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IMI611S-INTERMEDIATE MICROECONOMICS-1ST OPP- JUNE 2024 |
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nAmlBIA unlVERSITY
OF SCIEnCE Ano TECHnOLOGY
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 2024
DURATION: 3 HOURS
PAPER:THEORY
MARKS: 100
FIRST OPPORTUNITY EXAMINATION QUESTION PAPER
EXAMINER(S) Mr Eslon Ngeendepi
MODERATOR: Miss 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 S PAGES (Including this front page)
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SECTION A
20 Marks
QUESTION 1
1.1 List the three basic assumptions of indifference curves.
(6)
1.2 Rethabile sells jewellery that she makes. Wooden bead necklaces are her best
product, she sells 40 a month, for N$120 each. When Rethabile wants to make more
money and increases the price by 25%, the quantity demand decreases by 15%.
i. Calculate the price elasticity of demand for the wooden bead necklaces? (4)
ii. What should Rethabile do to increase revenue?
(2)
1.3 When the price of peanut butter is N$15 per jar, the quantity demanded of jam is 1
500 jars. When the price of peanut butter increases to N$17 per jar, the quantity
demanded of jam increases to 1 600 jars. Are peanut butter and jam complements or
substitutes?
(2)
1.4 When the price of product A decreases from N$42 500 to N$1 600, the quantity
demanded of product B increased by 20%. Are products A and B complements or
substitutes?
(2)
1.5 When the price of product A decreases from N$2 500 to N$1 600, the quantity
demanded of product B increased by 20%. Are products A and B complements or
substitutes?
(2)
1.6 When the electricity price increases by 19%,the quantity electric appliance demanded
will decrease by 2%. Are electricity and electric appliance complements or substitutes?
(2)
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QUESTION 1
SECTION B
20 Marks
Explain, with the aid of a diagram, what will happen ifthe government fixes a minimum price
for maize above the equilibrium price.
(6}
QUESTION 2
Eva has a budget of N$1200, with which she can buy books or buy internet data. A book
costs about N$50, while a unit of internet costs about N$60.
(a} Given this information, draw Eva's budget line (put books on the vertical axes}. (4)
(b} After improvements in internet technology, the cost of a unit of internet decreased.
Now Eva, only pays N$40 per unit of internet. Using the same graph as in S(a}, draw
Eva's new budget line.
(2)
(c} Derive the Marginal Rate of Transformation before and after improvement in
internet technology.
(4}
QUESTION 3
Gift must buy food and clothing. He has N$1200 to buy both, clothes are N$120 per item
and food is N$30 per meal.
(a} Draw Gift's budget line, showing clothes on the vertical axes.
(1)
(b} On the same graph, draw three possible indifference curves. The first indifference
curve, labelled U1, should be affordable but does not produce optimal satisfaction.
The second indifference curve, labelled U2,should show the optimal satisfaction that
Gift can afford and the third indifference curve, labelled LJ3,should be beyond Gift's
means.
(3}
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QUESTION 1
SECTION C
20 Marks
Annie consumes two goods, chocolates and chips. Chocolates are three times more expensive
than chips. But during a special, the price of chocolates is dropped, so chips and chocolates
are the same price. Draw Annie's initial budget curve and show her utility maximising
indifference curve, with chocolate on the vertical axes. On the same curve show, show Annie's
new budget line, with the substitution effect and income effect after the price of chocolate
has decreased.
(12)
QUESTION 2
Derive the demand curve of soup, given the following indifference curve. Assume that the
price of bread is N$10.
(8)
Answer:
48
40
32
"rOo
24
16
8
15 20 25 30
Soup
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SECTION D
20 Marks
QUESTION 1
a)
Complete the table below:
Product
Labour (a)
Capital (/3)
Scale
Type of return to scale
U.S.tobacco 0.18
0.33
Japanese Beer 0.40
0.60
(4)
= b) Suppose that a firm's production function is q 2KL, where Lis 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)
c) To explain input substitutability, make use of diagrams to depict the following
relationships.
·i. Perfect substitutes.
(5)
ii. Perfect complements.
(5)
SECTION E
20 Marks
QUESTION 1
a) A firm's profit function is n(q) =R(q) - C(q) =120q - (200 + 40q + 10q2). What is the
positive output level that maximizes the firm's profit (or minimizes its loss)? What are
the firm's revenue, variable cost, and profit? Should it operate or shut down in the
short run?
(10)
b) If the inverse demand function is p = 500 - l0Q, what is the elasticity of demand and
revenue at Q = 10?
(10)
TOTAL= 100 MARKS
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