Model Question Paper

ECONOMICS
HSE II Max. Marks: 80 1. Find the odd man out. Justify your answer. Cool off Time : 15 minutes Time : 2 hrs. (5)

a. Micro economics, Price theory, Allocation of resources, Macro economics. b. Income of the consumer, Price of the commodity, Tastes and preferences, Gross domestic product. c. Bank rate, open market operation, Taxation, Reserve ratio. d. Note issue, Bankers Bank, Controller of credit, Accepting deposits. e. Single seller, Control over supply, Price maker, Selling costs. 2. Categorise the following into Micro and Macro economics. (3)

Study of a firm,General price level, Gross domestic savings, Price of gold, Total employment, Income of a family.. 3. Draw a production possibility curve for the following schedule. Combinations A B C D E F Amount of good X (in thousands) 0 1 2 3 4 5 Amount of good Y (in hundreds) 15 14 12 9 5 0 (3)

4. Raman has a budget of Rs. 60. He wants to buy two goods x and y with his income. The price of x and y are Rs. 5 and Rs. 6 respectively. (4) (a) (b) (c) (d) Write the equation of Ramans budget line. How many units of x can he buy if he spends his entire income on x? How many units of y can he buy if he spends his entire income on y? Calculate the slope of the budget line.

5. Suppose the price elasticity of demand for a good is 0.2. If there is a 5% increase in the price of the good, by what percentage will the demand for the good go down. (2)

6. Data regarding the production and cost schedule of a firm are given below: Output 0 1 2 3 4 5 6 TC 100 125 140 145 160 200 260 (8)

If TFC is 100 calculate TVC,AFC,AVC,AC and MC. Draw diagram.

7. Demand and supply functions of commodity x are given as follows: d q = 500 P s q = 300 + P Find the equilibrium price and quantity. Due to increase in the cost of production of x the supply function changes to qS = 200 + P. Find the new equilibrium price and quantity. (3) 8. Complete the table. a) b) c) d) e) NVAMP = Value added = Net indirect tax = Personal disposable income= Net investment = A Monopolistic competition Perfect competition Oligopoly B Large number of firms A few firms Fairly large number of firms __________ __________ __________ __________ __________ Depreciation intermediate good Subsidies Personal taxes Depreciation C Homogeneous product Homogeneous or differentiated product Differentiated product

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9. Match column A with B and C.

10. BEL company Ltd. has increased all of its factors by 10% and its output increased by 13%. Identify in what stage company operates. (1) 11. Draw circular flow of income and expenditure in a simple two sector economy.(3) 12. Prepare a seminar report on the functions of RBI. (8) 13. Distinguish between open economy multiplier and closed economy multiplier. If c = 0.8 and m=0.3, calculate both open and closed economy multiplier. If investment increases by 100 what will be the impact on income in a closed economy? (5)

14. Correct the following statements if necessary. a) Liquidity trap is the situation in which speculative demand for money perfectly inelastic. b) The profit level that is just sufficient to cover the explicit cost and opportunity cost is super normal profit. (2) 15. C = 100+0.7Y, I = 50. Find the equilibrium level of income. If mpc changes to 0.5, what happens to the equilibrium income. (3) 16. An economy is experiencing very high revenue and fiscal deficits. In this context, the government announces big increase in subsidies. From the point of view of fiscal discipline, how will you assess this. (3) 17. A firm earns a revenue of Rs. 50 when the market price of a good is Rs. 10. The market price increases to Rs. 15 and the firm now earns a revenue of Rs. 150. What is the price elasticity of the firms supply curve. (3) 18. Provide appropriate term. a) Upper limit on the price of a good imposed by the government. b) Two sellers in a market. c) Minimum limit on the price of a good imposed by the government. d) Ratio of foreign currency to domestic currency. 19. An open economy functions are given as follows: C = 40 + 0.8Y, T = 50, I = 60, G = 40, X = 90, M = 50 + 0.05Y. Calculate the equilibrium level of income and net export balance.

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20. Compare the effect of the following statements on quantity demanded of apples. Draw diagrams. a) Income of the consumer increased from Rs. 500 to Rs. 800. b) Price of apple increased from Rs. 20 to Rs.30 per kg. (3) 21. Classify the following into visibles and invisibles: Machinery, Shipping services, Textiles, Wheat, Banking services, Insurance services. (3) 22. Find out the maximum possible output for a firm with zero unit of L and 10 units of K when its production function is Q = 5L + 2K (2)

Prepared by P.C. Beena, St. Johns HSS, Mattom, Mavelikara Cluster