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Bcom 201: Intermediate Microeconomics Question Paper
Bcom 201: Intermediate Microeconomics
Course:Bachelor Of Commerce
Institution: Chuka University question papers
Exam Year:2013
CHUKA
UNIVERSITY
UNIVERSITY EXAMINATIONS
SECOND YEAR EXAMINATIONS FOR THE AWARD OF DEGREE IN BACHELOR OF COMMERCE
BCOM 201: INTERMEDIATE MICROECONOMICS
STREAMS: BCOM Y2S1 TIME: 2 HOURS
DAY/DATE: WEDNESDAY 17/4/2013 2.30 PM – 4.30 PM
INSTRUCTIONS:
1. (a) Suppose a consumer’s demand for a good is given as: x=10+M/(10P_1 )
Given that the consumer’s income is Ksh.120 per day and that the price of good X is Ksh. 3 per unit;
(i) Find the consumer’s demand for milk. [1 Mark]
(ii) Assume that the price of good X now falls to Ksh. 2 per unit. Find the new
demand for good X. [1 Mark]
(iii) Determine the substitution and income effects under constant real income hypothesis of slutsky. [13 Marks]
(b) Suppose that a monopolist faces two markets with the demand curves given as:
D_1 (p_1 )=100-P_1
D_2 (p_2 )=100-?2P?_1
Assume that the monopolists marginal cost is constant at Ksh. 20 per unit
(i) If the monopolist can price discriminate, what price should the firm charge
in each market in order to maximize profits 2. [6 Marks]
(ii) Suppose the firm can not price discriminate, what price should it charge?
[5 Marks]
(iii) Describe the alternative ways which a monopolist can price
discriminate. [9 Marks]
2. (a) Given the following utility function:
U(x_1 ?,x?_2 )=Inx_1+x_2
(i) State the consumer’s problem. [1 Mark]
(ii) Form a Lagrangian function for the problem. [1 Mark]
(iii) Find the consumer’s demand function for x_1 ? and x?_2 [8 Marks]
(b) Given the following Cobb-Douglas production function:
f(x_1,x_2 )=x_1^a x_2^b
(i) Find the factor demand functions. [7 Marks]
(ii) Derive the supply function for this firm. [3 Marks]
3. (a) Assume that an industry has two firms; A and B. the market demand is
P = 200-0.8Q while the colluding firms have costs given as:
¦( @C)_a=?10Q?_a^2 and C_b=80 Qb.
(i) Determine the equilibrium price and quantity that each firm should
Produce. [7 Marks]
(b) Given the production function below Q=f(K,L)=?AK?^? L^ß
(i) Determine the marginal product of the factors. [2 Marks]
(ii) Find the Marginal Rate of Technical Substitution. [2 Marks]
(iii) Determine the elasticity of substitution. [4 Marks]
(iv) Determine the nature of returns to scale. [3 Marks]
4. (a) The market demand function of a competitive industry is represented by
Q=10.5 – P where q is aggregate quantity supplied by all firms at price p. All the firms in the industry has identical cost function. C=Q-Q^2+0.5Q^3
Where C is the cost of a firm and q is the quantity produced by each.
Calculate:
(i) The output produced by each firm in the long run. [5 Marks]
(ii) The long-run equilibrium price. [1 Mark]
(iii) The equilibrium number of firms. [4 Marks]
(b) Given the production and cost function as:-
Q=?500L?^(1/4) K^(3/4)
C=W.L+r.K
(i) Derive the demand curves for labour and capital with a view to
maximizing the output when the cost is limited to ksh.10,000. [2 Marks]
(ii) Determine the equilibrium levels of employment of the factors given
w = 100 and r = 75. [6 Marks]
(iii) Draw a sketch to explain the equilibrium of this producer. [2 Marks]
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