S. No. Questions Marks - 10
________________________________________
1 .Explain the relationship between different determinant of demand and the quantity demanded
2 .State the law of supply. Why does a supply curve have a positive slope?
3 .What is opportunity cost? Give some examples of opportunity cost.
4. “Long run average cost curve is an envelope curve.” Explain
5 .Explain the concept of returns to scale. Illustrate different types of return to scale with the help of isoquant curves.
6 .What is meant by price discrimination? Illustrate the third degree price discrimination assuming two markets. (Show diagram also)
7. “In a perfectly competitive market, while an industry is a price-maker, an individual firm is a price taker.” Elaborate it
8 .Explain the meaning of welfare economics and the Pareto optimality Criterion of social welfare
Case Detail:
CASE STUDY
Variety is spice of Life - Indian Fast Food Industry
Walk down the streets of Delhi ( or for that matter any big city ), one will come across number
of food joints, starting fro the local „dhaba? to one time favourite food the Delhites „Nirula?s? to
the KFC?s and Mc Donald?s. The fast food industry has a sizable number of new entrants and
the trend seems to continue. An obvious reason for such industrial growth seems to be the
„cosmopolitan? taste pattern developed by us. An average Indian 5-10 years back would
imagine a masala dosa or a burger to be a fast food. We have come a long way from those
days. Today?s Indians, and by that we do not mean only the „X-generation?, but, school
children, middle aged executives, grandfathers and house wives, all are fond of fast food, In
fact, fast food is too general a term, Today one has to specify, whether he wants a „fish-o-fillet?
burger from Mc Donald?s or a „pan pizza? from the Pizza Hut or the special KFC fried chicken,
the list of various types of fast food just goes on.
Technically speaking, it is the same chicken, which will be simply roasted with the standard
Indian marination in a road side tandoor, while in a KFC outlet, the chicken will be fried in the
famous KFC batter, and served with finger chips, coleslaw and the Coke. You feel you have
been transported to the country of Uncle Sam. There lies the difference. For the consumer, it is
a different product.
The „product? is differentiated in a number of ways starting from the way you present, the
ambience of the eating joint to the location and duration of working hours. The shop owners
harp on this factor and bolster their sales based on this „product differentiation? in their
advertisements.
After all a Mc Chicken burger, with its declared calorie content, rendered by well dressed
smart boys and girls in the posh market place is not the same as a simple chicken burger, kept
in the hot case of a local shop.
Product Differentiation is costly. Developing a new variety of cheese to be used on your pizza
and to suit the Indian taste requires some laboratory research, market research and aggressive
sales effort. Opening another Mc Donald?s joint in another busy market place all these are
costly affair. But, this differentiation brings in additional revenue. A new chicken burger with
lesser calorie content than an average burger will attract the young girls. A KFC outlet with a
special floor filled with balls and balloons will be a child?s delight. Since this is an industry,
where any body with a decent budget can enter, it almost becomes an obligation for the
existing ones to have a continues product innovation and differentiation to continue in the
business, in the long term.
1. Describe how you will justify that the above example is describing monopolistic competition. Can you draw a parallel example for another industry?
2. What are the marketing strategies followed under monopolistic competition?
Question No. 1 Marks - 10
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The goods that can be substituted with each other are known as:
Options
Complementary goods
Complementary goods
Inferior goods
Veblen goods
Question No. 2 Marks - 10
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Law of demand state that:
Options
Price is inversely proportional to quantity demanded
Price is inversely proportional to 1/quantity demanded
Not related
None of the above
Question No. 3 Marks - 10
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Law of supply states that:
Options
Price is inversely proportional to supply
Price is inversely proportional to 1/suppy
Price and supply are constant
Price and supply are not related
Question No. 4 Marks - 10
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At equilibrium price:
Options
Quantity demanded> Quantity supplied
Quantity demanded< Quantity supplied
Quantity demanded is not equal to quantity supplied
Quantity demanded is equal to Quantity supplied
Question No. 5 Marks - 10
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Demand for a Quantity is perfectly inelastic when:
Options
When quantity demanded changes with price
When quantity does not change with price
Quantity demanded increases with decrease in price
Quantity demanded decreases with increase in price
Question No. 6 Marks - 10
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Which of the following is the best example of the law of demand?
