A SAMPLE OF PAST YEAR QUESTIONS 1a. You are a producer of palm oil based cooking oil which is a normal goods and your best friend on the other hand is a producer of high suds detergent which is an inferior goods. Suppose that macroeconomic forecasters predict that the economy will be expanding in the near future. Using supply and demand analysis, how might you and your best friend use this information to production planning? (5 marks) b. The market for Malaysian made yogurt is in equilibrium. Recent health reports indicate that eating yogurt improves health but at the same time, the cost of making yogurt rises. Carefully analyze the probable effects on the market. (5 marks) c. Laser eye surgery to correct nearsightedness has been growing in popularity. Using a demand and supply model, discuss the effects on the price and quantity of laser eye surgeries performed if: i. The price of contact lenses declines ii. Surgical techniques improve to reduce the side effects of laser eye surgeries iii. More physicians complete training in laser eye surgery. (9 marks) d. Suppose that the marginal product of labor is: MP = 100 – L, where L is the number of workers hired. You can sell the product in the marketplace for RM50 per unit and the wage rate for labor is RM100. How many workers should you hire? (6 marks) 2. Ditney Werl Theme Park operates a one of the world’s famous theme park and hotel in Jinjang, Kuala Lumpur. The own price elasticity of demand for rooms at Ditney Werl Hotel is 3.5. The income elasticity of demand for rooms at Ditney Werl Hotel is 1.8. The cross-price elasticity of demand for rooms at Ditney Werl Hotel with respect to the price of airfare is -0.5. i. If Ditney Werl Theme Park raises its prices by 10 percent, what will be the percentage in occupancy of hotel rooms? (5 marks) ii.If an economic recovery increases incomes in the Malaysia by 4.2%, what will bethe percentage change in occupancy of hotel rooms? (5 marks) iii.If airline consolidation raises the price of airfare by 22%, what will be thepercentage change in occupancy of hotel rooms? (5 marks) iv. Clarify how profits are maximized and the optimal level of employment is achieved in a competitive labor market when the price of labor P L = MRP L . (10 marks) 3 a. At a recent board meeting, the president and CEO of Besi Curry Bhd got into a heated argument about whether or not to shut down the plant in Balakong. The president argued that the Balakong plant should continue to operate, at least until a buyer is found. The president’s argument was based on the fact that the Balakong plant’s fixed cost is RM68,000 per month. The CEO exploded over this point, castigating the president for considering fixed costs in making the shutdown decision.