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Microeconomics Question Paper

Microeconomics

Course:Business Administration

Institution: Kenya Methodist University question papers

Exam Year:2008

KENYA METHODIST UNIVERSITY

END OF SECOND TRIMESTER 2008 EXAMINATIONS

FACULTY : BUSINESS AND MANAGEMENT STUDIES
DEPARTEMENT : BUSINESS ADMINISTRATION
COURSE CODE : BUSS 111
COURSE TITLE : MICROECONOMICS
TIME : 2 HOURS

INSTRUCTIONS:
• Answer Question ONE (Compulsory and any other TWO Questions

Question 1
(a) Define the concept ‘price elasticity of demand’. How is it calculated? (5 marks)

(b) Explain the importance of understanding the concept of understanding the concept of elasticity of demand. (5 marks)

(c) Write short notes on each of the following:

(i) Exceptions to the law of demand
(ii) The law of diminishing returns
(iii) Scarcity and choice (12 marks)

(d) Define the term Opportunity Cost. Explain how the opportunity cost concept assists in deciding what to produce. (8marks)

Question 2
All countries in the world are faced by the same economic problem; that of scarcity and choice. The economic system they adopt as a means of dealing with the problem differs. Explain what you understand by the term economic system. Explain the characteristics of the three common economic systems adopted by various countries of the world. (20 marks)

Question 3
(a) Explain why the prices of agricultural commodities tend to fluctuate more than those of industrial goods. (8 marks)

(b) What are the economic consequences of such high fluctuations in agricultural commodity prices? (6 marks)

(c) Specify the policy recommendations that will reduce the fluctuations of agricultural products. (6 marks)

Question 4
In light of adoption of economic liberalization in many developed countries, what are the possible short comings of relying on free market and on the forces of competition from the standpoint of:
(i) Rational allocation of resources for economic development
(ii) Income distribution
(iii) Price stability (20 marks)

Question 5
(a) By use of a diagram illustrate the equilibrium price and output determination for a monopolist. (12 marks)

(b) Discuss the advantages and disadvantages of monopoly. (8 marks)

Microeconomics Question Paper

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