Tribhuvan University
Bachelor of Business Administration
Semester 1 · TU Board 2023
Course Title: Microeconomics (ECO203)
Full Marks: 100Pass Marks: 50Time: 3 Hrs
Candidates are required to give their answers in their own words as for as practicable.
Group A
Brief Answer Questions(10 × 2 = 20)
- 1.2
Business economics is also known as applied economics. Why?
- 2.2
Write any four determinants of demand.
- 3.2
Define price floor.
- 4.2
Prepare a list of properties of indifference curve.
- 5.2
Define advertisement elasticity of demand.
- 6.2
Consider the isocost equation : rK + wL = C and interpret the components.
- 7.2
Why does VMP_L curve slope downwards to the right?
- 8.2
Let the autonomous demand be 5 and slope of demand curve be 3. Derive linear demand curve.
- 9.2
Let the marginal product of labour be 12 units and price of the product be Rs 25. Calculate the value of marginal productivity of labour.
- 10.2
Calculate MR when Ep = -1.5 and AR = 15.
Group B
Short Answer Questions:(Attempt any SIX Questions)(6 × 5 = 30)
- 11.5
Describe the relationship between price elasticity of demand and revenue.
- 12.5
The market demand function and supply function for a product are given below: Demand function, Qd = 500 - 5P and Supply function, Qs = 100 + 5P where Q is the quantity and P is price. a. Compute demand and supply at prices: Rs 30, 35, 40, 45 and 50. b. Compute price elasticity of demand and supply at equilibrium price.
- 13.5
Explain the concept of accounting profit and economic profit with suitable examples.
Answer comingAlso asked in 2024
- 14.5
Explain the concept of cost-plus pricing.
- 15.5
Explain the dominant strategy of game theory with suitable examples.
Answer comingAlso asked in 2024
- 16.5
Explain the causes of interest rate differentials.
- 17.5
Given Q = 100K^1/2L^1/2, C = Rs 1100, W = Rs 25 and r = Rs 40. Determine the quantity of labour and capital that the firm should use to maximize output. What is the level of output?
Group C
Long Answer Questions:(Attempt any THREE Questions)(3 × 10 = 30)
- 18.10
How is equilibrium price determined? What will be the effect on equilibrium price due to increase in demand and supply simultaneously?
- 19.10
Explain the fundamental economic principles relating to (i) how people make decisions and (ii) how people interact.
- 20.10
Suppose price of X goods is Rs 400 and Y goods is Rs 200 and consumer budget constraint is Rs 4,000. a. Draw the consumer's budget line and show the consumer's equilibrium position under the equal allocation of the budget between X and Y goods. b. Assume that price of X goods falls from Rs 400 to Rs 300, sketch the new budget line. Also show the new equilibrium point when consumer allocates Rs 2,400 on X goods and Rs 1,600 on Y goods. c. Draw the price consumption curve and demand curve of X goods.
- 21.10
Consider the following cost schedule:
Output (Q) 0 1 2 3 4 5 6 7 8 Total variable cost (TVC) 0 40 72 96 128 200 320 496 720 a. At TFC = Rs 300, compute TC, AFC, AVC, AC and MC. b. Using schedule, show the relationship between AFC, AVC and AC. c. Graph TVC and TC and explain their relation.
Group D
- 22.
Read the following case carefully and answer the questions that follow: The role and responsibilities of Nepal Electricity Authority (NEA) are growing continuously as the nation is reeling under the unprecedented energy shortage, and NEA is the prime player of the sector. Energy lies at core of resources what needs for overall national development. NEA needs to concentrate its efforts at four fronts including improving its own financial health, consumer welfare, improving quality of its operation and services delivered and accelerated expansions to wipe out the imbalance between demand and supply. For that, it has to increase its own generation and transmission capacity as well as take lead role in making possible the cross-broader trade through development of appropriate infrastructures and mechanisms. NEA being legally empowered by the government enjoys the monopoly in the country like other firms such as Kathmandu Upatyaka Khanepani Limited (KUKL), Nepal Oil Corporation (NOC), etc. All of these natural monopolies practice policy of price discrimination. Beside these firms, other public as well as private organization also follow the policy of price discrimination as in Movie Theatre, Hospitals, Public Transport, Telecommunication, etc. NEA follow the policy of price discrimination with its consumers, which varies widely. The categories are billed as household, industries, export etc. Even within these categories, Household includes 6 different categories in terms of its consumptions under 60 Ampere category: Consumer GroupsEnergy Price/UnitUp to 20 unitsRs 6.0021 - 30 unitsRs 6.5031 - 50 unitsRs 8.0051 - 150 unitsRs 9.50151 - 250 unitsRs 9.50Above 250 unitsRs 11.00 Sometimes monopolies may charge high price in order to increase their profit. In such cases consumers may be manipulated, having no alternatives, as a result people will have adverse effect regarding the monopolies. Consumers, therefore, prefer competitive business environment. Questions: a. Why does government endorse the policy of price discrimination like to NEA? b. Does NEA apply price elasticity of demand while determining the price to the household sector? Give arguments. c. Is it justifiable to follow price discrimination in health service? Give your critical comments. d. Is it possible to follow price discrimination in a perfectly competitive market? Give reasons.
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