Elements Of Microeconomics Question Paper

Elements Of Microeconomics

Institution: Kenyatta University question papers

Exam Year:2008

KENYATTA UNIVERSITY
UNIVERSITY EXAMINATIONS 2007/2008
INSTITUTE OF OPEN LEARNING
EXAMINATION FOR THE DEGREE OF BACHELOR OF EDUCATION
AEC 100: ELEMENTS OF MICROECONOMICS
DATE: Wednesday 9th January 2008 TIME:8.00am - 10.00am
Instructions: Answer question ONE and any other TWO questions

Question One (Compulsory)
Clearly distinguish between each of the following pairs of concepts. They carry six marks each pair.
(a) Market economic system; Command economic system
(b) Own price elasticity of demand; Cross price elasticity of demand
(c) Diminishing marginal utility; Diminishing marginal rate of substitution
(d) Law of variable proportions; Law of returns to scale
(e) Fixed costs; Variable costs
(f) Monopoly market structure; Monopolistic market structure

Question Two
(a) Write short notes on market equilibrium (6 marks)
(b) Using the following demand and supply functions for a commodity x, compute the equilibrium price and quantity. (4 marks)
Qd = 100 - 2p; Qs = 40 + 4p
(c) Ceteris Paribus, use diagrams to illustrate and explain the effects on the value in (b) from:
(i) fall in price of x substitute (4 marks)
(ii) A simultaneous increase in input prices and a rise in consumer's income. (6 marks)

Question Three
(a) Clearly compare and contrast the cardinal and ordinal theories of utility. (4 marks)
(b) Explain how the concepts of diminishing marginal utility and diminishing marginal rate of substitution are used to justify the law of demand.(14 marks)

Question Four
Consider the production data below where labour is the variable factor of production:

Labour (hrs) Total physical products
1 15
2 35
3 60
4 90
5 120
6 144
7 158
8 160
9 160
10 158
(a) Find the average physical products and marginal physical products at each level of labour. (8 marks)
(b) Using the data, explain the three stages of production in the short-run. (12 marks)

Question Five
(a) Compare and contrast a competitive market structure and a monopoly structure. (10 marks)
(b) Explain five sources of monopoly power to a firm. (10 marks)

Elements Of Microeconomics Question Paper

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