ECU 402: Engineering Economics Second Semester Examination

Engineering economics paper for the bachelor of science engineering degrees, sat on Tuesday the twenty-sixth of January 2021 from eleven to one, question one compulsory at thirty marks and any two others at twenty. Question one explains with a diagram the effect of a rise in the price of sugar, after heavy rains destroyed processing plants in the sugar belt, on the production of ice cream; solves the equilibrium price and quantity of umbrellas from a supply and a demand function; decides with algebraic expressions whether the cross-price elasticity between sweet potatoes from Meru and yams from Kisii is positive or negative as substitutes; defines inflation, exchange rate and depreciation; derives marginal cost, average total, average fixed and average variable cost from a total cost function; separates net present value from the payback method of capital budgeting; gives two criticisms of the cardinal theory of consumer behaviour; and judges, on two sources of monopoly power, whether Kenya Power Limited is a monopoly. The other questions illustrate average fixed cost and marginal cost with labelled diagrams and derive marginal and average costs from a cost schedule; trace the effect of a depreciating shilling on Naivasha flower farmers exporting by air and on Gikomba traders importing merchandise from Shanghai, and what both do to the balance of payments; show graphically, as a movement along or a shift of the curve, the effect of flooded Ahero rice plantations, the fall in pay-as-you-earn on food consumption during the pandemic, a government fertiliser subsidy through the Agricultural Finance Corporation for majize farming, the mudslides that destroyed roads out of Elgeyo Marakwet, and the rising price of bread against sweet potatoes used for breakfast; discuss two causes of unemployment, compute a price from a demand function and a given price elasticity, give four causes of inflation with how each is prevented or mitigated, and compare two proposals that each return twenty thousand dollars over four years on an eighteen per cent discount rate by net present value; and take consumer equilibrium with a diagram, opportunity cost, ceteris paribus and the abnormal demand curve, a government rent ceiling on urban housing and its likely consequence, and straight-line depreciation of a building bought for twelve hundred thousand with a forty-year useful life and a salvage value of one hundred and twenty thousand.