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    1.1 Introductory Microeconomics Jan 2021

    Uploaded by

    Sile Cachia
    This document provides instructions and exam questions for a microeconomics exam. It consists of one section with 5 sub-questions examining concepts like total fixed costs, average fixed costs, average variable costs, average costs, and marginal costs. It also asks students to explain why average costs fall in the short run with increased output. The second section provides 6 additional questions on topics such as the law of demand, consumer utility maximization, market structures of perfect competition and monopoly, monopolistic competition, market failure, and government intervention. Students must answer question 1 from section A and any other two questions from section B. Calculators are allowed but graph paper is not required.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    1.1 Introductory Microeconomics Jan 2021

    Uploaded by

    Sile Cachia
    25 views4 pages
    This document provides instructions and exam questions for a microeconomics exam. It consists of one section with 5 sub-questions examining concepts like total fixed costs, average fixed costs, average variable costs, average costs, and marginal costs. It also asks students to explain why average costs fall in the short run with increased output. The second section provides 6 additional questions on topics such as the law of demand, consumer utility maximization, market structures of perfect competition and monopoly, monopolistic competition, market failure, and government intervention. Students must answer question 1 from section A and any other two questions from section B. Calculators are allowed but graph paper is not required.

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    This document provides instructions and exam questions for a microeconomics exam. It consists of one section with 5 sub-questions examining concepts like total fixed costs, average fixed costs, average variable costs, average costs, and marginal costs. It also asks students to explain why average costs fall in the short run with increased output. The second section provides 6 additional questions on topics such as the law of demand, consumer utility maximization, market structures of perfect competition and monopoly, monopolistic competition, market failure, and government intervention. Students must answer question 1 from section A and any other two questions from section B. Calculators are allowed but graph paper is not required.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    25 views4 pages

    1.1 Introductory Microeconomics Jan 2021

    Uploaded by

    Sile Cachia
    This document provides instructions and exam questions for a microeconomics exam. It consists of one section with 5 sub-questions examining concepts like total fixed costs, average fixed costs, average variable costs, average costs, and marginal costs. It also asks students to explain why average costs fall in the short run with increased output. The second section provides 6 additional questions on topics such as the law of demand, consumer utility maximization, market structures of perfect competition and monopoly, monopolistic competition, market failure, and government intervention. Students must answer question 1 from section A and any other two questions from section B. Calculators are allowed but graph paper is not required.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 4

    FACULTY OF ECONOMICS, MANAGEMENT & ACCOUNTANCY

    DEPARTMENT OF ECONOMICS
    FEBRUARY 2021 EXAMINATION SESSION

    ECN1011 – Introductory Microeconomics Monday, 8th February 2021

    Examination time: 10:00 – 12:00 + 45 extra minutes for uploading/downloading

    In case of difficulty during the examination (issues with exam paper, electricity power cut,
    internet connection, etc), you may contact the Faculty of Economics, Management &
    Accountancy on the following:

    Telephone: 2340 2734; 2340 2720


    Email: [email protected]

    Please note that for immediate feedback it is best to communicate using telephone. Use email
    only if there are circumstances when the use of telephone is not possible.

    Keep your mobile phone handy since important communications during the examination may be
    communicated by the University through SMS.

    By sitting for this examination, I declare that I am aware of the provisions of the regulations
    regarding conduct during examinations and I pledge to observe them.

    Students may not obtain or seek to obtain advantage in an examination, or give or endeavour to
    give assistance to other students. Students who are found guilty of a breach of the University
    Assessment Regulations are liable to disciplinary action which may result in the examination
    being cancelled and other consequences.

    Page 1 of 4
    INSTRUCTIONS TO STUDENTS:

    STUDENTS ARE REQUIRED TO ANSWER QUESTION 1 FROM SECTION A AND ANY OTHER TWO
    QUESTIONS FROM SECTION B

    NON-PROGRAMMABLE CALCULATORS ARE ALLOWED

    GRAPH PAPERS ARE NOT REQUIRED

    Section A
    1. The following table provides the total cost data for a manufacturer.

    Output (units) Total Variable Cost (Eur) Total Cost (Eur)


    0 0 10
    1 7 17
    2 13 23
    3 18 28
    4 26 36
    5 42 52
    6 69 79
    7 114 124

    (a) What is the manufacturer’s total fixed cost in Euro? Give two examples of fixed costs
    that this manufacturer might have.
    (6 marks)

    (b) For each output level, calculate the Average Fixed Cost (AFC) and draw the curve. Why
    does the AFC fall as output increases?
    (8 marks)

    (c) Calculate the Average Variable Cost, the Average Cost and Marginal Cost for each
    output level.
    (6 marks)

    (d) Draw the Average and Marginal Cost curves calculated in part c, in one graph.
    (6 marks)

    (e) Explain why with increased output a firm’s average costs fall in the short run. Provide a
    detailed answer.
    (14 marks)

    Page 2 of 4
    Section B

    2. (a) The Law of Demand states that ‘price and demand are inversely related’. Explain
    (6 marks)

    (b) How is price equilibrium achieved and how do market forces work to clear a
    disequilibrium? Explain your answer by using diagrams.
    (12 marks)

    (c) Distinguish between ‘a movement along the curve’ and ‘a shift’. Explain using diagrams
    (12 marks)

    3. (a) “An additional unit of consumption of any good will always yield an increase in both
    total and marginal utility”. Discuss this statement in the context of the Law of
    Diminishing Marginal Utility.
    (8 marks)

    (b) Explain the meaning of consumer utility maximization by superimposing the budget
    line on an indifference curve.
    (8 marks)

    (c) Explain how your answer in (b) changes if:

    (i) there is an increase in income and


    (7 marks)

    (ii) there is an increase in the price of one of the products.


    (7 marks)

    4. (a) By making reference to the assumptions of the two market structures of perfect
    competition and monopoly, discuss why, unlike in the case of a monopoly, a firm in
    perfect competition cannot make supernormal profits (or Losses) in the long-run.
    (10 marks)

    (b) By making reference to the concept of deadweight loss and society’s welfare, compare
    and contrast the equilibrium price and quantity for perfect competition and monopoly.
    Show this by using one graph.
    (15 marks)

    (c) Why is it useful to understand the perfectly competitive model, even though its
    underlying assumptions may not be realistic?
    (5 marks)

    Page 3 of 4
    5. (a) What do you understand by monopolistic competition?
    (8 marks)

    (b) Explain how equilibrium in the short and long run is attained under monopolistic
    competition?
    (12 marks)

    (c) What do you understand by collusion in an oligopoly? Does the consumer benefit from
    such collusion?
    (10 marks)

    6. (a) What is market failure? Explain by using two examples.


    (10 marks)

    (b) Many economists assert that most environmental problems involve ‘market failure’.
    Explain by providing examples and discussing this assertion.
    (12 marks)

    (c) How can government intervention correct for market failure?


    (8 marks)

    Page 4 of 4

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