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Exam paper for Microeconomics in BBA (with Answers)
PAPER # 1
Please note that this is a general example, and you may need to customize it
to suit your specific course content and requirements
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**Microeconomics Exam Paper**
**Course: Microeconomics**
**Program: BBA**
**Duration: 2 hours**
**Instructions:**
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**Section A: Multiple Choice Questions (20 marks)**
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Which of the following is considered a microeconomic topic?
a) National unemployment rate
b) Inflation
c) Consumer demand for smartphones
d) Government fiscal policy
Answer: c) Consumer demand for smartphones
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When a firm is earning economic profit, which of the following is true?
a) Total revenue equals total cost
b) Total revenue is greater than total cost
c) Total revenue is less than total cost
d) Total revenue is zero
Answer: b) Total revenue is greater than total cost
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Explain the concept of opportunity cost with an example
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For example, if a student has
the option to either study for an economics exam or go to a movie with
friends, and they choose to study, the opportunity cost is the enjoyment and
time spent at the movie, which could have been the next best alternative
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Calculate the price elasticity of demand using the following information:
Initial price = $10, New price = $12, Initial quantity demanded = 100, New
quantity demanded = 80
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20 / 1) / (2 / 10)
= -2
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Define and provide an example of a public good
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An
example is national defense, where the protection provided to one citizen
does not diminish the protection available to others in the same country
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Briefly explain the concept of price discrimination and provide an
example
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An example is airline ticket pricing, where
different fares are offered to passengers based on factors such as booking
class, time of booking, and flexibility
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**Section C: Essay Question (40 marks)**
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Provide
examples of government policies or interventions that address externalities
and information asymmetry
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Two
common types of market failures are externalities and information
asymmetry
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For example, pollution
from a factory can harm the environment and public health, causing
negative externalities
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Information asymmetry occurs when one party in a transaction has more
information than the other, leading to potential exploitation or inefficiency
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Government regulations can require healthcare
providers to disclose information about their services, ensuring that patients
can make informed choices
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In conclusion, government intervention in markets is vital to address
market failures, protect consumers, and promote efficient resource
allocation
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Additionally, ensure that you provide a clear marking scheme and allocate
appropriate marks for each question
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The paper
consists of 10 multiple choice questions and 5 short answer questions
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The total marks for the paper are 30
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Multiple Choice Questions:
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b) A higher price of a good leads to a lower quantity demanded of that good
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d) Pollution is a negative externality that harms society
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The opportunity cost of an action is
a) the value of the best alternative forgone as a result of that action
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c) the difference between the benefits and costs of that action
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Answer: a
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b) the trade-offs between two goods that consumers face in the market
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d) the relationship between the price and quantity demanded of a good
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A market is said to be in equilibrium when
a) there is no excess demand or excess supply in the market
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c) the quantity demanded equals the quantity supplied in the market
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Answer: d
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b) how much producers are willing and able to sell at each possible price,
holding other factors constant
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d) how the quantity supplied changes when one of the other factors
changes, holding price constant
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(5 marks)
Answer: Microeconomics is the study of how individuals and firms make
decisions and how they interact in markets
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An example of a microeconomic issue is how a
consumer decides what to buy given their budget constraint
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Question 2: Define and illustrate with a diagram the concept of opportunity
cost
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(10 marks)
Answer: Opportunity cost is the value of the next best alternative that is
forgone as a result of making a choice
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The opportunity cost of
producing more of one good is the amount of the other good that has to be
given up, which is equal to the slope of the PPF
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Question 3: Suppose the demand function for a good is Qd = 100 - 2P and
the supply function is Qs = 50 + P, where Q is quantity and P is price
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What happens to the
equilibrium price and quantity if there is an increase in demand to Qd = 120
- 2P? Use algebra and graphs to support your answer
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If there is an increase in demand to Qd = 120 - 2P, we need to repeat the
same steps:
120 - 2P = 50 + P
3P = 70
P = 70/3
Q = 120 - 2(70/3) = 80/3
The new equilibrium price and quantity are P' = 70/3 and Q' = 80/3
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This can
be shown graphically by shifting the demand curve to the right, resulting in a
new intersection point with the supply curve
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Which of the following is not a branch of microeconomics?
* Consumer behavior
* Firm behavior
* Market structure
* Macroeconomics
* Answer: (d) Macroeconomics

