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Introduction To Micro Economics Question Paper

Introduction To Micro Economics

Course:Bachelor Of Economics

Institution: Kenyatta University question papers

Exam Year:2009

KENYATTA UNIVERSITY

UNIVERSITY EXAMINATION 2009/2010

FIRST SEMESTER EXAMINATION FOR DEGREE OF BACHELOR OF ECVONOMICSAND BACHELOR OF COMMERCE

EET 100:INTRODUCTION TO MICRO ECONOMIC THEORY

DATE:TUESDAY 22nd December 2009 Time:8.00am-10.00a.m

Insructions :
answer question one aand any other two questions

QUESTION ONE

a)distinguish the following terms :
i)consumer surplus and producer surplus
ii)Arc elasticity and point elasticity
ii)Inferior and Normal goods
iv)Marginal rate of subtitutition and Marginal rate of techinical subtitution
(8mrs)
b)the market for nokia mobile phones is representde by the following functions
Q+1/3P =36
Q+9=12P
Where p is price
Q is quantity
i)identify the demand and suply functin giving reasons in each case (4mrks)
ii)Determine the equilibrium Pric and Quantity.(4mrks)
iii)calculate the price elasticity of demand for NOKIA phones where it price changes from kshs 30 to kshs 36(4mrks)
c)considering the effect of a price fll on consumer equilibrium carefully distinguish between an inferior good and a giffen good giving examples in each case.(10mrs)

QUESTION TWO

Distinguish between consumer equilibrium in cardinaal and ordinal approach (6mrks)
b)The informatio given below shows combination of two goods (xand ythat yeid the same level of utility to jack he has kshs 200 to spend entirelsy on the two goods and wishes to purchase the utiity maximizing ombination.the price of good X and Y are kshs 24 and Kshs 3 respectively.
combination GoodX Good Y MRSof good X for goodY
A 1 68
B 2 56
C 3 46
D 4 37
E 5 29
F 6 23
G 7 19
H 8 16
i)copy and complete the table byfiling in the missing values for MRS(3MRKS)
ii)Using the above infomation explain the concept of diminishing marginal rate of substitution 3mrks)
iii)Determine the utility maximizing combination of good X and good Y.4mrks)
iv)How much extra income does jack need in order to purchase this utility maximizing ombanation 4 mrks)

QUESTION THREE

a)use a well diagram to eplain short run equilibrium ,long run equilibrium and shut down point of perfectly competitive market(15mrks)
b)the demand function of a monopolist is given by p=140-2Q and his/her cost function is given by TC=10+5Q.Determine the profit maximizer quantity and price 5mrks)

QUESTION FOUR

a)The productin of a firm opeating under perfect competion is provided in the table below The firm sells each uint of its outputy at kshs 131.
TOTALPRODUCT(Q) TOTAL VARIABLE COST
0 0
1 90
2 170
3 240
4 300
5 370
6 450
7 540
8 650
9 780
10 930
i)calculate the values of total cost ,average cost average variable cost,marginal cost ant marginal revenue(5mrks)
ii)plot the AVC,ATC,MC andMR on a graph and etimate the profit maximazing price and quatity(6mrks)
ii)what si level of economic profit attained at this output (3mrks)
Outline any reasons why the exsitence of monopolises may be benefites to the economy (6mks)

QUESTION FIVE

a)Explain why indifference curves for rational consumers
i)slopes downwards (2MRK)
ii)convex to the origin (2MRKS)
iii)Do not intersect (2MRKS)
b)Desribe how you derive market demand currve from indiferrence curve
c)Explain three importance of elasticity(6mrks)

Introduction To Micro Economics Question Paper

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