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Hbc 2107: Introduction To Microeconomics Question Paper
Hbc 2107: Introduction To Microeconomics
Course:Bachelor Of Commerce
Institution: Dedan Kimathi University Of Technology question papers
Exam Year:2012
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DEDAN KIMATHI UNIVERSITY OF TECHNOLOGY
UNIVERSITY EXAMINATION 2010/2011
EXAMINATION FOR THE DEGREE OF BACHELOR
OF COMMERCE
HBC 2107: INTRODUCTION TO MICROECONOMICS
DATE: 29TH JULY 2011 TIME: 2.00PM – 4.00PM
INSTRUCTIONS: Answer question ONE and any other TWO questions
QUESTION ONE
a) Distinguish between the following terms. (18 marks)
(i) Ordinal utility theory and cardinal utility theory
(ii) Monopolistic market and oligopoly market.
(iii) Economic and non economic goods
(iv) Marginal rate of substitution and marginal rate of technical substitution.
(v) Arc elasticity and cross elasticity.
(vi) Isoquant and indifference curve.
b) Why is important to understand the concept of elasticity? (4marks)
c) Briefly explain the shortcomings of recently introduced control of fuel pump prices by the
government through Energy Regulation Council (ERC). (8 marks)
QUESTION TWO
a) The demand and supply curves of commodity W in the market are defined by the following
functions
P=100-2Qd
P=4Qs
Where Qd is the quantity demand. Qs is the quantity supplied and P is the price.
Determine the equilibrium price and quantity of W in the market. (5marks)
b) Briefly explain the factors that would cause a shift in supply curve. (10 marks)
c) Clearly distinguish between an oligopolistic firm and a short run monopoly firm. (12marks)
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QUESTION THREE
a) The data in the table represent a production function in which labour is a variable input.
Labour (hours)
Total physical product
1
10
2
30
3
55
4
85
5
115
6
139
7
153
8
155
9
155
10
153
(i) Calculate the marginal product and average products at each level of labour
(6marks)
(ii) Sketch on the same axis the graphs of Marginal, Average and Total product s and label the three stages of production in the short run. (6marks)
(iii) Explain the characteristics of each of the stages of production .Which stage should a rational producer operate in and why? (8marks)
QUESTION FOUR
a) Using well labeled diagrams describe the relationship between Average total cost, Average variable cost and marginal cost. (12 marks)
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b) The total cost of production of shoes in a given factory is given as follows
C = 1500+120Q+7.5Q2 +Q 3
Where C = Cost measured in shillings
Q = quantity measured in pair of shoes
Compute the average cost and the marginal costs given the output level of 10and 20 pair of shoes. (8 marks)
QUESTION FIVE
a) Using the indifference curve analysis, explain the concept of consumer equilibrium. (10marks).
b) A consumer has a demand function described by the function,
Q=15-0.5P, where Q=demand, P=price,
(i) Explain clearly why the coefficient of the price is negative. (2 marks)
(ii) Calculate the elasticity of demand at the point
Where P=Sh 12 and interpret your answer (4Marks)
(iii)Why is it important to understand the concept of elasticity (4Marks)
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