P A R T I : O n c ' m a r kq u c s t i < t n s

I n s tr t tc ti o n s :
checkthatthe
. Irirstchcckthatthisbooklethaspagesnumber;d1 drrough2'f i\lso
p a g c st o t h ea t t e n t i oonf t h e
b 0 1 l o tonf c v c r YP a g ci s m a r k c dA i O f . B r i n ga n ym i s s i n g
rrr igillttttl'.

. 'l'lris s f 2 0 r n t r l t i p l e ' - c l r o itcl tci c s t i 0 t t s[ 'i l t c l tc l t t c s t i o t t

p l r r .0t l . t l r cc x l t r t t i l t l t t i r ct t0' rt l s i s t o
is c.t'tctt l'tlicntc thccol-rcct
i s t i r l i o r v c rLl r yf o L r rp o s s i b l ca l l s w c r so, n e o f w 5 i c 5
a n s w c ro n t h c b u b b l e - s h e cN t ' O T o n t h i sb o o k l e t '

u'ill lose1/3 mark for each

. Eaclrcorrcctchoicewill earnyou 1 mark.Horvcver,r'ott rvill o l l l l ( ) l ( 'l l t l t t l t r l l c h t t l r l r l c 'v o t r
i n c o t ' t ' t ' c l c l t t l i c c . I l ' \ ' t . l t ts l t l t t l c t t t l t t c o f t l r c t r t r h t l l c s
gct 0 for thatqtrcstion.

. o o dl u c k .
Y o u r n l t vb c g i t tn o r v G

tJ=2x+)'tvhcre'r and1'a.retwo
I Considera consumerhavinga utility function
R s .5 c a c ha n dt h e
c o n r m o d i t i cSsu. p p o stch a t i h cp r i c eo f x ^ n d y a r eb o t h
incomeis Rs, 1C0.In equiiibrium, theconsuiner rvill consumethebundle
conslrmcr's
( a )( 1 0 . 1 0 )
(b)(0.20)
( c )( 2 0 , 0 )
( d ) n o n eo f t h c a b o v c

x
of r on the horizontalaxis,the Engeicurvefor commodity
2. With qr.rantity
corlcsponding to theutility functionlf,=y+flx)will be
(a) a raYthroughthe origin
(b) a verticalline
(c) a horizontalline
(d) a curvewith an inflexionPoint

3. Suppose hasa fixed coefficienttechnologyQ=Min(2K' 3L)' rvhereQ is

a Producer
outpLrtandK andL areth.einputs,At equilibrium
(a) K=L
. (b) K=(312)L
(c) K=(2/3)l-
( t l ) K r t t t l L i r r c itrrlctct'tttittntc

is
4. A rnonopolist will neverproducea quantityrvherethepriccelasticityof demand
i r t c l l r s lbi c c a t t s c :
( a ) P > M C i n s u c ha c a s e
(b) MR > MC in sucha case
(c) MR < 0 in sucha case
(dl P<ATCinsuchacase

ASOl
 wasoriginally5F + 10 c =
5, In the figurebelog'g,henthebudgetline (drawnin bold)
Iinesi i ) Irtd
200,Anita purchased 30 unitsof F and5 unitsof C' At two later dates'
in all threeinstances'As a
(2) were the UuOletlines, Anita had the samepreferences
which ma-rket baskets mighi shehavepurchased at the laterdlrtes?
rationalconsumer,
(a) A, B
(b) A, D
( c ) I J ,c
(d)c, I)

(C)
Clorhing,

originalbudgetIine

d | / r \

f ooa(t')

6 Nr\lllLI inrplics
( ; . r t)l r c t t t t c t t t p l t r Y t t l crlillt( ci s z c r o
(b) intlation is corlstalll
is constant
i. j ttt. ratcof growthof rcalCDP
(d)noneof theabove
ltttopctt
capitlrlrllobilify a l d f i x c d c x c l r a t t g cr l t t c s '
7 . I p u g ( ) p c r t g g 1 1 1 1 9 1 ) l ) ' r v li ltcI t ' [ c c t
r n u ' k c t o P c t ' a t i o r tr v i l l
rate
(a) increaseoulPLIlandreduceinterest
(b) incrcasethe rttoneY suPPlY
(c) iolver the tradedeficit
of the monetarybase
ioi .r,'*g, the composition
the interestratewill
8 . If a personis a borrotver'a rise'in
(a) alwaYsreducebonowng

ASOl
 (b) alwaysincrease bonowing
of incomeand
(c) could increasebonolvingdependingon therelativestrengths
substitutioneffects.
(cl)noncof thc abovc.

of thc exchangerate on the

appreciation
.q Thc .I-cttrvesuggeststhat the effect of an
t r i t t l cb r l a n c ci s t o :
(a) irnProveit in the short tun
(b) worsen it in the short run
(c) leave it unchanged
(d) imProve it in the long run'

classical
10.lJnclcr a fiscalexpansion
supplyconclitions,
(a)onlyraisestheprice leveland rate
theinterest
(b)cxpanclssupplyatconstant prices
(c)cxpanclssuppiyat prices
rising
iO)t.ou.t bothiupplyandpricelevelunchanged

