Download BMRKT_8_Y1 ECON6003 Introduction to Microeconomics

CORK INSTITUTE OF TECHNOLOGY
INSTITIÚID TEICNEOLAÍOCHTA CHORCAÍ
Semester 1 (Winter 2015) Examinations 2015/2016
Module Title: Introduction to Microeconomics
Module Code:
ECON6003
School:
Business & Humanities
Programme Title:
Bachelor of Business and Higher Certificate in Business
Programme Code:
BACCT_7_Y1, BACCT_8_Y1, BBISY_8_Y2 , BBADM_7_Y2,
BMRKT_8_Y1, BMNGT_7_Y2.
External Examiner:
Mr. G. Phelan.
Internal Examiner:
Ms. A. Conway, Ms. S. Huskisson.
Instructions – Please read carefully
Duration 2 Hours
Sections
A
B
C
Numbers of Questions to be
attempted
20
2
2
Percentage of Total Marks
Allotted to each Section
20
40
40
Section A:
The answers for section A must be entered into the MCQ Answer Sheet handed out with this
examination paper. Please ensure your name, student number, lecturers name and class group are written
clearly on this sheet, and submit it in the centre of your answer booklet. Any solutions provided on the
examination paper WILL NOT be corrected. There is no negative marking for incorrect answers.
Section B:
The answer to each question in this section must be answered in the answer booklet provided.
Section C:
The answer to each question in this section must be answered in the answer booklet provided.
Non-compliance with the above instructions will result in a loss of marks.
Please ensure you hand up your Answer Booklet + MCQ Answer Sheet.
INVIGILATORS Note: Please circulate a copy of “MCQ Answer Sheet ECON:6003 Winter 2015” to all students along with
the examination paper.
Page 1 of 8
Section A
A1.
The equilibrium price of a good is:
(a) The price with which everyone is unhappy.
(b) The price at which the quantity demanded and quantity supplied of a good are equal.
(c) The price set by the regulators in the economy.
(d) Both (b) and (c).
A2.
Drinking a can of cola gives Richard 20 utils of satisfaction. How many additional utils would you
expect Richard would get from drinking a second can of cola?
(a)
(b)
(c)
(d)
A3.
The demand function for Pandora bracelets is Q = 850-4P. Where P is the price of the good and Q
is the quantity demanded. If the price of the bracelet increases from €100 to €150, which of the
following statements is true:
(a)
(b)
(c)
(d)
A4.
The lost benefits that result from a decision taken by a consumer;
The lost benefits of the next best alternative to the decision taken;
The cost in interest to acquire the funds needed to make a decision;
None of the above.
Holding all other factors constant, which of the following would shift the demand curve for air
travel to the left?
(a)
(b)
(c)
(d)
A6.
Quantity demanded decreases by 50 units.
Quantity demanded decreases by 300 units.
Quantity demanded decreases by 200 units.
Quantity demanded decreases by 100 units.
The concept of opportunity cost describes:
(a)
(b)
(c)
(d)
A5.
20 utils.
Less than 20 utils.
More than 20 utils.
40 utils.
An increase in fuel costs.
Increased wages for airline staff.
Decreased price of ferry tickets.
Both (b) and (c).
A demand curve illustrates;
(a)
(b)
(c)
(d)
The relationship between the price of a good and the amount of that good that consumers are
willing and able to buy.
The interaction of equilibrium price and equilibrium quantity.
How consumer behaviour changes in response to advertising.
The amount of a good that is supplied at every price.
Page 2 of 8
A7.
A supply curve;
(a)
(b)
(c)
(d)
A8.
If a good is considered “inferior” then:
(a)
(b)
(c)
(d)
A9.
(b)
(c)
(d)
Increase – the good is price inelastic and in order to increase TR the firm should increase its
price.
Decrease – the good is price elastic and in order to increase TR the firm should decrease its
price.
Increase – the good is price elastic and in order to increase TR the firm should increase its price.
Decrease – the good is price inelastic and in order to increase TR the firm should decrease its
price.
Karl Marx was a supporter of:
(a)
(b)
(c)
(d)
A12.
Elastic.
Inelastic.
A substitute good.
An inferior good.
A company producing sports equipment wishes to increase its total revenue. Should it increase or
decrease its price when the product’s price elasticity of demand is equal to -0.8?
(a)
A11.
As its price rises, less of it will be bought.
As its price falls, more of it will be purchased.
As the consumer’s income increases less of the good is purchased.
As the consumer’s income increases more of the good is purchased.
Price elasticity of demand for a good has been calculated as – 6.0, therefore the good is:
(a)
(b)
(c)
(d)
A10.
Shifts to the right when price increases.
Shifts to the right when an input price (e.g. wages) decreases.
Never shifts but slopes downwards because firms can sell more products when prices fall.
Both (a) and (b) are true.
Capitalism.
Free markets.
A command or centralised economy.
None of the above.
All inputs are increased by the same proportion and the output increases more than
proportionately, this suggests that:
(a)
(b)
(c)
(d)
Constant returns to scale are present.
Increasing returns to scale are present.
Decreasing Returns to Scale.
None of the above.
Page 3 of 8
A13.
If total cost is €700 when output is zero, €1,000 when output is 10 and €1,400 when output is 20, then fixed
cost is:
(a)
(b)
(c)
(d)
A14.
In economics, the latin phrase “Ceteris Paribus” means:
(a)
(b)
(c)
(d)
A15.
