SULIT
FINAL EXAMINATION
SEMESTER 1, ACADEMIC SESSION 200812009
DURATION : 2 54 HOURS
DATE : NOVEMBER 2008
SMK 1013
MICROECONOMICS
INSTRUCTIONS TO CANDIDATES:
1.
Answer Al1 questions.
2.
Al1 amwers must be written in the Answer Booklet provided.
3.
Candidates are not allowed to bring any notes into the examination hall.
4.
Candidates are not allowed to take question papers out of the examination hall.
5.
Please complete your particulars in the Borang H and the Answer Booklet.
DO NOT OPEN THIS QUESTION BOOKLET UNTIL YOU ARE TOLD TO DO SO
This question booklet has SEVEN (7) printed pages excluding this cover page
HAKCIPTA TERPELIHARA
SULIT
SULIT
Section A: Multiple Choice Questions (30 marks)
1. The function which reveals the relationship between inputs and outputs is called
the:
A. Cost function
B. Production function
C. Demand function
D. Supply function
2. The law of diminishing returns indicates that:
A. When extra units of a variable resource are added to fixed resources, the
marginal product will decline beyond a certain point
B. Because of the economies and diseconomies of scale, a competitive firm's
long-run average cost curve will be U-shaped
C. The demand for goods produced by purely competitive industries is
downward sloping.
D. Beyond some point, the extra utility derived from additional units of the
product will yield the consumer smaller and smaller extra arnounts of
satisfaction.
3. Which of the following statements concerning the relationship between total
product (TP), average product (AV), and marginal product (MP) is not correct:
A. The AP continues to rise so long as the TP is rising
B. The AP reaches a maximum before the TP reaches a maximum
C. The TP reaches a maximum when the NIP of the variable input becomes
zero
D. The NIP cuts the AP at the maximum point on the MP
4. If the variable input is added to some fixed inputs, beyond a certain point, the
resulting additional output or marginal product will decline. This statement
describes:
A.
B.
C.
D.
Economies and diseconomies of scale
Diseconomies of scale
The law of diminishing returns
The law of diminishing marginal utility
1
HAKCIPTA TERPELIHARA
SULIT
SULIT
5. Marginal cost may be defined as a
A. Change in variable cost which results from producing one more unit of
output
B. Change in fixed cost which results from producing one more unit of output
C. Change in average cost which results from producing one more unit of
output
D. Change in total cost which results from producing one more unit of output.
6. In the short run, which of the following statements is correct?
A. Marginal cost intersects average variable cost and average fixed cost at their
minimum points
B. Average variable cost declines continuously as total output increases
C. If the inputs of al1 resources are increased by equal amounts, total output
will expand by a diminishing amount
D. Total cost always exceeds variable cost.
7. Which of the following short run costs continue to decrease as output increases?
A.
B.
C.
D.
Average variable cost
Average fixed cost
Marginal cost
Average cost
8. Economies and diseconomies of scale explain:
A. The profit-maximization leve1 of production
B. The distinction between fixed and variable costs
C. Why the firm's long run average cost curve is U-shaped
D. Why the firm's short-run marginal cost curve at its minimum point.
9. A perfectly competitive firm can be identified by the fact that:
A. There are other firms in the industry producing close substitute
B. It is a market only for normal profit in the short run
C. Its average revenue equals marginal revenue
D. It experiences diminishing marginal return.
10. The marginal revenue curve of a perfectly competitive firm:
A. 1s horizontal at the market price
B. Lies below the firm's demand curve
C. Increases at an increasing rate as output expands
D. 1s downward-sloping because price must be reduced to se11 more output.
2
HAKCWTA TERPELIHARA
SULIT
SULIT
1 1. Perfect competition means:
A. The existence of a large number of buyers and sellers
B. The existence of a single seller in the market
C. The buying of a product at different prices
D. 1s none of the above.
12. If a monopoly practices price discrimination, it will:
A. Earn a smaller profit
B. Earn less than before price discrimination
C. Charge a higher price when demand is inelastic and a lower price when
demand is elastic
D. Charge a higher price when demand is elastic and a lower price when
demand is inelastic.