9 t d e n o t e s t h e s erteoaf l
l l . C o n s i d e r t h e f o l l o r v i n g f u n c t fi ro-n+sg/t:, r v h e r e
numbers. Whichof tirefollorvin-q functions is quasi-convex?
( a )/ ( r )= . t2
(b),(r) = cos'r
( c ) / ( - t )= c - *
( d ) / ( . r '=) r ' ' i l . t l 0 ; / ( . t ) = 0 i f ' r = 0

r annx n matrixA with realentries.If matrixB is clcrivedby addingthefirst

12.Considc
columnof A to theiastcolumnof A, then
( a )d c tA < d c tB
( b ) d e t A > d e tB
(c) tlct 11= <lctB
(rlj the signof detA is the oppositeof the signof det B

(i.e.,.r> y implics,(,r)1.lLr'))irntltli('fcrcntinblc
strictly<.lccrensing
l.i. C_-.'sirlcr.a
Denotcthe derivativeof /
iun.iion1: 9l -r gt , where9t dinotesthe setoi real numbers.
irt.r e fr by D.llx).Which of thc followingmay be trueabout/
(a) D(.r-)> 0 for somex e !t
' '
1 l r )/ ) / ( r ) ( ) l i r l s o t t t c . rr' ' 9 i
( t / ) / ( r ) . . 0 l i l t c v c t ' v . t r , , ( r t . l ' ) r v l t c t ' cr l < / r
t c l ) 1 ) / ( . r )> 0 f o r c v c r Y ; e 9 i

14.If thestatement.,There existsa legislature andaparty suchthateverylegislatorin

statemcnts mustbe true?
thatpartypaysraxes"is false,thenwhich of the foliowing
(a) In cvery legislatureandeveryparty,all legislatorsdo not Pa),taxes.
( h )' l ' l r c l cc x i s t sa l c g i s l a t u rscr r Ctl h r a tc v c r yl c g i s l a t oi rn c v c r Yp a r t yd o c sn o t p a y
taxcs.
r v l t oc l o c s
( c ) l r rc v c r yl c g i s l l l t t r ct ,l t c r cc x i s t sn p f l r t yn n cal l c g i s l n t oi l l t h n tp n r t y

ASOl
 notpaytuxcs. . _, ^ who docsllot Pay
anrieverypalty,tliereexistsa legislator
(d) In everylegislaturc
taxes.
o sf d e g | c cl ' t i l c r t
e n dh o m o g e n e o u
c o n c a va
1 5 . I f l : 9 i " - + ! l i s t r v i c ed r f l b r e n t i a b l e ,
i xl ' / i s
t h cI l c s s i l r trtl t i t t t ' o
( a . rt r c g l t i vtcl c It t r l l c
(b)Positive del'initc
(r') sirtl"trlltt
1 i l) t t t l t t - . r t t l q Ir'tr t
arestlbjectinq t'r
16,Consideran expcrinrenr in whichfive fibershavingdifferentlengths
The lengthsof thefivc fibeLsat'c
proccssto lcrutru'hic5fiU.r *iir breakfirit'
r rc,sring l l t c p t o l r i t l r i l i l \ ' l l rrrtttl t V
' 5i r t c l t c ss' t t p l l t l s c
l i t r e l rl, i t r t ' l t t ' s ' .i 'rlr t ' l t c s " il r t c l t c ist t t t l tibcr.,l'lte
ploportiol)alto thc length ol tltilt
fiber wiil bc tlrc lirst to brcali is not I'norctha.3 irtc'csis:
breaksfirst is
tir.'i,igrh of tfre'fiUlritrat
probabilityrf.,ar
( a )3 / 5
(b)2t5
(c) 1/3
(d)2/3
l(x t
I'urtctio^
ol thc iollowr'g staternentsis WRONG:A probabilityclcnsity
17.Which
(a) can be usedto r-nodel a continuousvariable
(b) inregratcs to I overtherangeof x
(c) incrcases from 0 to I
steaciilY
therangeof x
(d) mustbe greaterthanor equalto 0 ovcr

l s . A p r i n r u y s c h o o l h a s 6 c l a s s e s , n u m btrte
e r probability
edfromlto 6'C
that l a s s l h a sclectcd
a randorrly stwicessmal]y
wrt" i'
students as eachof the otherclasse''
class?
studetttis fronr alr or'Jci-trutnbered
(a)i0/21
(b)3/7
(c) 8l2l
(d) 4t7
What'sthe
uaffic Iight on lhe way to the Universityis rcd 40Voof thetime'
19.
'- A in a row; (ii) any2 out of 3
daYs'
(i) 2 days
ot"f .Uility-ofgettinga redlight
( a )( i ) 0 . 1 6(; i i )0 ' 2 0
( b )( i ) 0 ' 1 ( r(;i i )0 ' 2 9
( c)(i ) 0 '? .a(i; i ) O'l e
(d) none of the above
variance of Y- is
of
nunlber heads when3 coinsaretossed'The
obtained
t*tY
20. den3te the
( a )5 . 5
( b )7 ' 0
( c )7 ' 5
( d )8 , 0

