Mid-Term Exam Intermediate Microeconomics Benha University

First year 28/3/2020 Faculty of commerce

Time”:1, hour English Section
Answer ONLY THREE of the following questions, Use graphs, equations and tables to
Describe your answers"

Question (1)
A-Define and explain briefly:
1- Microeconomics, Macroeconomics.
2- Positive analysis, normative analysis.
3- Actual prices, equilibrium prices.
4- Tasks performed by an economic system.
5- Consumer tastes and preferences

B- Suppose that supply and demand curves for orange in Egypt 20198 are:
Px =100-2QDx., Px =50 +3QSx. The actual price is LE 90.
1- What is the equilibrium price and quantity?
2- Would you expect the price to rise or fall?
3- If so, by how much? Why?
4- Calculate the ARC price elasticity of demand and supply when the price was between LE70, LE60.

Question (2)
A- Define and describe the difference between:
1- The point elasticity of demand, the ARC elasticity of demand.
2- Normal, inferior goods.
3- Price – consumption curve, income-consumption curve.
4- Engel Curve, consumer surplus.
5- Income elasticity of demand, the cross price elasticity of demand.
6- MRS (The marginal rate of substitution) , equilibrium of the consumer.
7- The substitution effect, income effect.

B- Suppose that Mustafa spends his entire income on goods X and Y .The marginal
Utility of each good is independent of the amount consumed of the other good.
Values are recorded in the table blow. The price of X is LE 2 and the price of Y is LE 1 :

Number of units of Mustafa’s marginal utility

good consumed
Good X Good Y
1 16 11
2 14 10
3 12 9
4 10 8
5 8 7
6 6 6
7 4 5
8 2 4
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 If Mr. Mustafa has income of LE 12 per month,
1. How many units of each good should he purchase?
2. What if the price of X decreases to LE 1?
3. Would his consumption of both goods change? Why or Why not?
4. Draw the demand curve for good X.

Question (3)
Answer( A) or (B)
A- Suppose that the consumer has an income of LE 10 per period and that he or she must spend it all on
meat or potatoes. If meat is LE 1 a pound and potatoes are LE 0.10 a pound.
1. Draw the consumer’s budget line?
2. What will be the budget line if the consumer’s income increases to LE 12?
3. What will be the budget line if the consumer’s income is LE 10 but the price of meat increases to LE 2
per Ib .?
4. What will be the budget line if the price of potatoes increases to LE 0.20 per Ib. and income LE 10?

B- Suppose the income elasticity of demand for food is (+ 0.5) and the price elasticity of demand
(-1) Suppose Aly spends (LE 10000) a year on food, that the price of food is (LE 2) and that his
income is (LE25000).
1-If a LE2 sales tax on food was to cause the price of food to double, what would happen
to Aly’s consumption of food?
2-Suppose that he is given a tax rebate of (LE5000) to ease the effect of the tax.
What would his consumption of food be now?
3-Is he better or worse off when given a rebate equal to the sales tax payment? Discuss?

Question (4)
A- Suppose that the production function is as follows:
Quantity of output / year 3 5 10 13 15 16 16 15 14
Quantity of input / year 1 2 3 4 5 6 7 8 9
 State the law of diminishing marginal returns.
 Describe and explain the main conditions for minimizing the cost of producing a given
output or for maximizing the output that can be sustained at a given cost.
 Use graphs and equations to describe your answer.

B- For the particular good that is monopolized.

P = 12-2Qd
MR = 12-4Qd
MC = 2Q

Where P is its price (in dollars per ton).Qd is the quantity demanded per year (in millions of tons).
MR is its marginal revenue (in dollars per ton).MC is its cost (in dollars per ton). And Q is the
quantity produced per year (in millions of tons).

1- How great is the deadweight loss due to monopoly?

2- What are the main differences between perfect competition and monopoly?
3- Why do we allow monopolies?

Best of luck
Prof. Nadia El Nemr
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