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    Faculty - Business Management - 2022 - Session 1 - Degree - Eco539

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    2022646388
    The document is a final assessment for an intermediate microeconomics course consisting of 4 questions. Question 1 covers market equilibrium and the impact of taxes. Question 2 covers long-run average costs and production theory. Question 3 covers monopolistic competition and monopoly profit maximization. Question 4 covers public goods, externalities, and the kinked demand curve model of oligopoly.

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    Faculty - Business Management - 2022 - Session 1 - Degree - Eco539

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    2022646388
    33 views4 pages
    The document is a final assessment for an intermediate microeconomics course consisting of 4 questions. Question 1 covers market equilibrium and the impact of taxes. Question 2 covers long-run average costs and production theory. Question 3 covers monopolistic competition and monopoly profit maximization. Question 4 covers public goods, externalities, and the kinked demand curve model of oligopoly.

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    FACULTY_BUSINESS MANAGEMENT_2022_SESSION 1 - DEGREE_ECO539

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    The document is a final assessment for an intermediate microeconomics course consisting of 4 questions. Question 1 covers market equilibrium and the impact of taxes. Question 2 covers long-run average costs and production theory. Question 3 covers monopolistic competition and monopoly profit maximization. Question 4 covers public goods, externalities, and the kinked demand curve model of oligopoly.

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

    Faculty - Business Management - 2022 - Session 1 - Degree - Eco539

    Uploaded by

    2022646388
    The document is a final assessment for an intermediate microeconomics course consisting of 4 questions. Question 1 covers market equilibrium and the impact of taxes. Question 2 covers long-run average costs and production theory. Question 3 covers monopolistic competition and monopoly profit maximization. Question 4 covers public goods, externalities, and the kinked demand curve model of oligopoly.

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    of 4

    CONFIDENTIAL 1 BA/FEB 2022/ECO539

    FACULTY OF BUSINESS AND MANAGEMENT


    FINAL ASSESSMENT

    COURSE : INTERMEDIATE MICROECONOMICS/


    MICROECONOMICS ANALYSIS
    COURSE CODE : ECO539
    EXAMINATION : FEBRUARY 2022
    TIME : 3 HOURS
    PLATFORM :

    INSTRUCTIONS TO CANDIDATES

    1. This question paper consists of four (4) questions.

    2. Answer ALL questions and show ALL of the calculations, where applicable.

    3. Answer ALL questions in English.

    4. Submit your hand-written answers in PDF or JPEG format.

    DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO


    This examination paper consists of 4 printed pages

    © Hak Cipta Universiti Teknologi MARA CONFIDENTIAL


    CONFIDENTIAL 2 BA/FEB 2022/ECO539

    each question should cover 25 marks

    QUESTION 1

    Given the following equations for good A:

    Demand: P = 460 – 10QD and Supply: P = 100 + 8QS

    a) i. Determine the market price and quantity for good A and show the equilibrium
    condition for good A in a fully labeled diagram.

    (5 marks)

    ii. Suppose the government imposes a unit tax on sales of good A and the new
    supply curve becomes Q1 = 0.125P - 19.25. Calculate the new price and quantity
    for good A. Show the new supply curve and new equilibrium in the same diagram
    (i) above. Calculate the total tax collected by the government, the new amount of
    producer surplus and new amount of consumer surplus after tax is imposed.

    (8 marks)

    b) Using a single diagram, illustrate and explain how subnormal profit of a perfectly
    competitive firm can change to supernormal profit, when the market price increases in
    the short-run (assume its’ costs remain unchanged).

    (12 marks)

    QUESTION 2

    a) Briefly describe why the long-run average cost curve is ‘U-shaped’.

    (5 marks)

    b) Using diagrams, explain the relationships between total production, average production
    of labour and marginal production of labour; as given by the theory of short-run
    production.

    (8 marks)

    © Hak Cipta Universiti Teknologi MARA CONFIDENTIAL


    CONFIDENTIAL 3 BA/FEB 2022/ECO539

    c) The diagram below shows four (4) isoquants (IQ) for four different levels of production
    and OX is the expansion path. C1, C2, C3 and C4 are the isocost lines for those four (4)
    productions levels. The price of labour is RM50 per person and price of capital is RM20
    per hour.

    Capital, K (unit)

    C3

    C2
    X

    C1
    38
    30
    IQ3 = 60
    20
    IQ2 = 40

    IQ1 = 20

    0 20 30 38 Labour, L (person)

    i) Identify the type of return to scale at all levels of production experienced by this
    firm when expanding its production from 20 units to 40 units, and from 40 units to
    60 units.

    (6 marks)

    ii) Calculate the average cost incurred at those three (3) levels of production.
    Describe the relationship between the type of return to scale experienced by this
    firm and its’ average cost.

    (6 marks)

    © Hak Cipta Universiti Teknologi MARA CONFIDENTIAL


    CONFIDENTIAL 4 BA/FEB 2022/ECO539

    QUESTION 3

    a) Explain why the demand curve for a monopolistically competitive firm slope downwards.

    (10 marks)

    b) A monopolist faces a demand curve P = 210 - 5Q and initially its’ marginal cost is
    constant at 20 (MC = 20).

    i) Calculate the profit- maximizing monopoly price and quantity.

    (5 marks)

    ii) Suppose the average cost at the equilibrium level for this firm is RM 8. Compute
    the monopolist total revenue and total cost at the optimal price. Explain the
    economic profit for the monopolist market.

    (5 marks)

    iii) If the firm’s marginal cost increases to RM30 (MC = 30); verify that the firm’s total
    revenue goes down.

    (5 marks)

    QUESTION 4

    a) Define public good. State and explain two categories of public good. (5 marks)

    b) Briefly explain positive and negative externalities. (5 marks)

    c) Briefly discuss TWO (2) characteristics of oligopoly market structure. (5 marks)

    d) Using a diagram, illustrate and explain kinked demand curve model of oligopoly.

    (10 marks)

    END OF QUESTION PAPER

    © Hak Cipta Universiti Teknologi MARA CONFIDENTIAL

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