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

Introductory Microeconomics Spring 2018

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

POKHARA UNIVERSITY – Introductory Microeconomics Spring 2018

Level: Bachelor                                               Semester: Spring                                   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. What do you mean by scarcity in economics?
  2. Find the equilibrium price and output from the demand and supply functions:
    Od-100-20P and Qs = 10+ 40P
  3. Why isoquant is convex to the origin?
  4. Let demand function (P)= 10-40, cost funcion (C) = 50+60, where, Q = Quantity and P = Prices in Rs. Compute profit maximizing output.
  5. What do you mean by third-degree price discrimination?
  6.  Derive the price consumption curve (PCC) on normal goods.
  7. Sate the behaviour of AR and MR under a perfect competition market.
  8. What is a monopsony market?
  9. Define the oligopoly market with two examples.
  10.  Define minimum wages.

Section ‘B’:

Descriptive Answer Questions [6×10]

Attempt any six questions.

11. Define economics. What are the major differences between microeconomics and macroeconomics Discuss?
12. Consider the following hypothetical table:

Points A B C D
Price 20 28 36 40
Demand 30 24 16 4

Based on the above information, calculate:
a. Price elasticity of demand at the movement from B to C.
b. Price elasticity of demand at the movement from C to A.
c. Average elasticity of demand between D and B, and interpret the results.
d. In which situation do we prefer average elasticity instead of point elasticity?
13. Define the concept of the indifference curve. How does the consumer attain equilibrium under ordinal utility analysis?
14. The short-run total cost function is TC = 200+ 50-0.0402 + 0.001 Q. If Q = 10, find Total Fixed Cost (TFC), Total Variable Cost (TvC)and  Cost (TC), Average Fixed Cost (AFC), Average Variable Cost (AVC), Average Total Cost (ATC or AC), and Marginal Cost (MC)

15. What is returns to scale? State and explain the laws of returns to scale.
16. What are the characteristics of a monopoly market structure? Explain how price and output are determined under monopoly in short nun.
17. What is brain drain? Explain its causes and consequences in developing country like Nepal.

Section ‘a’:

Case Analysis

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

Vegetable prices have continued to go up in the Kathmandu Valley despite rising in supply from various parts of the country. The Kalimati vegetable market, the largest vegetable market in the country, is currently receiving around 600 tons of vegetables per day. Around three days ago the daily supply stood at around 400 tons.
Despite a 50% hike in vegetable supply, prices of most of the vegetables are currently going up exerting pressure on the household budget. A snap survey conducted at Kalimati vegetable market showed that prices of vegetables had gone up in the range of 6 per cent to 88 per cent. Price of carrot for instance, which stood at Rs. 85 per kg on Tuesday, soared by 88.2 per cent on Friday to stand at Rs. 160. Pumpkin, which used to cost Rs. 45 per kg till Tuesday, was being sold at Rs 75 per kg on Friday. Tomato and onion, which are regularly used in Nepali dishes, also became costlier y 6 per cent and around 8 per cent, respectively, in the last three days. Prices of other vegetables, like cauliflower, radish, soybean and french bean, have also gone up.
Binay Shrestha, deputy director of the Kalimati Fruits and Vegetable Market Development Board, said it is a normal phenomenon for vegetable prices to increase during monsoon, as rain causes damage to the green produce.
Yet the rate of price hike is higher this year because of floods and heavy rain that damaged or destroyed vegetables in various parts of the country. Also, road blockades triggered by landslides, which have disrupted supplies, have played a role in raising prices.
Many retailers are now taking undue advantage of the situation to further jack up prices. This, however, should not mean all retailers are profiteering, as those who have received substandard vegetables, like those spoiled by rain or other adverse weather conditions, are being forced to increase retail prices to cover up losses. The valley generally gets most of its vegetable supplies from Kavrepalanchowk, Dhading, Makwanpur and Nuwakot. Although these places are not much affected by floods, incessant rain has caused some damage to vegetables grown in these areas, leading to the price hike. “Also, prices of eggplants, asparagus beans and bottle gourd, which are brought in from the Terai, have gone up”, Shrestha said.
The Ministry of Agricultural Development recently said vegetables worth Rs. 2.96 billion were destroyed in 31 districts by floods triggered by torrential rain that continues form August 11-14.
Because of this, the situation at the Kalimati vegetable market has not returned to normal, as it is still seeing a supply shortfall of around 100 tons per day. The market used to receive around 700 tons of vegetables on normal days.
a. Why vegetable prices have continued to go up in the Kathmandu Valley despite rising in supply? Give your answer with reason.
b. Why do you think the price of Tomato and onion rise only by 6 per cent and  8 per cent while at the same time the prices of other vegetables increase up to 80 per cent?
c. What are the main reasons for the rising in the price of vegetables during the monsoon?
d. Do you agree with the rate of the price of the vegetable hike is higher this year? Give reasons.
e. Sketch the demand and supply curve on how the price of vegetables is determined in a perfect competition market.
f. Graphically show and explain the effects on equilibrium price and output when the demand for vegetables increases with the given supply curve.
g. Give your suggestions regarding the price control of the vegetable in Kathmandu Valley.

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