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PMI511S- PRINCIPLES OF MICROECONOMICS- 2ND OPP- JUNE 2023 |
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n Am I B I A u n I VE Rs I TY
OF SCIEnCE Ano TECHnOLOGY
FACULTY OF COMMERCE, HUMAN SCIENCESAND EDUCATION
DEPARTMENT OF ECONOMICS, ACCOUNTING AND FINANCE
QUALIFICATION CODE:
07BECO, 07BACC, 07MARB,
07BBMA, 07BENT, 07BSMN,
07BTAR, 06DIPS, 07BOAC,
08BOPS, 07BHRM, 07BACO,
07BLAM, 07BOQS, 07BPMN
COURSE CODE: PMISllS
SESSION: JUNE 2023
DURATION: 3 HOURS
LEVEL: 7
COURSE NAME: PRINCIPLESOF MICROECONOMICS
PAPER: THEORY
MARKS: 100
SECOND OPPORTUNITY EXAMINATION QUESTION PAPER
EXAMINER(S) Ms. Precious Mwikanda
Ms. Elina Haivela
Mr. Makaisapi Tjiumbirua
Ms. Lavinia Hofni
MODERATOR: Mr. Eslon Ngeendepi
INSTRUCTIONS
..
1. This question paper is made up of Five (5) sections.
2. Answer Section A and B on the attached answer sheet
3. Write each question on a separate page in your answer booklet
4. Write neatly and legibly
THIS QUESTION PAPER CONSISTS OF 19 PAGES (Including this front page)
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1.2 Page 2 |
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SECTION A
20 Marks
Instructions:
•
Read all questions carefully.
•
Answer all questions.
•
All answers should be on the answer sheet provided on page.17. Tear the page off and
place it inside your examination script.
QUESTION 1
[20 Marks]
1.1 When resources are scarce, decision makers face trade-offs. As a result ..... [1 mark]
A. market based economies tend to perform less effectively than planned economies.
B. In equilibrium there will be "excess demand"
C. having more of one thing typically means getting by with less of something else.
D. wealthy individuals can choose to purchase any combination of goods and services
that they wish.
Toanswer questions 1.2, 1.3 and 1.4 refer to the diagram in Figure1 showing a production
possibilitiescurve (PPCf)or tables and chairs.
Figure 1: Production possibilities curve (PPC) for tables and chairs
Production possibilities curve
120
105
90
75
a 60
r---... A
eE
------B
.............__
,..._____
45
o•
C
30
15
0
0
2
3
4
5"'"'6
7
1
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1.2 Refer to the diagram in Figure 1 above. At which point is it possible to produce more
tables without giving up any chairs?
[1 mark]
A. Point A
B. Point B
C. Point C
D. Point D
1.3 Refer to the diagram in Figure 1 above. The opportunity cost of raising table production
from 2 to 3 units is:
[1 mark]
A. Zero
B. 15 chairs
C. 1 table
D. 75 chairs
1.4 Refer to the diagram in Figure 1 above. Which of the following statements is true?
[1 mark]
A. All points along the PPC represent productive efficiency and full employment of the
firm's resources.
B. If the firm produces 105 chairs, the maximum number of tables it can produce is 6.
C. To reach point E, the firm would have to reduce its inefficiency in production.
D. To change its production choice from point B to point C, the firm would have to
improve its technology in table production.
1.5 In the operation of the firm, capital is:
A. financing provided by the owners.
B. comprised of plant, equipment and inventories
C. money borrowed from banks to run the firm.
D. the outstanding obligations of the firm to others
[1 mark]
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1.6 If the quantity of a good, demanded increases by 15% when the price decreases by 1%,
the demand for this good is
[1 mark]
A. Perfectly elastic
B. Relatively elastic
C. Unit elastic
D. Relatively inelastic
1.7 If the price elasticity of demand is 0.63 and a firm increases the price of its product it
would expect its total revenue to:
[1 mark]
