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IMI611S- INTERMEDIATE MICROECONOMICS- 1ST OPP- JUNE 2023 |
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nAmI Bl AunIVERSITY
OF SCIEnCE Ano TECHn OLOGY
FACULTY OF COMMERCE, HUMAN SCIENCESAND EDUCAITON
DEPARTMENT OF ECONOMICS, ACCOUNTING AND FINANCE
QUALIFICATION : BACHELOR OF ECONOMICS, BACHELOR OF ACCOUNTING AND BACHELOR
OF ACCOUNTING (CHARTERED)
QUALIFICATION CODE: O7BEC0
LEVEL: 7
COURSE CODE: IMl611S
COURSE NAME: INTERMEDIATE MICROECONOMICS
SESSION: JUNE 2023
DURATION: 3 HOURS
PAPER: THEORY
MARKS: 100
EXAMINER(S)
FIRST OPPORTUNITY EXAMINATION
Mr Eslon Ngeendepi
Mr Pinehas Nangula
QUESTION PAPER
MODERATOR: MS Ndeshi Shitenga
INSTRUCTIONS
1. Answer ALL the questions.
2. Write clearly and neatly.
3. Number the answers clearly.
PERMISSIBLE MATERIALS
1. Pens/pencils/erasers
2. Calculator
3. Ruler
THIS QUESTION PAPER CONSISTS OF 5 PAGES (Including this front page)
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SECTION A
35 Marks
QUESTION 1
a) Explain the three key trade -offs faced by society.
(9)
b) List three key main players of microeconomics
(3)
c) Define the term model in economics.
(3)
d) Outline three (3) key properties of indifference curves.
(6)
e) What effect does a specific sale tax have on government revenue, equilibrium price and
equilibrium quantity?
(6)
f) Explain the error in the following statement: "As the price of avocados falls, the demand
for avocados increases."
(3)
g) Explain the error in the following statement: "The price of golf balls increasesfrom year
to year but every year golfers purchase more golf balls. This implies that the demand
curve for golf balls slopes upward."
(5)
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SECTION B
40 Marks
QUESTION 1
a) Suppose that the demand function for lamb in Namibia is Q = 63 - llp + 7pb + 3pc + 2Y,
where Q is the quantity in million kilograms (kg) of lamb per year, pis the dollar price
per kg (all prices cited are in Namibian dollars), pb is the price of beef per kg, pc is the
price of chicken per kg, and Y is annual per capita income in thousands of Namibian
dollars. What is the demand curve if we hold pb, pc, and Yat their typical values during
the period studied: pb = 19, pc= 6, and Y= 78?
(5)
b) Using the demand function for lamb from Question 1 (a) above, show how the quantity
demanded at a given price changes as annual per capita income, Y, increases by N$200.
(2)
c) Suppose that the supply function for lamb in Namibia is Q = 149 + 8p - 9ps, where Q is
the quantity in millions of kg of lamb per year, and p and ps are the prices of lamb and
sheep, respectively, in Namibian dollars per kg. How does the supply curve change if the
price of sheep increases from N$5 to N$5.50 per kg?
(6)
d) Suppose the supply function for processing coffee beans from coffee cherries in Mexico
= = is Qs 3.15 + 0.lp - 0.5pc and the demand curve for coffee beans is Qd 4.1 - 0.2p,
where Qs and Qd are quantities of coffee beans in thousands of 60-kg bags, p is the
price of coffee beans in millions of pesos per thousand 60-kg bags, and pc= 0.8 is the
price of coffee cherries in millions of pesos per thousand 60-kg bags. What is the supply
curve for coffee beans (that is, supply as a function of only the price of coffee beans)?
Solve for the equilibrium price and quantity of coffee beans.
(10)
e) Is it possible that an outright ban on foreign imports will have no effect on the
equilibrium price? (Hint: Suppose that imports occur only at relatively high prices.) (7)
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QUESTION 2
a) According to Duffy-Deno (2003), when the price of broadband access capacity (the
amount of information one can send over an Internet connection) increases by 10%,
commercial customers buy about 3.8% less capacity. What is the elasticity of demand
for broadband access capacity for firms? Is demand at the current price inelastic? (3)
b) Use calculus to prove that the elasticity of demand is a constant everywhere along the
demand curve whose demand function is Q = Ap.
(4)
c) Do you care whether a 15¢ tax per gallon of milk is collected from milk producers or
from consumers at the store? Why?
(3)
SECTION C
12 Marks
QUESTION 1
a) Which of the following pairs of goods are complements and which are substitutes? Are
the goods that are complements likely to be perfect complements for some or all
consumers?
(4)
i. Cars and tires
ii. Apple cider and hot chocolate
iii. Printers and ink cartridges
iv. Soybeans and chickpeas
b) Jose Maria's utility function is U(B, Z) = ABaZ~. What is his marginal utility of B? What is
n n his marginal utility of What is his marginal rate of substitution between Band (4)
c) Diogo has a utility function U(BZ) =ABaZfl, where A, a, and are constants, Bis
burritos, and Z is pizzas. If the price of burritos, pB, is N$2 and the price of pizzas, pZ,
is N$1, and Yis N$100, what is Diogo's optimal bundle?
(4)
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SECTION D
13 Marks
QUESTION 1
a) Suppose that a firm's production function is q = 2KL,where L is labor services and K is
capital services, and that K = 3. What are the total product, average product of labor,
and marginal product of labor curves?
(6)
b) What are returns to scale? Under what conditions (that is, for what values of the
parameters a and b) does the Cobb-Douglas production function, q = Kalb, exhibit
constant and increasing returns to scale?
(7)
TOTAL= 100 MARKS
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