Options
As the price of fur coats decreases, more consumers will buy them.
As the price of fur coats increases, more consumers will buy them.
As the price of fur coats decreases, people buy more wool jackets.
As the price of fur coats increases, people buy more leather jackets.
Question No. 7 Marks - 10
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Q7The price of an item drops 10% in such a way that the Price Elasticity of Demand of that item is unit-elastic. We would expect the quantity of the item demanded to
Options
drop by 5%
stay the same
increase by 5%
increase by 10%
Question No. 8 Marks - 10
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Law of variable proportions is not based on which of the following assumptions: -
Options
Constant Technology
Homogeneous factor units
Short-Run
Factor proportions are constant
Question No. 9 Marks - 10
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Increasing returns to a scale refer to a situation when all factors of production are increased, output:-
Options
Increases at a higher rate
Increases at a slower rate
Output remains the same
Is constant
Question No. 10 Marks - 10
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The main cause of the operation of diminishing returns to scale is that:-
Options
Internal and external economies<internal and external diseconomies
Internal and external economies> internal and external diseconomies
Internal and external economies= internal and external diseconomies
None of the above
Question No. 11 Marks - 10
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Which of the following is not an external economy:-
Options
Economies of concentration
Managerial economies
Economies of Disintegration
Economies of Localisation
Question No. 12 Marks - 10
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Implicit cost is:-
Options
Cost of payments for resources bought or hired by the firm
Cost of self owned resources and services
Cost borne by the society as a whole
None of the above.
Question No. 13 Marks - 10
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Total cost is equal to:-
Options
TC=FC+VC
TC=FC-VC
TC=VC-FC
TC=FC+VC/2
Question No. 14 Marks - 10
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The relationship between Average Cost Curve and Marginal Cost Curve of a firm is:-
Options
When AC is falling, MC is falling at a much faster rate and stays below AC.
At lowest point of the AC curves MC becomes equal to AC.
When AC starts rising,MC rises at a much faster rate & the MC curve is always above the AC curve
All the above.
Question No. 15 Marks - 10
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Increasing returns to scale for a firm are shown graphically by
Options
returns to scale have nothing to do with the shape of the long-run average cost curve.
a horizontal long-run average cost curve.
a vertical long-run average cost curve.
an upward-sloping long-run average cost curve.
Question No. 16 Marks - 10
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When cost curves are drawn for a firm, all of the following are generally assumed EXCEPT
Options
average fixed costs are constant.
firm is too small to influence factor prices.
average variable cost initially declines, and then rises at higher output levels.
marginal product of the variable factor eventually declines.
Question No. 17 Marks - 10
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Consumer surplus
Options
is the difference between what the consumer is willing to pay for all the units consumed and what he/she actually paid.
is the total value that a consumer receives from a purchase of a particular good.
is a measure of the gains a consumer receives in the market.
None of Above
Question No. 18 Marks - 10
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The supply curve remains the same if there is a change in
Options
the number of suppliers of the commodity
technology.
the price of the good
None of the above
Question No. 19 Marks - 10
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For an inferior good, the quantity demanded
Options
does not change when income rises or falls.
rises when income falls.
falls when income falls.
None of the above
Question No. 20 Marks - 10
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The law of diminishing returns states that if increasing quantities of a variable factor are applied to a given quantity of fixed factors, then
Options
the marginal product and the average product of the variable factor will eventually decrease.
total product will eventually begin to fall.
the average product will eventually decrease with constant marginal product.
None of the above
Question No. 21 Marks - 10
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The opportunity cost of money that a firm's owner has invested is an example of
Options
implicit costs.
direct production costs.
accounting costs.
None of the above
Question No. 22 Marks - 10
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In the short run, the firm's product curves show (TP= Total Product, MP is marginal product AP is average product)
Options
TP is at its maximum when MP = O.