A. decrease
B. increase
C. stay the same
D. none of the above
1.8 Which of the following is an exogenous variable of demand?
A. prices of related goods
B. technology
C. taxes and subsidies
D. the price of factors of production and other input
[1 mark]
1.9 If the price of coffee, a substitute for tea in consumption, increases, we would expect
the equilibrium quantity of tea to:
[1 mark]
A. decrease
B. increase
C. stay the same
D. increase or decrease (undetermined)
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1.10 If a 10% increase in the market price of a product leads to a 10% decrease in the
quantities demanded by all consumers in the market, then:
[1 mark]
A. the price elasticity of demand is greater than one
B. the price elasticity of demand is less than one
C. the price elasticity of demand is one
D. there is insufficient information to determine the price elasticity of demand
1.11 In the long run, a firm can vary __ _
A. the capital it uses but not the quantity of labor it hires
B. the quantity of labor it hires but not the capital it uses
C. both the quantity of labor it hires and the capital it uses
D. neither the quantity of labor it hires nor the capital it uses
[1 Mark]
1.12 If marginal product falls as an additional worker is employed, then we know that
average product___
[1 Mark]
A. is less than marginal product.
B. exceeds marginal product.
C. falls if it is less than marginal product or rises if it exceeds marginal product.
D. is less than marginal product and rising or more than marginal product and falling.
1.13 Ernie's Earmuffs produces 200 earmuffs a year at a total cost of $2,000. Its fixed
costs are $400. Ernie's average variable cost of producing an earmuff is_. [1 Mark]
A. N$12
B. N$20
C. N$8
D. N$4
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1.14 The return that an entrepreneur can expect to earn, on average, is called. [1 Mark]
A. profit.
B. normal profit.
C. economic profit.
D. accounting profit.
1.15 The table below shows Elaine's utility from pizza and Pepsi. If Elaine consumes 2 slices
of pizza and 3 Pepsis, her marginal utility from the fourth Pepsi is ____
units.
[1 Mark]
Table 1: Elaine's utility from pizza and Pepsi
Pizza
Pepsi
Slices per week
Total utility
Quantity per week
Total utility
0
0
0
0
1
100
1
70
2
150
2
130
3
175
3
180
4
190
4
220
5
195
5
250
A. 60
B. 54
C. 40
D. 220
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1.16 Price discrimination is possible
[1 mark]
A. If firms keep their secrets.
B. If buyers of the commodity can be prevented from reselling a monopolised
commodity.
C. only if firms conspire with competitors.
D. All of the above.
To answer questions 1.17, 1.18, and 1.19 refer to the diagram in Figure 2 market
structure below:
Figure 2: Market structure
SMC
ATC
20•----,------/
_g
..g l 5. 7 5 t-1.....-----'-~-------=--~-->----
AVC
-/ D =MR
0
8.000
Ouontitv
1.17 Refer to the diagram in Figure 2 above. At which point is it possible for this firm to
maximize its profit?
[1 mark]
A. Point A
B. Point B
C. Point C
D. Point D
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1.18 Refer to the diagram in Figure 2 above. What is the total variable cost? [1 mark]
A. 124 000
B. 96 000
C. 960.00
D. 160 000
1.19 Refer to the diagram in Figure 2 above. Which of the following statements is true?
[1 mark]
A. This firm is making supernormal profit.
B. This is a competitive market.
C. This firm is making a loss profit.
D. it's monopolistic.
1.20 The supply curve for a firm in perfect competition in the short run:
A. depends on the industry's supply curve.
B. depends on the industry's demand curve.
C. is the rising part of the average total cost curve.
D. is the marginal cost curve above the average variable cost curve.
[1 mark]
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SECTION B
20 Marks
Instructions:
•
Read all questions carefully.
•
Answer all questions.
•
All answers should be on the answer sheet provided on page.18. Tear the page off and
place it inside your examination script.
QUESTION 1
(20 Marks]
1.1 A micro-economist studies the behaviour of the individual entities of the economy. [ T/Fl
1.2 Factors of production are also known as outputs.
[T/F]
1.3 Capitalism is a system in which economic decisions are made through the market.[T /F]
1.4. A market economic system is likely to generate an uneven distribution of output among
the people of the country.
[T/F]
1.5. The economic reason for increasing opportunity costs is that economic resources are
not equally efficient in all industries.
