DBIT 201  MICROECONOMICS. 2

UNIVERSITY EXAMINATIONS: 2016/2017
EXAMINATION FOR THE DIPLOMA IN BUSINESS INFORMATION
TECHNOLOGY
DBIT 201 MICROECONOMICS
DATE: AUGUST, 2017 TIME: 2 HOURS
INSTRUCTIONS: Answer Question One & ANY OTHER TWO questions.

QUESTION ONE [30 MARKS] – COMPULSORY
(a) Distinguish between the following terms
(i) Opportunity cost and Utility (2 Marks)
(ii) Short run production period and long run production period (4 Marks)
(b) (i) Define the term consumer sovereignty (2 Marks)
(ii) Discuss four factors that are likely to limit consumer sovereignty. (8 Marks)
(c) Using relevant examples, distinguish between economies of scale and diseconomies of scale
(6 Marks)
(d) Discuss four factors affecting demand for a commodity in the market (8 Marks)
QUESTION TWO [20 MARKS]
(a) Explain five disadvantages of free market system (5 Marks)
(b) Explain five reasons why government intervenes in economic activities. (5 Marks)
(c) Discuss five problems affecting agriculture in Kenya hence suggest possible measures for the
problems identified (10 Marks)
QUESTION THREE [20 MARKS]
(a) Define the term price elasticity of demand hence discuss four factors affecting price elasticity
of demand (9 Marks)
(b) State the law of demand and explain three exceptional cases to the law of demand (7 Marks)
(c ) Discuss four factors affecting price elasticity of supply (4 Marks)
QUESTION FOUR [20 MARKS]
(a) Distinguish between maximum price control and minimum price control (4 Marks)
(b) Explain four reasons why the government would find it necessary to control prices of certain
goods and services in an economy (4 Marks)
(c )Distinguish between oligopolistic market and monopolistic competition market (4 Marks)
(d) The following function represents the Total cost function of the firm operating in its short run
period;
4 500 2

Required;
(i) The firm’s Marginal cost at Q=10 Units (3 Marks)
(ii) The firms Average Variable Cost AT Q=5 Units (3 Marks)
(iii) The firm’s Average Total Cost at Q=15 Units (2 Marks)
QUESTION FIVE [20 MARKS]
(a)Explain five features of perfect competition market (5 Marks)
(b)Distinguish between price discrimination and product differentiation (4 Marks)
(c )Explain three sources of power monopolies for in an economy (6 Marks)
(d) State the law of supply and discuss four factors affecting supply of a commodity in the
market (5 Marks)

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