POLYTECHNIC OF NAMIBIA SCHOOL OF MANAGE:MENT SCIENCE DEPARTMENT OF ACCOUNTING, ECONOMICS AND FINANCE. Economics of Agriculture.

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1 POLYTECHNIC OF NAMIBIA SCHOOL OF MANAGE:MENT SCIENCE DEPARTMENT OF ACCOUNTING, ECONOMICS AND FINANCE COURSE NAME: COURSE CODE: Economics of Agriculture EOA611S DATE: June 2015 MARKS: 100 DURATION: 3 Hours FIRST OPPORTUNITY EXAMINATION: QUESTION PAPER Examiners: Moderator: Mr. Pinehas Nangula Mr. Eslon Ngeendepi Dr. Cyril Ogbokor 1. There are two sections (A, B and C) in this paper. 2. Candidates must answer all questions. 3. Number your answers in accordance with the question paper. 4. Start each answer on a new page. 5. Write clearly and legibly. This paper consists of 5 pages, including this front page.

2 Section A: Multiple Questions Answer all questions in this section [2x10 marks] 1. Which of the following is not considered a factor of production? a) A hectare of farm land b) A librarian c) A machine used in heart-transplant operations d) A N$100 note 2. The production possibilities curve (PPC) shows combinations of goods that: a) Can be produced at full employment b) Can be consumed for a given income c) Are available for trade d) Can be produced by a firm using different processes. Use the following information to answer questions 3 to 5: Suppose the demand for a product can be represented by QD = 100-5p, while the supply is given by QS = p, where Pis the price in N$. 3. The equilibrium price for the product is the following: a) N$5 b) N$6.67 c) N$15 d) N$20 4. At the equilibrium price and quantity, total consumption expenditure is the following: a) N$15 b) N$25 c) N$375 d) Cannot be calculated. 5. If the price is set at N$10, the market will experience: a) A surplus (excess supply) of 50 b) A surplus (excess supply) of 40 c) A shortage (excess demand) of 10 d) A shortage (excess demand) of In a market for second-hand clothes (which are classified as inferior goods), an increase in consumer income will result in: a) An increase in equilibrium quantity and a decrease in equilibrium price b) An increase in equilibrium price and quantity c) A decrease in equilibrium price and quantity d) A decrease in equilibrium price and an increase in equilibrium quantity. 7. Which of the following would cause an (unambiguous) increase in the equilibrium price of tomatoes?

3 a) An increase in the price of cucumbers (assuming that tomatoes and cucumbers are complements in consumption) b) The development of a new high-yield variety of tomato, together with an advertising campaign promoting the good features of tomatoes. c) A strike among workers on tomato-producing farms, together with an increase in consumers income (assuming that tomatoes are normal products) d) A decrease in the price of green peppers (assuming that tomatoes and green peppers are substitutes in production, but independent in consumption). 8. If the price elasticity of demand is 1.6 and a firm increases the price of its product by 10 /o, it would expect its total revenue to: a) Decrease by 16% b) Decrease by 6% c) Increase by 6% d) Increase by 16%. 9. Consider two goods, X and Y. If the price of goods X increases from N$50 to N$60, the quantity demanded of good Y increases by 10 /o. The cross price elasticity of demand between X and Y is approximately, and the two goods are a) +0.5; complements b) +0.2; complements c) +0.5; substitutes d) +0.2; substitutes 10. If the price elasticity of supply is zero, then: a) The supply curve is horizontal b) A small decrease in the price will result in suppliers producing nothing c) If the price rises, suppliers will still produce the same amount d) There. is a shortage of the good on the market.

4 Section B [20 marks] Question One Suppose Kanu has N$13 to spend on bananas and apples. The price of Bananas is N$2 per kilogram, while the price of apples is N$1 per kilogram. The following table represents kanu's total utilities of bananas (TUB) and apples (TUA) respectively ' Use the information in the table above to answer the following True or False questions: 1) When spending his total income ofn$13 on bananas and apples, Kanu is in equilibrium if he buys 3 kilogram of bananas and 4 kilograms of apples. 2) When spending his total income ofn$13 on bananas and apples, Kanu is in equilibrium if he buys 2 kilogram of bananas and 3 kilograms of apples. 3) When spending his total income ofn$13 on bananas and apples Kanu is in equilibrium if he buys 4 kilograms of bananas and 5 kilograms of apples. 4) When spending his total income ofn$13 on bananas and apples Kanu is in equilibrium if he buys 5 kilogram of bananas and 5 kilograms of apples. 5) Kanu will be in equilibrium if his total utility is equal to 273 utils. 6) Kanu will be in equilibrium if his total utility is equal to 129 utils. 7) Kanu will be in equilibrium if his total utility is equal to 259 utils. 8) Kanu will be in equilibrium where his total utility is at a maximum, given the prices of bananas and apples and his available income. 9) A consumer is in equilibrium if his or her maginal utility is at a maximum. 1 0) A consumer is in equilibrium if the marginal utility per dollar is equal for all products he or she can afford to buy Section C [70 marks] Question One [30 marks] 1. An economist estimated that the cost function of Omaere product produced by Namibia Dairy is: C(Q) = Q + 30Q Q 3 Based on this information, determine: a. The fixed cost of producing 5 units of output. b. The variable cost of producing 5 units of output. c. The total cost of producing 5 units of output. d. The average fixed cost of producing 5 units of output. e. The average variable cost of producing 5 units of output. f. The marginal cost when Q = 5.

5 2. If the firm mentioned in question 2 (above) is price taker and has the following information; sells its Omaere brand for N$ a. Calculate its total revenue when the quantity is 5 b. Calculate the firm's profit level when the quantity is 5 Question Two [20 marks] 1. "Agricultural commodities have unique characteristics from industrial goods". Discuss the unique features of agricultural goods that make them distinctive from industry goods. [6 marks] 2. Give a detailed descrl_rtion of the functional approach to studying agricultural marketing. [8 marks] 3. What are the main challenges for land reform in Namibia? [8 marks] Question Three [10 marks] Consider a two good world (Maize meal HxセLI@ Mahangu meal (X 2 )) with prices P 1 = N$ 50.00, P 2 = N$60.00, and income I= N$ 1, a. Show the budget line equation for the above scenario and graph the budget line (call the first budget B 1 ). b. What levels of maize and mahangu flour will enable the consumer to be in equilibrium level of consumption, if you assume a 1 to 1 utility function (U= X 1 *X 2 )? You may show your answer graphically [7 marks] All the best