ASOl
 PART II: Trvo'markqucstions

I r r sI t ' t tc l i t l l t s :
qrrestion
'l'ltis c r l t t s i s tosf 4 0 m r r l if p l c - c l r o i c cq t r c s t i o r t s l l l n c l r
. 1 r : r rpl f l l r c c r l t t t t i t t r t t i o t l lntlicatc tltc corrcct
is [6lltlrvctlbV I'6ttrprossiblc nllswel'S, one of rvhicI is ctlt'tcct'
nns\\']cr on tlrc llrrbblc-shcct, NOT on this booklct'

yorr tYill losc 2/3 tnnrk ftlr

. Ilach cOr'rcct choicc rvill carn you 2 ntarkS.I{orvcvcr,
thc trubblcsor lllorc tltnn ottc trtrbblc'
cilch incor.rcctchoicc. If you shaclcnone of
r r rr will get 0 for that question'

andQ is
:1. A firm hasrheproduction functionQ= ITL- L2,rvhere.Lis labourinput
100-Q'rvhatisthe
o L r r p l rI rf .t h e f i r m i s a m o n o p o l i s t w i t h a d e m a n d c u r v e P ( Q ) =
lr4fip.(MarginaiRevenueProductof Labour)curve?
rol rzoo- 288L+ lzt-z- tt
(b) 1200-288L-72L2 + 4L3
( c ) 1 2 0 0 - 4 8 8 L+ 7 2 L 2- 4 L 3 ^
( d ) i 2 0 0 - 4 8 8 L- 7 2 L 2 + 4 L 3
his hotrse'*'ill be Rs'
22.SLrdhir livcsin Gujarat.His totalwealthnextyeal' incllCrng
t'ill occttrttcxtvearand
-5.00.000, Tlcrc ii ^ f O pcrcentchanccthata 6ig eart6qtrrkc
contprlcrely destroyhis lrouse,valuedat Rs' 2'00'000'
(i) \Vlat is SuOnii'sexpected wealthnextyearif he chooses llot to buy house
insurance?
= W05,whereW represents
(ii) Suppose Sudhir'sutility functionis givenby U (W)
risk-loving,or risk-
of rupees'ls Sudtrirrisk-averse.
totalwealthin thousands
neutral?

(a ) (i ) R s.4 ,5 0 ,0 0and 0 (ii) risk-averse

(b ) (i ) R .s.4 .5 0 ,0and 00 (ii) risk-neutral
(c) (i ) R s,4 ,8 0 ,0 0and 0 (ii) risk-loving
(d) ( i ) R s . 4 , 8 0 , 0 0 C (ii)risk-averse
and

noise(N) thatd,eclines as the distance(d) itt

13. Consirlcran airportthatprodr-rccs
' N(d)= I/d7' Prafvlrvt-rrks nt thc airport'
kilorrrc'tcrs. lrol11 thc airportincrcases:
l I t t o i s t. 'l t r r ti sl i l s s r r c i n t rcvt li t' ll 'trlvt cl t c r c
I ' r: r l l r l , st l . r r ' r g c{ i . o nnr i ' l i s ics l l r r p e cI p c t t' r t t i o
rvnv)'
l , r . l r l 'l ri vr lc s .l l i s c o s t s . o l ' c o n t r n r n r tricnRgt r p c cI p c rk i l o r l r c l c t ' ( c i t c l t
closcsthe can live to the airportis d = 0'1 km'
(i) wrar is theclistance Praiulwill live from thc airportin thc absence of
c o r t t l t c t t s l t t fi o t 't l r cn o i s c ?
(ii) supposePrafulis compensated for his damage, whcreverhe may live' How
rnLrch rvill hc bc comPcnsatcd?

ASOI
 ( a ) ( i ) I k r n a n d( i i ) R s ' 1 0 0
( b ) ( i ) 0 ' 1 k m a n d( i i ) R s ' 1 0 0
( c ) ( i ) 1 k m a n d( i i ) R s ' I
( d ) ( i ) 0 ' 1 k m a ' r d( i i ) R s ' 1 0 0

eachfirm hasthe samecost

24. Supposethe car marketis perfectlycompetitiveind
The marketdemandandcost
srntcrure.Thcrc are 1000firms in the iniustry,
s e l t c t l t t l c lst t c g i v c l t l r c ' l r r r r ' '

Detnatrd
N,larketD I3.?()
6,80 8.40 10.00 I 1,60
Price(iacs/ 3.65 5 20
oer car) 250 200
500 .150 400 350 300
Quantity
(thousands
r )

Costspcr i n r r( l t s . I r C S ) 400 450 500

t ?00 250 300 350
8.40 10,00 12.40 t2.10
MC 6.40 1.00 7.6s 9.00
7.20 7.50 R00
7,80 7 (X) 7.10
4vq I 1,00 I 043 10.06 r0.00 t0.22 11 . 0 0
ATC 12.80

ln the lotrg rtttt i ^ ^ . L - - , . .rvill

(a) Somefirlusw'illexitrheindustly' butothers, , i l r rrenratn
,,nr

iuj Sorn.111rn5rvill entertheindusry

rvill remainthesame
i.j ff,. numberof firms
down
ia) ftt. industryrvill ciose
aregivenby
cuvesfor apples
25.Abhik'sandBnnda'sdemand
p=20-q(Abhik)
p=5-(q/2)(Brinda)
andthattitenrarkcr
inthenrarket, supprl'
,"0;i:'J:,iJ,:';:i:J:lt,y T,n:umers the market is:
= ti'e equilibriumquantityin
functionis given by' p 2 + Q'fnen
( a ) 1 2a P P I e s
(b) 9 aPPles
(c)6 aPPles
( t l )3 i r p p l c s

rvheatis givenby the functtott:

