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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.
| 6501. |
State the conditions of consumer's equilibrium in cases of indifference curve approach ? |
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Answer» SOLUTION :The conditions of CONSUMER's Equilibrium by Indifference Curve Approach are (i) `MRS_(XY) =` Ration of price or `(P_(X))/(P_(Y))`, and (II) MRS continuously FALLS. |
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| 6502. |
How is equilibrium reached if there is excess demand at a price lower than equilibrium price? |
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Answer» Solution :At any price lower than the equilibrium price, quantity DEMANDED of a commodity exceeds its quantity supplied. It is CALLED a situation of excess demand. It is not an equilibrium price because Quantity demanded is equal to quantity supplied at equilibrium price only. Whenever there is excess demand, eqquilibrium will be achieved as explained under. At `OP_(1)`, there is excess demand equal to `M_(1)M_(2)`. Excess demand WOULD create competition among buyers which will push price up from `OP_(1)` to OP. As price rises there would be : extension in supply from B to E CONTRACTION in demand from C to E Hence, equilibrium will be achieved at point E when quantity demanded is equal to quantity supplied. 
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| 6503. |
Differentiate between law of demand and price elasticity of demand. |
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Answer» Solution :(i) LAW of demand states the inverse relation between price of a commodity and its QUANTITY demanded,assuming no change in other factors. Onthe other hand , price elasticity of demand INDICATES the RATE of change in quantity demanded of the commodity due ot change in its price. (ii)Law of Demand reflects the direction of change in demand , whereas, price elasticity of demand measures the magnitude of change in demand. |
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| 6504. |
Explain the meaning of budget set and budget line |
| Answer» Solution : Budget set refers to the attainable combinations of a set of TWO GOODS, given prices of the goods and INCOME of the consumer. Similarly, if income of the consumer remains UNCHANGED, the budget line will shift to the right when there is a proportionate fall in the prices of both goods X and Y. | |
| 6505. |
Explain the effect on equilibrium price when price of inputs increases. OR The market for cars is in equilibrium. Suppose the price of almunium parts (used in cars) increases. Explain the effect of rise the price of aluminimum parts on the equilibrium price and quantity of cars. (Use diagram) |
| Answer» Solution :When price of inputs increase, ASSUMING no change in other FACTORS, then the cost of production rises. As a result, supply decreases due to fall in the PROFITABILITY level. It will lead to EXCESS demand. This leads to competition among buyers, which raises the price. Increase in price leads to rise in supply and fall in demand. These changes continue till supply and demand become equal at a new equilibrium price. As there is a decrease in supply only, equilibrium QUANTITY will fall, but equilibrium price will rise. | |
| 6506. |
What is MU when TU is maximum ? |
| Answer» Solution :When MU is ZERO, TU is the MAXIMUM and it is the point of maximum SATISFACTION. i.e., point of satiety. When Mu becomes negative, TOTAL utility starts diminishing. This is the AREA of dissatisfaction. | |
| 6507. |
When the price of a commodity falls from Rs. 10 per unit to Rs. 9 per unit , its quantity supplied falls by 20 percent . Calculate its price elesticity of supply. |
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Answer» Solution :Percent change in price `=(-1)/(10)xx100=-10%` Percent change in supply =-20% `E_(s) =("Percentage change in supply")/("Percentage change in price")=(-20)/(-10)=2` |
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| 6508. |
Which changes can cause a leftward shift in the demand curve ? Also state the change, which causes downward movement along the demand curve ? |
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Answer» Solution :(i) Fall in price of substitue goods. (ii) INCREASE in price of complementary goods. (III) Fall in INCOME of the consumer in CASE of a normal good. (iv) Unfavourable changes in tastes and prefernces of the consumer. (v) Expectation of fall in price of the COMMODITY in the future. |
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| 6509. |
Distinguish between fixed and variable costs |
| Answer» SOLUTION :Variable costs vary with the amount produced. FIXED costs REMAIN the same, no matter how much output a company produces. A variable COST is a company's cost that is associated with the amount of GOODS or services it produces. A company's variable cost increases and decreases with the production volume. | |
| 6510. |
An increase in the price of Coffee will have the following effect on the demand curve of Tea : |
