Economics Revision kit Questions Nov 2016


(a) (i) Explain the term “price control” as used in economics. (1 mark)

(ii) Highlight eight reasons for price controls in an economy. (8 marks)

(b) Outline six advantages of a controlled market system. (6 marks)

(c) With the aid of a diagram, explain the concept of consumer surplus. (5 marks)
(Total: 20 marks)


(a) Enumerate six factors that could lead to a rightward shift of the supply curve. (6 marks)

(b) State six assumptions of the marginal productivity theory of wage determination. (6 marks)

(c) Summarise eight factors that could affect own price elasticity of demand of a commodity. (8 marks)
(Total: 20 marks)


(a) With the aid of well labelled diagrams, discuss the short run and long run equilibrium positions of a firm operating under monopolistic competition. (12 marks)

(b) A monopolist sells his product in two distinct markets, A and B. The cost function of the monopolist is given as:

C = 100Q

C is the total cost function
Q is the total production in units

The demand functions of the two distinct markets are given as:
QA= 50-0.2PA
QB=100- 0.5 PB

QA is the demand of the product in market A.
QB is the demand of the product in market B.
PA is the price of the product in market A.
PB is the price of the product in market B.


(i) The equilibrium level of price and quantity of the product in market A. (4 marks)

(ii) The equilibrium level of price and quantity of the product in market B. (4 marks)
(Total: 20 marks)


(a) Highlight five strategies that could be implemented governments in developing countries to spur growth in the industrial sector. (5 marks)

(b) Using an appropriate diagram, describe the expansion curve of a firm as applied in the theory of production. (5 marks)

(c) Discuss ten limitations of using national income statistics to compare the standards of living between different countries. (10 marks)
(Total: 20 marks)


(a) The United Kingdom (UK) recently withdrew its membership from the European Union (EU), a process that was referred to as “Brexit”. Analyse the likely economic effect of -13rexit” on the United Kingdom’s:

(i) Exchange rates. (2 marks)

(ii) Interest rates. (2 marks)

(iii) Inflation rate. (2 marks)

(iv) Securities exchange market. (2 marks)

(b) The table below shows the total variable costs of Ujuzi Limited at different levels of output.

Level of output (units) Total variable cost (Sh.)
0 0
1 80,000
2 130,000
3 200,000
4 270,000
5 310,000
6 510,000
7 530,000
8 580,000

The total fixed cost of the company is Sh.150,000.

(i) The average cost of producing each level of output. (4 marks)

(ii) The marginal cost of producing each level of output. (4 marks)

(iii) The maximum attainable profit. (4 marks)
(Total: 20 marks)


(a) Outline five factors that determine the rate of exchange of a country’s currency. (5 marks)

(b) Enumerate five roles of the central bank in an economy. (5 marks)

(c) Suggest five policy measures that could be adopted to reduce the level of unemployment in a developing country. (10 marks)
(Total: 20 marks)


(a) Explain the relationship between money supply and the level of inflation in an economy. (2 marks)

(b) State six advantages of a floating exchange rate system in an economy. (6 marks)

(c) Summarise eight challenges that hinder successful achievement of national development targets set developing countries. (8 marks)

Sector Total output Intermediate purchaser
  Sh.”000″ Sh.”000″
Service 76,000 37,000
Agricultural 55,000 23,000
Manufacturing 111,000 69,000

Indirect taxes and fixed assets depreciation amount to Sh.21,000,000 and Sh.22,000,000 respectively.

(i) Gross national product using the value added approach. (2 marks)

(ii) Net domestic product at market price. (1 mark)

(iii) Net domestic product at factor cost. (1 mark)
(Total: 20 marks)

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