26. Afarttter'sdetnatldfor
n.ror)cv
Letthelarnrcr's
-nJ;fir;ii"rKry andpisthepriceofrvhear.
income
i n c o n re b e R s'l 0 O0 .S u p p osethatr nitially,thefarf*'nttmer BPLcard
purachaseswheati
obtains nthenr ar .k e
per kg. Now, consider r;ffit;;;.tttrtt be thc
for Rs.l0 perkg' What will
whichatiowshim to purchase up ,o'ii rtf or *rtt" l:t lt' 5 eficct'/
to theSlutsky substitution
increase in his dertrand for wheatott'ilui?U'ft

ASOl
 ( a )3 . 5k g
( b )a ' 0k g
( c ;4 . 5k g
t d )5 . 0k g
haswo
An etonomy
information'
thc ncxtfour using
questions thefollorving
r\rrsr'cr
( l q c | l | r ( ] a n t | 2 ) a n c | 3 t t l t i t s e a c h o f w o g o o d s , X a n | Y , A n o | l o c a t ir ot tn, ni nbtchri' ss e' t cv ol tnc or em y
ofnon'rtr"c'trr!t'craal
i . t , r t . f i t r crt tl , s r t t r r l t l t t' i: fa . i n ) . ( r r ' l ' r ) ' i t l ' . ) ' 2 ) )
t nd 2
X n n t !| , ( . ( , | | . \ . 1 (/| l| ltrt .' (. , \ . ( t ' l r tl . u
( . r t . . )t ) r r r r r (i ' \ 2 , 1 , 2 ) t t t . It l, t c r t t t t t l t t t t t{ s 1 4 o r l d ' , ;
nvo goodslcft o"'er aftcr the
rc.rltectiveitt, artd (x0,!0) are tlte amountsof the
xg=3-x]-x2' yo=3-)'1 - lz)'The agents'
t'ort,stttnlttionoJ'tttclwoagcnts(i'c',
i = 1 , 2 , ( r i . . r ' i ) r n t t s fs a l i s f i i
ultilitt,to c o n s u n l ei s l i n t i t e c ls, o t h a t f o r e a c l t A g e n t
ltis con'tttntptittrt
('/1()()'ft'
'r(:}
.; * r; < 12. Agcttt.t is ltigttcrort the socialladrterdrtrl{t'/'r
of tlrc
lterconsrtmptionbttnclle frotrt n'llr't rentains
bttndlr,(-rt.),1)Jirst. Agent2 cltooscs
rrrtallocatiort
Attequilibium for this economv i's
t\\,()goods after AgerttI lns chosetr.
.ruclttlnt
( | ) (x1, l) Agentl's utilirysubiectto thecotlstratnt's
maximiz.e'r
^ )
r r < 3 . ) r S 3 .x i ++ Y y ,3=<I 1 L '2a ,nau n d
cottstrnltlts
e sg e n t2 ' su t i l i r ys u b j e ctto t h e
( 2 ) . ( . r 2 . . t ' 2n) t a x i r n i z A
r : < J - 1 1 .) ' 1< 3 - ) ' t ' " t 3 ' r' | < t Z '
a 1 ( I 1 , y t ) = x l 1 ' 1 a n cAt g e n2t ' su t i l i t y f u n c t i o r t
I r i s g i v e t t l n t A g e , t l ' su t i l i t y f t t t l c t i o n
' a ' i s a g i v e np o s i t i v en u n t b e r '
n 1 ( x 2 .) : ) = c t x 2* y 2 , w h er e

( r 1. y r ) ' ( x z ' . r ' :) ) s p c c i f i c dh c l o r v i s a n

2 7 .W S i c h o ' c o f t 6 c a l l o c a t i o n( (s; 1 6, ) ' 0) ,
cquilibriLrrn for thiseconontY?

(a)((0,0),(3,\6), (0,3- "6))

r t r () ( 0 . 0()s, . 2 ) . (-3. 6 ' t ) )

theequilibriumallocationin the above
28. Lct c=1, for Agent2's utility function.Then,
question is
the slopesof the Agents'indjfference curvesare
(a) Paretoefficient,because
tangcntat thatallocation'
(b) Ngt Parctocfficicnt,bccause theslopcsof thc Agcnts indiffcrcncccurvcsarc
not tangentat thatallocation'
(c) I)urct.cl'fiiic.t, bccnuscthcrcis a boundon Agctrti's lbility to consttlllc'

ASOI
 rvithouttllltkitlg'Agcrrt
( c l )N o r P a r . c r o c t ' f i c i c n r . a s A g e n t 2 c i u t b e n r a d e b e t t e r o f f
I r i t r l : , ct r ll

i l S 0 l ltto c o l l s t l l l tict 't t tyl o r t o r t l i l

2 9 ,S u 1 l 1 . r t0l r. sc cr cw i r \l t o l r o r t t tttllt tt J t ca l r i l i t yO l ' i l t r y
utility I'unctiotr' IrorwltiltVitlucol
choosethe valueo1tircpararneter'a'in Agent2's
'a' would the equilibriuinin Question1 be efficient?
(a) I
(b)""8
t.l u6
(tl) l

Agerttl' so r\gcrtt-- I'el:

30. Now Suppose tlllatr\gertt2 is higheronthesocialladdertharl
featureso1'thc
ro chooseh.,. .nnru,t"tption bunile beforeAgent I do.es'Ail other
of theallocations
economyareunchangtA'tf a =Z'which one
((xo,)'o),(rt,-l'1),(xz'):))belowisanequilibriumforthismodifiedeconont;"?