[T/F]
1.6 If the price of a good increases from N$ 3.00 to N$3.50 and this results to quantities
demanded decreasing from 1600 to 1400, the price elasticity of demand using point
formula is 1.15.
[ T/F]
1.7 Perfectly elastic demand means that when the price changes by 1%, the quantities
demanded decrease by a percentage less than one?
[T/F]
1.8 A price floor is set to support producers of a particular industry.
8
[T/F]
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1.10 Page 10 |
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1.9 If the price elasticity of demand is 0.5 and the demand curve is linear, a company
wanting to increase its total revenue should increase the price of the product. [T/F]
1.10 If the cost of producing a good increases and people's incomes increases at the same
time, the equilibrium price will stay the same.
[T/F]
1.11 If Pete enjoys his first pancake of the morning much more than his fifth pancake of the
morning, he is exhibiting utility maximizing behavior.
[T/F]
1.12 A consumer will maximize utility when all income is spent, and the marginal utility is
equal for all goods.
[T/F]
1.13 According to the principle of diminishing marginal utility, as an individual consumes
more and more of a good or service, the total utility increases while the marginal utility
decreases.
[T/Fl
1.14 All the production points that lie above the total product curve are inefficient. [T/F]
1.15 The marginal product of labor is defined as the increase in output attributable to the
last worker hired divided by the total number of workers employed.
[T/F]
1.16 A firm that makes zero economic profit is said to earn a normal profit and it represents
the minimum profit necessary to keep the firm in operation.
[T/F]
1.17 A firm in a perfectly competitive market structure is a price taker.
[T/F]
1.18 A firm obtains a total revenue of N$50 by selling 4 units and a total revenue of N$60 by
selling 5 units. The marginal revenue of the 5th unit is thus N$20.
[T/F]
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1.19 A firm practicing price discrimination will charge a lower price to buyers with more elastic
demand and a higher price to buyers with less elastic demand.
[T/F)
1.20 A monopoly differs from a perfectly competitive firm in that the monopoly's demand
curve and marginal revenue curve are downward sloping rather than horizontal[T/F]
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SECTION C
20 Marks
QUESTION 1
(6 Marks]
1.1 Given the following market schedules for demand and supply of Hake fillet. Use the
information in table 2 below to draw the demand and supply curves as well as labelling
the market equilibrium price and equilibrium quantity for Hake.
[6 marks]
Table 2: Quantities of Hake fillet and prices:
Quantity Demanded Price (N$/kg)
1000
2
800
4
600
6
400
8
200
10
QUESTION 2
Quantity Supplied
200
400
600
800
1000
(14 Marks]
2.1 With your knowledge in Economics, explain the following concepts:
a) Opportunity cost
b) Scarcity
c) Production possibility curve
[2 marks]
[2 marks]
[2 marks]
2.2 With examples distinguish between the term's "microeconomics" and "macroeconomics".
[4 marks]
2.3 Mention 2 advantages and 2 disadvantages associated with the economic system used in
Namibia.
(4 marks]
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SECTION D
20 Marks
QUESTION 1
[5 Marks]
1.1 Consider the following market information and answer the questions that follow. The
price of butter in Botswana rises from 4 Pula to 5 Pula and the quantities demanded
decrease from 40 to 20.
a) Calculate the price elasticity of demand using point elasticity.
[3 marks)
b) What type of price elasticity do you find in your answer (a) above?
[1 mark)
c) What is the effect of this type of price elasticity on the total revenue of the butter
supplier?
[1 mark]
QUESTION 2
[5 Marks]
2.1 Which of the following news items involves a short-run decision and which involves a
long-run decision?
a) June 31, 2023: Edgars will open 75 more stores abroad than originally predicted, for a
total of 975.
[1 mark]
b) July 25, 2023: For three hours on Tuesday, Edgars will shut down every single one of
its 7,100 stores so that workers can receive a refresher training course. [1 mark]
c) August 2, 2023: Edgars replaces some workers with talking assistant robots.
[1 mark]
d) October 18, 2023: Edgars merges with Woolworths.