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2
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* As the price of a good increases, the demand for that good will increase
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* The demand for a good is always increasing
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Which of the following is not a characteristic of a perfectly competitive
market?
* There are many buyers and sellers in the market
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* The firms are price takers
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* The firms have perfect knowledge of the market
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5
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Explain the law of supply
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This is because producers
are more willing to supply a good at a higher price
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What are the determinants of supply?
The determinants of supply are the factors that can change the quantity of a
good supplied by producers
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In a monopolistically
competitive market, there are many buyers and sellers, but the products
sold by the firms are differentiated
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**Section C: Essay Questions (50 marks)**
1
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Consumer surplus is the difference between the amount that a consumer is
willing to pay for a good and the amount that they actually pay for it
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2
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A tax on a perfectly competitive market will cause the price of the good to
increase and the quantity of the good to decrease
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The government plays a role in a market economy by providing public
goods, regulating markets, and redistributing income
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This means that it is
impossible to prevent people from consuming the good, and one person's
consumption of the good does not reduce the amount available for others

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to consume
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The government also regulates markets to protect consumers and
producers
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The government also
redistributes income through taxes and transfer payments to reduce poverty
and inequality
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Which of the following is not a branch of microeconomics?
* Consumer behavior
* Firm behavior
* Market structure
* Macroeconomics
* Answer: (d) Macroeconomics
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* True
* False
* Answer: (True)

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3
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* True
* False
* Answer: (True)
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* True
* False
* Answer: (True)
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* The goods sold are homogeneous
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* Firms have market power
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**Section B: Short Answer Questions (4 x 5 marks)**
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Consumer surplus is the difference between the maximum price a consumer
is willing to pay for a good and the actual price paid
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7
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In the short run, a firm in perfect competition is a price taker
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The firm's profitmaximizing output level is found by producing the quantity at which
marginal revenue equals marginal cost
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This means that the market price will eventually equal the minimum average
cost of production
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What are the three stages of production according to the law of variable
proportions?
The three stages of production according to the law of variable proportions
are:
* Increasing returns to scale: This is the stage where the output of a firm
increases more than proportionately to the increase in inputs
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* Constant returns to scale: This is the stage where the output of a firm
increases proportionately to the increase in inputs
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Explain the difference between monopolistic competition and oligopoly
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Oligopoly is a market
structure in which there are a few large firms that dominate the market
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This means that each firm can charge a
price above marginal cost, but not as much above marginal cost as a
monopoly could
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This means that the actions of
one firm can affect the profits of the other firms
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**Section C: Essay Question (10 marks)**
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Market failure occurs when the market does not allocate resources
efficiently
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* Public goods: These are goods that are non-excludable and non-rivalrous
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The consequences of market failure can include:
* Inefficient allocation of resources
* Inequitable distribution of income
* Environmental degradation
* Economic instability
There are a number of policies that can be used to address market failure,
such as taxes, subsidies, and regulation
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Please let me know if you have any
questions
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Microeconomics: The primary subject of the exam paper
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BBA: To specify the academic level and program for which the exam paper
is intended
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Exam Paper: To indicate that the document contains exam questions
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Study Material: Attract students looking for study materials related to
microeconomics exams in BBA
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Sample Questions: Indicate that the document contains sample questions
for practice
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Answers Included: Highlight that the answers to the questions are
provided within the document
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Business Administration: Specify the broader field of study for BBA
students
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Economics: Attract students interested in economics in general
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BBA Exam: Indicate that the document is relevant for BBA exam
preparation
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Exam Practice: Attract students seeking practice materials for their
microeconomics exams
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Microeconomics Questions: Specify the subject matter of the exam
paper
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microeconomics
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BBA Study Guide: Attract BBA students looking for study guides for
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* Microeconomics
* BBA
* Economics
* Demand
* Supply
* Market equilibrium
* Elasticity
* Consumer surplus
* Producer surplus
* Perfect competition
* Monopoly
* Oligopoly
* Monopolistic competition
* Production function
* Cost curves
* Profit maximization
* Game theory
* Welfare economics
* Externalities
* Public goods
* Information asymmetry
* Behavioral economics

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