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Bcom 101:Principles Of Microeconomics Question Paper

Bcom 101:Principles Of Microeconomics

Course:Bachelor Of Commerce

Institution: Chuka University question papers

Exam Year:2010

INSTRUCTIONS:
Answer question One and any other two questions. Do not write on the question paper.
1. (a) Write short notes on the following:
(i) Goals of microeconomic policy. [4 marks]
(ii) Problems of economic organization. [3 marks]
(iii) Scarcity and choice. [2 marks]
(iv) Economies and diseconomies of scale. [2 marks]
(b) Explain the factors that limit consumer sovereignty. [5 marks]
(c) Explain the features of free market system. [5 marks]
2
(d) Consider the following demand function for good a.
Qa = 200 – 4Pa + 2Pr + 0.2Y
Where: Qa = quantity of good a in demand Pa = price of good a Pr = price of related good r Y = consumer income
Given ; P = 20; Pr = 24; Y = 2,000 find the following elasticities and interpret your results.
(i) Income elasticity of demand [2 marks] (ii) Own price elasticity of demand [2 marks] (iii) Cross price elasticity of demand [2 marks]
(e) By the use of a diagram, explain how a consumer achieves equilibrium. [3 marks]
2. (a) You are given the following information regarding a certain firm with labour as the only variable input.

Labour (L)
Total Product (TP)
0 1 2 3 4 5 6 7 8 9 10
- 100 220 360 460 530 570 595 600 594 560
Find: (i) Marginal product (MP) [1 mark] (ii) Average product (AP) [1 mark]
(b) Explain the three stages of production. [6 marks]
3
(c) Consider the following utility function
U = 15x?y?
Determine:
(i) Marginal utility of good x; (MUx) [1 mark]
(ii) Marginal utility of good y; (MUy) [1 mark]
(d) Explain in details the properties of indifference curves. [6 marks]
(e) (i) What do you understand by the term unstable equilibrium? [1 mark]
(ii) You are further given the following market model.
Qd = 19 – P2
Qs = -8 + 1P2
Determine equilibrium price and quantity. [3 marks]
3. (a) Consider the following total cost function.
3Q3 – 5Q2 + 4Q + 150
Determine:
(i) The fixed cost function (FC) [1 mark] (ii) The variable cost function (VC) [1 mark] (iii) The average fixed cost function (AFC) [1 mark] (iv) The average variable cost function (AVC) [1 mark] (v) Show that ATC = AVC + AFC [1 mark]
(b) Explain the distinguishing features of oligopoly market structure. [4 marks]
(c) Describe how firms achieve equilibrium in the short-run under perfect competition. [4 marks]
(d) Explain the exceptions to the law of demand. [5 marks]
4
4. (a) Distinguish between fixed costs and variable costs. [2 marks]
(b) You are given the following information regarding a certain firm.
Q
QQAC
150
453 2 ? ???
Required:
(i) Find total costs for the firm (TC). [1 mark]
(ii) Find marginal costs (MC) [1 mark]
(c) Explain any three features of monopsonist market structure.
(d) Distinguish between allocative and productive efficiency. [2 marks]
(e) (i) Discuss in details any three causes for market failure. [6 marks]
(ii) Explain any five policies that are used to correct for market failure. [5 marks]
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Bcom 101:Principles Of Microeconomics Question Paper

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