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THE MOMBASA POLYTECHNIC UNIVERSITY COLLEGE
Faculty of Business & Social Studies
DEPARTMENT OF BUSINESS STUDIES
UNIVERSITY EXAMINATIONS FOR THE DEGREE OF
BACHELOR OF BUSINESS ADMINISTRATION HBC 2103: INTRODUCTION TO MICRO ECONOMICS
END OF SEMESTER EXAMINATIONS
SERIES: SEPTEMBER/OCTOBER 2011
TIME: 2 HOURS
INSTRUCTIONS:
This paper consists of FIVE questions.
Answer Question ONE and any other TWO questions.
___________________________________________________________________________________
QUESTION 1 (Compulsory)
a) Other than price of the Good, price related goods consumer income and consumers tastes and
preferences, identify and explain any other FIVE determinants of the demand of a commodity in the
market.
(10 marks)
P  700  2.5Q
C  75Q  500
b) A firm’s product price given as
while the total cost is given as
.
Determine the firms profit maximizing output and price and compute the total profits.
(7 marks)
c) Define the following economic concepts:
i)
Opportunity cost
ii)
Gross Elasticity of Demand
iii)
Public good
iv)
Economic Rent
v)
Geffen good
(1 mark)
(1 mark)
(1 mark)
(1 mark)
(1 mark)
d) Outline any FOUR benefits that result from privatization of public companies.
(6 marks)
e) Explain the least-cost-factor combination to a firm.
(7 marks)
© 2010 – The Mombasa Polytechnic University College
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QUESTION 2
a) Briefly explain how the cardinalist approach has been used to resolve the water-diamond paradox.
(6 marks)
b)
i)
ii)
c)
Explain the short-run equilibrium of a firm in perfect competition that is:
Making abnormal profits
Making losses
Outline any TWO internal economics of scale.
(6 marks)
(6 marks)
(2 marks)
QUESTION 3
a)
i)
ii)
iii)
iv)
Distinguish between the following concepts:
Fixed costs and variable costs
Implicit and costs of Explicit costs
Private cost of social costs
Marginal costs of sunk costs.
b) Using illustrations, briefly describe the FOUR characteristics of loquats.
(3 marks)
(3 marks)
(3 marks)
(3 marks)
(8 marks)
QUESTION 4
a) Define price discrimination and exarmance of conditions under which a mangolists effects price
discrimination. (7 marks)
b) A monopolist operates in three markets whose demand for the monopolistists products are given as
follows:
P1  63  4Q
P2  105  5Q2
P 3  75  6Q3
Market I
20Q  75
If the monopolists total cost is
Determine the output and price for each market that maximizes the monopolists profits. Compute the
monopolists total output. (13 marks)
c) Highlight any FOUR reasons for acquisitions and mergers.
d) Discuss the application of any THREE defensive strategies giving reasons for each.
(8 marks)
(12 marks)
QUESTION 5
a) Explain the Law of Diminishing Marginal product.
b) Outline any THREE causes of externalities.
c) Explain the regressive labour supply curve.
© 2010 – The Mombasa Polytechnic University College
(12 marks)
(3 marks)
(5 marks)
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