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Dibm 0112: Principles Of Microeconomics Question Paper

Dibm 0112: Principles Of Microeconomics

Course:Diploma In Business Management

Institution: Chuka University question papers

Exam Year:2012

CHUKA UNIVERSITY

COLLEGE

UNIVERSITY EXAMINATIONS

FIRST YEAR EXAMINATION FOR THE AWARD OF
DIPLOMA IN BUSINESS MANAGEMENT

DIBM 0112: PRINCIPLES OF MICROECONOMICS

STREAMS: DIP. (BUS. MGT) TIME: 2 HOURS
DAY/DATE: TUESDAY 11/12/2012 8.30 A.M – 10.30 A.M.
INSTRUCTIONS:

- Answer question One and any other two questions.
- Do not write anything on the question paper.

Question One (Compulsory)

1. (a) Distinguish between the following terms used in economics:

(i) Microeconomics & macroeconomics
(ii) Change in quantity demanded & change in demand
(iii) Giffen goods & Veblen goods
(iv) Opportunity cost & Scarcity
(v) Isoquant & Isocost [10 marks]

(b) Government from time to time control prices using minimum & maximum price controls.

(i) With aid of diagram explain maximum price control. [5 marks]

(ii) What effect that such a control could have and how does the government
intervene to maintain that price? [7 marks]

(c) With aid of diagram, explain the resultant change in the equilibrium position
following an increase in taxation. [6 marks]

(d) Given the following consumer’s utility function

U = 20X - 4Z2 + 40Z – X2

Compute the marginal utility of good x and marginal utility of good z.
[4 marks]
Question Two:

2. (a) Given the following functions

Q1 = 15 – 0.5P
Q2 = 3 + 2P

Required:

(i) Identify with reasons which one is the demand and supply function.
[2 marks]
(ii) Calculate the equilibrium price and quantity. [4 marks]

(iii) Compute the own price elasticity of demand and interpret your
results. [6 marks]

(b) Explain the assumptions of ordinal utility theory. [8 marks]

Question Three:

3. (a) Explain the sources of monopoly power. [5 marks]

(b) With aid of diagram, explain the short-run and long-run equilibrium of
a firm operating in a competitive market. [15 marks]

Question Four:

4. (a) With aid of diagram, explain the three stages of production. [9 marks]
(b) Given the following cost function

TC = Q + 4Q2 where TC = Total cost
Q = Output

Calculate the following:

(i) Fixed cost [2 marks]
(ii) Marginal cost [1 mark]
(iii) Average cost [1 mark]
(c) Suppose that Total revenue of the firm is

TR = 5Q + 3Q2 and TC is as given above in (b).

Obtain the quantity that maximizes profit and hence maximum profit.
[6 marks]

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Dibm 0112: Principles Of Microeconomics Question Paper

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