BBM 1st Semester
Micro Economics for Business Board Question Paper 2023

Define business economics.

What is price ceiling?

Let, the income elasticity of demand for rice is e_y = - 0.75. Interpret the result.

State the condition for optimum employment of one variable input.

Distinguish between implicit and explicit cost.

Monopoly firm is price maker. Why?

Write any two examples of two part-tariffs.

Why does government fix minimum wages?

Find the equilibrium level of output of the firm when MR = 300 - 0.002Q and MC = 20 + 0.0008Q.

What is economic rent?

Explain the uses of microeconomics in business decision-making.

Define cross elasticity of demand and explain its types.

Explain the concept of consumer's surplus and producer's surplus.

Describe any four properties of Cobb-Douglas production function.

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

The demand function of a monopoly firm is P = 40 – 0.4Q and cost function C = 280 + 8Q. Compute profit maximizing output, price and TR and profit.

Let, the cost function TC = 6000 + 400Q –20Q² + Q³ and demand function P = 400 –10Q.
a. Compute TFC.
b. Derive TVC, AVC, AC and MC functions.

How does subsidy policy of government affect the market equilibrium? The demand function for a product is Q_d = 3000 – 50P, and supply function is Q_s = –1500 + 50P. Find equilibrium price and quantity. If the government provides subsidy of Rs 6 per unit. What will be the effect on equilibrium price and quantity?

What is indifference curve? Explain its properties.

Production function of a firm is Q = 200√KL, wage rate of labor is Rs 160, price of capital is Rs 200 and price of the product is Rs 8 per unit. Determined optimum number of labor and capital that the firm should use in order to maximize output under given total cost outlay is Rs 8,000. Also calculate the total output and profit of the firm.

What is wage differential? Explain the factors that causes wage differentials.

Read the following case carefully and answer the questions that follow:
Vegetable prices have continued to go up in the Kathmandu Valley despite rising in supply from various parts of the country. The Kalimati vegetable market, the largest vegetable market in the country, is currently receiving around 1000 tons of vegetables per day. Last week the daily supply stood at around 600 tons. Despite a 50 percent decline in vegetable supply, prices of most of the vegetables are currently going up exerting pressure on the household budget. A snap survey conducted at Kalimati vegetable market showed that prices of vegetables had gone up in the range of 10 percent to 100 percent. Prices of all kinds of vegetables, like cauliflower, radish, soybean, tomato, pumpkin, and French bean etc. have gone up.
According to the information of the Kalimati Fruits and Vegetable Market Development Board, said it is a normal phenomenon for vegetable prices to increase during monsoon, as rain causes damage to the green produce. Yet the rate of price hike is higher this year because of floods and heavy rain that damaged or destroyed vegetables in various parts of the country. Also, road blockades triggered by landslides, which have disrupted supplies, have played a role in raising prices. Many retailers are now taking undue advantage of the situation to further jack up prices. This, however, should not mean all retailers are profiteering, as those who have received substandard vegetables, like those spoiled by rain or other adverse weather conditions, are being forced to increase retail prices to cover up losses. The valley generally gets most of its vegetable supplies from Kavrepalanchowk, Dhading, Makwanpur, Nuwakot and Chitwan. Although these places are not much affected by floods, incessant rain has caused some damage to vegetables grown in these areas, leading to the price hike.
The Ministry of Agricultural Development recently said vegetables worth Rs 2.96 billion were destroyed in 31 districts by floods triggered by torrential rain that continues in last month. Because of this, the situation at the Kalimati vegetable market has not returned to normal, as it is still seeing a supply shortfall of around 100 to 200 tons per day. The market used to receive around 800 tons of vegetables on normal days.
Questions:
a. Why vegetable prices have continued to go up in the Kathmandu Valley despite rising in supply? Give your answer with reason.
b. How is the price of vegetables determined in a perfect competition market?
c. What will be the effect on equilibrium price and quantity of vegetables when bad weather heavily damages the vegetable plants?
d. Explain the effects on equilibrium price and quantity when the demand for vegetables increases due to increase in number of households in Kathmandu valley.