13. Monopolistic competition means:
A. Few firms produce standardized goods
B. Many firms produce standardized goods
C. Few firms produce differentiated goods
D. Many firms produce differentiated goods
14. The kinked demand curve of an oligopoly is based on the consumption that:
A. Competitors will follow a price cut but ignore a price increase
B. Competitors will ignore a price cut but follow a price increase
C. Competitors will match both price cuts and price increases
D. There is no product differentiation
15. According to the kinked-demand curve model, an oligopoly firm will produce
where:
A. The average total is at minimum
B. The average revenue equals marginal cost
C. The marginal revenue equals marginal cost
D. The demand curve intersects with the average total cost
16. Monopolistic competition and oligopoly are similar in their:
A. Number of sellers
B. Non-price competition
C. The kinked-demand curve analysis
D. Mutual interdependence arnong firms in their industry.
3
HAKCIPTA TERPELIHARA
SULIT
SULIT
NOV/2008/SMK10 13
17. An employer in a perfectly competitive market should hire additional labour until:
A. The wage rate is less than the marginal product
B. The marginal revenue product exceeds the wage rate
C. The marginal product is equal to the average product
D. The marginal wage cost is higher than the marginal revenue product.
18. Which of the following is not a component of the demand for loanable funds?
A. Household consumptions
B. Household saving
C. Government financing of budget deficits
D. Firm purchases of new investment
19. The demand for loanable funds is downward sloping:
A. Because businesses find investments to be profitable at low interest rates
than at high interest rates
B. Because households are willing to save more at a high interest rates than
they are at low interest rates
C. Only when the nominal interest rate exceeds the real interest rate
D. Because the amount of profitable business investment varies directly with
the interest rate.
20. In the loanable funds market:
A. The demand curve reflects the behaviour of borrowers
B. The supply curve reflects the behaviour of savers
C. The price is the interest rate
D. Al1 of the above.
Section B: Structured Questions
1. Table 1 shows the amount of output produced by a firm using two (2) types of
inputs, Factors A and B.
Table 1: Amount of Output Produced by A Firm Using Inputs A and B
Input
Output per day
1O0
240
520
1040
2000
Factor A
4
8
16
32
64
Factor B
12
24
48
96
192
4
HAKClPTA TERPELIHARA
SULIT
a. 1s the firm operating in the short run or long run? Explain why?
b. Identify the range of output the firm experiences in these instances:
1.
Increasing returns to scale
..
11.
Constant returns to scale
iii.
Decreasing returns to scale.
(8 Marks)
2. Table 2 shows the production cost of an electric company in Bandar Baru Nilai,
Negeri Sembilan.
Table 2: Production Cost of An Electric Company
Total
Product
Average
Variable Cost
Average
Cost
Total
Average
Cost (RM) Fixed Cost
Marginal
Cost (RM)
a. Complete the table above.
b. Without scale, draw the Average Fixed Cost (AFC), Average Variable Cost
(AVC) and Average Cost (AC) in one diagram.
c. 1s the firm operating in short run or long run? Why?
(8 Marks)
3. Table 3 shows the schedule for fixed cost and variable cost of a perfectly
competitive market.
Table 3: Schedule for Fixed Cost and Variable Cost in Perfect Competition Market
Ouput
1
Total Cost (RM)
3o
1 Variable Cost (RM)
20
a. Calculate the equilibrium output if the price of the product is RM18 per unit.
b. Calculate the total profit or loss at the equilibrium output.
c. If the price of the output is RM26 per unit, what type of profit does the firm
earn?
d. What is the shut-down price of the firm?
(8 Marks)
5
HAKCIPTA TERPELIHARA
SULIT
SULIT
NOV/2008/SMK1013
4. Table 4 shows the demand and cost schedules for a monopolistically competitive
firm.
Table 4: Demand and Cost Schedules for a Monopoly Competitive Firm
Output (units)
1
2
3
4
5
6
Price (RM)
80
72
64
56
48
40
Total Cost (RM)
40
80
116
144
160
168
a. Calculate the marginal revenue and marginal cost
b. What is the profit maximizing price and output?
c. 1s the firm realizing economic profits or losses at the profit maximizing
output?
(8 Marks)
5. Table 5 shows the labour related to its wage rate and marginal revenue product.
Table 5: Labour Related to Wage Rate and Marginal Revenue Product
(Number of
Workers)
a.
b.
c.
d.
Marginal
Revenue
Product of
Labour
Wage Rate
24
22
24
Total Labour
Cost
Marginal
Labour
Cost
Calculate the firm's total labour cost and marginal labour cost
How many units of labour will the firm hire?
What will be the wage rate in question (b)?
What will be the wage rate and number of workers, if the firm hired labour in a
perfectly competitive labour market?
(8 Marks)
6
HAKCTPTA TERPELIHARA
SULIT
SULIT
Section C: Essay Questions.
1. Using isoquant and isocost analysis, explain how a producer can achieve the
equilibrium level.
(6 Marks)
2. Explain the relationship between marginal cost and average cost using a suitable
diagram.
(6 Marks)
3. Discuss why a perfect competitive firm earns normal profit in the long run?
(6 Marks)
4. Discuss why the demand curve in an oligopoly is kinked.
(6 Marks)
5. Explain the demand for money and the supply of money.
(6 Marks).
SULIT