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This section includes InterviewSolutions, each offering curated multiple-choice questions to sharpen your knowledge and support exam preparation. Choose a topic below to get started.
| 5351. |
Why are the firms said to be interdependent in an oligopoly market? Explain |
| Answer» SOLUTION :N/a | |
| 5352. |
If a consumer faces the Budget line equation: 20 X + 10 Y = 500. Answer the following questions: (i) What will be the slope of budget line ? (ii) How many units would he be to buy if the entire sum of Rs 500 is to be spent on Good X only? show calculations. (iii) Construct a new budget line equation if the price of Good Y falls by 50%. Also, write the slope of the new budget line equation. |
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Answer» SOLUTION :(i) The SLOPE of a budget LINE measures the amount of change in good Y required per unit of change in good X along the budget lime. It is measured as follows : Slope `= (-P_(X))/(P_(Y)) = (-20)/(10) = -2` (ii) If entire sum of Rs 500 is to be spent on Good X, then: `20 X + 10 (0) = 500` or `20 X = 500` or, `X = 500 div 20 = 25` units. (III) If price of Good Y falls by 50%, then new price of Good Y will be Rs `10 - 50 %` of Rs `10 - Rs 5`. New Budget Line Equation will be: `20 X + 5Y = 500` Slope `= (-P_(X))/(P_(Y)) = (-20)/(5) = - 4` |
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| 5353. |
Any departure of price from the equilibrium price must, through a series of a actions and reactions, result in : |
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Answer» NEW higher equilibrium price |
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| 5354. |
Explain the implication of the following in an oligopoly market, (a)Barriers of entry and exists of new firms, (b) A frew no. of big sellers. |
| Answer» Solution :a) Barriers to entry of firms: The main reason for few firms under oligopoly is the barriers, which PREVENT entry of NEW firms into the industry. Patents, requirements of large capital, control over crucial raw materials, ETC., are some of the reasons, which prevent new firms from entering into industry. Only those firms enter into industry which are able to CROSS tose barriers. As a result, firms can earn abnormal profits in the long run.b)A few no.of big sellers: Implication is that there exists severe competition among DIFFERENT firms and each firm try to manipulate both prices and volume of production to outsmart each other. | |
| 5355. |
What economic measure can the Government take to reduce demand for commodity xx which is harmful for health ? |
| Answer» SOLUTION :PUT a TAX on it so that its PRICE RISES. | |
| 5356. |
An increase in real income of a consumer induces him to buy more of a commodity whose prices has fallen. This is known as : |
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Answer» INDUCEMENT Effect |
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| 5357. |
What is the behaviour of average revenue in a market in which a firm can sell more only by lowering the price ? |
| Answer» Solution :AVERAGE REVENUE continuously FALLS as OUTPUT increases. | |
| 5358. |
Investigator is a person who plans and conducts an empirical investigation independently. (True/False) |
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Answer» |
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| 5360. |
Due to increase in one more member, the family expenditure on milk increased. It is an example of extension in demand. |
| Answer» Solution :It is an example of 'Increase in DEMAND' as the resultant RISE in expenditure (due to rise in demand) is due to a factor other than the price of MILK. | |
| 5361. |
A demand curve "shifts" due to change in: |
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Answer» Tastes |
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| 5362. |
The period of time in which the plant capacity can be varied is known as : |
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Answer» Short run |
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| 5363. |
Explain implication of following features of perfect competition: (a) large number of buyers and sellers., (b) freedon of entry and exist of firms |
