abatan Pencjajian Politeknik

EXAMINATION AND EVALUATION DIVISION

DEPARTMENT OF POLYTECHNIC EDUCATION
(MINISTRY OF HIGHER EDUCATION)

COMMERCE DEPARTMENT

FINAL EXAMINATION
DECEMBER 2010 SESSION

PB102: MICROECONOMICS

DATE: 20 APRIL 2011 (WEDNESDAY)

DURATION: 2 HOURS (8.30am — 10.30am)

This paper consists of EIGHT (8) pages including the front page.
Section A: Objective (20 questions — answer all)
Section B: Structure (2 questions — answer all)
Section C: Essay (2 questions — answer all)

CONFIDENTIAL UNTIL 20 APRIL 2011

DO NOT OPEN THIS QUESTION PAPER UNTIL INSTRUCTED BY THE
CHIEF INVIGILATOR
 CONFIDENTIAL PB102: Microeconomics

SECTION A

OBJECTIVES (20 marks)

Instruction: This section consists of 20 objective questions. Write your answers in the
answer booklet.

I. Economics is the study of how:

A. we choose to use unlimited resources

B. unlimited resources are used to satisfy scarce wants
C. scarce resources are used to satisfy unlimited wants
D. society uses abundant resources to satisfy unlimited desires

2. Opportunity cost is defined as....

A. the cost of using a factor of production.

B. the fixed cost involved in the short term.
C. the cost related to the optimum level of production.
D. the cost of the second best option that will have to be forgone in order to
select the best option.

3. Which of the following is NOT a merit of free market economy?

A. Social welfare is prioritized.

B. Economic efficiency is achieved.
C. Economic decisions are made quickly.
D. Development in technology and innovation are encouraged

4. Which of the following can bring about a change in the quantity demanded?

A. change in supply
B. change in income
C. change in taste
D. change in product price

5. The law of supply shows the relationship between

A. demand and supply.

B. population and demand.
C. price and quantity supplied.
D. consumer's income and demand.

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 CONFIDENTIAL PB102: Microeconomics

6. A right shift in demand and supply curve will lead to

A. a lower equilibrium quantity.

B. a higher equilibrium quantity.
C. a lower equilibrium price.
D. a higher equilibrium price.

7. Which of the government intervention will shift the curve of supply to left?

A. Subsidies
B. Taxes
C. Upgrade technology of production machine
D. Increase duty of import goods

8. If a large percentage change in the price brings about zero percentage change
in quantity demanded, the demand is said to be
•
A. elastic
B. inelastic.
C. perfectly inelastic.
D. perfectly elastic.

9. To determine the types of goods, economist would estimate

A. price elasticity of demand

B. price elasticity of supply
C. income elasticity of demand
D. cross elasticity of demand

• 10 . Which of the following statement is NOT TRUE about the cross elasticity of
demand?

A.Cross elasticity of demand is a measure of the reactivity of the quantity

demanded of a good to a change in the price of another good
B. If the value of cross elasticity of demand is negative the good are
complementary goods
C. If the value of cross elasticity of demand is positive the goods are inferior
goods and normal goods
D. If the value of cross elasticity of demand is zero the goods have no
relationship

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 CONFIDENTIAL PB102: Microeconomics

11. The value of cross elasticity of demand between goods P and Q is 3. When the
price of P increases from RM3 to RM6, the quantity demanded of P changes
to 20 units. What is the original quantity demanded of good P?

A. 2 units
B. 3 units
C. 4 units
D. 5 units

12. What is the definition of price elasticity of supply?

A. Price elasticity of supply is a measure of the degree of reactivity of the

change in quantity supplied of a good to a change in its price
B. Price elasticity of supply will determine how a change in its price will
affect the total revenue
C. Price elasticity of supply is unitary elastic
D. If the value of price elasticity of supply is inelastic any change in
consumer's income will not affect the quantity supplied

13. Which of the following combination is TRUE about factors of production?

A. Labour — profit
B. Capital — interest
C. Entrepreneur — dividend
D. Land — output

14. The difference between average cost (AC) and average fixed costs (AFC)

A. Total Variable Costs (TVC)

B. Total Fixed Costs (TFC)
C. Average Variable Cost (AVC)
D. Marginal Cost (MC)

15. In the Long Run:

A. all costs are fixed cost.

B. all costs are variable cost.
C. at least one is fixed cost.
D. none of the above occurs.

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 CONFIDENTIAL PB102: Microeconomics

16. 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. the existence of a large number of buyer and single seller.

