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Micro-Economics(Buss 111) Question Paper

Micro-Economics(Buss 111)

Course:Business Administration

Institution: Kenya Methodist University question papers

Exam Year:2011

TIME: 2 HOURS
Instructions: Answer Question ONE and any Other TWO Questions.
Question One
Using supply and demand curves, show the effect of each of the following events on the market for cigarettes.
A cure for lung cancer is found.
(3 Marks)

The price of cigarettes increases.
(3 Marks)

A fertilizer that increases the yield per acre of tobacco is discovered.

(3 Marks)
A law that prohibits smoking in public places is passed.
(3 Marks)

Discuss the factors that cause a shift in a supply curve.
(8 Marks)

What are the features of perfect competition. Illustrate profit maximization in perfect competition.
(10 Marks)

Question Two
Write short notes on the following:
Factors of Production.
(5 Marks)
Economies of Scale
(5 Marks)
Short-run and long-run Equilibrium
(5 Marks)
Criticism of Monopoly
(5 Marks)

Question Three
Suppose an industry has only one firm with a cost function given by:
C= 100 + 9q2 and a demand function for the industry is given as: P= 20-q.
Determine the profit maximizing output level for the monopoly.
(10 Marks)
Determine the price the firm will charge and the profit level at the firm.
(8 Marks)
In the long run, will this firm choose to stay in the industry? Explain.
(2 Marks)

Question Four
Using a diagram, illustrate the law of diminishing returns. (20 Marks)
Question Five
Suppose demand and supply for a product are given:
P = 100-0.05Q
P =-200+ 0.25Q
Calculate the equilibrium price and quantity.
(4 Marks)

If the government sets a price ceiling at Shs. 40, determine the excess demand that occurs.
(8 Marks)

Using a diagram, illustrate equilibrium before price ceiling is imposed and show the effect of the price ceiling.
(8 Marks)

Micro-Economics(Buss 111) Question Paper

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