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Introduction To Microeconomics Question Paper
Introduction To Microeconomics
Course:Bachelor Of Commerce
Institution: Technical University Of Kenya question papers
Exam Year:2016
THE TECHNICAL UNIVERSITY OF KENYA
FACULTY OF SOCIAL SCIENCES AND TECHNOLOGY
SCHOOL OF SOCIAL AND DEVELOPMENT STUDIES
DEPARTMENT OF ECONOMICS AND RESOURCE MANAGEMENT
FIRST YEAR FIRST SEMESTER EXAMINATION FOR THE DEGREE OF BACHELOR OF ECONOMICS,BACHELOR OF BUSINESS INFORMATION TECHNOLOGY, BACHELOR OF COMMERCE,BSc.
ACCOUNTING AND FINANCE
ABEQ/ABMI/ABBQ/ABAQ1151:INTRODUCTION TO MICROECONOMICS
DECEMBER 2016
TIME:2HOURS
INSTRUCTIONS: Answer Question ONE and any other TWO
QUESTION ONE
a)State the law of demand and explain three situations in which it may not hold.(4 marks)
b)Explain four characteristics of perfect competition. (4 marks)
c)Using relevant examples, distinguish between stable and unstable equilibrium as used in economics. (4 marks)
d)Consider a monopolist who has the following demand function.
p=140 - 2p
and that his total cost function is given by
TC = 10 + 5q™2
Find
i)The profit maximizing price.(2 marks)
ii)The sales revenue maximizing price. (2 marks)
e)Briefly discuss two main economic systems in that are concerned with ownership and control of resources. (4marks)
f) Firm A and B operate under different market systems and they both make supernormal profits. Firm A operates under perfect competition while firm B operates under monopolistic competition. Using diagrams explain this scenario. (10 marks)
QUESTION TWO
a)Using relevant illustrations, discuss the concept of price ceiling and price floors within the Kenyan context. Are they justified? (10 marks)
b)With the aid diagrams explain the following economic concepts
i)Marginal rate of substitution (5 marks)
ii)Kinked demand curve. (5 marks)
QUESTION THREE
a)Explain four characteristics of an indifference curve. (4marks)
b)Use the concepts of consumer surplus and producer surplus to explain why economists say competitive markets are efficient. Why are below-or above-equilibrium levels of output inefficient, according to these two sets of ideas? (9 marks)
c)Suppose the market for frozen Delmonte Orange Juice is in equilibrium at a price of Kshs 100 per Sachet and a quantity of Kshs 4200 Sachets per month.Now suppose that at a price of Kshs 150 per Sachet,Quantity demanded falls to 3000 Sachets and Quantity supplied increases to 4500 Sachets per month.
i)Draw the appropriate diagram for this market. (3 marks)
ii) Calculate the price elasticity of demand for frozen Delmonte Orange Juice between the prices Kshs 100 and Kshs 150.Is this demand elasticity elastic or inelastic? (4 marks)
QUESTION FOUR
a)Wanadhi firm is said to be enjoying Internal economies of scale. Explain any four economies of scale. (8 marks)
b)i. Use a diagram to explain how a monopolist determine its price and output.(6 marks)
ii. Explain three limitations of consumer sovereignty.(6 marks)
QUESTION FIVE
a)Discuss the major barrier to entry into an industry and explain how each barrier can foster either monopoly or oligopoly. (10 marks)
Explain the five factors that affect demand of goods and services in the economy.(10 marks)
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