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Cfu 102 Introduction To Microeconomics (Day &Amp; Eve) Question Paper

Cfu 102 Introduction To Microeconomics (Day &Amp; Eve)

Course:Bachelor Of Commerce

Institution: Kca University question papers

Exam Year:2011

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UNIVERSITY EXAMINATIONS: 2010/2011
FIRST YEAR EXAMINATION FOR THE DEGREE OF BACHELOR OF
COMMERCE
CFU 102 INTRODUCTION TO MICROECONOMICS (DAY & EVE)
DATE: DECEMBER2011 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
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potential sources of economies of scale. ( 5 Marks)
e) If a rise in the price of good results to a fall in revenue from the good. What category would the price
elasticity of demand for the good fall into?
f) “Choice is at the centre of all economic problems” discuss this statement and indicate how
far an individual has freedom of choice.
Question Two
In some of the former Soviet Union a price celling is still imposed on basic foods while in
European community farmers 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 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: (10 Marks)
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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-maximizing level of output: (10 Marks)
ii) Maximum achievable profit
Question Four
Given below are the demand and supply function for oil in the world market
DD =25.2 – 1.8P
SS =3.6 + 0.6P
Required:
a) Calculate the market equilibrium price of oil in the world market (5 Marks)
b) What would be the consequences in the market with oil producing and exporting countries
(OPEC) reduce production and when demand for motor vehicles increased (5 Marks)
c) The introduction of taxation per barrel of oil (5 Marks)
d) Fall in the price of cheap energy substitute product (5 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
(6 Marks)

Cfu 102 Introduction To Microeconomics (Day &Amp; Eve) Question Paper

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