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Eco 2103 Question Paper

Eco 2103

Course:Bachelor Of Commerce

Institution: Maasai Mara University question papers

Exam Year:2017

Instructions
Answer question ONE and any other THREE
Question one
a) Using diagrams, clearly distinguish the following economic concepts
I) Hicks substitution effect and slutsky's substitution effect. (6mks)
ii) Discuss the assumptions about consumer preferences (axioms) (4mks)
b) Wangechi has a bread consumption demand function given as Q=300+M/16P where Q is the quantity of bread in loaves per week, P is the price per gram per week and M is her income which is Ksh 3600 per month. If the price of bread per loaf changes from Ksh 30 to Ksh 60, calculate her substitution effect, income effect and total effect of the price change. (8mks)
C) Otieno is faced with the following utility function U (x, y) =(x^2,y)for two goods X and Y. Given that his income is represented by M =100 and Px =20 and Py =15 are the respective prices of goods X and Y consumed.Determine kimeli's demand function for the two goods (7mks)
QUESTION two
a) If the government wants to raise a certain amount of revenue, is it better to raise it via a quantity tax or an income tax. (7mks)
b) Using a well labeled diagrams, discuss three stages of production. (8mks)
QUESTION THREE
a) Derive the slutsky equation and prove that it is an identity. (9mks)
b)Discuss the conditions that govern perfectly competitive markets. (6mks)
QUESTION FOUR
a) Coca cola company Ltd produces and sells a product in two markets. Market A's demand function is given as Q1=1600-10p1 while the demand function for market B is Q2=2000-10p2.Q1 and Q2 are the quantities sold in the respective markets at prices P1 and P2 respectively. The firm's total cost is given as
TC =0.05q^2 +10,000 and Q=q1 +q2.
i) Determine the quantities and prices that maximizes the firms profit. (6mks)
ii) What is the maximum profit for the firm. (3mks)
b) list the assumptions of oligopolist market. (6mks)
QUESTION FIVE
a) An entrepreneur has the following short run average total cost function
ATC=0.05q^2 - 0.4q +15 +10/q - 0.6/q^3
Find :
I) The total cost (1mks)
ii) Total fixed cost (1mks)
iii) Total variable cos (1mks)
iv) Average fixed cost (2mks)
v) Average variable cost (2mks)
vi) marginal cost (2mks)
b) Briefly discuss the factors that can cause the existence of a monopoly. (6mks)

Eco 2103 Question Paper

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