ECOVISIONNAIRE PRACTICE PAPER - 1

Transcription

1 ECOVISIONNAIRE PRACTICE PAPER - 1 Q1. A country has 2 alternatives of production, either as 50X-100Y or 54X-98Y from the available resources. If the country chooses the second alternative, what is the marginal opportunity cost of producing X? (i) 3Y (ii) 4X (iii) 2Y (iv) 6Y Q2. Suppose there is a downward sloping straight line demand curve which is 8cm long touching both the axis. Then, price elasticity of demand at a point 4cm away on the demand curve is: (i) 2 (ii) 1 (iii) 0.5 (iv) cannot be determined Q3. Suppose price of a good goes up by 10% and the total expenditure also goes up by 20%. Then, price elasticity of demand of a consumer is: (i) >1 (ii) =1 (iii) <1 (iv) =0 Q4. Gross profit can also be denoted as : (a) TR (-) TC (ii) MR (-) MC (iii) TR (-) TFC (iv) TR (-) TVC Q5. Suppose the demand for meals at a medium-priced restaurant is elastic. If the management of the restaurant is considering raising prices, it can expect a relatively: (i) large fall in demand (iii) small fall in quantity (ii) small fall in quantity (iv) large fall in quantity demanded Q6. Explain the effects of the following on PPC: (a) Decrease in unemployment (b) Increase in the population of a country Q7. Explain the concept of marginal rate of substitution with the help of a schedule. 1 P a g e

2 Explain any two exceptions to the law of demand. Q8. Distinguish between decrease in demand and decrease in quantity demanded. Q9. Explain the relationships between marginal revenue and average revenue when a firm is able to sell more quantity of output (a) at the same price (b) only by lowering the price. Q10. Given Ed = -0.2 and percentage increase in quantity demanded =20%, find the percentage change in expenditure. If Ed =-0.4 in addition to ΔQ/Q =- 0.5, find new expenditure on the commodity of initial expenditure is 1,500. Q11. Explain why the minimum of AVC is at the level of output lower than that of AC. Q12. What are the conditions of consumer s equilibrium under utility analysis (two commodities)? A consumer consumes two good X and Y. The ratio of price of good X to that of Y is 2:1. Total money income of the consumer is 52 and price of good Y is 2. Find consumer s equilibrium. Units MU(X) TU(Y) Q13. Calculate the weekly TC and AVC from the following particulars: Number of workers employed Number of units produced per week Weekly wage of each worker Weekly rent of shed Raw materials used Power , (b) Show the relationship between MR and elasticity of demand with the help of a diagram. Are the following statement true or false? Give reasons: (i) Excess of marginal revenue over marginal cost is always better than equality between the two in order to achieve equilibrium for a producer. (ii) In the following case, producer s equilibrium is at output level 2. (iii) 2 P a g e Output MR TC Law of supply does not indicate the magnitude of change in quantity supplied of a commodity due to change in its price.

3 (iv) Fall in productivity of wheat due to a cyclone will lead to a downward movement along the same supply curve of wheat. Q14. Identify the market from the given features and also briefly explain the implications of each feature: 1. Homegeneity of goods 2. High degree of interdependence 3. Price-maker with constraints Q15. Due to the latest fashion changes, the demand of cotton shirts has suddenly increased and at the same time, price of cotton falls due to ride in the number of firms manufacturing cotton. How will this whole situation affect the equilibrium price and quantity of cotton shirts? Q16. In India, suppliers of money are the Section B (i) Government (iii) Both (a) and (b) (ii) Banking system (iv) None of these Q17. deficient demand leads to (a) full employment equilibrium (c) over employment equilibrium (b) underemployment equilibrium (d) None of these Q18. repayment of loan is a (a) capital expenditure (c) capital receipt (b) revenue receipt (d) revenue expenditure Q19. Flexible exchange rate is also known as (a) pegged exchange rate (c) both (a) and (b) (b) floating exchange rate (d) none of these Q20. A country s BOT is 500 crores. If the value of exports of goods is 650 crores, then the value of imports will be (i) 1,150 crores (ii) 500 crores (iii) 150 crores (iv) none of these Q21. Demand for domestic goods and domestic demand for goods are always equal. Defend or refute. 3 P a g e

4 Q22. With the given information, answer the following questions: Earlier, 1$= 60 and now, 1$ = 65. (i) (ii) What does the above indicate? Some economists say that the reason behind this is change in the balance of payments. Do you agree?) Q23. In an economy only the following transactions take place: Firm A sells all of its products worth 4,000 to firm B. Firm B sells its entire output for 8,000 to firm C. Firm C sells its goods fro a final demand at 14,000. Calculate: (a) The value added by each firm. (b) Indirect tax of 20% is levied on A s product. This burden of tax is shifted on to the consumers. Find market price of the good for each firm. Distinguish between private income and national income. Q24. How is exchange rate determined in the foreign exchange market? Explain. Q25. If national income is 90 and consumption expenditure is 81, find out the average propensity to save. When income rises to 100 and consumption to 88, what will be the marginal propensity to consume and the marginal propensity to save? From the following information, calculate consumption level in the economy. ( in crores) 1. Wages and salaries Autonomous consumption MPS : MPC 29:87 4. Dividend Net factor income from abroad Mixed income Rent, interest and profit 350 Q26. From the following data, find: (a) Primary deficit (b) Revenue deficit 4 P a g e ( In crores) Capital receipts net of borrowing 950 Salary paid to government employees 1,000 Interest payments 100 Goods & service tax 500 Purchase of machinery by the government 1,110

5 Wealth tax 300 Q27. Giving reasons, state whether the following statement are true false : (i) If the ratio of marginal propensity to consume and marginal propensity to save is 4:1, the value of investment multiplier will be 4. (ii) The value of marginal propensity to save can never be negative. (iii) Sum of average propensity to consume and marginal propensity to consume is always equal to 1. (iv) When marginal propensity to consume is grater than marginal propensity to save, then the value of multiplier will be greater than 5. Q28. Explain the problem of double counting in estimating national income with the help of an example. Also explain two alternative ways of avoiding the problem. Q29. Explain the process of money creation by commercial banks with the help of a numerical example. Take LRR as 25%. Q30. Form the given information, calculate national debt interest: ( in crores) (i) Royalty 450 (ii) Surplus of the government sector 250 (iii) Subsidy 100 (iv) Mixed income of the self-employed 270 (v) Net current transfers from ROW 150 (vi) Rent 120 (vii) Current transfers to the government (-)50 (viii) Wages In kind 330 (ix) Net factor income to aboard 110 (x) Private income 1,590 (xi) Contribution to the provident fund scheme 500 (40% by employee) (xii) Profit and interest P a g e