Introductory Microeconomics – Old Question Paper 2012 | Semester: Spring

questionIntroductory Microeconomics
Old Question Paper
Year: 2012 | Semester: Spring
Pokhara University

Exam 2012 Spring

1. a. What is Microeconomics? Describe the importance and limitations of Microeconomics. [8]
b. Explain the factors that influence the demand for a product such as mobile phones. [7]
2. a. Suppose the demand schedule for mobile is as follows:

Price (Rs) Quantity demanded (Qd)

(Income= $ 10,000)

Quantity Supplied (Qs)

(Income= $ 12,000)

8 40 50
10 32 45
12 24 30
14 16 20
16 8 10

i. Calculate the price elasticity of demand as the price of mobile increases from $8 to $10 if income is $10,000. [4]
ii. Calculate the income elasticity of demand as income increase from $ 10,000 to $ 12,000 if the price is $ 14. [4]
b. State and illustrate the conditions of a consumer’s equilibrium at the given money income and price of goods demanded by under the indifference Curve Approach. [7]
3. a. State and illustrate the Law of Diminishing Returns to variable proportions. [8]
b. Explain the method of finding least cost combination of inputs in the production theory. [7]
4. a. Define cost of production. Calculate Total Variable Cost (TVC),Total Cost(TC) ,Average Fixed cost (AFC), Average Cost(AC) and Marginal cost (MC) from the given information. [8]

Output in kg 1 2 3 4 5 6 7 8
Average Variable Cost in Rs 10 12 15 17 19 23 30 50

b. How are average revenue and marginal revenue related in monopoly market? Explain. [7]
5. a. Restaurants are categorized monopolistic market and suppose that they are incurring losses. Why would they continue to produce rather than shut-down? In which condition would they shut down? [7]
b. Differentiate between monopolistic and perfect competitive market. [8]
6. a. What is factor pricing? Explain the determination of factor price in an imperfectly competitive factor market. [7]
b. Why does the Individual Labor Apply Curve bend backward? Explain and illustrate. [8]
7. Write short note on any two:[2×5=10]
a. Positive and Normative Economics
b. Substitution Effect
c. Expansion path

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