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Final Exam FEB 2022 ECO162

malaysian economy (Universiti Teknologi Malaysia)

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UNIVERSITI TEKNOLOGI MARA

FINAL EXAMINATION

COURSE : MICROECONOMICS
COURSE CODE : ECO162
EXAMINATION : FEBRUARY 2022
TIME : 3 HOURS

INSTRUCTIONS TO CANDIDATES

1. This question paper consists of two (2) parts: PART A (20 Questions)
PART B (4 Questions)

2. Answer ALL questions.

3. Answer ALL questions in English.

DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO

This examination paper consists of 1111 printed pages

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PART A
Multiple-choice Questions

QUESTION 1
Which of the following items reflects the study of microeconomics?
A An increase in inflation rate at 3% in 2021.
B The production of new model of HONDA Accord cars in Malaysia.
C Export of Malaysia’s agriculture produces reduced.
D The national income of Malaysia has falled due to pandemic COVID-19.
(2 marks)

QUESTION 2
The amount of a good that must be given up to produce another good is the concept of
A scarcity.
B opportunity cost.
C efficiency.
D choice.
(2 marks)

QUESTION 3
The economic decisions in an Islamic economic system depend on
A public and private sectors to runs the economic activities.
B principles of Shari’ah.
C price mechanism.
D private interest.
(2 marks)

QUESTION 4
A rightward shift of a supply curve might be caused by
A an improvement in the relevant technique of production.
B a rise in the price of inputs.
C an increase in consumer income.
D some firms leaving the industry.
(2 marks)

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QUESTION 5
A “change in demand” means
A the quantity demanded changes as price changes.
B a movement along a given demand curve.
C a shift in the demand curve.
D a change in the shape of the demand curve.
(2 marks)

QUESTION 6
Used furniture is an inferior. An increase in income or wealth is likely
A increase the demand for used furniture.
B increase the price of used furniture.
C decrease the demand of used furniture.
D decrease the supply of used furniture.
(2 marks)

QUESTION 7
Assume that the price of product X rises by 13 percent and the quantity supplied of X increases
by 15 percent. The coefficient of price elasticity of supply for good X is
A more than 1 and therefore supply is elastic.
B less than 1 and therefore supply is inelastic.
C negative and therefore X is an inferior good.
D positive and therefore X is a normal good.
(2 marks)

QUESTION 8
If goods X and Y have a positive cross elasticity of demand, we know that
A they are both inferior goods.
B they are substitutes.
C they are complements.
D they both have price elasticity greater than one.
(2 marks)

QUESTION 9
Which of the following is not the determinant of price elasticity of demand?
A Availability of substitutes.
B Consumer’s habit.

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C Level of technology.
D Proportion of income spent on a product.
(2 marks)

QUESTION 10
The coefficient of the price elasticity of demand of bread is 3.5. A 2 percent increase in the
price of bread would cause
A a 7 percent increase in the quantity demanded for bread.
B a 7 percent decrease in quantity demanded for bread.
C a 7 percent decrease in quantity supplied of bread.
D a 7 percent increase in the quantity supplied of bread.
(2 marks)

QUESTION 11
The two opposing forces that reach balance in market equilibrium are
A government and scarcity.
B science and policy.
C labour and capital.
D demand and supply.
(2 marks)

QUESTION 12
The government imposed ceiling price on chicken to prohibit chicken farmers from raising the
price of chicken. This will cause
A an excess supply of chicken.
B an excess demand for chicken.
C an increase in the demand for chicken.
D a decrease in the supply of chicken.
(2 marks)

QUESTION 13
A leftward shift in a demand curve and rightward shift in a supply curve both result in
A higher price and quantity is unchanged.
B lower price and quantity is unchanged
C higher quantity and price is unchanged
D lower quantity and price is unchanged
(2 marks)

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QUESTION 14
Price control consists of
A Price ceiling and price floor.
B Indirect tax and subsidy.
C Price ceiling and subsidy.
D Price floor and indirect tax.
(2 marks)

QUESTION 15
The second stage in production best happens when
A the producer stop the production.
B the producer need to increase its production by hiring more labours.
C production is inefficient.
D the production is in the most efficient stage.
(2 marks)

QUESTION 16
Diseconomies of scale is the result of
A discount given for bulk purchases.
B the use of by products.
C specialization in the use of machinery.
D inefficient management.
(2 marks)

QUESTION 17

Which one of the firm most likely could practice price discrimination?
A Perfect competition.
B Monopoly.
C Monopolistic competition.
D Oligopoly.
(2 marks)

QUESTION 18

In oligopoly market, the kinked demand curve is based on the assumptions

A the rival follow any decisions made by the firm.
B the rival will not follow any decisions made by the firm.
C the rival will ignore price cut and follow price increase.

