Metropolitan University, Sylhet

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Metropolitan University, Sylhet

Department of Business Administration


Spring Term Supplementary Examination – 2020
Program: BBA
Course Title: Introductory Microeconomics/Principles of Economics 1; Course Code: ECO 131/BBA133

Full Marks: 40
Answer any four set of questions. All parts of each question must be answered sequentially. Figures in
the right margin indicate full marks.
1. a) The demand and supply schedule for gum are:

Price Quantity demand Quantity supplied

Tk(per pack) (millions of packs per week) ( millions of packs per week)
20 180 60
30 160 80
40 140 100
50 120 120
60 100 140
70 80 160
80 60 180

b) Draw a diagram of the gum market and mark in the equilibrium price and quantity. 5
c) Suppose that gum price TK70 per pack, is there a shortage or surplus, and how does the 5
price adjust?

2. a) What is elasticity of demand? What are the kinds of elasticity of demand? 3


b) Define different types of price elasticity of demand with diagrams. 3
c) Define income elasticity of demand and Cross Elasticity of demand. How to calculate 4
them?

3. a) Define total utility and marginal utility. 3


b) Explain the law of diminishing marginal utility. 3
c) Does competitive market use resources efficiently? 4

4. a) What is production function? Distinguish between short run and long run production 3
function.
b) By using the concept of Total Product of Labor, Marginal Product of Labor and 4
Average Product of Labor show the three stages of production and explain in which
stage a rational producer will take his production decision.
c) What is returns to scale? Distinguish among constant, increasing and decreasing return 3
to scale.
5. a) Calculate Average Total Cost (ATC), Average Fixed Cost(AFC), Average Marginal
Cost(AMC), Average Variable Cost(AVC), from the given table: 7

Unit of labor Output Fixed cost Variable cost


(L) (Q) (FC) (VC)
0 0 100 0
1 5 100 50
2 15 100 100
3 27 100 150
4 37 100 200
5 45 100 250
6 52 100 300
7 57 100 350
8 60 100 400

b) Why does short-run average cost curve become ‘U’ shaped? 3

6. a) Explain all the possible profit outcomes for perfect competitive firm in the short run. 4
b) Why does a monopoly always make an economic profit? 3
c) Monopoly might be more innovative than competition. Explain why? 3

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