Download BBUSS_7_Y1 ECON6003 Introduction to Microeconomics

CORK INSTITUTE OF TECHNOLOGY
INSTITIÚID TEICNEOLAÍOCHTA CHORCAÍ
Semester 2 (SUMMER 2016) 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:
BBUSS_7_Y1, BBUSE_6_Y1, BBUSA_6_Y1
External Examiner:
Mr. G. Phelan
Internal Examiner’s:
Ms. A. Conway, Ms. S. Huskisson, Ms. N. Lenihan.
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, unless
otherwise instructed.
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 Summer 2016” to all students along with
the examination paper.
Page 1 of 9
Section A
A1.
An improvement in technology will cause:
(a)
(b)
(c)
(d)
A2.
Which of the following would increase the amount of an inferior good that consumers would like
to purchase?
(a)
(b)
(c)
(d)
A3.
All resources are fixed.
At least one factor of production is fixed.
All factors of production are variable.
Some resources are fixed and others are variable.
Which of the following is a characteristic of a Perfectly Competitive Industry?
(a)
(b)
(c)
(d)
A6.
€93.75.
€750.
€81.25.
€100.
The short run is a time period in which:
(a)
(b)
(c)
(d)
A5.
An increase in consumers’ incomes.
An increase in the price of a complement.
A decrease in the price of a substitute.
A decrease in consumers’ incomes.
At 8 units of output, average fixed cost is €12.50 and average variable cost is €81.25, then total
cost at this output level is:
(a)
(b)
(c)
(d)
A4.
The PPF to shift inwards towards the origin.
The PPF to shift outwards away from the origin.
The economy to move down the PPF.
The economy to move upwards along the PPF.
Few buyers and sellers.
Heterogeneous Product.
No barriers to entry or exit.
Barriers to entry and exit.
The quantity demanded of Good A increases from 1000 to 1500 units when the price falls from
€1.50 to €1.00 per unit. The Price Elasticity of Demand for this product is approximately:
(a)
(b)
(c)
(d)
3.5.
-3.5.
-1.5
1.5.
Page 2 of 9
A7.
When the minimum wage is set above the equilibrium market wage:
(a)
(b)
(c)
(d)
A8.
If the price increase of Good A, increases the demand of Good B, then Good A and B are
(a)
(b)
(c)
(d)
A9.
A decrease in costs of production.
An increase in costs of production.
An increase in the price of cheese (assume wine & cheese are complements).
An increase in the price of wine.
If an increase in output is proportionately smaller than the increase in inputs. Which of the
following best describes this?
(a)
(b)
(c)
(d)
A12.
Technology.
Input Costs.
Government Regulation.
All of the above.
Which of the following will cause a movement along the supply curve for wine?
(a)
(b)
(c)
(d)
A11.
Inferior Goods.
Substitute Goods.
Complementary Goods.
Normal Goods.
A supply curve is directly affected by:
(a)
(b)
(c)
(d)
A10.
It will have no affect on the quantity of labour employed.
The unemployment rate will fall.
There will be excess supply for labour at the minimum wage.
The number of people in the labour force will decrease.
Increasing returns to scale.
Constant Returns to scale.
Descreasing returns to scale.
Efficiency.
If the percentage change in the quantity demanded is proportionately more than the percentage
change in price, which of the following represents this?
(a)
(b)
(c)
(d)
Unit Elastic.
Inelastic.
Elastic.
All of the above.
Page 3 of 9
A13.
There will be excess demand in the market when:
(a)
(b)
(c)
(d)
A14.
If the government introduces a ‘fat tax’ on sugary drinks, which will be passed on to the
consumer in the form of a higher price, what will be the outcome?
(a)
(b)
(c)
(d)
A15.
Positive.
Negative.
Inverse.
Both (b) and (c).
Which of the following influences supply?
(a)
(b)
(c)
(d)
A18.
Income.
Tastes & Preferences
Price.
Population.
The relationship between price and quantity demanded is:
(a)
(b)
(c)
(d)
A17.
The demand curve would shift to the left.
The demand curve would shift to the right.
Movement along the demand curve.
The demand curve will not be affected.
A change in which of the following will not result in a shift in the demand curve?
(a)
(b)
(c)
(d)
A16.
Price is below the equilibrium price.
Price is above the equilibrium price.
Price at the equilibrium price.
None of the above.
Income, Population, Technology.
Costs of Production, Technology, Population.
Income, Tastes & Preferences, Nature & Random Shocks.
Expected Future Prices, Government Regulations and Costs of Production.
Which of the following best describes the Production Function?
(a)
(b)
(c)
(d)
Land, Labour, Capital and Enterprise.
TP = f(Land, Labour, Capital, Enterprise).