, ", , 5 )(,0 , 3- J 3 ) )
( a )( ( 0 , 0 () 3
Lt,:- ^[tus),(JN 5''l-rusll
(b)((0,0),(3- ^,Ts
( c l ( ( 0 '( ) ; (, ( ) j, JJrt1,.6)i
, , 3- " ' l ' ( 1 , ' \ 6 ) )
( d )( ( 0 , 0 () 2
dtI cL'()tt()ttt\)
the rtextfour questitttts'Cortsidcr
7'ltefollotvittg ittfttrttrutiottapplies to ori the e'Ypactcd
tlrc ttotrtirtal rvage rate (W)is setby tlte io'k'it anclit clepends
t,,,here
rale of unertrploVntertt (u) irt the follott'irtg i!'rr')''
tttitl tlta
ltrice tat'ct(P" )
\ \ / = P ' l I - c l u ) , w l r c r e a i s a p a r a t t v t c r ; 0 < a < l ' T l t e u c t r u t l p r i cwage
e l e vr]ta
cl(P )tttttltt
'eo
wlto charge a mark up over the noninaL
- t n o r lutulis
otlwr ; ssr b), tlte prodttcers
p - ( l * A S W, w h t : r cA > 0 i s a n o t h epr a r a t t t e t e r '
then the ri.lteol-
If rhe are
rvorker:; able
al\\,45,s io colTectiyguessthe price level
3l '
*iir tlrvaysbe maintainedat a levelrvhichis givenby:
unenrploy,m.n,
I
l ' qr, /\ -_'
\

L+A
al
/h\ -_.- '
\v/ , r
t1- A
I
tr-)
'"'
(l - ))g

---
I +a
/.t\
\"/ . 1
I-r n

stocko[ Iabourforcc ii arld

rvill be be
alrvaY's full employmentof the aggregate
32.There in thc followrngway:
only if the exPected andthe..i.iur irice levelarerelated

ASOl
 (a) + =
I

D
( b ) -n=c 1 +I
I'
D
/^ \
r
P =
(cl) - (l +,iXl- a)

to
,I'ltc appliesto the next ttt'oquestiotts'Irr additiott
follox'irtg additiottalirtforntation supposerheproduction technolo.gy is
tlte rttfcrtttariongwenfor tlte above two^questions,
Y' N'::d.L denote
suclttlnt orrc etrtplol,ecl workerro,, produreone rtnito.fotttpur'Let
level of enlployntentand the aggrcgatcstocko'f labourforce
tltt: Lcvclo.f outltut,'tltc
inforntationgiven in ilrc previotts
rcsl)ectivc!\,.ott tlte basisof the wage and price
anr'lanstt'crthefollotuing n+'o
ortt a rclation'rhipbeween P' P' and Y
v+'rtrk
rlrtr:,sti,tt.s',
tlrrt'.sl trt t t.s".

33.An increase in outputceterisparibusleadsto

(a) arrincrease in theactualpricelevel
(b) a decrease in the actualpricelevel
unchanged
i.j rt.r.actualpricclcvcl will rcmain
alli,thingaboutthc changein
to concluclc
sufficient
(cl)givcn infortnationis not'
I t ctlt l t lP r i c cl c v cl
lcittlsttr
stockol'labOrfOrcccctc|i'r'7rrili,ttI
. r\n irrc|casc
-1.1 in thc aggrcgatc
(a) an increase in theactuaipricelevel
(b) a clecrease in the actualpricelevel
(c) theactuaipricelevelwili remainunchanged
airotrtthc changcin
(rl) givcrrirt'cir mationis not strfficicntto concltrdc.rr'rlting
a c t t t aPl r i c cl c v c l
'l'ltc to tltc nexttv'o qucslittns'Cottsitlcrthe follon'inr
.fttllrntittliinfortnaliortapplics thc following set of
ntctcrocL'onctptic morlel. The gooclsmarket is characteriZcdls;'
((/ItQtI()t1s.'
(' -. do l"d,\'

I = l n + p , \ ' -p . i
C = e (cxogettouslY given)
do,dt,ar, 00,fr, 0, areallpositiveconstants
,,,,'lrcre andtz' + F' < 1'
'l'lrcrnottcvtttarkctcqtrilibritrm
conditionis givcnby:
i7
- : l = / t Y - Y r i : Y , , 7, positiveconstants.
I'
Ansrver thc follorving tlvo questions on thebasisof thismodel:

