The shift in the SS curve to S’S’ is due to an imposition of a tax.
Which of the following areas in the diagram shows excess burden of the tax?
(a) ODIY
(b) SDA
(c) FGA
(d) CAD
Ans. (c)
2. Consider the following statements:
A. The number of firms is large both under perfect competition and monopolistic competition.
B. There is freedom of entry and exit in both perfect competition and monopolistic competition.
C. In both perfect competition and monopolistic competition, every firm is a price taker and quantity adjuster.
Which of the statements given above are correct?
(a) A, B and C
(b) B and C
(c) A and C
(d) A and B
Ans. (d)
3. Match List I (Market Type) with List-II (Implication) and select the correct answer using the codes given below the lists:
List-I List-II
(Market Type) (Implication)
A. Perfect competition 1. Collusion of firms
B. Monopoly 2. Excess capacity
C. Monopolistic competition 3. Uniform price
D. Oligopoly 4. Blocked entry
Code:
A B C D
(a) 2 4 3 1
(b) 3 1 2 4
(c) 2 1 3 4
(d) 3 4 2 1
Ans. (d)
4. In the Kinked Demand Curve Model, suppose MC curve shifts upward in the discontinuous range of MR curve.
Which one of the following is correct? At equilibrium,
(a) price rises but quantity remains the same
(b) price and quantity both remain the same
(c) quantify rises but price remains the same
(d) price and quantity both rise
Ans. (b)
5. Consider the following statements:
Short run profit is maximum under perfect competition when
A. second order condition is satisfied.
B. MC curve cuts MR curve from below.
C. MC curve cuts MR curve from above.
Which of the statements given above is/are correct?
(a) A and C
(b) A and B
(c) A only
(d) B only
Ans. (b)
6. Which of the following is not a necessary condition of perfect competition?
(a) Large number of firms in the industry producing homogeneous products
(b) Free entry and free exit of firms
(c) Need for incurring selling costs to attract consumers
(d) Absence of artificial restrictions by the government
Ans. (c)
7. Consider the following statements:
A. The shape of a unitary elastic demand curve is a rectangular hyperbola.
B. The shape of a perfectly elastic demand curve is a rectangular hyperbola.
C. Perfectly inelastic demand curve is parallel to the price axis.
D. Perfectly elastic demand curve is parallel to the quantity axis.
Which of the statements given above are correct?
(a) A and B
(b) A, C and D
(c) B and C
(d) B and D
Ans (b)
8. Which one of the following statements is correct?
A straight line demand curve (cutting both the axis) is elastic
(a) throughout the length of the demand curve
(b) at the mid-point
(c) below the mid-point towards the demand axis
(d) above the mid-point towards the price axis
Ans. (d)
9. Under perfect competition, supply curve is identified as which one of the following?
(a) Rising portion of marginal cost curve
(b) Rising portion of average total cost curve
(c) Rising portion of average variable cost curve
(d) Portion of marginal cost above the average variable cost curve
Ans. (d)
10. Which one of the following is the correct sequence of magnitude of minima in ascending order in marginal cost (MC) curve, average cost (AC) curve and average variable cost (AVC) curve?
(a) MC, AVC, AC
(b) AVC, AC, MC
(c) MC, AC. AVC
(d) AC, MC, AVC
Ans. (a)
11. Consider the following statements:
A. The vertical distance from average cost (AC) curve to average variable cost (%&VC) curve is average fixed cost (AEC).
B. AVC curve, AC curve and marginal cost (MC) curve are ‘U shaped.
C. AFC curve is horizontal to ‘X’ axis.
Which of the statements given above are correct?
(a) 1 and 2
(b) 2 and 3
(c) 1 and 3
(d) 1, 2 and 3
Ans. (a)
12. Short-run marginal cost of a firm does not contain any element of which of the following?
(a) Costs of raw materials
(b) Salaries of the managerial staff
(c) Wages of labour engaged on daily basis
(d) Cost of fuel for operating machines engaged in production.
Ans. (c)
13. Suppose a fisherman has a fishing net and a boat. He alone hunts fish in sea for which he has to pay no license fee etc. Fish, caught by him, will have which one of the following?
(a) Zero economic cost of production as he makes no out-of-pocket payment to anybody and is working of his own
(b) Negative economic cost of production because he enjoys fishing and has to make no payment
(c) Positive cost of production due to his sacrificing the opportunity of working elsewhere and renting out fishing net and boat etc
(d) Infinite cost of production
Ans. (a)
14. Income consumption line of the ‘Consumer Theory’ is analogous in ‘Production Theory’ to which one of the following?
(a) Expansion path
(b) Isoquant line
(c) Ridge line
(d) Isocost line
Ans. (a)
15. Which of the following is not correct in respect of Cobb-Douglas production function?
(a) It was originally based on the empirical study of US manufacturing industry.
(b) It is a linearly homogeneous production function, taking into account two factors, labour and capital, for the entire output of the manufacturing industry.
