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Elements Of Microecomonics Question Paper

Elements Of Microecomonics

Course:Bachelor Of Education Arts

Institution: Kenyatta University question papers

Exam Year:2009

KENYATTA UNIVERSITY
UNIVERSITY EXAMINATIONS 2008/2009
INSTITUTE OF OPEN LEARNING (IOL)
EXAMINATION FOR THE DEGREE OF BACHELOR OF ARTS, BACHELOR
OF COMMERCE, BACHELOR OF EDUCATION
AEC 100: ELEMENTS OF MICROECOMONICS

DATE:
Monday 5th January 2009 TIME:
8.00am-10.00am

INSTRUCTIONS
Answer question ONE and any other TWO questions
QUESTION ONE
Distinguish between the following sets of terms.

(30marks)
i)
Oligopoly and monopoly
ii)
Own price elasticity and of demand and cross price elasticity of demand
iii)
Change in demand and change in quantity demanded.
iv)
Engel curve ad demand curve
v)
Social costs and private costs
vi)
Economies of scale and returns to scale
vii)
Income consumption curve and price consumption curve
ix)
Indifference curve and isoquant
x)
Budget line and isocost line

Question Two
a)
Suppose that a consumer consumes two goods X and Y. Suppose further that X is

a normal good and that the price of good X increases. With the aid of a well

labeled diagram explain hoe the quantity of demand of good X will change,

clearly isolating the income and substitution effects.

(10mark)
b)
Outline and briefly explain five characteristics of a perfectly competitive market.

(10marks)

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Question Three

a)
List any four types of markets that you know.

(4marks)

b)
With the aid of well labeled diagram discuss the three stages of

production. Clearly show the relationship between total product, marginal

product and average product.

(10marks)

c)
Briefly distinguish between microeconomics and macroeconomics.

(6marks)
Question Four

a)
List any four types of isoquants that you know.

(4marks)

b)
Briefly distinguish between normal, inferior and giffen goods.

(6marks)

c)
Given X = f (K,L) is the production function of a firm and C=wL+rK is

its cost constraints. Mathematically derive equilibrium of the firm

(10marks)
Question Five

a)
Compare and contrast the cardinalist and ordinalist theories of consumer

behavior.

(10marks)

b)
With the aid of well labeled diagram, illustrate the fact that being in

equilibrium does not necessarily mean that a firm is making profits. Show

cases where a firm makes windfall profits, normal profits, lost but can

continue operations and loss but can continue operations and loss that

leads to shut down of operations.

(10marks)

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Elements Of Microecomonics Question Paper

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