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Introduction To Microeconomics Question Paper
Introduction To Microeconomics
Course:Bachelor Of Commerce
Institution: Kca University question papers
Exam Year:2009
UNIVERSITY EXAMINATIONS: 2009/2010
SECOND YEAR STAGE 2 EXAMINATION FOR THE DEGREE OF
BACHELOR OF COMMERCE
CFU 102: INTRODUCTION TO MICROECONOMICS
(DAY&EVENING CLASS)
DATE: DECEMBER 2009 TIME: 2 HOURS
INSTRUCTIONS: Answer Question ONE and Any other TWO Questions
QUESTION ONE
a) From the following information, calculate the marginal cost of each level of output
( 5 Marks)
Out put Total cost
1 20
2 30
3 50
4 90
5 135
6 90
b) Explain the reasons why collusive agreements by Oligopolysts to restrict output tend to be unstable ( 5 Marks)
c) Using a demand and supply diagram, explain the effects on the labour market of the
introduction of a minimum wage. ( 5 Marks)
d) Billy, a young businessman is deligiated that the company he set up is now large enough to
benefit from economies of scale. Using your knowledge of economic theory, explain the
potential sources of economies of scale. ( 5 Marks)
e) If a rise in the price of a good results to a fall in revenue from the good. What category would the price elasticity of demand for the good fall into? (5 Marks)
f) “Choice is at the centre of all economic problem” discuss this statement and indicate how far an individual has freedom of choice. ( 5 Marks)
QUESTION TWO
In some of the republic of the former soviet union a price celling is still imposedon basic foods
while in European community farmes still receive a guaranteed minimum price for some of their produce.
a) Assuming the existence of a free market in all other respect, explain briefly the economic consequences of both of these form of price control. ( 15 Marks)
b) What justification would you advance for Government intervention in a free market.
( 5 Marks)
QUESTION THREE
A firm has the following cost structure:
Output Total cost (£)
0 80
1 100
2 140
3 210
4 280
5 400
6 600
a) Define and calculate the following for the firm:
i) Fixed cost:
ii) Average total cost schedule:
iii) Marginal cost schedule.
b) If the industry price is fixed at £120, calculate the firm’s:
i) Profit-maximising level of output:
ii) Maximum achievable profit.
QUESTION FOUR
Using demand and supply diagrams, analyze the effects on the market equilibrium price and quantity
traded for good with reference to the following.
a) The introduction of a per tax on the suppliers of good x
(7 Marks)
b) A reduction in the production cost of good x ( 7 Marks)
c) Fall in the price of good Y which is a substitute. ( 6 Marks)
QUESTION FIVE
a) Briefly outline the characteristics of a perfectly competitive industry in long- run equilibrium.
(7 Marks)
b) Briefly outline the characteristics of a monopoly in long-run equilibrium. (7 Marks)
c) Why are monopolists often able to earn profits in the long-run whilst perfectly competitive firms are not? ( 6 Marks)
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