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Economics Question Paper

Economics

Course:Computerized Accounting

Institution: Onix Computer Services question papers

Exam Year:2009

Orbit School of Management Studies

Economics
Monday 30 November 2009

Time Allowed: 3 hours

Answer any FIVE questions.
ALL questions carry equal marks.

QUESTION ONE
a. Define the term "indifference curve". (2mks)

b. Outline the applications of the indifference curve analysis in an economy. (8mks)

c. Briefly explain the factors that influence the cost of production in a firm. (6mks)

d. Highlight the assumptions of the law of variable proportions as applied in production theory. (4mks)

QUESTION TWO
a. Distinguish between "individual demand" and "market demand". (4mks)

b. In relation to management of business, explain the applications of the theory of demand. (10mks)

c. With the aid of a diagram, briefly explain the effect of a government subsidy on a given product to its market equilibrium position. (6mks)

QUESTION THREE
a. "Economics is concerned with the allocation of scarce resource".
Outline three resource allocation decisions made in an economy. (6mks)

b. Highlight three characteristics of economic resources. (6mks)

c. Discuss the importance of the concept of opportunity cost in an economy. (8mks)

QUESTION FOUR
a. Distinguish between the following market structures:

i. Monopoly and monopolistic competition. (4mks)

ii. Oligopoly and duopoly. (4mks)

b. With the aid of diagrams, describe the profit maximising and loss making levels of output of a monopolist firm in the short-run period. (12mks)

QUESTION FIVE
a. The following data relate to the economy of country XYZ.

Investments 4,000,000
Government spending 10,000,000
Autonomous consumption 8,000,000
Net exports 3,600,000.

The marginal propensity to rate of the economy of country XYZ is 0.4.

Required:
i. The consumption function of this economy. (5mks)

ii. The equilibrium level of income of the economy. (7mks)

b. Using a diagram, outline the circular flow of income in an open economy. (8mks)

QUESTION SIX
a. Using an illustration, explain the theory of absolute advantage. (6mks)

b. Summaris the limitations to the theory of comparative advantage. (8mks)

c. Highlight the reasons why national debt management is a salient policy issue in developing countries. (6mks)

QUESTION SEVEN
a. Define the term "development planning". (2mks)

b. Discuss the importance of development planning in an economy. (8mks)

c. Explain the factors that limit the application of monetary tools in developing countries. (10mks)

Economics Question Paper

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