ASOl l0
 in tltc gtrods'ttllltkcl'
ltscsby otteuttit' t o l t t a i n t a i tet q u i t i b r i u r l r
3,5It' iutctcstrlrc(i) ittct'e
by
level(f hrs ttl decrease
incor"ne
n
'D '" ulllls
/' -r '' l
1- (&t -rPtl
I
(b) --------;- ui)tts
1 - ( c t t+ P t )
i
(c)'- ,--Lllllls
/'
l ' - ( ( l r t 1 i , )t 11,
i':
1
(cl) ------- unlts
1'(dr+Pt)+*o,
T:
i n c r c a s teh e c q u i l i b r i t l ni tr t c o t l t c
i l i g r r V c n t r l l cel lxt p e n d i t u r(eG ) w i l l
3 6 .A u t t t ti n c r c u s c
level ( i') by
fr- Lrnits
(a)
l-(at+ p,)
LUllts
'"'
1 - 1 a ,+ P , ' )
1 ---
(.) uni15
I - ( q t *f i , ) - t p ,
I units
161
I-(ut. P,)';o,
/ 2
to the rtext suvitri ltttsilrtl 0 lrtlt ttt tt
ttvo questiorts'
Thefollotvitrg irtfortrrtttioil opplies
Slrc1;it,r's'litr lttr
2 rrt.tttlts tt,itltwaSes IVt atuJ trz resPCCtivaly'
housc:lroltl Jor so ttslo t)1(t'\ttttt:L'
t^,y,Lt trtrttths (denoted by, c, and c., respecilvely)
co^surlptiottirttlte
I
herutilirygivettbs'logc''ffirogcz'whered>0isthetJiscounlrata'Slrci:ttls'rt
has to reptit" tt'itlt
her employ.er in the first month'whichshe
allotvedto borrovt'front shecQtr'\avcsottte
rete r, her seconcl *o'''i''La'nings' Ahernatively
inrerest ar tlrc frott at tht sct,tc
tirr''1iirr ,tK)ntlt o,ra trf,)'i,"in tne i":1,:: earn an i,rterest
of her ly6rgc..,. i,,
(lttsrrlar tlrcfollolittg two quesltotts"
raler. Itt rhisJ'rutr"'"t''''t
irt tlte first tttotttltil'rrrrtl
rvill optimally decide to bonow trom her enrployer
-37.Savitri
if ti*- iolio*'ing conditionis satisfied:
"ttiy( a ) r v " > ( 1 - rr ) x ' ,
(b)(1+6)>(Irr)
( c ) ( 1- d ) r ' ' ' > ( 1+ r ) t v ,

II
ASOl
 ( d ) ( 1 +d ) < ( 1 +r )
r a t e( d ) g o e su P '
38'Asstrrningthattheaboveconditionissatisfied'.whenthediscount
h e rb o n o w t n g
( a )g o e su P
(b) goesdown
(c) docs liot change
givcn ittfot'tttlttiotr
( t l ) c l t t l t t o t' l t y t ' " t ' t t ' ' "l r l t s i s< l t ' t l t c

with fixed exchange rates'\\'hcntltc exchangeratc ls

3 9 considcrtwo openeconomics where
'l1-,c tftt iollorving sct of cquations'
ru'ity. ..onoti.,r-arc charact.rir.dUy
i =L2'.
/.' + \
C = ( ' , , ,+ ' C l , \ ) i - . { i /
. ;
l ' = l i

7:
U,=Ui

T, = I,Y,
M,=ll1n'+m"Y'
I ' = l z = 2 5 0 : G ' = 7 1 ' 1G : '=120; tt=t:=0'4:
I i c o r= c o z= 2 O O ; c r t = c r 2 = 0 ' 5 ;
= = 0 ' 3 t h c nw h i c ho f t h ef o l l o r v i n gi s t r u e ?
= 0'05; il1t2
/ / 1 iI = t t l r ' . 4 0 ;n t , r
it runsa
levelof outptltthancotrntry2 and
(n) coLrnrrv1 hasa higherequilibrium
t l l l ( l ct l c f i c i t y i s - i \ - r ' i sC t r t r t t t r 2
y
2 arltl it rttttsa
a lorua, equilibrium levcl of otrtptrttltrtttcottrttry'
(tr) country I ltas
rmclc Alficitvis-ir-vis Country 2
itrunsa
( c 1C i o u n r fr yf r u r o t ' t i g f , . r c q u i l i | r i u mol cf ov ler lt p u t t l t r t t t C o t t n t r y Z a n d
tradeslrPlusvis-i-visCountry2 a
(c.l)countryt t',o.n to*er equilibrium levelof otttptrttltancountry2 andit runs
sirrpltrs
tt.ittlc Cotllltry2
vis-tr-vis
$'ith flcxiblecxchangerates
4 0 In tlic Mundcll-Fleming moclelof a smallopeneconorny
If iump
ttreeconomyis initiallyin equilibrium'
a'd pcrfccrcapitaln.,"friiii',suppose of the country's(i)
sLrmraxesare increased. what ttnppensto the eqidlibrit,n lcvcls
rate?
GDP; (ii) interestrateand (iii) exchange
(a) (i) falls,(ii) falls,(iii) appreciates
unchanged;(iii)depreciates
iui iii and(ii) remain
unchanged'
(iii)remnin
i.j iij falls,(ii) ancl
(d) All thrccrcmainunchangcd'

4 l ./: 9i' + 9i is convexif andonlYif

( a ){ ( x ,r ) 9 t ' x g f l / ( . r ) S r } i s c o n v e x
(b) {(,r,r) 91'x9i | /('r) 2 r} is convex
(c) { x€ tl' I fG)<r} is convexforeveryr e 9t
(cl )(-r€!n ' l ./(-t)>r) i s convex for ever ry e 9i

ASOl t2
 of/atx > 0 is
b yfi x)- f' e' dt,thentheder ivative
1 2 . Iff: 9 i, +9 i i s d e i i n cd
_t ,
( a ) 2 x c ' -- c '
-1
(b)2xe' + e'
tc) (}- - i) ."'
(d) (2r- l) .'

