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Economics cpa mock 3 exams with answers


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By Omosa


Description/Abstract

 

 QUESTIONS 

NUMBER ONE 

a) Discuss the different approaches used in the measurement of the National Income of a country. 

 

(6 marks) 

b) The Economic Advisory Department of Examland has estimated that its country‟s marginal propensity to consume equals 0.6, investment in millions of shillings equals 2,000, Government spending 8,000, autonomous consumption 10,000 and net exports 1,000. 

 

Required: 

1. Calculate the level of equilibrium of National Income for this economy. (5 marks) 

2. If the currency of Examland depreciated, what would likely happen to the National Income? Why? (3 marks) 

c) What are the main problems associated with National Income Accounting in developing countries? (6 marks) 

 

(Total: 20 marks) 

NUMBER TWO 

(a) Explain what is meant by the terms own price, income and cross elasticities of demand. (9 marks) 

(b) How and when is the concept of elasticity applied in economic policy decisions. (11 marks) 

(Total: 20 marks) 

NUMBER THREE 

(a) Define the term Monetary Policy. (2 marks) 

(b) Discuss any four instruments of this policy used to control and regulate money supply by the Central Banking Authorities. (12 marks) 

(c) What limits the successful application of these tools (in b above) in developing countries? (6 marks) 

(Total: 20 marks) 

NUMBER FOUR 

(a) State the main sources of monopoly powers. (5 marks) 

(b) Explain why the marginal revenue curve lies below the average revenue curve in a monopolistic firm (3 marks) 

(c) Illustrate diagrammatically the output levels for both profit-maximizing and the loss making monopolist firm in the short-run. Give brief explanations. (12 marks) 

(Total: 20 marks) 

NUMBER FIVE 

Write brief notes on the following economic concepts: 

(a) Choice , Scarcity and opportunity cost. (5 marks) 

(b) Exchange rate. (5 marks) 

(c ) Producer‟s surplus. (5 marks) 

(d) Isoquants. (5 marks) 

(Total: 20 marks) 

NUMBER SIX 

(a) Make a distinction between fixed and variable costs of production. Give examples of each. (5 marks) 

(b) In a perfectly competitive market the average revenue and average cost functions are: 

AR = K1Q – K2 and AC = K1 - K2 respectively. 



K1, K2 are constants 

Q is the output level 

Based on the given functions, determine: 

(i) Fixed and Variable cost functions (6 marks) 

(ii) The level of output at which the firm breakevens (3 marks) 

(c) Distinguish between implicit and explicit costs. (6 marks) 

(Total: 20 marks) 

NUMBER SEVEN 

Kenya is planning to be a newly industrialized country by the year 2020 A.D. What obstacles are likely to impede the achievement of this objective and what steps must be taken to overcome such obstacles? (Total: 20 marks) 

NUMBER EIGHT 

(a) Assume there are 10,000 identical individuals (consumers) in the market for commodity x each with a demand function given by Qdx = 12 – 2Px and 1,000 identical producers of commodity x, each with a supply function which takes the form Qsx = 20 Px. 

Required: 

(i) Determine the market demand and market supply functions for commodity x. (4 marks) 

(ii) Compute the market equilibrium price (Px) and quantity (Qx) (6 marks) 

(b) One of the determinants of demand for a commodity is advertising. 

Required: 

(i) Explain the extent to which advertising influences demand. (5 marks) 

(ii) State the factors that a business firm should consider while developing an advertising policy. 

(5 marks) 

(Total: 20 marks)

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