FACULTY:
FACULTY ECONOMIC AND MANAGEMENT SCIENCE
DEPARTMENT: ECONOMICS
SUBJECT:
BASIC MICROECONOMICS
SUBJECT CODE: EMI3571
DATE:
June 2008
DURATION:
2 HOURS
MARKS: 100
UNIVERSITY OF NAMIBIA EXAMINATION
FIRST OPPORTUNITY EXAMINATION
EXAMINER:
MODERATOR:
Mr. Erwin Naimhwaka
Dr. Omu Kakujaha-Matundu
This question paper consists of [5] pages including this front page.
Instructions
Read the questions carefully and answer all the questions in all the sections
First Opportunity Examination
November 2008
Marks: 100
Section 1
Question 1
State whether the following statements are true or false.
a. An economic model is a way of focusing attention on all the possible variables.
b. Government should not do something about unemployment in Namibia is a positive statement.
c. If government introduces minimum wage, this wage must be above the market-determined wage if it
is to be effective.
d. The supply curve of labour of an oligopsonist is a vertical line.
e. When the cross price elasticity is positive and greater than one, such goods are substitute goods.
f.
If quantities change from 50 to 40 when there is a decrease in income from N$20 000 to N$18 000:
a. income elasticity is 1.2
b. such good is an inferior good
g. Human resources are the most important factors of production of any country, because without people
no production can take place.
h. It has been scientifically proven that when you present a demand curve, price must always be on the
Vertical X axis.
i.
In reality a demand curve is always a straight line.
(20)
Question 2
Write down the letter(s) corresponding to the right answer(s) in each case.
1. Which of the following movement on the production possibilities curve (PPC) below
represents a movement that does not involve opportunity cost?
a.D to C
b.B to C
c.A to B
d.B to D
e.D to B
f. C to F
Capital
Goods
E
C
D
B
2
A
Consumer goods
2. Studying decisions made by individual households and businesses are called:
a.Microeconomics
b.Aggregate supply
c.Aggregate demand
d.Macroeconomics
3. Opportunity cost is:
a.The additional cost of producing an additional unit of output
b.A cost that cannot be avoided, regardless of what is done in the future
c.The additional cost of buying an additional unit of a product
d.That which we forgo, or give up, when we make a choice or a decision
4. A slide along the demand curve can be caused by a change in:
a.Tastes
b.Change in population size
c.The price of the product
d.Income
e.All of the above
f. None of the above
5. In a perfectly competitive market for factors of production:
a.Only employers are price takers
b.Only employees are price takers
c.Neither employer and employees are price takers
d.Employers and employees are price takers
(10)
Subtotal 30
3
Section B
Answer all the questions
Question 3
Use the diagram below to:
a. Derive the demand function for the demand curve
(6)
b. What is the slope of this demand curve
(2)
c. Calculate elasticity at point C
(3)
d. Calculate elasticity at F
(3)
e. Calculate the arc elasticity between B and E
(4)
f.
(6)
Calculate the quantity and price where revenue is maximized
Price N$
A
60
B
50
Price N$
C
40
D
30
E
20
F
10
0
G
100
200
300
400
500
600
Quantity
Question 4
Say what will happen to equilibrium price and equilibrium quantity in the following cases:
a. Decrease in demand
b. Increase in supply
c. Increase in supply and demand
d. Increase in supply and decrease in demand
e. Increase in demand and decrease in supply
f.
Decrease in demand and supply
4
g. Increase in demand
(16)
Subtotal 40
5
Section C
Answer all the questions in this section.
Question 5
Graphically demonstrate the effects of a tax on market equilibrium. Label you diagram
accordingly and indicate clearly the effects on surpluses, revenues and on efficiency. (10)
Question 6
If sellers of butter increased the price by 5%, and the quantity demanded reduced by (i) 20%,
(ii) 2%, and (iii) 5%
a) What is elasticity in each case?
(6)
b) What happens to revenue in each case?
(4)
Question 7
Graphically show the following and give an example of goods that are likely to have such
characteristic:
a.
b.
c.
d.
Inelastic demand
Elastic supply
Perfectly elastic demand
Perfectly inelastic supply
(2)
(2)
(3)
(3)
Subtotal 30
6