(c) It tells us that output depends upon labour and capital, and that part of output which cannot be explained by labour and capital, is attributed to the residual.
(d) It is based on the assumption of operation of law of diminishing returns.
Ans. (d)
16. Which one of the following statements is correct? If the elasticity of substitution between two factors X and Y be zero, then it implies that for a given change in outputs,
(a) X and Y will always change by the same proportion
(b)Y changes but X remains the same
(c) X changes but Y remains the same
(d) X and Y both change necessarily by different proportion
Ans. (a)
17. Consider the following statements:
According to the law of variable proportions; total product is maximum when
A. marginal product becomes zero.
B. marginal product curve cuts average product curve from above.
C. slope of marginal product curve is zero.
D. tangent of the total product curve is parallel to the horizontal axis.
Which of the statements given above are correct?
(a) A and D
(b) C and D
(c) A and C
(d) B and C
Ans. (c)
18. Assertion (A): The monopolist never operates on the portion of the demand curve which is inelastic. Reason (R) When elasticity of demand is less than unity MR is negative.
Ans (a)
19. Assertion (A): The Revealed Preference Hypothesis excludes the study of Giffin Paradox
Reason (R) Revealed Preference Hypothesis considers only negative income elasticity of demand whereas Giffin Paradox relates to positive elasticity of demand.
Ans. (c)
20. Assertion (A): Indifference curve for perfect substitute goods is a downward sloping straight line. Reason (R): For perfect substitute goods, MRS is falling.
Ans. (a)
21. Assertion (A): There is no excess capacity under monopolistic competition in the long run. Reason (R): The demand curve under monopolistic competition is downward sloping.
Ans. (d)
22. Assertion (A): M curve lies below the VMP curve under imperfect competition.
Reason (R): Under imperfect competition MR < P.
Ans. (a)
23. Which of the following statements about Pareto Optimum are correct?
A. It changes with changes in the distribution of income.
B. At the Pareto Optimum, MRS in consumption = MRT in production.
C. It is not unique.
D. It is obtained under imperfect competition.
Select the correct answer using the codes given below:
(a) A and B
(b) A, B and C
(c) A, C and D
(d) B and C
Ans. (b)
24. Match List- I (Economist) with List -II (Concept) and select the correct answer using the codes given below the lists:
List- I List -II
(Economist) (Concept)
A. Pareto 1. Compensation Principle
B. Hicks-Kaldor 2. Social Welfare Function
C. Bergson 3. Social Optimum
D. Scitovsky 4. Double Criterion Compensation
Code:
A B C D
(a) 3 1 2 4
(b) 2 4 3 1
(c) 3 4 2 1
(d) 2 1 3 4
Ans. (a)
25. Which one of the following statements is correct?
In a production process with two factors, land and labour, if the marginal productivity of land is negative, then it is in
(a) the stage I for land and stage II for labour
(b) the stage II for land and labour
(c) the stage I for land and stage III for labour
(d) the stage I for labour and stage III for land
Ans. (b)
26. Which one of the following statements is correct?
The Engel Curve for Giffen goods is
(a) positively sloped
(b) negatively sloped
(c) vertical
(d) horizontal
Ans. (b)
27. Which one of the following statements is correct? According to the classical economists, the existence of unemployment at any time is only of temporary nature and can be considered as
(a) structural unemployment
(b) cyclical unemployment
(c) frictional unemployment
(d) disguised unemployment
Ans. (c)
28. Which one of the following statements is correct?
Creeping inflation is a situation in which the rate at
which price level rises is:
(a) very high
(b) high
(c) moderately high
(d) slow
Ans. (d)
29. Which of the following groups are adversely affected by inflation?
A. Wage earners in the informal sector.
B. Profit earners.
C. Salary earners with salaries indexed to inflation
D. Pensioners with fixed pensions.
Select the correct answer using the codes given below:
(a) A and B
(b) C and D
(c) A and D
(d) B and C
Ans. (a)
30. Which one of the following is a qualitative credit control method?
(a) Open market operations
(b) Bank-rate
(c) Variable cash reserve ratio
(d) Moral suasion
Ans. (d)
31. What kind of change is to be made in (i) Cash reserve ratio, and (ii) Bank rate, to control inflation?
(a) (i) should increase but (ii) should decrease
(b) (ii) should increase but (ii) should decrease
(c) Both should increase
(d) Both should decrease
Ans. (c)
32. Which one of the following pairs is called an open market operation?
(a) Selling and buying of securities or bills by the central bank
(b) Selling and buying of foreign exchange
(c) Selling and buying of shares by the foreign institutional investors
(d) Selling and buying of gold in the open market by commercial banks
Ans. (a)
33. The money multiplier in an economy increases with which one of the following?
(a) Increase in the cash reserve ratio
(b) Increase in the statutory liquidity ratio
(c) Increase in the banking habit of the population
(d) Increase in the population of the country
Ans. (c)
34.
In the context of the figure above which of the following statements is/are correct?
