ECO402 Midterm Past Paper 2006

ECO402 Microeconomics · Mid Term Examination – Spring 2006 · Time Allowed: 90 Minutes · INSTRUCTIONS:

• All questions are compulsory.
• This exam consists of 10 Multiple Choice Questions (MCQ’s) carrying 1

mark each,5 fill in the blanks carrying 1 mark each, 5 Short questions carrying 3 marks each and 1 Descriptive questions carrying 10 marks.

• You are required to show all the working of short questions as well as

Descriptive question.

• This examination is closed book, closed notes, closed neighbors.

anyone.

• You may wish to pace yourself with your own watch, but the Supervisor will

be the official timekeeper of the test.

Failure to comply with the Supervisor’s directions will result in your test being cancelled. Please comply with supervisor’s directions to avoid any unpleasant event.

Q1. Marks : 1

Which best expresses the law of demand?

 A higher price reduces demand  A lower price reduces demand  A higher price reduces quantity demanded  A lower price shifts the demand curve to the right

Q2. Marks : 3

If a consumer starts in equilibrium in their consumption of apples and chocolate bars, and the price of apples rises, what will happen to the quantity demanded of apples, and why?

Q3. Marks : 1

_____________is the additional utility gained from consuming one extra unit of a good or service.

Q4. Marks : 1

A firm will earn an economic profit if:

 Its total sales revenue equals the cost of labor and raw materials  It produces its output utilizing the least-cost production method  It is regulated by government  Its total sales revenue exceeds the sum of all its economic costs

Q5. Marks : 10

a). Define equilibrium.

b). If · – QS = 1,800 + 240P · – QD = 3,550 - 266P

Find out the equilibrium quantity and price. Also find out the elasticity of demand and supply and show that elasticities are elastic or inelastic?

Q6. Marks : 1

A market is characterized by:

 Either down sloping demand or up sloping supply but not both  The exchange of goods and services, but not resources  Exchange between buyers and sellers  Face-to-face contact between buyers and sellers

Q7. Marks : 1

The_________________shows how much firms wish to sell at different prices.

Q8. Marks : 1

Two variables have a positive relationship if ___________________:

 They move in opposite directions  They move in the same direction  One decreases when the other increases  One increases when the other decreases

Q9. Marks : 3

What does production possibility frontier show?

Q10. Marks : 1

The numerical measurement of a consumer’s preference is called_______________:

 Satisfaction  Use  Pleasure