UNIVERSITY EXAMINATIONS: 2017/2018
EXAMINATION FOR THE DEGREE OF BACHELOR OF BUSINESS
INFORMATION TECHNOLOGY
BUSS 101 INTRODUCTION TO MICRO ECONOMICS
FULL TIME/PART TIME
DATE: JULY/AUGUST, 2018 TIME: 2 HOURS
INSTRUCTIONS: Answer Question One & ANY OTHER TWO questions.
QUESTION ONE
a) Using diagrams clearly explain the concept of economies and diseconomies of scale citing the
various sources of economies of scale to a firm. (10 Marks)
b) The table below shows the Total product per given number of workers for a product.
Determine the Average and Marginal product at each level of out put
c) Using diagrams explain the law of diminishing returns clearly highlighting the various stages
associated with the law (8 Marks)
d) ‘Price Control’ is used by the government to achieve desired levels of economic activity in
the economy.
i. With the aid of well-labeled diagrams, distinguish between price floors and price
ceilings.
(6 Marks)
ii. What are the major consequences of each of the price control measures?
(6 Marks)
(Total: 30 Marks)
QUESTION TWO
a) Given that:
QX = 9 – ½ P2
QY = 8P + ½ P2
Required:
i) Identify which of the two functions is a demand and a supply function. (4 Marks)
ii) Explain the concept of free market economy citing the advantages and disadvantages it poses
(6 Marks)
b) Explain the importance of the concept of elasticity of demand citing the Factors that determine
it.
(10 Marks)
(Total: 20 Marks)
QUESTION THREE
(a) Using examples discuss the various factors of production (5 Marks)
(b) Explain the concept of mobility of factors of production citing the various types of factor
mobility (5 Marks)
(c)
(i) Discuss the significance of factor mobility in any economy (5 Marks)
(ii) What policy recommendations would you suggest to facilitate labor mobility in developing
countries? (5 Marks)
(Total: 20 Marks)
QUESTION FOUR
(a) Using a diagram draw a perfect market structure making supernormal profits citing the ideal
conditions for the market to operate
(8 Marks)
(c) Illustrate and clearly explain the nature of indifference curves for perfect substitutes and for
Complementary goods (6 Marks)
(d) Explain the differences between the ordinal and cardinal utility citing the characteristics of
indifference curves (6 Marks)
QUESTION 5
(a) Using a diagram explain the concept of scarcity, choice and opportunity cost (10 Marks)
(b) Explain why the government needs to intervene in the economy citing the various ways of
intervention ( 10 Marks)
(Total: 20 Marks)
