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Micro Economic Theory Question Paper

Micro Economic Theory

Course:Bachelor Of Commerce

Institution: University Of Nairobi question papers

Exam Year:2012

1. The function of a consumer is expressed as U=x(2/3)y(1/3) and the consumer budget constraint is given as 100x +150y =45000
a)Form this consumer’s Lagrangian function
b)Derive the first order conditions for equilibrium
c)How many units x any y will the consumer buy to maximize satisfaction?
d)Determine the marginal utilities of each commodity when x =y = 64
e)Determine the slope of this consumer’s indifference curve

2. Using labeled diagrams show the following
a.Demand curve facing a firm operating in a perfectly competitive market
b.Long run expansion path
c.Price consumption curve
d.Decreasing returns to scale
e.Engel curve for an inferior good x

3. State whether each of the following statements is TRUE or FALSE. Substantiate your answer in each case.
a.Inferior good is one bought by few customers
b.The key feature of oligopoly market is the independence in output and price decision.
c.The economic region of the production function is where both the marginal product and the average product are falling
d.Consumer equilibrium occurs when the slope of the consumer’s indifference curve is equal to the slope of the budget line
e.Increasing returns to scale means that an increase in all inputs of production will result in an increase in output of the firm

4. The total fixed cost of production is Kshs 600 and the average variable cost function is given as AVC = 10 – 0.03q + 0.00005q2
a.Determine the marginal cost function
b.At what output (q) is AVC at its minimum
c.Clearly state the short run law of production

Micro Economic Theory Question Paper

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