17. The advantages or merits of perfectly competitive is that

A. consumers have a wide variety to choose products

B. advertising is not necessary because the products are homogeneous and
consumers have perfect knowledge of market conditions.
C. able to control price or production quantity due to firm is a price maker
D. encourage research and development to reduce production costs and
increase the production quality

18. Monopolistic competition market can reach equilibrium and maximize profits
when output is produced at the level where

A. Marginal Revenue (MR) is equal to Average Revenue (AR)

B. Marginal Revenue (MR) is equal to Average Cost (AC)
C. Marginal Revenue (MR) is equal to Marginal Cost (MC)
D. Marginal Revenue (MR) is equal to Average Variable Cost (A VC)

19. Which of the following statement is NOT TRUE about the differences
between monopoly market and a monopolistic market?

A. Monopoly market generate supernormal profit in the long run but

monopolistic market only generate normal profit in the long run
B. Monopoly market consists of one firm but monopolistic market
consists of many firms
C. Monopoly market has no close substitute's products but monopolistic
market have close substitute products
D. Monopoly market have elastic demand curve and monopolistic market
have inelastic demand curve

20. Oligopoly is a market where there are

A. many sellers
B. few sellers
C. few buyers
D. one seller

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 CONFIDENTIAL P8102: Microeconomics

SECTION B
STRUCTURED QUESTIONS (30 marks)
Instruction : This section consists of TWO (2) structured questions. Answer both
questions.

QUESTION I

The followings table shows the relationship between total products of good B and the
number of workers employed.

Total Product Average Product Marginal Product

Land (L) Number of
(TP) (AP) (MP)
(acres) workers
(unit) (unit) (unit)
10 1 7 7
10 2 15
10 3 24
10 4 32
10 5 37
10 6 40
10 7 45
10 8 46
10 9 46
10 10 45

(a) Calculate the Average Product (AP) and Marginal Product (MP) for every
worker.
(9 marks)
(b) Sketch the Average Product (AP) and Marginal Product (MP) in the same
diagram.
(4 marks)
(c) Which worker reflects the maximum total production?
(2 marks)

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 CONFIDENTIAL PB102: Microeconomics

QUESTION 2
The table below shows the production cost of a company called 'AMZADD'.

Quantity Total Cost Total Variable Total Fixed Cost Marginal Cost
(Unit) (RM) Cost (TVC)(RM) (TFC)(RM) (MC)(RM)

0 10
1 19
2 27
3 34
4 40
5 47
6 55
7 64
7A

(a) Complete the above table.

(9 marks)
(b) State whether the firm is operating in the short run or the long run? Give
reason to support your answer.

(3 marks)
(c) The graph below shows the long run and short run Average Cost curves of a
firm.

Cost
♦ SRACJ
SRAC4
SRAC2 SRAC3
I RA C

Output
50 100 150 200 250

In the long run, which plant size should the firm use in order to produce 100
units and 250 units of output?
(3 marks)

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 CONFIDENTIAL PB102: Microeconomics

SECTION C

ESSAY (50 marks)

Instruction : This section consists of TWO (2) structured questions. Answer both
questions.

QUESTION 1

(a) Define law of demand and law of supply.

(5 marks)
(b) Demand can be divided into individual demand and market demand.
Explain each type of demand.
i. Individual demand
ii. Market demand

(5 marks)
(c) By giving an example, explain FIVE (5) determinants of demand.
(15 marks)

QUESTION 2

(a) Explain FIVE (5) characteristics of a perfectly competitive market.

(10 marks)

(b) Discuss TWO (2) merits and demerits of a monopolistic competitive market.
(8 marks)

(c) In the short run, a monopoly can generate normal profit where Average
Revenue Equal to Average Cost (AR =. AC). Draw and label the curve.
(7 marks)

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