Economics

MACHAKOS UNIVERSITY
University Examinations for 2017/2018 Academic Year
SCHOOL OF BUSINESS AND ECONOMICS

DEPARTMENT OF ECONOMICS
FOURTH YEAR FIRST SEMESTER EXAMINATION FOR
BACHELOR OF SCIENCE IN ELECTRICAL AND ELECTRONICS
ECU 402: ENGINEERING ECONOMICS
DATE: 15/12/2017 TIME: 8:30 – 10:30 AM

INSTRUCTIONS
1) Answer question one and any other two questions
2) Question one is compulsory and carries 30 marks
3) All other questions carry 20 marks each
QUESTION ONE (30 MARKS)
A production manager in a fertilizer manufacturing company has estimated the demand and cost
function as follows:
Q = 30-P
FC =250 -
A VC = 20 + 40Q - 0.5Q2
Where Q is output, P is price, FC is fixed cost and AVC is Average
Variable Costs
Examination Irregularity is punishable by expulsion Page 1 of 3

Required:
i) Compute the level of output at which the firm breaks even. (10 marks)
ii) Compute the level of output that maximizes profit for the firm (10 marks)
b) Explain the rationale for government regulation policies in the markets. (10 marks
QUESTION TWO (20 MARKS)
a) Decision making process in any organization follows various elements starting from
identifying the objectives of the organization up to the implementation of the decision.
Assume that you are the project manager of a project that you have been allocated by the
county government. Discuss the various elements of decision making in light of the
specific project. (10 marks)
b) The law of diminishing returns IS applicable in profit making organizations in
determining the amount of a variable input to employ. State the law and use an
appropriate diagram(s) to illustrate and explain the profit maximizing amount of a
variable input that a firm chooses to employ.
QUESTION THREE (20 MARKS)
A In a free enterprise system, economic profits play an important role in guiding the decisions
made by the thousands of competing independent economic units. There are different theories
that guide the expected profits from a firm. Assume that you are a manager to one of the hotels in
the java franchise coffee shops in Sudan where incomes are growing and the shop is the only
high end coffee shop in the area.
a) Discuss two theories of profit that would guide in the prediction of profits for that center.
You must give appropriate justification for each theory: (8 marks)
b) The total cost function for a firm in a perfectly competitive market IS given by the
equation:
TC = Q3 - 24Q2 + 600Q where TC = total cost in Kshs and Q is quantity.

i) Compute the cost and output level at which the firm maximize profit in the long-
run? (7 marks)
ii) Use a diagram to illustrate the profit maximizing price' and output for the firm.
In the long run (5 marks)
QUESTION FOUR (20 MARKS)
a) Distinguish between consumer clinics and market experiments methods of estimating
demand in the market. Out of the two methods, justify the best method for forecasting
demand for a new type of cooking oil in the market. (9 marks)
b) Define price discrimination. Explain factors that make it possible to discriminate [prices
for any firm (6 marks)
c) Briefly explain two government policies against monopolies (5 marks)
QUESTION FIVE (20 MARKS)
a) Dealing with different currencies or operating in various economies poses some threat to
the firm. Exchange rate volatility can translate into heavy losses if there are adverse
exchange rate changes between the date of the transaction and the date of the actual
receipt or payment. Discuss three methods of foreign exchange risk management.
(6 marks)
b) Describe four economies of scale that a firm is likely to expenses as a result of expansion.
(6 marks)
c) Macroeconomics is significant in informing managerial decisions. Giving an example of
a profit maximizing firm, that produces steel for an international market; provide the
rationale for integrating macroeconomics concepts in managerial economics. (8 marks)

MACHAKOS UNIVERSITY

FOURTH YEAR SECOND SEMESTER EXAMINATION FOR
BACHELOR OF SCIENCE (ELECTRICAL AND ELECTRONICS ENGINEERING)
BACHELOR OF SCIENCE (CIVIL ENGINEERING)
DATE: 14/5/2019 TIME: 8.30-10.30 AM
INSTRUCTIONS
Answer question ONE and any other two questions
QUESTION ONE (COMPULSORY) (30 MARKS)

a) Outline the fundamental principles of engineering economy (7 marks)
b) List the elements of engineering economics analysis procedure (7 marks)
c) Distinguish between the following pairs:
i) Fixed cost and variable cost (2 marks)
ii) Cash cost and book cost (2 marks)
iii) Sunk cost and opportunity cost (2 marks)
d) Contrast and compare present worth (PW) and internal rate of return (IRR) as methods
of evaluating engineering projects for investment. (10 marks)

a) Optimizing a design with respect to cost is a four-step process. Outline the steps.
(7 marks)