St Bernard cornflakes with a PED value of -8.0.
Eggs with a PED value of -0.4.
Frozen vegetables with a PED value of -2.8.
Aldi milk with a PED value of -4.0.
Which of the following is a barrier to entry to an industry?
(a)
(b)
(c)
(d)
A19.
Excess supply of a good/service.
Excess demand for a good/service.
Price is not at its equilibrium level.
All of the above.
In order to maximise tax revenue, which of the following goods should the government choose to
put a higher rate of VAT?
(a)
(b)
(c)
(d)
A18.
€100.
€150.
€250.
€350.
Which of the following can occur, when the government imposes a price control on a market?
(a)
(b)
(c)
(d)
A17.
“The market is at equilibrium”.
“Invisible hand”.
“Profit maximisation is the goal”.
“All else being equal”.
When a firm produces 1 unit of output total cost is €350. When the firm produces 2 units of
output, total cost is €450. The marginal cost of producing the second unit of output is:
(a)
(b)
(c)
(d)
A16.
€1000.
€1400.
€900.
€700.
Start up costs.
A patent.
A government awarded licence.
All of the above.
Which of the following best describes Producer Surplus?
(a)
(b)
(c)
(d)
The price suppliers are willing to sell a good for.
The profits made by a firm.
The difference between what a consumer is willing to pay for a good and what they actually pay.
The difference between what a producer is willing to sell a good for and what they actually sell
the good for.
Page 4 of 8
.
A20.
The economic problem is concerned with:
(a)
(b)
(c)
(d)
Scarcity.
Disequilibrium.
Too much government intervention.
All of the above.
Page 5 of 8
Section B
B1.
Suppose the market for a product is characterised by the following supply and demand equations:
Qs = - 20 + 2p
Qd = 100 – 2P
Price
€5
€15
€25
€35
€45
Quantity Supplied (Qs)
Quantity Demanded (Qd)
(a)
Transcribe and complete the table above in your answer booklet.
(2 marks)
(b)
Plot the supply and demand curves on the graph paper provided.
(4 marks)
(c)
Identify the equilibrium price and equilibrium quantity on your graph.
(2 marks)
(d)
Calculate equilibrium price and quantity using a mathematical approach.
(4 marks)
(e)
At what price levels, is there
(f)
(i)
excess demand in the market.
(ii)
excess supply in the market.
(4 marks)
Explain and illustrate the factor that causes a change in quantity demanded.
(4 marks)
(20 marks)
B2.
(a)
The owner of a takeaway pizza business sells pizza for €2 a slice. She sells 80 slices per day, but she
thinks that she can charge more. She raises the price to €4 a slice and sells 60 slices.
(i)
Calculate the price elasticity of demand (PED). Interpret your answer.
(ii)
Has the business owner increased her revenue by charging more? Why? Explain the relationship
between elasticity and revenue.
(b)
(5 marks)
(5 marks)
The Income elasticity of demand for games consoles is + 2.5 and total sales in 2014 was 100,000 units.
Calculate the expected total sales for this year, if consumers’ incomes are expected to fall by 8% in
(c)
2015. Show your workings.
(5 marks)
Using an example, explain why inferior goods have a negative YED.
(5 marks)
(20 marks)
Page 6 of 8
B3.
On an isolated island in the South Pacific, the inhabitants grow potatoes and catch fish. The table below
shows the maximum annual combinations of potatoes and fish that can be produced.
Combination
A
B
C
D
E
F
(a)
Good X
Potatoes (kilos)
1,000
800
600
400
200
0
Good Y
Fish (Kilos)
0
300
500
600
650
675
Using graph paper, plot the above information (showing points A-F) on a PPF diagram.
(6 marks)
(b)
Can this island produce 500 kilos of fish and 800 kilos of potatoes in one year? Explain your answer
and illustrate where this point would lie, relative to the PPF curve you have drawn.
(3 marks)
(c)
(i)
What is the opportunity cost of moving from point C to point B?
(3 marks)
(ii)
What is the opportunity cost of moving from point E to point D?
(3 marks)
(d)
List the 4 factors of production and briefly explain what would need to happen for this economy’s PPF
to shift outwards away from the origin.
(5 marks)
(20 marks)
Page 7 of 8
Section C
C1.
C2.
(a)
Explain the three forms/methods of practicing price discrimation
(6 marks)
(b)
List the four different market structures.
(2 marks)
(c)
Taking any two of the four you have listed above, compare and contrast them under each of the
following headings:
(a)
(b)
(c)
i.
Market Power (Price).
ii.
Type of good.
iii.
Freedom of entry/exit.
(12 marks)
(20 marks)
Explain and state the formula (where required) for each of the following:
(i)
Fixed Cost (FC).
(ii)
Variable Cost (VC).
(iii)
Average Variable Cost (AVC).
(iv)
Marginal Cost (MC).
(8 marks)
Using an example, with the aid of an appropriate diagram, explain why a firm might initially
experience economies of scale and then experience diseconomies of scale.
(8 marks)
Explain the difference between the short run and the long run.
(4 marks)
(20 marks)
C3.
Discuss any four of the following concepts:
(a)
(b)
(c)
(d)
(e)
(f)
Price ceiling.
Marxian School of thought.
Price floor.
Inductive models.
Marginal utility.
Price elasticity of supply.
(5 marks)
(5 marks)
(5 marks)
(5 marks)
(5 marks)
(5 marks)
(20 marks)
Page 8 of 8