TP begins to decrease when AP begins to decrease.
when MP > AP, AP is decreasing.
None of the above
Question No. 23 Marks - 10
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A fall in the price of raw milk used in the production of ice cream will
Options
decrease the supply of ice cream, causing the supply curve of ice cream to shift to the left.
decrease the demand for ice cream.
increase the supply of ice cream, causing the supply curve of ice cream to shift to the right.
None of the above
Question No. 24 Marks - 10
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A monopolistically competitive firm is like a monopoly firm insofar as
Options
both face perfectly elastic demand.
both earn an economic profit in the long run.
both have MR curves that lie below their demand curves.
neither is protected by high barriers to entry.
Question No. 25 Marks - 10
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A monopolistically competitive firm is like a perfectly competitive firm insofar as
Options
both face perfectly elastic demand.
both earn an economic profit in the long run.
both have MR curves that lie below their demand curves.
neither is protected by high barriers to entry.
Question No. 26 Marks - 10
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Product differentiation
Options
means that monopolistically competitive firms can compete on quality and marketing.
occurs when a firm makes a product that is slightly different from that of its competitors.
makes the firm?s demand curve downward sloping.
All of the above answers are correct
Question No. 27 Marks - 10
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If a collusive agreement in a duopoly maximizes the industry?s profit,
Options
each firm must produce the same amount.
the industry level of output is efficient.
industry marginal revenue must equal industry marginal cost at the level of total output.
total output will be greater than without collusion
Question No. 28 Marks - 10
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A firm that has a kinked demand curve assumes that, if it raises its price,_________ of its competitors will raise their prices and that, if it lowers its price,_________of its compititors will lower their prices.
Options
all; all
none; all
all; none
none; none
Question No. 29 Marks - 10
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In the dominant firm model of oligopoly, the large firm acts like
Options
an oligopolist.
a monopolist.
a monopolistic competitor.
a perfect competitor.
Question No. 30 Marks - 10
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Limit pricing refers to
Options
the fact that a monopoly firm always sets the highest price possible.
a situation in which a firm might lower its price to keep potential competitors from entering its market.
how the price is determined in a kinked demand curve model of oligopoly.
none of the above
Question No. 31 Marks - 10
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If marginal product is below average product:
Options
The total product will fall
The average product will fall
Average variable costs will fall
Total revenue will fall
Question No. 32 Marks - 10
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The law of diminishing returns assumes:
Options
There are no fixed factors of production
There are no variable factors of production
Utility is maximised when marginal product falls
Some factors of production are fixed
Question No. 33 Marks - 10
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When firms collude to set prices, their individual demand curves become relatively more elastic.
Options
true
false
may be
None of the above.
Question No. 34 Marks - 10
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Oligopolists are less likely to experience price rigidity when they have excess capacity than when they are near full capacity
Options
true
false
may be
none of the above
Question No. 35 Marks - 10
________________________________________
The resources in an economy are:
Options
Constantly increasing
Fixed at any moment
Constantly increasing
None of the above
Question No. 36 Marks - 10
________________________________________
Economic growths can be shown by:
Options
An inward shift of the production possibility frontier
A movement down the production possibility frontier
An outward shift of the production possibility frontier
All
Question No. 37 Marks - 10
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The marginal productivity theory states that under perfect competition, price of each factor of production will be:-
Options
Equal to its marginal productivity
More than its marginal productivity
Less than its marginal productivity
Equal to or more than its marginal productivity.
Question No. 38 Marks - 10
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The factor price for the industry is determined by the point where:-
Options
Demand > Supply of a factor
Demand< Supply of a factor
Demand =Supply of a factor
None of the above.
Marks - 10
________________________________________
Which of the following is not an assumption of Marginal Productivity Theory:-
Options
Homogeneous factors
Perfect Competition
Short-run analysis
Law of diminishing marginal returns
Question No. 40 Marks - 10
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In order to attain the equilibrium position a firm will employ laborers up to a point
Options
MRP>wage rate
MRP<wage rate
MRP <=wage rate
MRP=wage rate
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