n= l'2' "'
4 3 .T h es e q u e n c( ex , , )r,v h e r e x=n ( - 1 ) " ( 1 + n - ' ) a n d
(a) corlvcrgcs to I
( b ) c o n v e r g etso - 1
( c ) c o n v e r g etso I r u t d - - i
(d) converges to neitherI nor -1

- 1 4T. h es c r f l l = r( * 1 - r r - ' , 1 +r t - ' ) i s i d e n t i c at ol

( a )( - 1 'l l
( b )[ - 1 ,l )
( c )( -1 ' 1 )
( d )[ - l , 1 l

to
1 5 . ' l - hscc tU i . , [ * 1 ' ' t r - ' , 1 -' t - r l i s i d c n t i c a l
t a )t - 1 ' l l
( b )[ - 1 , 1 )
( c )( - i ' l )
( d )[ -1 , 1 ]

1""'n}'whichofthetollorvtng
4 6 , F o xr , y e 9 1 " , l e tt l ( " r1,' ' 1 = m a x { l x , - y l' li =
r e , r t i o n sh o l d si o r a i l ' r ,r ' : e S ' ?
(a) ri(.r,z) = ri('r,."'1+ d$' z)
(b) d(r, z) > cJ(x'v; + dU' z)
(c) c/(.r,:) > ri('r' 1';+ d(l' z)
(d) /(.r, i) < ri(.r,r') ' d(Y'z)

X a n dy e Y i ' a n d l c t X- Y=
47,GivensetsX Y,i e r X x l = { ( x , y ) l , r e con'ectfor sctsA' D
\Vhich of the followingformulaeis generally
{.reXl'va}'}.
lttttl C"/
(a) (r\ - d) x 6 ' = 1 1 j x c ) - ( A x c )
( b ) ( A - B ) xf = ( , . l x c ) ' ( B x c )
( c ) ( A : B ) xC = ( A x C ) - B
(.'j)(,'\'- iJ) * (l =,.1- (il x C)

r " j ' A t ( 0 ' 0 ) t h i sf u n c t i o n

4 8 , S u p p o s e / :9 1 2+ ! i i s d c f i n e d ' bzy=
( a ) A t t a i n sa t t r a x i n r u m

t3
ASOl
 ( b )A t t a i r ra
s minimum
(c) Attainsa saddlePoint
(d)Isundcfincd
'ralueof thefunctionin thepreviousquestion'subjectto the
-. 1/ 0 \Vhatis themaximum
constraints x > 0, ) > 0, and2x+Y= 6?
(a)2.5
( l r )4
(t ' ) ' l , 5
( r l )9

mostbeautifulcities- theyale among

5 0 ."Bcautifulcitiesrepelpeople'Look at India's
of the follo*'ing statements
thc leastpopulatedcitiesoi the country".Which
illustratcs a methodof reasoning mostsimilarto theone in the argumentabove?-
tendto be morenaught"v' thanotherchildren'Hence
(a) childrenwho arespanked
if a child is not spanked, thatchildis lesslikeiy to be naughtl"
Ho$'ever'most
(b) Pesticides areknownto causeasthmaamongsontepeople'
j
pcst c i c l c s
a r en o tc o n t m o n l y
a s t h m a t ipcc o p l et c n dt o l i v e i n r e g i o n sw h e r e
used.
(c) This softrvareprogramhelpsincrease the$'orkelficicncl'of its users'As a
acrivities.
result,th.s. ui.rs*havemorefreetimefor other
cooler
(d) Duringwarmrveather. my cropssufferfrom pestsmorethanduring
Thercfore
ri,cathcr. . a lvarmenuironment musthclp pcststo multipll''

z l t t ' l l l s l r 1 ' l r t tzs\ t t t l t l t

\I'llrt'rrvt'r';tr'.('lt'ilvcltitll('l();ttlistltttlcityisrvlttlttt'slrYttlrirlr't
ltts
o r t h c b t r s ,s o l t c t ( ) \ \ c s L tc t l i t t \ \ ' l t l t t i s
e i i l i l t ( ) t[ l c c i t l c u , h c t h c r t o t a k c t h c t r a i n
cxpectcd travel time?
( a )Z ( w + z )
(l>)Z(w+z)lw-z
(c) (tv+z+2)12
(d) Noncof the above
\\trat is
5 ? A classltas(r students' randonrlydividedinto two tcams,A and B, for a race.
in first,sccondandthird?
thc probabilitythat the tlueerunnersin teamA will comc
( a )3 I / 6|
(b)1/6!
( c )( 3 1 ) 2 / 6 1
( c l )3 / 6 1

thateachperson
5 i Supposc outof a groupof4 friendsis randomlyassigncdto oneof 6
thatno classhasmorctiranortcpcrsonfrorrrthis
Whatis theprobability
ckisscs.
groLrp?
h) 6tt4l
( b t5 / 1 8
k) 4t6
(cl) 614t.

