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Bcom 101: Principles Of Microeconomics Question Paper

Bcom 101: Principles Of Microeconomics

Course:Bachelor Of Commerce

Institution: Chuka University question papers

Exam Year:2012

CHUKA UNIVERSITY

COLLEGE

UNIVERSITY EXAMINATIONS

FIRST YEAR EXAMINATION FOR THE AWARD OF DEGREE OF
BACHELOR OF COMMERCE

BCOM 101: PRINCIPLES OF MICROECONOMICS

STREAMS: BCOM Y1S1 TIME: 2 HOURS
DAY/DATE: TUESDAY 11/12/2012 2.30 P.M – 4.30 P.M.
INSTRUCTIONS:

Answer question One and any other Two questions.
Do not write on the question paper.

(a) Clearly distinguish between the following terms used in economics. Use
diagrams where necessary.

Giffen goods and Veblen goods. [2 marks]
Perfect cartels and market sharing cartels. [2 marks]
Monopoly and monopolistic competition. [2 marks]
Positive and normative economics [2 marks]
Deductive and inductive methods [2 marks]

(b) Suppose that a firm’s total cost is described by the following quadratic function

TC = 1800 + 18Q +3Q2

Determine the output level at which

Average cost is minimized. [2 marks]
Average variable cost is minimized. [2 marks]
Average total cost is equal to marginal cost. [2 marks]

(c) Given the utility function

U = 1000x13y? and the consumer budget is
3000 = 100x + 50y
Determine the equilibrium basket of the consumer. [6 marks]
(d) Consider a two commodity market model represented by

Q_(d_1 )=4- P_1+?(1/2)P_2

Q_(S_1 )=-?(5/2)+?((3 )/2)P_1

Q_(d_2 )=8+2P_1-2P_2

Q_(S_2 )=-3+6P_2

Calculate the equilibrium prices and quantities for the market. [6 marks]

(e) Distinguish between ordinal and cardinal utility theories. [2 marks]

Q2. (a) Explain the factors that influence the price elasticity of demand. [10 marks]

(b) Demand for a product A is a function of its own price PA, price of the substitute
PB and income of the consumers Y. It is given as

QA D = 1000 – 7PA + 0.50Y + 1.25 PB

Determine the own price elasticity, cross price elasticity and income elasticity
of demand at a point of time when PA = 120, PB = 100 and Y = 5000
[6 marks]

(c) With the help of neat sketches, demonstrate different degrees of price
elasticity. [4 marks]

Q3. You are provided with the following information pertain a certain firm.

Units of Input Total Product
(L) (TP)
1 100
2 220
3 360
4 460
5 530
6 570
7 595
8 600
9 594
10 650

Determine both the average and the marginal products. [2 marks]
Describe the three stages of production by the use of a well labelled diagram. [7 marks]

Outline any four characteristics of monopoly firm apart from barriers to entry.
[4 marks]

Explain the various sources of monopoly power. [7 marks]

Q4. (a) Using diagrams, show and explain the short run and long run equilibrium position
of the firm under perfect competition. [10 marks]

(b) A firm under a competitive market has a demand curve given by Q = 20 – 10P.
Its cost function is C = 50 + 40Q. Compute the firm’s price, quantity and profits.
[10 marks]

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Bcom 101: Principles Of Microeconomics Question Paper

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