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Hcob2505:Production Economics Question Paper

Hcob2505:Production Economics

Course:Bachelor Of Commerce

Institution: Meru University Of Science And Technology question papers

Exam Year:2014

QUESTION ONE (30 MARKS)
a. Absolute advantage and comparative advantage are both concepts in international trade. Discuss. (10 Marks) b. What do you mean by production function? What s the difference between a short run and long run production function? (10 Marks) c. With an aid of a diagram explain the three stages of production (10 Marks)
QUESTION TWO (20 MARKS)
a. Given the following total cost function: TC = 200 + 10Q = 8Q2 + 12Q3 i. Derive the MC function (3 Marks) ii. Derive the AC function (3 Marks) iii. Calculate the MC and AC when Q is 10 units (4 Marks) b. Using an illustration, explain the concept of constant returns to scale. (10 Marks)
QUESTION THREE (20 MARKS)
a. Find the degree of homogeneity and determine whether the function displays constant, decreasing or increasing returns to scale. i. Q = aK1/2 L1/4 (3 Marks) ii. Q=AK4/7 L4/7 (3 Marks) iii. Q = AK3/4 L1/4 (3 Marks) c. Write the three assumptions of an isoquant (3 Marks) d. Highlight the factors that affect external economies of scale (8 Marks)
2
QUESTION FOUR (20 MARKS)
a. Identify eight causes of unemployment n developing countries (8 Marks) b. Which are the characteristics of an entrepreneur (12 Marks)
QUESTION FIVE (20 MARKS)
a. You are given the following information regarding a certain firm.
Output (Q) TFC FVC
0 200 0
1 200 50
2 200 90
3 200 120
4 200 140
5 200 150
6 200 156
7 200 176
8 200 208
9 200 270
10 200 350
Determine total cost (TC) marginal cost (MC) average variable costs (AVC) average fixed costs (AFC) and average total costs (ATC) (10 Marks)
b. Write short notes on: i. Isocost line (2 Marks) ii. MRTS (2 Marks) iii. Opportunity cost (2 Marks) iv. Fixed costs (2 Marks) v. Capital (2 Marks)
iv.
3

Hcob2505:Production Economics Question Paper

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