TP = (Land, Labour, Capital, Enterprise).
All of the above.
Page 4 of 9
A19.
Marginal Revenue is equal to:
(a)
(b)
(c)
(d)
A20.
Change in total revenue divided by a change in quantity.
Total revenue divided by total quantity.
Total revenue minus total costs.
Total costs divided by total quantity.
A market structure with many firms selling slightly differentiated products is best described as:
(a)
(b)
(c)
(d)
Perfect Competition.
Monopolistic Competition.
Oligopoly.
Monopoly.
Page 5 of 9
Section B
B1.
The Market for Gym Membership in Ireland
Price
S1
S0
B
3
B
D
K
S2
C
E
A
F
H
G
D1
D0
D2
Quantity (No.of memberships)
The initial equilibrium point in the Market for Gym Membership in Ireland is to be taken as point ‘A’ in the diagram
above, for each of the following questions. Answer these questions in your answer booklet.
(a)
(i) Migrants return from Canada and Australia to Ireland, due to improved economic activity in Ireland.
Other things constant, the new equilibrium will be at what point?
(2 marks)
(ii) The European Union wishes to improve the health of people living in Europe, so it offers a grant to
anyone willing to open a new gym in any European country. Other things being constant, the new
equilibrium will be at what point?
(2 marks)
(iii) There is a worldwide shortage of the metals used to make gym equipment; also, consumer incomes in
Ireland increase. Other things being constant, the new equilibrium will be at what point?
(2 marks)
(iv) Ireland’s weather becomes warm and dry and Olympic athletes reveal that exercising outdoors, in the
fresh air, is what helps them achieve peak fitness. Other things being constant, the new equilibrium will
be at what point?
(2 marks)
(v) Medical research confirms that the use of gym equipment can lead to muscle and bone deterioration in
later life. In an effort to raise more revenue, the government imposes a tax on gym owners. Other
things being constant, the new equilibrium will be at what point?
(2 marks)
Part (b) on next page
Page 6 of 9
(b) The demand and supply for product Z can be represented by the following equations:
Qd = 284 – 3P
Qs = 104 + 6P
(i) Use a mathematical approach to determine the equilibrium price and quantity in the market.
(5 marks)
(ii) Identify the market situation if price is €30.
Explain the market outcome when price is €30.
(5 marks)
(20 marks)
Page 7 of 9
B2.
(a)
Explain any three determinants of Price Elasticity of Demand.
(6 marks)
(b)
Bloggs Ltd. currently sells product A at €20 per unit. At this price, demand is 50,000 units per annum.
The directors of Bloggs Ltd. would like to increase revenue and are considering a price cut to €19 per
unit. Research suggests that the PED for product A is -0.8.
(i) What will quantity demanded for product A be, after the directors introduce the price cut?
(4 marks)
(ii) What difference will the price cut make to total revenue?
(4 marks)
(iii) Advise Bloggs Ltd on how to increase revenue for product A.
(6 marks)
(20 marks)
B3.
(a)
Explain the term ‘marginal product of labour’.
(3 marks)
(b)
(i) Transcribe and complete the table below in your answer booklet.
(6 marks)
(ii) Comment on labour productivity once the figures are calculated.
(3 marks)
(c)
Number of
Workers
TP
1
30
2
62
3
96
4
118
5
136
6
144
APL
With the aid of a diagram, explain the long-run average cost curve.
MPL
(8 marks)
(20 marks)
Page 8 of 9
Section C
C1.
(a) Transcribe and complete the table below, describing the four market structures, in your answer booklet.
(9 marks)
Type
Number of Firms
Freedom of
Entry
Examples
Perfect
Competition
Monopolistic
Competition
Oligopoly
Monopoly
(b)
Explain the difference between the long run and the short run market outcomes for Perfect Competition
and Monopoly.
(6 marks)
(c)
Explain why a Monopolist might use limit pricing.
(5 marks)
(20 marks)
C2.
(a)
Explain and illustrate using an appropriately labelled diagram the following:
(i) Price Ceiling
(4 marks)
(ii) Price Floor
(4 marks)
(b)
Using examples, explain one advantage and one disadvantage of both a Price Ceiling and a Price
Floor.
(8 marks)
(c)
Explain consumer surplus with the aid of an example.
(4 marks)
(20 marks)
C3.
Discuss any four of the following concepts:
(a)
(b)
(c)
(d)
(e)
(f)
Income Elasticity of Demand (YED).
Deductive model.
Law of Diminishing Marginal Utility.
Price Maker.
Marginal Cost.
Economies of Scale.
Page 9 of 9
(5 marks)
(5 marks)
(5 marks)
(5 marks)
(5 marks)
(5 marks)
(20 marks)