UNIVERSITY EXAMINATIONS: 2015/2016
EXAMINATION FOR THE DIPLOMA IN BUSINESS INFORMATION
TECHNOLGY
DBIT201 MICROECONOMICS
DATE AUGUST 2016 TIME: 1½HOURS
INSTRUCTIONS: Answer Any THREE Questions.
QUESTION ONE
(a) Distinguish between the following terms as used in economics
i. Economic resources and utility
ii. Wealth and welfare
iii. Scarcity and opportunity cost (6 Marks)
(b) (i) Define the term consumer sovereignty (2 Marks)
(ii) Evaluate any 4 factors that are likely to limit consumer sovereignty. (4 Marks)
(c) Discuss why most farmers in Kenya generate low and unstable income (4 Marks)
(d) Differentiate between the short run period and the long run period of production (4 Marks)
QUESTION TWO
(a) Explain any 5 advantages of free market system (5 Marks)
(b) Highlight any 5 reasons why government intervenes in economic activity. (5 Marks)
(c) (i)Define the term price control (2 Marks)
(ii)Distinguish between the maximum price control and minimum price controls (4 Marks)
(iii) Give any 2 advantages of price controls and any 2 disadvantages of price controls
(4 Marks)
QUESTION THREE
(a) Define the term demand and discuss any 5 factors that affect demand for a commodity in the
market (6 Marks)
(b) Distinguish between economic forces; Excess Demand and Excess Supply showing clearly
their effects on the price of a commodity in the market (4 Marks)
(c) State the law of supply and discuss any 4 factors affecting supply of a commodity
(5 Marks)
(d) Explain the term “rational consumer” (2 Marks)
(e) Using an illustration, define what is meant by market Equilibrium of a commodity
(3 Marks)
QUESTION FOUR
(a)Define the term market (2 Marks)
(b) Distinguish between price discrimination and product differentiation (4 Marks)
(c) Outline any 4 conditions under which price discrimination can be possible and successful for
a monopolist. (4 Marks)
(d) Highlight any 5 features of a firm under perfect completion market (5 Marks)
(e)Outline any 3 advantages and any 2 disadvantages of monopoly market (5 Marks)
QUESTION FIVE
(a)Using examples, discuss any 3 economies of scale that a large firm can enjoy (6 Marks)
(b) Outline any 3 features of oligopoly market (3 Marks)
(c) Explain any 5 reasons why the government in an economy would find it necessary to
intervene in economic activities (5 Marks)
(d) The following function represents the total cost function of a firm in its short run period
Determine;
Marginal cost
The average fixed cost when Q=3 units
The average variable cost when Q=5 units
Average total cost when Q= 10 units (6 Marks)
