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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:2012

QUESTIONONE (30 MARKS)
a. Define a perfect competitive market and explain its characteristics. (7 Marks) b. Explain the properties of indifference curve. (4 Marks) c. Define the following terms as used in economics: i. Scarcity and choice (2 Marks) ii. The law of return to scale (2 Marks) iii. Opportunity cost (2 Marks) iv. Production (2 Marks) d. Using demand and supply functions of a commodity, compute the equilibrium price and quantity. Qd = 200 – 4p Qs = 80 + 8p (6 Marks) e. Explain any five factors that influence the demand of a good or service. (5 Marks)
QUESTION TWO (20 MARKS)
a. Briefly describe the three stages of production. (12 Marks) b. State the law of diminishing returns. (2 Marks) (i) Complete the table below (4 Marks)
Quantity of x consumed per week Total utility units per week marginal Utility (units)
0 0 a
2
1 20 b 2 50 c 3 60 d 4 e 2 5 f -2 6 54 g 7 46 h
c. Differentiate between inferior goods and giffen goods. (2 Marks)
QUESTION THREE (20 MARKS)
a. Differentiate between arc elasticity and point elasticity of demand. (2 Marks) b. If the price of coffee rises from ksh.45 per 250 grams pack to ksh.55 per 250 grams pack and as a result the consumer’s demand for tea increases from 600 packs to 800 packs of 250 grams.
Required:
Calculate the cross elasticity of demand. (8 Marks)
c. With the aid of a diagram state the law of supply and explain the factors that influence supply of a good or service. (10 Marks)
QUESTION FOUR (20 MARKS)
a. Define elasticity and outline its importance in economics. (5 Marks) b. Discuss the characteristics that would indicated that the market for a good or service is in disequilibrium. (5 Marks) c. with the aid of a diagram explain the economic effects of: i. Maximum price legislation (5 Marks) ii. Minimum price legislation (5 Marks)
QUESTION FIVE (20 MARKS)
a. Differentiate between short run period and long-run period of a firm. (6 Marks) b. A firm has complete monopoly over the production of lighting bulbs. The following information is given. Total revenue TR = 1000 – 10 q2 MC = 100 + 10 q
Where q equals output of bulbs per unit of time.
Required:
i. Determine the number of bulbs that would be sold and the price charged if the firm was to set its price as a monopoly. (6 Marks) ii. Briefly discus the factors that give rise to monopoly. (8 Marks

Hbc2104:Introduction To Micro Economics Question Paper

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