b) Mrs. Mwangi will need KES 1,500,000 in five years to pay for a major overhaul on her
tractor engine. She has found an investment that will provide a 7% return on her invested
funds. How much does Betty need to invest today so she will have her overhaul funds in
five years? (5 marks)
c) Enumerate various situations in which engineering economics can play a role. (8 marks)

a) Discuss the different methods used to evaluate alternative projects. (10 marks)
b) A cell phone company has a fixed cost of $1,500,000 per month and a variable cost of
$20 per month per subscriber. The company charges $39.95 per month to its cell phone
customers.
i) What is the breakeven point for this company? (3 marks)
ii) The company currently has 73,000 subscribers and proposes to raise its monthly
fees to $49.95 to cover add-on features such as text messaging , song downloads,
game playing and video watching. What is the new breakeven point if the variable
cost increases to $25 per customer per month? (3 marks)
iii) If 10,000 subscribers will drop their service because of the monthly fee increase
in Part (b), will the company still be profitable? (4 marks)

Assume a project costs shs 30,000 and yields the following uncertain cash flows:
Year Cash flow
1 12,000
2 14,000
3 10,000
4 6,000
Assume also that the certainty equivalent co-efficient have been estimated as follows
a0 = 1.00
a1 = 0.90
a2 = 0.70
a3 = 0.50
a4 = 0.30

The risk-free discount rate is given as 10%
Required:
Compute the NPV of the project

a) Given that i = 10% Show that
FVIFANDi,4 = [ FVIFi,3 + FVIFi,2 + FVIFi,1 + FVIFi,0] (1+i) without using tables.
(10 marks)
b) When valuing a firm, it’s important to describe the business entity under consideration.
Discuss the three important aspects that help describe a business entity (10 marks)

MACHAKOS UNIVERSITY
University Examination 2018/2019
SCHOOL OF ENGINEERING AND TECHNOLOGY
DEPARTMENT OF BUILDING AND CIVIL ENGINEERING
FOURTH YEAR SPECIAL/SUPPLEMENTARY EXAMINATION FOR
BACHELOR OF SCIENCE IN CIVIL ENGINEERING
DATE: 1/8/2019 TIME: 8.30-10.30 AM

INSTRUCTIONS

a) Optimizing a design with respect to cost is a four-step process. Outline the steps. (7 marks)
b) Mrs. Mwangi will need KES 1,500,000 in five years to pay for a major overhaul on her
tractor engine. She has found an investment that will provide a 7% return on her invested
funds. How much does Betty need to invest today so she will have her overhaul funds in five
years? (5 marks)
c) Enumerate various situations in which engineering economics can play a role. (8 marks)
d) A friend of yours bought a small apartment building for $100,000 in a college town. She
spent $10,000 of her own money for the building and obtained a mortgage from a local bank
for the remaining $90,000. The annual mortgage payment to the bank is $10,500. Your friend
also expects that annual maintenance on the building and grounds will be $15,000. There are
four apartments (two bedrooms each) in the building that can each be rented for $360 per
month.

Required:
i) Does your friend have a problem? If so, what is it? (2 marks)
ii) What are her alternatives? (Identify at least three.) (3 marks)
iii) Estimate the economic consequences and other required data for the alternatives in
Part(b) (5 marks)

b) A cell phone company has a fixed cost of $1,500,000 per month and a variable cost of $20
per month per subscriber. The company charges $39.95 per month to its cell phone
customers.
ii) The company currently has 73,000 subscribers and proposes to raise its monthly fees
to $49.95 to cover add-on features such as text messaging , song downloads, game
playing and video watching. What is the new breakeven point if the variable cost
increases to $25 per customer per month? (3 marks)
iii) If 10,000 subscribers will drop their service because of the monthly fee increase in
Part (b), will the company still be profitable? (4 marks)

Assume a project costs shs 30,000 and yields the following uncertain cashflows:
Year Cash flow
1 12,000
2 14,000
3 10,000
4 6,000
Assume also that the certainty equivalent co-efficients have been estimated as follows
a0 = 1.00
a1 = 0.90
a2 = 0.70
a3 = 0.50
a4 = 0.30

Required:

a) The following data has been developed for Crown Company, the manufacturer of an
advanced line of adhesive:
State of nature Probability Market Return Return for the firm
Rm Rj
1 0.1 -0.15 -0.30
2 0.3 0.05 0.00
3 0.4 0.15 0.20
4 0.2 0.20 0.50
The risk free rate is 6%. Find:

i) The expected market return E(Rm) (3 marks)
ii) The variance of the market return Ϭ2 (Rm) (3 marks)
iii) The expected return for Crown Company E (R1) (3 marks)
iv) Given that cov (Rj, Rm)= 0.0215, find Bj (3 marks)
v) Using the above information state the CAPM (3 marks)
vi) What is required for Crown Company? How does it compare with its expected
return? (3 marks)
b) Clearly distinguish between ordinary annuity and annuity due (2 marks)