[1 mark]
e) November 18, 2023: Edgars is closing 616 stores by the end of December. [1 mark]
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QUESTION 3
(10 Marks]
3.1 Ajax Manufacturing has a fixed scale of plant with the levels of total product given in the
table for different levels of labour. Copy table 3 into your answer book and complete it by
calculating the average product and marginal product.
(5 marks]
Table 3: Ajax Manufacturing
Quantity of labor
(workers)
Total product
0
0
1
24
2
so
3
74
4
94
5
110
Average product Marginal product
--
--
--
--
--
--
--
--
--
--
3.2 Are the curves in figure 3 below drawn correctly? Explain your answer
(2 marks]
Figure 3: Cost curves
~-"""""""""""'==,..,.=.....-cc..==""""="""":.=.==
-·2=<==i->--
§
a
7
'"'o
:::2..
6
<0....> 5
4
-------------;····-----·····-·;...............
MC ------··'-················-'···
----
---------------·-··············
...
=::::.. --··:::::::j:::::::::::··· :r::::
-······
......... .
3
2
1
:::i: , ·············,···············1••••
0
10
20
30
40
50
Output
(units
per day)
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3.3 The table below shows Danielle's utility from ice cream and romance novels.
Table 4: Danielle's utility
Ice cream
Quantity
Total utility
1
95
2
180
3
255
4
320
5
375
6
420
Romance novels
Quantity
Total utility
1
170
2
320
3
450
4
560
5
650
6
720
a) What is Danielle's marginal utility from the 4th novel?
[1 mark]
b) Define the law of diminishing marginal utility.
[1 mark]
c) State whether the statement below is true or false.
[1 mark]
"Utility is a personal opinion, and it is impossible to compare my opinion with yours. It is
also not physically measurable because you cannot measure a person's pleasure or
enjoyment."
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SECTION E
20 Marks
QUESTION 1
(5 Marks]
1.1 List any two demand shifters that can lead to a change in demand for Namibian beef.
[2 marks]
1.2 Assume that the supply of Namibian beef is relatively inelastic. Draw a supply curve
showing relatively inelastic supply. Clearly indicate on your graph the effects on price and
quantity.
[ 3 marks]
QUESTION 2
(12 Marks]
2.1 Copy table 5 into your answer booklet and, compare and contrast perfect competition and
monopoly using the Market descriptions.
[8 marks]
Table 5: Perfect competition Vs Monopoly
Market description
Perfect competition
(a) Number of firms
(b) The product
(c) Market entry
(d) Control over the price
Monopoly
2.2 Suppose that you enter Mr. Price a clothing store in Wern hill Park and see a sign above a
T-shirt rack saying: "Buy one, get the second one at 50% off." What type (degree) of price
discrimination does this example represent?
(2 marks]
2.3 Why does it make sense for some stores to discriminate based on price?
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(2 marks]
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QUESTION 3
[3 Marks]
3.1 Use the diagram below to answer questions (a) and (b).
Figure 4: Monopolist Demand curve
__, 10
-- c~ ;i::=:::s
BO
""'"' __, 60
tl2
0
"' "' c.>
4-0
"' a.>
c.>
----- "-- - s....
0...
20
--""-"-- 0
" '\\
'" i\\.
Mc
I~
/
~c
:--
I"><:
i---
L---"'"
-
T'I. -"'y--,,
"-...
5 10 15 20 ~o
40
50
Q -u an.
ti . ty
MR
a) What are the equilibrium output and price?
b) What is the cost per unit (average cost)?
[2 marks]
(1 mark]
TOTAL MARKS: 100
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Student number: .......................................................
ANSWER SHEETFORSECTIONA
Mark the correct answer with an X.
A
B
C
D
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
1.9
1.10
1.11
1.12
1.13
1.14
1.15
1.16
1.17
1.18
1.19
1.20
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3 Pages 21-30 |
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Student number: ......................................................
ANSWER SHEETFOR SECTIONB
Mark the correct answer with an X.
TRUE
FALSE
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
1.9
1.10
1.11
1.12
1.13
1.14
1.15
1.16
1.17
1.18
1.19
1.20
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