Get premium membership and access revision papers, questions with answers as well as video lessons.
Got a question or eager to learn? Discover limitless learning on WhatsApp now -
Start Now!
Cfu 102 Introduction To Microeconomics Question Paper
Cfu 102 Introduction To Microeconomics
Course:Bachelor Of Commerce
Institution: Kca University question papers
Exam Year:2012
1
UNIVERSITY EXAMINATIONS: 2011/2012
YEAR 1 EXAMINATION FOR THE BACHELOR OF COMMERCE
CFU 102 INTRODUCTION TO MICROECONOMICS (Saturday)
DATE: APRIL 2012 TIME: 2 HOURS
INSTRUCTIONS: Answer Question One and Any other Two Questions
QUESTION ONE
a) Evidence suggests that there is less price competition in an oligopoly than other forms of
market structure. Why is this the case. (5 Marks)
b) From the following information calculate the marginal cost of each level of output
(5 marks)
c) Outline five main features of a free market economy (5 marks)
d) Explain how a utility maximizing consumer responds to a fall in the price of a given good. Give
reasons for your answer (5 marks)
e) Using an appropriate diagram, explain what is meant by a price-floor (or minimum price)
(5 marks)
f) Using an appropriate diagram, explain how a perfectly competitive firm maximizes profit in the
Output Total Cost
1
2
3
4
5
6
20
30
50
90
135
190
2
long-run. (5 marks)
(Total: 30 marks)
QUESTION TWO
A small island economy has a single state-run airport which is serves by a single state-run airline. Use
an appropriate diagram to analyse the effects on the market equilibrium price and quantity traded for
air travel following:
a) An increase in the cost of jet fuel (an input into the production cost of air travel) (6 Marks)
b) The privatization of the island’s airport resulting in large increases in the cost to consumers of
parking at the airport and using its services. (7 Marks)
c) The entry into the market of a low-cost or ‘budget’ airline providing a rival service to the staterun
airline. (7 marks)
(Total: 20 Marks)
QUESTION THREE
the following is some data about costs for single firm.
Out put Total Variable Cost (ksh) Total cost (ksh)
0 0 20
1 15 35
2 25 45
3 34 54
4 42 62
5 51 71
6 61 81
7 76 96
8 106 126
9 156 176
a) Identify the level of fixed costs for this firm. (2 Marks)
b) Derive average cost and marginal cost schedules from the data given. (5 Marks)
c) If this firm is able to sell all its output at a fixed price of Ksh 12 per unit, how many units
should it sell to maximize its profits and what will its level of profits be? (5 Marks)
d) If the fixed selling price fell to Ksh 8 per unit how should the firm respond:
i. In the short-run (8 marks)
3
ii. In the long-run?
(Total: 20 Marks)
QUESTION FOUR
a) Explain how a fixed per unit tax on the producers of a competitively produced good would affect
the price at which it was sold and the quantity traded. How is the burden of the tax distributed
between consumers and products? (8 marks)
b) Explain which kind of goods a government should tax if its objective is to maximize tax revenue.
(6 marks)
c) With the aid of a diagram, explain the COBWEB model of agricultural goods (6 marks)
(Total: 20 marks)
QUESTION FIVE
a) Why is perfect competition believed to be an ‘ideal’ form of market structure? (10marks)
b) What losses are experienced by consumers if they are supplied by a profit-maximizing monopolist
rather than a perfectly competitive industry? (10 marks)
(Total: 20 marks)
More Question Papers
Popular Exams
Return to Question Papers