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| 6511. |
In what manner does AR of a monopoly firm change as output increases ? |
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| 6512. |
Explain in 'interedpendence of firms' feature of oligopoly. Or Explain 'homogeneous products' feature of perfect cometition. |
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| 6513. |
A monopolist firm has full control over price and demand for his product. |
| Answer» Solution :A MONOPOLIST firm has FULL control over PRICE, but demand of the product is not in his control. The monopolist faces a downward sloping demand CURVE, which indicates that demand varies inversely with price. | |
| 6514. |
Average cost and average variable cost curve coincides when average fixed cost is zero. |
| Answer» Solution :False. AVERAGE COST and average variable cost cannot coincide as DIFFERENCE between them is average fixed cost, which can never be ZERO. | |
| 6515. |
State any three characteristics of a perfectly competitive market. |
| Answer» Solution :The features of Perfect competition are: 1) Very large no. of buyers and sellers: 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 no. that an individual buyer cannot influence the market price. Under such conditions, price of a commodity is determined by the market forces of demand and supply and each buyer and seller has to accept the same price. As a result, uniform price prevails in the market. 2) Homogeneous product: The products offered for sale in the market are homogeneous, i.e., the product sold is identical in all respects like size, shape, quality,etc. Since each firm produces 100% identical products, their products can be readily substituted for each other. So, the buyer has no specific preference to buy from a particular seller only. 3) 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. | |
| 6516. |
Explain the 'Law of Variable factors and fixed factors |
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| 6517. |
What is the relation between market price and average revenue of a price-taking firm ? |
| Answer» SOLUTION :For a PRICE-taking FIRM, market price is equal to average REVENUE. | |
| 6518. |
What will happen to MP, when TP increases at diminishing rate ? |
| Answer» SOLUTION :MP is POSITIVE and DECREASING. | |
| 6519. |
Why averagecost falls upto a greater output level as compared to average variable cost ? |
| Answer» SOLUTION :AVERAGE Cost falls UPTO a greater OUTPUT level because of FALLING average fixedcost. | |
| 6520. |
Explain the feature "few firms" and its implications in an oligopoly market |
| Answer» Solution : Few firms: Under oligopoly, there are few large firms. The exact no. of firms is not defined. Each firm produces a significant portion of the total output. There exists severe competition among different firms and each firm try to MANIPULATE both prices and volume of production to OUTSMART each other.Implication is that the no. of firmsis so small that an action by any one firm is likely to affect the rival firms. So, EVERY firm KEEPS a close watch on the activities of rival firms. | |
| 6522. |
Explain the conditions of equilibrium of a firm based onmarginal cost and marginal revenue . |
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| 6523. |
Discuss the primary reason for 'indeterminateness of demand curve' under the oligopoly from of market. |
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| 6524. |
In case of unitary elastic supply, the supply curve starts from |
| Answer» Answer :A | |
| 6525. |
Define market to good. |
| Answer» Solution :MARKET REFERS where the BUYERS and seller of a commodity COME in contact with each other to effect thetransactions of purchaseand SALE of the commodity | |
| 6526. |
Equilibrium price is the market determined price where demand is equal to supply. However, equilibrium price may not be the best price. Why does government interventation become necessary on a welfare state like India ? |
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| 6527. |
Which of these is a characteristic feature of Monopoly? |
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Answer» SINGLE SELLER |
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| 6528. |
How does TR reactwhen MR is zero ? |
| Answer» SOLUTION :When MR is zero, TR is CONSTANT and MAXIMUM. | |
| 6529. |
A consumer consumes only two goods X and Y both Priced at Rs 4 per unit. If the consumer choose a combination of these two goods with Marginal Rate of Substitution equal to 4, then the consumer will : |
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Answer» BUY more UNITS of X |
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| 6530. |
Define an indifference curve |
| Answer» SOLUTION :Indifference curve REFERS to the graphical representation of various alternative COMBINATIONS of bundles of two goods among which the consumer is INDIFFERENT. | |
| 6531. |
What is meant by equilibrium quantity? |