| Answer» Solution :a) Implication of 'very LARGE no. of buyers and sellers' is that the no. of sellers is so large that the share of each seller is insignificant in the total supply. Hence, an individual seller cannot influence the market PRICE. Similarly, a single buyer's share in total purchase is so insignificant because of their large numbers that an individual buyer cannot influence the market price. b)Implication of ' freedom of entry and exit' : 'Freedom of entry' signifies that there are no barriers to the entry of NEW FIRMS into industry. When the existing firms are earning abnormal profits, the new firms, attracted by the prospects of profit, enter the industry. This raises market supply, which in turn, leads to fall in market price and consequently profits. Te entry continues till each firm is earning just the normal profits. 'Freedom to exit' signifies that there are no barriers which restrict the existing firms from leaving the industry. The firms TRY to leave when they are facing losses. As the firms start leaving, market supply falls, leading to rise in market price and consequently reduction in losses. The firms continue to leave till the losses are wiped out and each existing firm is earning just the normal profits. | |
| 5364. |
Define TFC and AVC numerically and graphically. |
| Answer» | |
| 5365. |
Explain product differentation. |
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Answer» Solution :The product of each individual firm is DIFFERENTIATED from the products of other firms on the basis of brand, size, colour, shape etc. Examples of product differenatiation: TV: Samsung, Sony , Videocon, etc. Tea: Book Bond, Tata, Tea, Taj Mahal, etc. Product differentiation creates a monopoly POSITION for a firm as the PRODUCER is the monoplist of the brand NAME. Such products are neither homogeneous nor COMPLETELY different. Higher degree of product differentiation if establishes brand image among consumers, will be able to fetch high price in the market. For example, Colgate is costlier than Babool. |
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| 5366. |
what is the shape of dd curve under (a) Perfectly elastic demand (b) perfectly inelastic demand © Unitary elastic demand (d) Greater than unitary elasticdemand Less than unitary elastci demand ? |
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Answer» Solution :(a) Perfectly elastic DEMAND , Horizontal i.E dd curve is parallel to Y-axis. (b) Perfectly inelastic demand . Vertical i.e dd curve is parallel to Y-axis. (C) Unitary elastic demand. Rectangular hyperbola or LINEAR or linear dd curve forming `45^(@)` angle with both the axis. (d) Greater than unitary elastic dd. FLATTER demand curve. (e) Less than unitary elastic dd. steeper demand curve. |
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| 5367. |
Which of the following statements about Price Ceiling is accurate ? |
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Answer» An effective Price Ceiling MUST be at a price below the EQUILIBRIUM price. |
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| 5368. |
What does an indifference curve show ? |
| Answer» Solution :An indifference curve shows the GRAPHICAL REPRESENTATION of VARIOUS alternative combinations of bundles of TWO goods AMONG which the consumer is indifferent. | |
| 5369. |
When AC curve slopes downwards, what willbe the position of MC curve ? |
| Answer» SOLUTION :MC CURVE will be below theAC curve. | |
| 5370. |
Explain the implication of non-price competition in an oligopoly market |
| Answer» Solution :If a firm TRIES to reduce the PRICE, the rivals will also react by reducing their prices. However, if it tries to RAISE the price, other firms might not do so. It will LEAD to loss of CUSTOMERS for the firm, which intended to raise the price. So, firms prefer non-price competition instead of price competition. | |
| 5371. |
The following headline appeared in the Hindustan Times on 2^(nd) August, 2014. "Crop damaged in Himachal sent tomato prices roaring in Delhi". Use a diagram and economic theory to analyse the statement. |
Answer» Solution : When the TOMATO crop was damaged in Himachal the supply of tomato decreases. This means that the supply curve shifts leftward to `S_(1)S_(1)`. At the prevalling market price (OP), there was an excess demand of AE. In this SITUATION, buyers would competed to raise the market price. As market price would have risen, quantity demanded to tomatoes would have contracted and the quantity supplied would have expanded. This process would have continued till a NEW equilibrium price was reached at `OP_(1)`, where market demand is EQUAL to market supply. `OP_(1)` is higher thanthe old price to tomatoes. This explains how prices in Delhi ROSE when the tomato crop got damaged in Himachal. |
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| 5372. |
if P.e_(D) =1 what will be the nature of its demand curve ? |
| Answer» SOLUTION :The DEMAND CURVE is UNITARY ELASTIC. | |
| 5373. |
Defin product differentiation |
| Answer» Solution :PRODUCT differentiation refers to DIFFERENTIATING the product on the BASIS of brand SIZE, COLOUR, shape, etc. | |
| 5374. |
