Principles of Microeconomics (ECNC2101)
Higher Institute of Commerce and Management (HICM)
Semester: First Semester
Level: 200
Year: 2012
THE UNIVERSITY OF BAMENDA
Higher Institute of Commerce and Management
(HICM Level 1)
First Semester Examination 2012/2013
Principles of Microeconomics, Time Allowed: 3 hours
Examiner: Dr NDAMSA / Mm MASANGA
Question 1(10 marks)
Write TRUE for the correct stamen and FALSE for the wrong one. Do not copy the statements and donot
write Yes or No
1) A successful harvest season shifts the demand curve for a commodity to the right
2) Technology is the only production input that does vary in the very long run.
3) A minimum price set by the government is above the equilibrium price.
4) Inferior and normal goods can be determined by the use of cross elasticity analysis
5) The technical efficiency region of production lies within the upper and lower
6) Market equilibrium is stable with a normal demand curve and a supply curve that slopes
downwards from left to right
7) When a firm does not produce anything its total costs are made up of overhead costs.
8) If MUA/PA is greater than MUB/PU then we need to increase the consumption of B in order to
get to equilibrium.
9) The income consumption curve is always positive since changes in income increase
consumption.
10) Then Engel curve links consumer income to purchasing power.
Question 2: (13 marks)
In the local market, we have the following market demand (Q
d
) and supply (Q
s
) functions for wooden
furniture: Q
d
=20 - 6P and Q
s
= P
2
+ 4, where P= price of the commodity in CFA franc.
Determine the equilibrium price and quantity. State the two main characteristics of such an equilibrium
Use diagram(s) to illustrate and explain the effect on the equilibrium situation in (a) of a simultaneous
increase 1 input prices and a rise in the consumer’s income, ceteris paribus. (3 marks).
Suppose the government fixes n maximum price which is 50% less than the equilibrium. What are the
consequences of such a price policy? (3 marks)
Question 3 (12 marks)
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Mr.Ndam is an employee at HICM, UBa, on a salary of 600,000F per month. He attends to a consultancy
service that yields him 50,000F a month. Mr.Ndam resigns from his job and consultancy to set up a stock
shop using his house, whose rents are 50,000F a month. He articles worth 1.5 million Francs month, pays
a salesgirl 40 000 francs per month. Monthly sales in his shop amount to 2.1 million francs a month
How is accounting cost different from economic cost? (2 mark)
Define implicit and explicit costs. (2 mark)
identify the implicit and explicit costs items from the above problem and find the
Find the total cost of Mr. Ndam’s business (3 mark)
Is Ndam’s business economically profitable? Show your calculations (2 mark)
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