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Buss 111: Micro Economics Question Paper

Buss 111: Micro Economics

Course:Business Administration

Institution: Kenya Methodist University question papers

Exam Year:2009

KENYA METHODIST UNIVERSITY

END OF THIRD TRIMESTER 2009 EXAMINATIONS

FACULTY : BUSINESS AND MANAGEMENT STUDIES
DEPARTMENT : BUSINESS ADMINISTRATION
COURSE CODE : BUSS 111
COURSE TITLE : MICRO ECONOMICS
TIME : 2 HOURS

INSTRUCTIONS
• Answer Question ONE (compulsory) and any other TWO Questions

Question 1
a) Identify five factors that may influence the elasticity of supply. (5marks)

b) With the aid of a diagram, explain the concept of economic rent (5marks)
c) The table below relates to a firm operating under perfect competition. Each unit of output is sold at Sh. 80.

Quantity units Fixed cost Total cost
0 50 50
1 50 200
2 50 300
3 50 390
4 50 470
5 50 540
6 50 600
7 50 670

Determine;
i) Average total cost at each level of output.
ii) Marginal cost at each level of output
iii) Level of output that maximizes profits
(5marks)

a) With the help of diagrams, distinguish between movements along a demand curve and shift of the demand curve. (5marks)

b) Explain Five characteristics of a mixed economic system (5marks)

c) Mapesa Ltd is a monopolist in a certain industry in country X. Explain the forms of controls that the government of the country may initiate in order to reduce the monopoly powers of the company (5marks)

Question 2
a) i) Explain the various ways of determining the price of a commodity
ii) Discuss the limitations of price mechanism as a method of resource allocation.
(10marks)
b) With the aid of a diagram explain how a firm operating under monopolistic competition condition earns supernormal profits in the short-run. (10 marks)

Question 3
a) Although countries derive certain benefits from engaging in international trade, sometimes they may impose restrictions on such trade.
Explain the arguments advanced for the imposition of such restrictions. (10 marks)
b) One of the practices by a monopolist is price discrimination. Explain the conditions necessary for the success of price discrimination. (10 marks)

Question 4
a) A certain commodity has experienced sudden increase in its demand in the market though its price has remained unchanged.
( i) Illustrate this phenomenon by use of a diagram.
(ii) Explain the possible factors that may have caused this. (10 marks)

b) Briefly explain the following terms as used in economics;
(i) Opportunity cost
(ii)Oligopoly
(iii)Wealth
(iv)Scarcity
(v) Law of diminishing returns
(10 marks)

Buss 111: Micro Economics Question Paper

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