A. Investment is autonomous.
B. Saving is autonomous.
C. Investment is dependent on income.
D Saving is dependent on income.
Select the correct answer using the codes given below:
(a) B and C
(b) A and D
(c) B only
(d) A only
Ans. (b)
35. consider the following consumption saving functions:
A. C = 200+0.8Y
B. S = 200+0.2Y
C. C = 150+0.8Y
D. S = -150+0.2Y
Which of the above are consistent pairs of functions?
(a) A and B
(b) A and D
(c) B and C
(d) C and D
Ans. (d)
36. There are 2 assets A and B in which one can invest his savings of Rs. 1,000/. Assume that there is no risk and interest rate is 10%.
Asset A gives a return of Rs. 100/- in perpetuity
Asset B gives Rs. 200/. at the end of year 1 and Rs. 900/- at-the end of the year 2.
Which one of the following statements is correct?
(a) Present value of A and B are the same.
(b) Present value of B is higher than that of A.
(c) Present value of A is higher than that of B.
(d) Information is inadequate to determine the present value of A and B
Ans. (c)
37. Which one of the following statements is correct?
Value of output and value-added can be distinguished if we know
(a) the value of intermediate inputs
(b) the value of net indirect taxes
(c) the value of imports
(d) the value of consumption of fixed capital
Ans. (a)
38. Given:
% Change in nominal GNP = 1.8
% change in population = 0.5
% change in price level = 1.3
What is the approximate percentage change in real per -capita GNP?
(a) Zero
(b) 0.5
(c) 1.0
(d) 1.3
Ans. (a)
39. Match List- I (Concept) with List -II (Economist) and select the correct answer using the codes given below the lists:
List I List II
(Concept) (Economist)
A. Liquidity trap 1. M. Friedman
B. Demonstration effect 2. A.C. Pigou
C. Permanent income hypothesis 3. J. Duesenberry
D. Wealth effect 4. J.M. Keynes
Code:
A B C D
(a) 4 3 1 2
(b) 1 2 4 3
(c) 4 2 1 3
(d) 1 3 4 2
Ans. (a)
40. Which one of the following statements is correct?
To derive disposable income from national income, one has to
(a) deduct income taxes and add transfer payments.
(b) deduct income taxes and deduct transfer payments
(c) add income taxes and add transfer payments
(d) add income taxes and deduct transfer payments
Ans. (a)
41. Approach paper to 11th five plan, issued by the Planning Commission refers to the merger of which one of the following pairs of government programmes?
(a) Sarva Shiksha Abhiyan with Mid-day Meal Programme
(b) Jawahar Rojgar Yojana with Mid-day Meal Programme
(c) Sarva Shiksha Abhiyan with National Rural Employment Guarantee Programme
(d) Shram Shakti Yojana with Jawahar Rojgar Yojana
Ans. (a)
42. Which one of the following statements is correct? J.M. Keynes assumed that supply of money as a function of rate of interest is
(a) perfect elastic
(b) highly elastic
(c) unitary elastic
(d) perfectly inelastic
Ans. (a)
43. Who developed the Time Preference Theory of interest?
(a) Irving Fisher
(b) N. Senior
(c) J.R. Hicks
(d) J.M. Keynes
Ans. (a)
44.
In the graph given above, what does the point B indicate?
(a) Excess supply in the goods market and excess demand in the money market
(b) Excess demand in the goods market and excess supply in the money market
(c) Excess supply in both goods and money market
(d) Excess demand in both goods and money market
Ans. (b)
45. Which one of the following is the most important determinant of speculative demand for money?
(a) Income
(b) Interest rate
(c) Profits
(d) Prices
Ans. (b)
46. Which one of the following equations was used by Fischer to exp the Quantity Theory of Money ?
(Symbols have their usual meanings)
(a) MV= PT
(b) MP = VT
(c) MP = PT
(d) PV = MT
Ans. (a)
47. If Y is the total money income of the community M is the money supply and P is the price level, than how is Vy (The income velocity of money) defined as?
(a) Vy = M/Y
(b) Vy = Y/M
(c) Vy = Y/ (MP)
(d) Vy = PY/M
Ans. (d)
48. When shall an increase in money supply have a small effect on nominal Gross Domestic Product?
(a) If the velocity is decreasing
(b) If the velocity is unchanged
(c) If the velocity is increasing
(d) If the Government spending is also increasing
Ans. (d)
49. There are a number of banks in a market. The initial total primary deposit is Rs. 1,000. Every bank is required to maintain a 10% reserve legally The transactions are completely made through cheque and no transaction is made in cash. W1{at will be the total credit creation in the market?
(a) Rs. 1,000
(b) Rs 5,000
(c) Rs. 10,000
(d) None of these
Ans. (c)
50. Which one of the following is a source of non-tax revenue for governments?
(a) Import duty on cars
(b) Octroi at cheek points on roads.
(c) Entrance fee to museums,
(d) Excise duty or beverages
Ans. (c)
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