Are slopes of a demand curve and elasticity curve and elasticity of a demand curve the same thing ? |
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Answer» Solution :NO. Elasticity fo demand is not the same thing as the slope of a demand curve. Slope of a demand curve is the absolute change in price and qty. demanded and is measured as `DeltaP//DeltaQ`. On the other hand, elasticity of demand will be different on different points of a curve, EXCEPT when the curve is perfectly elastic and perfectly inelastic. Hence two are different. Slope of the curve may REMAIN constant, but its elasticitly may be different. For example, slope of a straight line DD curve is uniform , but its elasticity is differnet at different points. |
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| 5375. |
At the state of producer's equilibrium marginal cost of the firm should be rising. |
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Answer» |
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| 5376. |
The cost which is never zero even when production is stopped is known as : |
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Answer» SupplementryCost |
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| 5377. |
Price floor is fixed to protect the interest of ________ |
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Answer» |
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| 5378. |
What is (a) Fuller utilisation of resources ? (b) Growth of resources ? |
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Answer» SOLUTION :(a) Fuller utilisation of resources means utilising resources to the full by avoiding wastage of resources or avoiding unutilisation and UNDERUTILISATION of resources. (b) Growth of resources means, increase in supply of resources and THEREBY increase in PRODUCTION of goods and services. |
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| 5379. |
Demand of a given commodity can be specified irrespective of its price. |
| Answer» Solution :DEMAND for a given COMMODITY is always stated with REFERENCE to price. | |
| 5380. |
Why are TC and TVC curves parallel each other ? |
| Answer» Solution :TC and TVC curves are parallel to each other becausethe vertical GAP between them RESPRESENTS TFC which remains CONSTANT at all levels of OUTPUT. | |
| 5381. |
Explain the likely behaviour of total product and marginal product when for increasing production only one input is increased while all other inputs are kept constant. |
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Answer» Solution :Marginal product is the ADDITION to total product when one more unit of variable factor is employed, keeping other factors constant. The law of diminishing returns to a factor states that Marginal Product of a factor initially rises with its employment level, but after a certain level of employment it STARTS falling and ultimately becomes negative. (i) As LONG as MP is positive and increasing, TP increases at an increasing rate. (ii) When MP is positive but decreasing, TP increases at a diminishing rate. (iii) When MP = 0, TP is maximum and constant. (iv) When MP becomes negative, TP starts falling. |
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| 5382. |
Name any four factours affecting P.e_(D) |
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Answer» Solution :1. Nature of the commodity . 2. AVAILABILITY of close substitutes , 3. Proportion of total EXPENDITURE SPENT on the good. 4. Habits of the consumer. |
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| 5383. |
Why do problems related to allocation of resources in an economy airse? Explain. |
| Answer» Solution :What to produce how to produce and for whom to produce are the problems related to ALLOCATION of resources in an economy. These arise because resources are scare and have alternative uses. The economy has to DECIDE which possible goods and SERVICES it will produce. It has to decide whether to use more LABOR or more MACHINES. It has also to decide about the distribution of goods among individuals. | |
| 5384. |
Excess of receipts from sale of goods over expenditure incurred on producing them is termed as: |
| Answer» Solution :N/a | |
| 5385. |
A consumer consumes only two goods X and Y. The consumer choose a combination of two good with marginal utility of X equal to 30 and that of Y equal to 20. If price of good X is Rs 6 per unit, then what will be price of good Y at the point of consumer's equilibrium ? |
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Answer» Solution :A consumer in consumption of TWO commodities is at equilibrium when : `(MU_(X))/(P_(X)) = (MU_(Y))/(P_(Y))` PUTTING the GIVEN values in the equilibrium CONDITIONS: `(30)/(6) = (20)/(P_(Y))` `P_(Y) = 4` |
