Principles of Microeconomics (ECNC2101)
Higher Institute of Commerce and Management (HICM)
Semester: First Semester
Level: 200
Year: 2011
Question 1(10 marks)
Write TRUE for the correct statement and FALSE for the wrong one do not copy the questions
statements and do not answer YES or NO
1) A successful advert shifts the demand curve for a commodity to the right.
2) A maximum price set by the government is above the equilibrium price.
3) Inferior and normal goods can be determined by cross elasticity analysis.
4) Technology is the only production input that does not vary the very long run
5) The technical inefficiency region of production lies within the upper and lower ridges lines.
6) Market equilibrium is stable with a normal demand curve and a supply curve that slopes downwards
from right to left.
7) When a firm does not produce anything its total cost are made up of feed
8) If MUA/PA is greater than MUB/PB then we need to increase of B In order to get to equilibrium.
9) The Income consumption curve is always positive since change in income increase consumption
10) Then Engel curve links consumer income to consumption expenditure
Question II (20 marks) 1) 2)
1. Why is economics a pure science? (a sentence)
2. Why do economists say price elasticity of demand reflects movement along a demand curve? (a
sentence)
3. Given three baskets of goods A. B and C. Clearly indicate what you understand ended by tin
consumer preference (2 lines )
4. What is the main different between the cardinal and ordinal analysis of utility (2 phrases)
5. What makes marginal utility to be diminishing? (a phrase)
6. Which principle in economics explains the eventual decrease in total output when a variable
input is applied to a filed input ’ (3 words)
7. Why do higher indifference curves yield higher satisfaction to the
phrase)
8. What is a production function? (a sentence)
9. Why do we talk of the law of returns to scale in the long run? (a sentence)
10. What is another name for an isoquant? (3 words)
11. Which two factors limit the producer’s ability to move to higher isoquants in an isoquant map?
UNIVERSITY OF BAMENDA
HIGHER INSTITUTE OF COMMERCE AND MANAGEMENT HICM
COURSE LECTURER: Prof. TAFAH EDOKAT
COURSE TITLE: PRINCIPLES OF MICROECONOMICS
COURSE CODE: ECN 101
CREDIT VALUE: 6 TIME: 13:00-16:00 DATE 06/03/2011
INSTRUCTION: ANSWER ALL QUESTIONS
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(2 phrases)
12. What is the relationship between marginal cost and average cost? (3 phrases)
13. What makes short run cost different from long run cost? (a sentence)
14. What is another name for an isocost line? (3 or 4 words)
15. What is the value of the marginal rate of technical substitution (MRTS) at the intensive margin
of production? (1 word)
16. What is a ridge line? (a sentence)
17. What do you understand by normal profits? (a sentence)
18. What is another name for economies of scale? (4 or 5 words)
19. What do you understand by the economies of input purchases? (a sentence)
20. Which two factors according to you can explain decreasing returns to scale? (2 lines)
Problem (5 marks)
Mr. Kum is an employee of CAMTEL on a salary of 150 000F a month. He resigns to set up a beer
parlor using his house, whose rents are 30 000F a month. He guys beer at 500 000 F per month, pays a
salesgirl at 25000 F a month, and uses electricity and water worth 20 000 F per month. Sales of beer
amount to 800 000F every month.
a)
Define implicit and explicit costs, identify these costs items from the above problem and find their
totals (4 marks)
b)
Find the total cost of Kum’s business (0.5 mark)
c)
Is Kum’s business profitable (0.5 mark)
Exercise (5 marks)
A consumer in Bambili likes to eat both apples and bananas. At the local store, each apple costs 20
francs and each banana cost 25 francs. His utility function for apples (A) and bananas (B) is given by
U(A, B) = 6 AB where MU
A
= 6 B and MU
B
= 6 A. Suppose he has 400 to spend on apples and
bananas, how many of each should he buy to maximize his satisfaction?
Goodluck!
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