This is the question set along with answers of Introductory Microeconomics Fall 2016, which was taken by the Pokhara University.
POKHARA UNIVERSITY – Introductory Microeconomics Fall 2016
Level: Bachelor Semester: Spring Year:2016
Programme: BBA/BBA-BI/BCIS/BHCM/BBA-TT Full Marks: 100
Course: Introductory Microeconomics, Fall 2016 Pass Marks: 45
Time: 3 hrs
| Section “A”
Very Short Answer Questions Attempt all the questions. |
10×2 |
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| 1. | What is microdynamics? | |
| 2. | Why the law of demand is not applicable in the case of shifts in the demand curve? | |
| 3. | Why the indifference curve is convex to origin? | |
| 4. | Define and derive the budget line with a proper example. | |
| 5. | Define the Marginal Rate of Technical Substitution (MRTS). | |
| 6. | Why AR & MR curves are horizontal straight line in perfect competition? | |
| 7. | Differentiate nominal wage from real wage. | |
| 8. | Write the condition of price discrimination. | |
| 9. | What is a bilateral monopoly? | |
| 10. | ABC commercial bank pays a higher wage rate for the CEO and a Lower for officers. Why? | |
| Section “B”
Descriptive Answer Questions Attempt any six questions. |
6×10 |
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| 11. | Prof N.G. Mankiw has analyzed some fundamental principle of economics. Explain. | |
| 12. | Define the concept of the indifference curve. How does the consumer attain equilibrium under ordinal utility analysis? | |
| 13. | Explain the law of variable proportion with its three stages. Which stage is relevant for a rational producer? | |
| 14. | The total cost function of a producer is given as:C=868+47Q+0.5 Compute TFC,TVC,TC,AFC,AVC,AC and MC at the output 12 units. | |
| 15. | Discuss the determination of equilibrium price and output under a perfect competition market. | |
| 16. | Suppose the cost function of a tea shop is C=60+7 and the demand function
is P=120-5Q a) Compute TR, TC and profit up to output level 10 units. b) Derive MR and MC functions. c) Determine the profit-maximizing output using the MC-MR approach. |
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| 17. | What is the brain drain? Explain the cause and consequences of brain drain in the Nepalese context. | |
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18. |
Section “C” Case Analysis Read the situation given below and answer the questions that follow. In 1990, congress adopted a new luxury tax on items such as yachts, private aeroplanes, furs, jewellery, and expensive cars. The goal of the tax was to raise revenue from those who could most easily afford to pay. Because, only the rich could afford to buy such extravagances, taxing luxurious seemed a logical way of taxing the rich. Yet, when the forces of supply and demand took over, the outcome was quite different from the one congress intended. Consider, for example, the market for yachts. The demand for yachts is quite elastic. A millionaire can easily not buy a yacht; she can use the money to buy a bigger house, take a European vacation, or leave a larger bequest to her heirs. By contrast, the supply of yachts is relatively inelastic, at least in the short run. Yacht factories are not easily converted to alternative uses, and workers who build yachts are not eager to change careers in response to changing market conditions. Our analysis makes a clear prediction in this case. With elastic demand and inelastic supply, the burden of a tax falls largely on the suppliers. That is, a tax on yachts places a burden largely on the firms and workers who build yachts because they end up getting a significantly lower price for their product. The workers, however, are not wealthy. Thus the burden of a luxury tax falls more on the middle class than on the rich. The mistaken assumptions about the incidence of luxury tax quickly became apparent after the tax went into effect. Suppliers of luxuries made their congressional representatives well aware of the economic hardship they experienced, and congress repealed most of the luxury tax in 1993. Questions: a) What do you mean by inelastic demand? Why is a supply of yacht relatively inelastic in the short run? b) With elastic demand and inelastic supply, the burden of tax largely falls on suppliers, why? c) Why does the government impose a heavy tax on luxurious goods? Give some cases of Nepal. d) Why does congress repeal most of the luxury tax in 1993?
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