BBM 1st Semester
Introductory Microeconomics Board Question Paper 2019

TRIBHUVAN UNIVERSITY
FACULTY OF MANAGEMENT
Office of the Dean
April 2019
Full Marks:60 Pass Marks:30 Time:3hrs
BBA / BBM /
First Semester /
ECO 211:
Introductory Microeconomics

Candidates are required to give their answers in their own words as for as practicable.
The figures in the margin indicate full marks

Long Answer Questions
Section "A"

Brief Answer Questions:

[6×1=6]
1.

Write any four determinants of demand.

2.

What is meant by linear demand function?

3.

Let, production function: Q = 100L0.8K0.4. Compute, factor intensity and degree of returns to scale.

4.

Define marginal rate of substitution?

5.

LAC is U-Shaped. Why?

6.

What are the conditions for price discrimination?

Section "B"

Descriptive Answer Questions:

[6×3=18]
7.

Describe the concept of micro dynamic analysis.

8.

Explain the properties of iso-quant.

9.

Explain the relationship between AC and MC.

10.

Describe laws of returns to scale.

11.

Explain the determinants of Loanable funds theory of interest.

12.

How are the price and the output determined under monopolistic competition in long run?

Section "C"

Problems Solving Questions:

[4×6 = 24]
13.

Consider the following demand and supply schedule for wheat.

CombinationABCDE
Price (Rs.):200300400500600
Quantity Supply (units):255075100125
Quantity Demand (units):125100755025

a) Determine price elasticity of demand at equilibrium price.
b) Compute price elasticity of supply at movement from B to D.
c) Let, supply for a wheat increases by 10 units at each price elasticity of supply? Give reasons.

14.

Let consumer budget constraint is Rs 40,000, price of X goods is Rs 800 per units and price of Y goods is Rs 1600 per unit respectively.
a) Sketch the consumer's budget constraint. Suppose that consumer splits his/her income equally between X and Y goods. Show, where the consumer ends up on the budget constraint?
b) Suppose that price of X falls from Rs 800 to Rs 400 price of Y and budget remains constant, sketch the new budget constraint facing the consumer. Suppose, after fall in price of X, consumer spends Rs 24,000 on X goods and Rs 16,000 on y Goods. Show, where the consumer ends up on the new budget constraint?
c) Derive the price consumption curve and also explain the nature of X and Y goods.

15.

Let, demand function (P) = 50-0.5Q. Cost function (C) = 350 + 10Q.
Where Q = quantity and P = price in Rs. Compute profit maximizing output, price, TR and maximum profit under.
a) TR-TC approach
b) MR-MC approach

16.

A technician sacrifices the job having salary of Rs. 360,000 annually to initiate his own business. He decided to invest Rs. 480,000 deposited in the bank that yields 5% interest per year. Similarly, he thinks to use his own house rented in Rs. 1500 per month. The revenue in the first year seems to be Rs. 130,000 monthly and estimated expenses are as follows.
Advertisement: Rs 9,000/month
Employee Salary: Rs 50,000/month
Supply of materials: Rs 15,000/month
Utilities: Rs 2,000/month
Find:
a) Business profit
b) Economic Profit
c) Suggest whether starting new business is beneficial for him or not. Give reasons.

Section "D"

Comprehensive Answer Questions:

[3×4 = 12]
17.

It is observed that 100,000 farmers are involved in producing tea in Nepal. Similarly, market survey shows that large numbers of households are consuming tea in Nepal. There is also high export demand for Nepalese tea. In this reference, answer the following questions:
a) What will be the effect on equilibrium price and quantity of tea when government provides subsidy for tea farming?
b) What will be effect on equilibrium price and quantity of tea when government increases import tax on coffee?
c) What will be the simultaneous effect on equilibrium price and quantity of tea when government provides subsidy for tea farming and increase import taxes on coffee?