1 A
I T
ASOI
 f(x) ='113'for:r
5.1.A contirluous ra*dor:rvariablehashe probabilitydensityfunction
between- I and +2, and0 elsewhere. Its mean,varianceand nredianare:
(a)(1,3/a,Vz)
(b) ('h,3/t,Vz)
( c ) ( t h ,l , 1 )
(d) (V7,l, th)
follols'
55.Thejoint probabilitydistributionof A andw for a givenpopulationisas
is the weight shecan lift'
rvhereA is thc individual'sagein yearsandw

A
40 Years 60 Years 80 Years
I 5 Years 25 years
o.16 o.t4 o.r2 o'01
1 0k i l o s 0'03
0 . 11 0,09 0'00
W 20 kilos 0.02 0,l3
0.08 0.0i 0 00
30kiios 0'01 0.09

of A is:
The expcctatiorto1 the tllargitlaldistribution
(a) 36.7Years
( b ) 3 7 , 6Y c u s
( c ) 3 5 ' 6Y c a t s
( d ) 3 8 . 6Y c a r s
t l t c y* ' o r r l dv ' t c t o t t l r cr t r l i r r g
y t { 0 0 l i k c l l ' v o t c r s , 2 lr5c s p o . d c c l ^ t ' a l
5 ( r .I ' , s L r r ' c o dcttotc
votefor theoppositionpu'ty' Lct.7r
pu.rya'ci lB5r.rpo,,..tcithattireywould ol'tirc
,;;;t"io prer..reotheruling part)'at tlte ttrrtc
ihe iracrio,.,
"t;;i;k;l),
p of surveyresponclents who prefcrrcdthc rtrlirtg'litL'v
s*.vey,a'd Iet Uerh! 1'raction
The statldarcj enor of P is:
( a )0 ' 0 2 :
( b )0 . 0 3 s
(c)0'0a5
( d )0 . 0 5 5

5 T , L . e t X a n d Y b-;;lii)
etworandom v a r i a b l e s w i t h E [coefficient
X ] = 3 , 8 [ of
Y ]conelattott
_0,V[Xl^=t,Y|)]':,''
andE[Xy] = 5 cov[x, y]; (ii) thePearsonian
betrveen f andY (px.v);(iii) VIX+YI'
( a )0 . 5 '5 ' 3 9
( b )5 ' 0 . 5 ,3 J
( c )5 ,5 , i 9
( d )5 , 0 . 5 ,3 9
variaible withparameters /t = 4 andP= 0'78'calculate
5g.If y is a binonrial rancjom
Pr o b(YJ 3 ) to I d e ci n rrl P l a ces'
( a )0 '1 5
( b )0 . 2 1
( c )0 '6 4
( d )0 . ? 9

15
ASOl
 a
For tltefollowirtg two questiorts pleas.e notethat the two'tailert57ocritical valuefor
is il:,96and the Corresponding valuefor a one-tailed
.srarru d normaltlis;tribution'
trcliae
i.rt1.645,At the I7o leveL thecriticalvaluefor a wo-tailedtestis
of si.gnificance,
tc,rr
4.58 onttlhc corresponcling 'ituiTo' a one-tailedtestis Q"33' )

wasgivcnto trvoclasses consisting of 40 and50 students

-5g.An cxaminatrolt r f 3'
r v n s2 r ' i t 1 . s t n t t d a rddc ' i n t i o r o
r . c s ' ( . c t i v c Il yn.t 6 c f i i s tc l l i s st l t cn t c a ng r a c l c ( l c ' i . t i ( ) *o f 7 ' orr
rvit'u strrrrrrrr'rl
r r , l r i l rc, t l r cs c c . ' t r c r , s st ' c , r c l r r g r . c r ir v a s7 s tltc pcrformaltce
differulcc Lrct\r'ccll
rhcbasisof a nvo-tailedtesi,is therea significant
of the two classesat a level of significance of 5Voand 17o?
of the nvo classesat
(a) Thereis no significantdifferencein the performance
the570 and17aleveisof significance
in the perfornrance of the classesat the
(b) rir.r.l, o rignificantdiffer"ence
57clevelbuino significant difference at thc 1q6ls'el of significance
in theperfonttartce of theclasses at the
(c) Thereis a significant difference
5% level of significance
lVo levelbuino significantdifferencear the
at both the 590 and 7Vo
rd) fnere is a significint differencein performance
l c v cI s

votersfrom DistrictB shorved

(r0.A sanrple poll of'300votersfrom DistrictA and200
rverein favourof a giYencandidatc' At a lcvelof
tlrat5(;% anc] |o/orcspeclively thc
dif'fcrence bet*'cen
sigrrificance of 5Vo,teitt|e hlpolhesisthat(a) thereis a
A'
1 1 i * . t r . i(cbt )st.h cc a n c l i c l ai st cp r c f e r r c idn D i s t r i c t
(.) t h ct l i s t r i c t sa r t dt h cc l t n c i i c l a t c
- t . t r c rics n o s i g n i f i c a nctl i f f c r c n cbec n v e c n
is not Preferredirr DistrictA
(b)Thcreisnosignificantdifferencebetweenthecjistrictsandthecandidate
ls Preferredin DistrictA is
(c) Th"r;l;^; Jgniii.nn, difference betrvee n thedistrictsandthecandidate
not Prcfcn'cd in DistrictA
thc ilistrictsandthc caltdiciatc ts
(cl) f-fl"r.-ir-^ ,ignil'icant diffcrcnccbctrvccrt
Preferredin DistrictA

x'itlt )'our bubblc

lou finish, lmnd in thisbookletalong
tlJ'tu' -to
s h c t t ttie invigilators before leaving the exotttination lmll'

ASOl to