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Introductory Microeconomics – Question Paper 2007 | Semester: Spring

Introductory Microeconomics
Old Question Paper Year: 2007 | Semester: Spring
Pokhara University

Exam 2007 Spring

1. a. What is microeconomics? Explain the positive and normative aspects of economics. [8]
b. Why does a demand curve slope downwards to the right?

2. a. What is market equilibrium? Show how equilibrium price is determined in a free market economy. [7]
b. Calculate the price elasticity of demand at price Rs 100 for the following demand curve.
Interpret the result. [8]

3. a. Suppose there are 1000 identical individuals in the market for commodity X, each with a demand function given by Qdx=12-2Px and 100 identical producers of with a supply function given by Qsx=20Px. Then find: [8]
i. The market demand function (QDx) and the market supply function (QSx) for commodity X
ii. The equilibrium price and the equilibrium quantity.
b. What is the indifference curve? Explain the properties of indifference curves. [7]

4. a. What do you mean by producers’ equilibrium? How can the producer maximize the production at the given total cost and input prices. [8]
b. Compute AVC, AFC, AC and MC with the help of the following data: [7]

Output (units) TVC TFC
1 100 100
2 210 100
3 330 100
4 460 100
5 660 100

In which, AVC=Average Variable Cost, AFC=Average Fixed Cost ,AC =Average Cost ,MC= Marginal cost TVC=Total variable Cost ,TFC=Total Fixed cost

5. What is marginal revenue? Show the relationship between marginal revenue and marginal cost curve in a perfectly competitive market. [15]

6. Define monopolistically competitive market with examples. Explain the short-run and long equilibrium of the firm in monopolistically competitive market. [15]
Under what conditions will a firm shutdown temporarily and under what conditions will a firm exit a market permanently? Explain. [15]

7. Write short notes on (Any Two) [2×5]

a. Accounting and economic cost
b. Marginal Rate of Substitutions MRTS)
c. Inferior and Giffen goods
d. Input Pricing


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