MICROECONOMICS

INSTRUCRIONS: ANSWER ANY THREE QUESTIONS IN SECTION A & ANY

TWO IN SECTION B
QUESTION ONE
a) Define the following economic concepts
i) Economic resources
ii Consumer sovereignty
iii) Marginal utility
iv) Microeconomics
(4 Marks)
b) Using specific examples and illustrations differentiate between movement along and
shift of the demand curve (6Marks)
QUESTION TWO
a) Argue the case for and against command economy (4 Marks)
b) Due to the many disadvantages of free market economy government intervention is
necessary. Explain. (6 Marks)
QUESTION THREE
a) Explain any four factors influencing consumers willingness and ability to buy
(4 marks)
b) Using the production possibility curve explain the concept of opportunity cost
(6Marks)
QUESTION FOUR
a) Explain the law of variable proportions (4 Marks)
b) Illustrate and explain the kinked demand curve of an oligopoly (6 Marks)

SECTION B
Question Five
a) Illustrate and explain the effect of a decrease in demand on a monopolist firm
profit(6 marks)
b) Define the term price discrimination as used in economics(2 Marks)
c) Outline the necessary conditions for a firm to successfully price discriminate (6
marks)
d) Identify the ideal conditions for a perfect competitive firm (6 mar
Question Six
a) Identify and explain the benefits and challenges associated with large scale
production (8 Marks)
b) Describe the classical theory of interest rate determination and identify the

criticisms (8Marks)
c) Explain the profit maximizing condition (4 marks)
Question Seven
a) The total cost equation in production of beef at some hypothetical factory is given
as:
C=1000+100Q-15Q+Q
Required
i) Compute the total and average costs at output level of 10 kg (5 Marks)
ii) Calculate the marginal cost of 12th and 13th Kg (5 Marks)
b) Using an illustration explain the effect on market equilibrium price &quantity
traded of ice cream following
i) A fall in price of ice cream
ii) A healthy campaign which claims ice cream makes you fat
iii) Arise in wage of ice-cream workers
(10 marks)