FVIFANDi,4 = [ FVIFi,3 + FVIFi,2 + FVIFi,1 + FVIFi,0] (1+i) without using tables. (10 marks)

MACHAKOS UNIVERSITY
BACHELOR OF SCIENCE IN ENGINEERING AND ELECTRICAL ENGINEERING
DATE: TIME:
INSTRUCTIONS:

a) Outline the fundamental principles of engineering economy (7 marks)
b) Graphically represent how to determine optimal bundles for goods and services
for a rational consumer. (7 marks)
c) Distinguish between the following pairs:
i. Fixed cost and variable cost. (2 marks)
ii. Cash cost and book cost. (2 marks)
iii. Sunk cost and opportunity cost. (2 marks)
d) Contrast and compare present worth (PW) and internal rate of return (IRR) as methods of
evaluating engineering projects for investment. (10 marks)
a) If you were in charge of a large multinational firm, under what conditions would you build
or operate a manufacturing facility in an underdeveloped country? Explain in details (4
marks)

b) Discuss in detail the legal and political foundation of Global Business management (4
marks)
c) Explain how expanding globally allows firms to increase its profitability (4 marks)
d) There are two alternatives to perform a job as follows;
A B
Initial cost 15000 25000
Salvage value 2500 5000
Service life 4 6
Annual operating and maintenance 3000 1500
Minimum rate of return is 15% before taxes.
a) Which do you recommend using equivalent uniform annual cost? (2 marks)
b) At what salvage value for A are two alternatives equal? (2 marks)
c) At what maintenance and operating cost per year for B are the two equal? (2 marks)
d) At what service life for B are the two alternatives equal? (2 marks)

customers.
ii) The company currently has 73,000 subscribers and proposes to raise its monthly fees
to $49.95 to cover add-on features such as text messaging, song downloads, game
playing and video watching. What is the new breakeven point if the variable cost
increases to $25 per customer per month? (3 marks)
iii) If 10,000 subscribers will drop their service because of the monthly fee increase in
Part (b), will the company still be profitable? (4 marks)

Assume a project costs shs 30,000 and yields the following uncertain cash flows:
Year Cash flow

1 12,000
2 14,000
3 10,000
4 6,000
Assume also that the certainty equivalent co-efficient have been estimated as follows
a0 = 1.00
a1 = 0.90
a2 = 0.70
a3 = 0.50
a4 = 0.30
Required:

FVIFANDi,4 = [ FVIFi,3 + FVIFi,2 + FVIFi,1 + FVIFi,0] (1+i) without using tables.
(10 marks)

MACHAKOS UNIVERSITY
BACHELOR OF SCIENCE (ELECTRICAL AND ELECTRONICS ENGINEERING)
DATE: 16/12/2021 TIME: 8.30-10.30 AM
INSTRUCTIONS:
(i) Answer question ONE and any other two questions
(ii) Show ALL your workings clearly
QUESTION ONE (COMPULSORY) (30 MARKS)

a) Discuss the following concepts as used in Economics (Use well labeled diagrams where
necessary):
i) Benefit Cost Ratio (2 marks)
ii) Marginal Rate of Substitution (2 marks)
iii) Net Present Value (2 marks)
iv) Average Cost (2 marks)
v) Returns to Scale (2 marks)
b) The county government of Machakos is very serious about drugs. Possession of drugs is
illegal and is severely penalized. However, a black market exists which the county
government has failed to dismantle despite serious attempts. The county’s health minister is
worried about the situation. In early 2018, a consultant working with health ministry
suggested that the government should increase the price of a pack of cigarettes from Kshs
200 to Ksh 600. A survey conducted in December 2018 suggested that over the year, the
quantity demanded of marijuana decreased from 2000 kgs per day to just 800kgs.
Calculate the cross-price elasticity of demand and discuss why the policy has proved so
effective. (5 marks)

