 (6 Marks)
d) (i) Define monopoly and explain four sources of monopoly power. (7 Marks) (ii) A monopoly can charge any price and sell any quantity in its market. Critique this statement. (3 Marks)
QUESTION TWO (20 MARKS)
a) State the law of demand (3 Marks) b) Differentiate between change in demand and change in quantity demanded ( use well labeled diagram) (6 Marks) c) Outline any five factors that affect demand of a product. (5 Marks) d) Differentiate between price ceilings and price floors. (6 Marks)
QUESTION THREE (20 MARKS)
a) Explain the major characteristics of perfect competition. (10 Marks)
b) With a well labeled diagram, explain the short run equilibrium production for a firm in a perfectly competitive market. (10 Marks)
QUESTION FOUR (20 MARKS)
a) Discuss the arguments for and against monopolies. (8 Marks) b) Describe and differentiate a perfectly inelastic and perfectly elastic demand (use a well labeled graph). (8 Marks) c) Explain the importance of elasticity of demand. (4 Marks)
QUESTION FIVE (20 MARKS)
a) Explain, with the help of graphs where necessary, the four properties of an indifference curve. (8 Marks) b) Explain the concept of consumer equilibrium. (6 Marks) c) Given the cost function: C= 200 + 5Q2 + 3Q3 Where C= total cost Q= level of output. (i) Determine the level of total fixed costs. (2 Marks) (ii) Total Variable cost function. (2 Marks) (iii) The marginal cost (2 Marks)

Hbc2104:Introduction To Micro Economics Question Paper

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