Principles Of Microeconomics Question Paper

Principles Of Microeconomics

Course:Bachelor Of Arts (Economics & Sociology)

Institution: Chuka University question papers

Exam Year:2011

ECONOMICS EXAM
CPA PART 1 SECTION 2
INSTRUCTIONS :ATTEMPT ALL QUESTIONS
TIME ALLOWED :3 HOURS

QUESTION ONE
(a) i. Give the meaning of the term ''Price Control'' (2 marks)
ii. Explain the circumstances under which price control is considered necessary (4 marks)

b) i. With the aid of well-labelled diagrams,distinguish between price floors and price ceilings. (6 marks)
ii. What are the major consequences of each of the price control measures? (8 marks)
(Total:20 marks)

QUESTION TWO

a) Distinguish between own-price elasticity of demand and cross-elastisticity of demand. (10 marks)

b) Briefly discuss the factors which affect the own-price elasticity of demand. (4 marks)

c) Discuss the usefulness of these parameters in management and economic policy decision -making. ( 6 marks)
(Total:20 marks)

QUESTION THREE

a) Define marginal utility and clearly explain the term ''diminishing marginal utility '' (6 marks)

b) Illustrate and explain the following :
(i. ) Consumer equilibrium under the cardinalist approach. (7 marks)
( ii.) Consumer equilibrium under the ordinalist approach. (7 marks)
(Total:20 marks)

QUESTION FOUR

a) What is ''Oligopoly'' (2 marks)

b) Using a well illustrated diagram, explain why prices are ''sticky'' downwards under an oligopolistic market structure. (12 marks)

c) What key assumptions underlie the law of variable proportions? (6 marks)
(Total:20 marks)

QUESTION FIVE

a) Define the term ''production function '' (2 marks)

b) Differentiate between economies of scale and returns to scale. (4 marks)

c) Using the cardinalist approach of consumer behaviour,distinguish between income and substitution effects of price of a normal good.(8 marks)

d) Explain the main characteristics of Indifference curves. (6 marks)
(Total:20 marks)

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