Pokhara University ||Fall 2018 || Introductory Microeconomics || BBA\BCIS

This is the question set along with answers of Introductory Microeconomics Fall 2018, which was taken by Pokhara University.

POKHARA UNIVERSITY – Introductory Microeconomics Spring 2017

Level: Bachelor                                               Semester: Fall                                   Year:2018

Program: BBA/BBA-BI/BCIS/BHCM/BBA-TT                                             Full Marks: 100

Course: Introductory Microeconomics                                                                 Pass Marks: 45

Time: 3 hrs

Section “A”

Very Short Answer Questions

Attempt all the questions.

1. Define positive economics.
2.  Define Giffen goods.
3. What is the cross elasticity of demand?
4. Why AR and MR curves are horizontal straight line under perfect competition?
5. Write any four principles of economics?
6.  Why microeconomics is called price theory?
7.  Why the indifference curve is convex to the origin?
8.  Define the oligopoly market with examples
9. List out the four causes of
10. fa

Section ‘B’:

Descriptive Answer Questions [6×10]

Attempt any six questions.
11. “Scarcity is the root cause of economic problems.” Justify this statement with suitable examples.
12. A market consists of three consumers A, B, and C whose individual demand function are as follows:
A: P = 35 -0.500A
B: P = 50 -0.25Q3
C: P = 40 – 2.00QC
The market supply equation is given Qs = 40 + 3.5P
Determine the market equilibrium price and quantity.
b. At the equilibrium price, determine the price elasticity demand and interpret the result.
13. Separate Income effect and Substitution effect from price effect for Normal and Inferior goods.
14. Complete the following table and answer the given questions,
Output

Output	TFC	TVC	TC	AFC	AVC	AC	MC
0	100	–
1		10
2		18
3		24
4		32
5		50
6		80
7		124
8		180

a.Prove that the trend of AC is influenced by the trend of AFC and AVC
b. Explain the graph AC, MC and their relationship.
15. Explain the law of variable proportions in which stage of production does a rational producer operate.
16. Define monopolistic competition. How the price and the output are determined under it?
17. Derive the demand curve for one variable input under monopoly.

Section ‘c’:

Case Analysis

18. Read the situation given below and answer the questions that follow:

The United States is one of the world’s leading producers of potatoes. Idaho is a particularly famous source of this product, but other states like Maine, Oregon, and Washington are important too. In 1995, farmers in Idaho and elsewhere planted more potatoes than usual and growing conditions were unusually favourable. Frost, pests, and disease were of limited importance. The result was a marked shift to the right of the supply curve for potatoes. The 1996 crop was the largest in U.S. history almost 49 billion pounds. Consequently, the price of potatoes per 100-pound sack nosedived from about $8 in 1995 to about $1.75 in 1996. According to leading potato produces, farmers, lost about $1,000 per acre on the 1996 crop. Unfortunately, this is not the only problem facing U.S. potato producer. The potato market today is dominated by French fries, which are becoming popular throughout the world. But as demand for French fries grows in various countries, producers of French fries are trying to establish local sources of potatoes. For example, according to the chairman of McCain Foods, the world’s leading producer of frozen French fries, “If we’re in England, we’re buying all of the potatoes we can buy in England.” Obviously, this reduces the exports of potatoes by U.S. producers, while U.S. exports of French fries have increased considerably in recent years. There is the feeling that this growth may considerably.
Questions:
a. Identify the market structure for U.S. potato and explain the characteristics. [6]
b. Which factors are responsible for shifts in the supply curve of U.S. potato? Explain them with the help of a diagram. [6]
C. What will be the effect on the equilibrium price of U.S. potato due to change in factors related to the internal market and external market? Explain with the help of a diagram. [8]

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