| Answer» Solution :EQUILIBRIUM QUANTITY REFERS to the quantity at which the quantity DEMANDED of a commodity is equal to the quantity supplied. | |
| 6532. |
Only one indifference curve will pass through a given point on an indifference map |
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Answer» |
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| 6533. |
Primary source of data is preferred to secondary source because |
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Answer» It EXPLAINS DEFINITIONS |
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| 6534. |
Increase in price of substitude good leads to : |
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Answer» EXPANSION in Demand |
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| 6535. |
If both demand and supply increase simultaneously, the equilibrium price will also change. |
| Answer» SOLUTION : If INCREASE in DEMAND is proportionately equal to increase in supply, then EQUILIBRIUM price will remain same. | |
| 6536. |
Equilibrium price of an essential medicine is too high. Explain what possible steps can be taken to bring down the equilibrium price but only through the market forces. Also explain the series of changes that will occur in the market. |
| Answer» Solution :One possibles step can be REDUCE tax on MEDICINE (or alternatively give subsidy). This will bring down cost and in turn 'increase' supply. DEMAND remaining unchanged, a situation of 'excess supply' will emerge which will LEAD to competition between sellers. This will lead to fall in price of the medicine. | |
| 6537. |
As output is increased AVC: |
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Answer» GOES farther away from ATC |
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| 6539. |
In a class of 50 students 10 have failed and their average of marks is 2.5 . The total marks secured by the entire class were 281. Find the average marks those who have passed. |
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Answer» SOLUTION :GIVEN: N = 50, Failed Students = 10 Mean MARKS ofthose who failed = `2.5` Total marks secured by the entire class = 281 Total marks obtained by those who have PASSED = 281 - 25 = 256 Average marks obtained by those who have passed = `(256)/40 = 6.4` Average marks obtained by those who have passed = `6.4`. |
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| 6540. |
A country's resources are fully and efficiently employed. The problem of scarcity exists. What advice will be given to raise the efficiency level of the human resources of light scarcity? |
| Answer» SOLUTION :SPREAD of EDUCATION and TRAINING. | |
| 6541. |
Define index number. |
| Answer» Solution :In the WORDS of Spiegel, "An INDEX Number is a statistical measure designed to SHOW changes in a variable or group of related variables with respect to TIME, geographiclocation or other characteristics." | |
| 6542. |
A rational consumer is called 'rational' because he/she aims at : |
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Answer» Maximizing purchases |
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| 6543. |
State the relation between totalcost and marginal cost. |
| Answer» Solution :Total cost of production of any COMMODITY is the amount of cost incurred for production of that commodity.In other words it is the summation of total FIXED cost and total variable cost at any POINT of time for production .MARGINAL cost on the other hand is the extra amount of cost incurred for production of one extra | |
| 6544. |
The following table gives the marginal product schedule of labour. It is also given that total product of labour is zero at zero level of employment. Calculate the total and average product schedules of labour. |{:("Labour",1,2,3,4,5,6),("MP of labour (units)",3,5,7,5,3,1):}| |
Answer» SOLUTION :
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| 6545. |
When quaritle item is not a rraction. Let us find out the value of Q1 from the following data : |
Answer» Solution : `Q_(1)(N+1)/(4)TH"item"=(19+1)/(4)th` `=20/4th =5th` item. The VALUE of 5th item is RS 56. `thereforeQ_(1)=Rs. 56.` |
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| 6546. |
If (MU_(X))/(P_(X)) gt (MU_(Y))/(P_(Y)), then the consumer should buy more of commodity Y and less of commodity X to reach the equilibrium position |
| Answer» SOLUTION :Consumer should buy more of commodity X as MARGINAL UTILITY (MU) from last rupee spent on commodity X is greater than MU from last rupee spent on commodity Y. | |
| 6548. |
When does the movement along the supply curve occur? |
| Answer» Solution :It occurs, when quantity SUPPLIED change due to change in the PRICE, keeping other FACTORS constant. | |
| 6549. |
What is any combination of the amount of two goods consumed by a consumer called ? |
| Answer» SOLUTION :It is CALLED a 'consumption BUNDLE' or 'Bundle'. | |
| 6550. |
Comment on the shape of the MR curve in case the TR curve is horizontal straight line. |
| Answer» Solution :MR will be ZERO as horizontal TR implies that QUANTITY demanded RISES in the same proportion to FALL in PRICE. | |
