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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:2010

FACULTY : BUSINESS AND MANAGEMENT STUDIES
DEPARTMENT: BUSINESS ADMINISTRATION
TIME : 2 HOURS
INSTRUCTIONS Answer Question ONE and any Other TWO Questions

Question 1
a) Write brief notes on the following terms.
i) Kinked demand curve
ii) Externalities
iii) Stable equilibrium
iv) Backward bending supply curve
v) Conglomerates (10marks)
b) What do you understand by production possibility curve? Using an appropriate diagram explain why it is concave to the origin. (6marks)
c) Using appropriate examples, distinguish between fixed cost and the variable costs of a firm in the short-run. (6marks)
d) Under monopolistic competition products are usually differentiated yet they are close Substitutes for one another. Explain the two main types of product differentiation highlighting the effects of such differentiation. (8marks)

Question 2
a) Suppose that a firm operating in the short-run has a fixed cost of sh. 25,800. The table below relates its total variable costs to the unit of output produced.
Units of output: 0 1 2 3 4 5 6 7 8 9 10
0 6080 11360 16000 20160 24000 28000 32480 37920 44960 53760
Calculate the firms TC, A.T.C, A.V.C, A.F.C, and MC costs (tabulate your answer). (10marks)
b) State the law of diminishing marginal utility. Briefly explain the main assumption of the marginal utility approach highlighting some of its major limitations. (10marks)
c) Using an appropriate diagram, discuss the concept of the consumer’s equilibrium under the indifference curve analysis (4marks)

Question 3
a) Highlight any four sources of monopoly. (4marks)
b) With the help of a well illustrated diagram, discuss how a monopolist maximizes his profit in the short-run (6marks)
c) Define the term elasticity of demand. Discuss the main economic applications of the concept of elasticity of demand (10marks)

Question 4
a) Production can be defined as the creation of goods and services in order to satisfy human needs. Discuss the four factors of production highlighting the factor reward for each factor. (8marks)
b) Briefly explain the following terms:
i) Opportunity cost
ii) Mixed Economy (4marks)
c) As firm expands its scale of plant in the long run, it experiences various advantages of large scale production. Discuss the various economies of scale enjoyed by a firm in the long- run (8marks)

Buss 111: Micro Economics Question Paper

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