c) Discuss any two methods that can be used to calculate depreciation. For each method,
highlight one advantage and limitation of using the said method. (5 marks)
d) Discuss four monetary tools that the Central authorities can use to control inflation in a
Country. (5 marks)
e) Explain any two determinants of elasticity of demand. (5 marks)
a) An investment has infinite life and makes annual payments of $3000 for the first 5 years and
$ 1600 per year thereafter. Using 6% interest per annum, compute the present worth of the
annual disbursements. (10 marks)
b) An asset is purchased for $100,000. The estimated life is 7 years and the salvage value is
$15,000. Assuming the item is depreciated via straight-line method; find the book value of
the asset at the end of 3 years. (10 marks)
a) The following data has been developed for Crown Company, the manufacturer of an
advanced line of adhesive:
State of nature Probability Market Return Return for the firm
Rm Rj
1 0.1 -0.15 -0.30
2 0.3 0.05 0.00
3 0.4 0.15 0.20
4 0.2 0.20 0.50
The risk-free rate is 6%. Find:
i) The expected market return E(Rm) (3 marks)
ii) The variance of the market return Ϭ2 (Rm) (3 marks)
iii) The expected return for Crown Company E (R1) (3 marks)
iv) Given that cov (Rj, Rm)= 0.0215, find Bj (3 marks)
v) Using the above information state the CAPM (3 marks)
vi) What is required for Crown Company? How does it compare with its expected
return? (3 marks)

b) Clearly distinguish between ordinary annuity and annuity due (2 marks)

a) Interest on a debt is 12% per year compounded monthly. Compute the effective annual
interest rate. (5 marks)
b) If a one-time amount of $500 is invested at an annual interest rate of 8% (compounded
annually), find its future worth at the end of 30 years. (5 marks)
c) A new sander costs $3,600 and has an annual maintenance cost of $400. The salvage value
after 7 years is $600. Assuming an annual interest rate of 10%, what is the present worth?
(5 marks)
d) A solar heating system costs $10,000, has an estimated life of 10 years and a scrap value of
$1500. Assuming no inflation and an interest rate of 4%, what uniform annual amount must
be invested at the end of each of the 10 years in order to replace the machine? (5 marks)
customers.
ii) The company currently has 73,000 subscribers and proposes to raise its monthly fees to
$49.95 to cover add-on features such as text messaging, song downloads, game playing
and video watching. What is the new breakeven point if the variable cost increases to $25
per customer per month? (3 marks)
iii) If 10,000 subscribers will drop their service because of the monthly fee increase in Part
(b), will the company still be profitable? (4 marks)

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MACHAKOS UNIVERSITY

University Examinations for 2017/2018 Academic Year

SCHOOL OF BUSINESS AND ECONOMICS

BACHELOR OF SCIENCE IN ELECTRICAL AND ELECTRONICS

ECU 402: ENGINEERING ECONOMICS

DATE: 15/12/2017 TIME: 8:30 – 10:30 AM

1) Answer question one and any other two questions

2) Question one is compulsory and carries 30 marks

3) All other questions carry 20 marks each

QUESTION ONE (30 MARKS)

Where Q is output, P is price, FC is fixed cost and AVC is Average

Examination Irregularity is punishable by expulsion Page 1 of 3

QUESTION TWO (20 MARKS)

identifying the objectives of the organization up to the implementation of the decision.

specific project. (10 marks)

b) The law of diminishing returns IS applicable in profit making organizations in

appropriate diagram(s) to illustrate and explain the profit maximizing amount of a

variable input that a firm chooses to employ.

QUESTION THREE (20 MARKS)

high end coffee shop in the area.

You must give appropriate justification for each theory: (8 marks)

TC = Q3 - 24Q2 + 600Q where TC = total cost in Kshs and Q is quantity.

Examination Irregularity is punishable by expulsion Page 2 of 3

In the long run (5 marks)

QUESTION FOUR (20 MARKS)

a) Distinguish between consumer clinics and market experiments methods of estimating

demand for a new type of cooking oil in the market. (9 marks)

for any firm (6 marks)

c) Briefly explain two government policies against monopolies (5 marks)

QUESTION FIVE (20 MARKS)

rationale for integrating macroeconomics concepts in managerial economics. (8 marks)

Examination Irregularity is punishable by expulsion Page 3 of 3

SCHOOL OF BUSINESS AND ECONOMICS

DATE: 14/5/2019 TIME: 8.30-10.30 AM

QUESTION ONE (COMPULSORY) (30 MARKS)

QUESTION TWO (20 MARKS)

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QUESTION THREE (20 MARKS)

QUESTION FOUR (20 MARKS)

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QUESTION FIVE (20 MARKS)

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DATE: 1/8/2019 TIME: 8.30-10.30 AM

QUESTION ONE (30 MARKS)

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QUESTION TWO (20 MARKS)

QUESTION THREE (20 MARKS)

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QUESTION FOUR (20 MARKS)

The risk free rate is 6%. Find:

QUESTION FIVE (20 MARKS)

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QUESTION ONE (30 MARKS)

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QUESTION THREE (20 MARKS)

QUESTION FOUR (20 MARKS)

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QUESTION FIVE (20 MARKS)

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(ii) Show ALL your workings clearly