Class Test on Micro Economics Essay

i) All questions in this section are compulsory ii) Marks for questions are indicated against each iii) Answers for very short answer questions carrying 1 mark must be answered in ONE sentence each iv) Answers for short answer questions carrying 3 marks each should not normally exceed 60 words v) Answers for short answer questions carrying 4 marks each should normally not exceed 70 words vi) Answers for long answer questions carrying 6 marks each should not normally exceed 100 words each. vii) Answers should be brief and to the point – The above word limits should be adhered to as far as possible. 1. Name the characteristic which make monopolistic competition different from perfect competition[1] 2. Why is demand for water inelastic?[1] 3. State one feature of oligopoly[1] 4. In which market form is the demand perfectly inelastic?[1] 5. Distinguish between increase in demand and increase in quantity demanded[3] 6. Goods X and Y are substitutes. Explain the effect of a fall in price of Y on the demand for X.[3] 7. At a price of Rs. 5 per unit of a commodity A, total revenue is Rs 800. When its price rises by 20%, total revenue increases by Rs. 400. Calculate its rice elasticity of demand[3] 8. Explain the implication of freedom to entry and exit of firms under perfect competition[3] 9. Given below is the cost schedule of a firm. Its average fixed cost is Rs 20 When it is producing 3 units. |Output |1 |2 |3 | |Average Variable cost (Rs.) |30 |28 |32 | Calculate its marginal cost and average total cost at each given level of output.[3] 10 Explain the features of â€Å"What to produce† OR Explain any two main features of centrally planned economy.[4] 12. When the price of a commodity falls by Rs. 2 per unit, its quantity demanded increases by 10 units. Its price elasticity is (-)1. Calculate its quantity demanded on its equilibrium price.[4] 13. Explain the effect of increase in income of buyers of a normal commodity on its equilibrium price.[4] 14. State whether the following statements are true or false: Give reasons for your answer (a) When total revenue is constant, average revenue will be constant. (b) Average variable cost can fall even when marginal product is rising (c) When marginal product falls, average product will also fall.[6] 15. Explain the law of variable proportions with the help of total and marginal product curves. [6] 16 Explain producers equilibrium with the help of a marginal cost and marginal revenue schedule [6]