Principles of Microeconomics (ECNC2101)

Higher Institute of Commerce and Management (HICM)

Semester: Resit

Level: 200

Year: 2014

Answers (200 )
THE UNIVERSITY OF BAMENDA
Higher Institute of Commerce and Management
(HICM Level 1)
Resit Examination 2013/2014
Principles of Microeconomics, Time Allowed: 3 hours
Examiner: Prof. TAFAH EDOKAT / NDAMSA Dickson
Instruction: answer the questions in the sequence they appear.
QUESTION 1 (20 MARKS)
write TRUE for the correct statement and FALSE for the wrong one. Do not copy the statements.
a) A demand curve slopes downwards from right to left due to the inverse relationship between price and
quantity demanded.
b) There is no private ownership of any item in the socialist system.
c)
Production beyond the intensive margin cannot be efficient
d)
When a firm does not produce anything its total costs are made up of variable costs.
e)
Normal and luxurious goods can be determined by their income elasticities.
f)
The technical inefficiency region of production lies within the upper and lower ridge lines;
g)
Technology is the only production input that only varies in the very long run.
h)
Market equilibrium is stable with a normal demand curve and a supply curve that slopes downwards
from right to left
i)
If MUA/PA is greater than MUB/PB then we need to increase the consumption of B in order to get to
equilibrium.
j) Atomistic nature of firms in perfect competition underscores powerlessness
Question II (40 marks; Here all questions carry TWO marks each, except 3 & 4 with FOUR marks each)
1.
Give one major reason why the definition of economics is controversial, incomplete or inadequate, (a
sentence)
2.
Where does the government place a maximum price policy with respect to the market price? (3 or 4
words)
3. State the main characteristics of human nature identified in the definition of economics proposed by
Robbins Lionel (4 phrases)
4. How do you determine, using elasticity whether two goods are substitutes, complements or neutral? (3
sentences)
5.
Why are indifference curves convex to the origin? (1 or 2 phrases)
6.
If we have two goods A and B. State the first and second order conditions for utility maximization, (a
mathematical expression and a phrase)
7.
What do you understand by an input? (a sentence)
8.
What two factors may hinder a monopolist from making profit? (2 phrases)
9.
What is the economic significance of a negative Marginal Rate of Technical Substitution (MRTS)? (one
sentence)
10. What effects has marginal product on total product in stage 1? (a phrase)
11.
Which economic principle is used to explain what happens to production with one input which can be
changed? (3 or 4 words)
12.
What do you understand by the intensive margin of labour?
13.
Why do higher isoquants yield higher levels of output to the producer? (a phrase)
14.
What is the relationship between marginal cost and average cost? (3 phrases)
15.
What do you understand by normal profits? (a sentence)
16.
What is another name for economies of scale? (4 or 5 words)
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17.
What do you understand by the economies of input purchases? (1 sentence)
18.
What does free resource mobility imply under perfect competition? (1 sentence)
Problem (10 marks)
With the help of a well labeled diagram(s), show and explain the fact that a perfect competitive firm does not
necessarily maximize profit every time marginal cost and marginal revenue are equal (that is, MC = MR).
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