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D the rival will ignore price increase and follow price cut.
(2 marks)
QUESTION 19
Average revenue is the
A revenue from one unit of a good or service sold.
B revenue from the total amount of a good or service sold.
C change in revenue from selling an additional unit of good or service.
D difference between the revenue from selling a good or service and its cost of production.
(2 marks)

QUESTION 20
Which is the correct sequence if we are ranking market structures from that where a firm has
most control over price to that where a firm has least control?
A Oligopoly, monopoly, monopolistic competition, pure competition.
B Pure competition, monopoly, oligopoly, monopolistic competition.
C Monopoly, oligopoly, monopolistic competition, pure competition.
D Monopolistic competition, monopoly, oligopoly, pure competition.
(2 marks)

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PART B
Short-answer Questions

QUESTION 1

a) The table below shows the monthly production of pizzas and cars in a particular country.

Production Pizza (unit) Car (unit)

Alternatives
A 0 10
B 1000 9
C 2000 7
D 3000 4
E 4000 0

i) Sketch the production possibilities curve (PPC) of the country.

(2 marks)
ii) Calculate:

- the opportunity cost of increasing the production of pizza from 1000 to 2000.

- the opportunity cost of producing 10 units of car.

(2 marks)

iii) State an economic implication indicated when combinations of 2000 pizzas and 9 cars
are produced by the country.
(1 mark)

b) The table below shows the price of Good X and demand for Good Y, Good Z and income
level.

Price of Good X (RM) Demand of Good Y Demand of Good Z Income (RM)

(unit) (unit)
1.50 180 400 1200
2.80 220 320 2000
4.20 360 240 2500
6.00 500 200 3600

Based on the table above, answer the following questions.

i) Calculate the cross elasticity of demand for Good Y if the price of Good X increases
from RM2.80 to RM4.20.
(2 marks)

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ii) Calculate the cross elasticity of demand for Good Z if the price of Good X increases
from RM4.20 to RM6.00.
(2 marks)
iii) Find the relationship between

- Good X and Good Y.

- Good X and Good Z.

(3 marks)

iv) Calculate the income elasticity of Good Z if the income increases from RM1200 to
RM2000.
(2 marks)

v) Based on the income elasticity you have calculated, determine type of good for Good
Z.
(1 mark)

QUESTION 2
The following is the hypothetical of individual demand and market supply schedule for
fertilizers in Bandar Baru.

Price (RM) Quantity Supplied Quantity Demanded (kg)

(kg) Ahmad Muthu Chin
1.00 25 15 35 15
1.20 30 13 32 14
1.40 35 10 29 13
1.60 45 8 25 12
1.80 50 5 22 11
2.00 58 3 18 10
2.20 65 1 15 9
a) Sketch the market equilibrium of fertilizers. State the equilibrium price and quantity of
fertilizers.
(3 marks)
b) Suppose government imposes a price control of RM1.20 to the fertilizers. State the price
control implemented by the government and determine the implication of such price
control.
(2 marks)

c) Show the price control that is implemented by the government in a diagram you have
drawn in a). State two (2) disadvantages of the price control.
(3 marks)

d) State three (3) factors that would increase the supply of fertilizers.

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(3 marks)

e) Sketch the following situation on the market of fertilizers.

i) COVID-19 virus has hit every country and affected the economy.

ii) People start to eat more vegetables to stay healthy.

(4 marks)

QUESTION 3
The table below shows the weekly total product, average product and marginal product of a
firm.

Capital (unit) Labour Total Product Average Product Marginal Product

(unit) (Unit) (unit)
3 0 -
3 1 60
3 2 70
3 3 70
3 4 65
3 5 60
3 6 50
3 7 40
3 8 30

Based on the table above, answer the following questions.

a) Fill in the blank columns.

(4 marks)

b) State the number of labour when the diminishing marginal return sets in. Justify your
answer.
(2 marks)

c) Is the firm operating in the short run or long run? Justify your answer.
(2 marks)

Given the following information

Average fixed cost (AFC) = RM12.50

Average variable cost (AVC) = RM81.25

Output (Q) = 8 units

d) Based on the information given above, calculate the total fixed cost (TFC) and total cost
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(TC).
(2 marks)
e) Find the total cost (TC) when the output is zero.
(1 mark)

QUESTION 4
The table below shows the revenue and cost information for a monopoly firm known as Jana
Berhad.

Price Quantity Total Revenue Total Cost Marginal Marginal Cost

(RM) (unit) (RM) (RM) Revenue (RM) (RM)
200 10 400 - -
180 20 1800
170 30 3100
160 40 4300
150 50 5300
140 60 6200
130 70 7300
120 80 8600
110 90 10 100
100 100 11 900

a) Complete the blank column.

(4 marks)

b) Determine the proft maximizing price and quantity of the firm.

(3 marks)

c) Calculate the total profit at equilibrium. State the type of profit or loss the firm earned.
Justify your answer.
(4 marks)

d) State three (3) characteristics of this firm.

(3 marks)

e) Sketch a well-labeled diagram to show the equilibrium condition of the firm.

(3 marks)

f) Briefly explain why does the demand curve of monopolist slopes downward and it is
inelastic.
(2 marks)

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