# Pokhara University || Fall 2017 || Introductory Microeconomics || BBA\BCIS

This is the question set along with answers of Introductory Microeconomics   – Fall 2017, which was taken by the Pokhara University.

POKHARA UNIVERSITY – Introductory Microeconomics

Level: Bachelor                                               Semester: Fall                          Year:2017

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

Course: Introductory Microeconomics                                                          Pass Marks: 45

Time: 3 hrs

Section “A”

Attempt all the questions.

1. What is meant by positive economics?
2. Find out equilibrium price and output from the demand and supply functions: Qd = 100-20P and Qs = 10+40P
3. If the elasticity of demand for a product is constantly 0.9, and the consumer buys 4 units of it when the price is \$1.50 per unit, how many will he buy when the price is \$1.00 per unit?
4. What is the indifference curve?
5. Define the concept of opportunity cost?
6. Why is isoquant convex to origin?
7. Define the perfect competition market?
8. What are the causes of increasing returns to scale?
9. Define the meaning of input pricing.
10. Why do female workers get lower wages than male workers?

Section B

Attempt any six questions.

11. “Scarcity is the root cause of all the economic problems.” Discuss.

12. What means by consumers equilibrium? Explain consumer’s equilibrium using indifference curve.

13. Consider the following data

 No. of labour 1 2 3 4 5 6 7 8 Total product 40 100 180 240 280 300 310 300

a. Compute AP and MP.

b. Graph TP, AP and MP.

c. Explain the relationship between AP and MP.

14. Complete the following table and explain the relationship between AC and MC.

 Output TFC TVC TC AFC AVC AC MC 0 200 1 250 2 290 3 320 4 340 5 375 6 430 7 510 8 600

15. Find the profit-maximizing output and maximizing profit from, cost function, C= 50+6Q2  and price function P= 100-4Q. Also, find MC and MR.

16. Define monopolistic competition. Explain how price and output are determined under it in the short-long run?

17. What is meant by a brain drain? What are its causes and consequences? Explain.

Case Study

Nepal has a long history of tea cultivation. Planting of a tea plant in Illam 150 years ago is considered as the beginning of tea cultivation in Nepal. Scientific development and promotion of tea started after Nepal Tea Development Corporation was established in 1966. Commercial tea cultivation spread to Panchthar, Terathum, Dhankuta and Jhapa districts within decades after starting in the hills of Illam. These five districts were declared tea zone in 1981 due to their huge potential.

Despite the huge production potential, the labour problem is one of the main problems of the tea industry. Frequent strikes lead to a decrease in the production of tea.

Demand for Nepalese tea is increasing not only inside the country but also outside the country. Due to the increasing demand for tea, its price is increasing day-by-day. However, the supply of tea is inelastic because the production of tea can be expanded to other districts like Taplejung, Lalitpur, Kavre, Lamjung, Nuwakot and others.

The whole country can reap benefits if tea cultivation is promoted. It is unfortunate that the government has still not been able to provide adequate facilities and subsidies for tea cultivation despite it being an economically important crop. The Indian government provides grants and subsidies to the tea industry in Darjeeling district adjoining Ilam and Taplejung of Nepal. Many factories in Darjeeling procure tea leaves from Nepal and sell them abroad as their own products. The Indian government has also been providing grants and subsidies for tea cultivation in the state of Assam. Another neighbouring country Sri Lanka, like India, has also been providing facilities to the tea industry. It is necessary for the Nepal government to also give special priority to the tea industry.

Questions:

1. With the aid of the demand and supply curve, show how the price of tea affected by foreign demand.
2. How do labour problems affect the price?
3. Draw a diagram that shows both short-run and long-run supply curves and show how the market first moves to a short-run equilibrium and then to long-run equilibrium and also comment on what happens to the price over time?
4. Does Indian policy affect the tea industry of Nepal? Give your suggestion to improve this industry.

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