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Aec 101: Introduction To Micro-Economics Question Paper

Aec 101: Introduction To Micro-Economics

Course:Bachelor Of Business Administration

Institution: Maseno University question papers

Exam Year:2014

MASENO UNIVERSITY

UNIVERSITY EXAMINATION 2014/2015

FIRST YEAR FIRST SEMESTER EXAMINATIONS FOR THE DEGREE
OF BACHELOR OF BUSINESS ADMINISTRATION, ARTS, EDUCATION,
SCIENCE AND AGRI-BUSINESS WITH INFORMATION TECHNOLOGY

(MAIN CAMPUS)

AEC 101: INTRODUCTION TO MICRO-ECONOMICS

Date:5th December 2014 Time: 11.00-1.00pm

INSTRUCTIONS:
.Answer question ONE and any other TWO questions.
.Question ONE carries 30 marks, the rest 20 marks each.
.Marks will be awarded for being neat, clear and use of relevant illustrations.

MASENO UNIVERSITY ISO 9001:2008 CERTIFIED

QUESTION ONE
(a)Explain the basic economic problems any society and how they are solved in capitalistic and mixed economies (12 marks)

(b)Differentiate between the following:

(i)Producer and consumer equilibrium (4 marks)

(ii)Economic and consumer accounting profits (4 marks)

(c)Explain the concept of Kinked demand curve and the features of an oligopoly market (10 marks)

QUESTION TWO
(a)Explain the differences between explicit and implicit costs of production and geometrically derive average and marginal products (10 marks)

(b)Explain the features of a perfectly competitive market and the demand curves of firms in this market and their profit maximization conditions. (10 marks)

QUESTION THREE
Suppose that you are given a firm's demand function as
Q=2000-20P
And firm's cost function is given as :
TC=0.05Q^2+10,000
(i)Find the firm's total revenue(TR) and her marginal revenue(MR) (4 marks)

(ii)Calculate the firm's marginal costs (MC) (2 marks)

(iii)Calculate the firm's average costs (2 marks)

(iv)From the information given above, calculate the firm's profit maximizing output and price levels(Q* AND P*) (8 marks)

(v)Calculate the firm's maximum profit (2 marks)

(vi)Show that this is the true maximum profit by using the second order conditions as a test (2 marks)

QUESTION FOUR
Using diagrams differentiate between the following:
(i)Producer surplus and consumer surplus (5 marks)

(ii)Budget and Isocost lines (5 marks)

(a)Using classical production function, explain the stages of production of a firm and advise on the optimal stage of operation (10 marks)

QUESTION FIVE
(a)Given a demand function of the firm:
Q=1000-20P
Calculate the point of demand when
p=100 and q=80 (5 marks)

(b)Explain the determinants of elasticity of supply of a good or service (10 marks)

(c)Explain the importance of price and income elasticity to a producer and government (5 marks)

Aec 101: Introduction To Micro-Economics Question Paper

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