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| 5386. |
Find out coefficient of rank correlation between X and Y |
Answer» Solution : Here NUMBERS 30,50 and 70 are REPEATED twice in series Y. Therefore, m=2 in Y. `r_(k)=1-(6[SUMD^(2)+(1)/(12)(m_(1)^(3)-m_(1))+(1)/(12)(m_(2)^(3)-m_(2))+(1)/(12)(m_(3)^(3)-m_(3))])/(N^(3)-N)` `=1-(6[19.5+(1)/(12)(2^(3)-2)+(1)/(12)(2^(3)-2)+(1)/(12)(2^(3)-2)])/((8)^(3)-8)` `=1-(6[19.5+(1)/(12)(6)+(1)/(12)(6)+(1)/(12)(6)])/(512-8)` `=1-(6[19.5+0.5+0.5+0.5+])/(504)` `=1-(6[21])/(504)=1-(126)/(504)` `=1-0.25=0.75` Coefficient of Rank Correlation `(r_(k))=0.75`. |
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| 5388. |
At what leverl of price fo the firms in a perfectly competitive market supply when free entry and exit is allowed in the market ? How is equilibrium quantity determined in such a market ? |
Answer» Solution :Free entry and exit of firam TAKES place in the LONG run. Equlibrium price will always be equal to MINIMUM AC.  In equilbrium (Point B), the quantity supplied will be DETERMINED by the market demand at the price so that they are equal. Thus, at P = MC = AC, each firm supplies OQ level of output. |
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| 5389. |
An indifference curve is best described as a series of points which show: |
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Answer» COMBINATION of two COMMODITIES which give the consumer same satisfaction |
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| 5390. |
Subsidies on medicien have been withdrawn, thus making then costiler. How will it affect market demand ? Is demand for cigaretters. |
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Answer» SOLUTION :Impact of indirect taxes is that the price of the commodity increases, while subsidies reduce the price of the commodity. Withdrawl of subsidies will cause the price of mediciens to rise. Market DEMAND will not be affected by this rise in price as demand for medicines is PERFECTLY inelastic. Withdrawl of subsidies is not justifiable as these are essentials whose demand cannot be postponed or SUBSTITUTED with anything else. |
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| 5391. |
What is meant by law of variable proportion ? |
| Answer» Solution :It states, if more and more UNITS of a VARIABLE FACTOR are employed with fixed factors MP first increases, then falls but REMAINS positive and then becomes zero and finally becomes negative. | |
| 5392. |
What does a rightward shift of demand curve indicate? |
| Answer» Solution :The RIGHTWARD SHIFT of the DEMAND curve INDICATES an INCREASE in demand of the commodity. | |
| 5393. |
In every economy, human want are unlimited and resources to satisfy them are limited. What should be done to maximise the satisfaction of human needs? |
| Answer» Solution :There should be economising of RESOURCES, i.e., MAKING optimum USE of the AVAILABLE resources. When the resources are USED in the best possible manner, then the economy manner, than the economy will be able to fulfil most of human needs. | |
| 5394. |
In case of __ supply falls at thesame price. |
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Answer» DECREASE in supply |
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| 5395. |
From the data given below, find the number of items (N), r=0.5,sumxy=120, Standard Deviation of Y(sigma_(y))=8,sumx^(2)=90 where , x and y are deviations from arithmetic mean. |
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Answer» SOLUTION :GIVEN `: r=0.5,sumxy=120,sumx^(2)=90, sigma_(y)=8` Now, ` sigma_(y)=sqrt((sumy^(2))/(N))` when `y=Y-bar(Y)` [formula of STANDARD Deviation ] `8=sqrt((sumy^(2))/(N))` Squaring both sides, we GET `64=(sumy^(2))/(N) implies sumy^(2)=64N` Now, `r=(sumxy)/(sqrt(sumx^(2)xxsumy^(2)))` `implies 0.5=(120)/(sqrt(90xx64N))` Squaring both sides `0.25=((120)^(2))/(90xx64N)` `implies0.25=(14,400)/(5,760 N)` `implies (0.25)(5,760)N=14,400` `implies(1,440)N=14,400` `:. N=(14,400)/(1,440)=10` NUMBER of Items=10 |
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| 5396. |
Market demand curves is flatter than individual demand curves. |
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Answer» |
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| 5397. |
MC curve cuts AC curve at its |
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Answer» MINIMUM point |
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| 5399. |
Do you agree that classified data is better than raw data? |
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| 5400. |
Give one reason for a rightward shift in demand curve. |
| Answer» SOLUTION :INCREASE in the PRICE of SUBSTITUTE GOODS. | |