Sample Question Format

(For all courses having end semester Full Mark=50)

KIIT Deemed to be University

Online End Semester Examination(Autumn Semester-2020)

Subject Name & Code: Engineering Economics(HS2002)

Applicable to Courses:[Link]

Full Marks=50

Time:2 Hours

SECTION-A(Answer All Questions. Each question carries 2 Marks)

Time:30 Minutes
(7×2=14 Marks)

Questi Quest Question CO Answer Key

on No ion Mapping (For MCQ
Type( Questions only)
MCQ/
SAT)
[Link]: MCQ 1. Four central problems of an economy CO1 (b)
1 are what to produce,
----------------------------, for whom to
produce and Economic growth
problems.
(a) Who will to produce
(b) How to produce
 (c) When to produce
(d) Where to produce

MCQ 2. Which of the following pairs is a CO1 (b)

substitute?
(a) Mobile phone and charger (c)
Salt and pepper
(b) Wool and cotton (d)
Tea and sugar

MCQ 3. ----------- goods are the goods whose CO1 (d)

demand is negatively related to income.
(a) Complement (c) Normal

(b) Substitute (d) Inferior

MCQ 4. Movement along the demand curve CO1 (d)

arises because of change in the
-------------------.
(a) Consumer’s income (c)
Taste and preference of the
consumer
(b) Prices of related goods (d)
Price of the good itself

[Link]: MCQ 5. Demand function for a commodity X is CO2 (a)

2 QX = 10,000 – 5PX (QX = Quantity
demand for the commodity X, PX =
Price of the commodity X). If price of
the commodity is ₹ 200 per unit, then
elasticity of demand is ----------.
(a) 0.1 (c) 2
(b) 0.13 (d) 2

MCQ 6. Demand function for a commodity is CO2 (b)

given as Q = 3000 + 25Y (Q = Quantity
demand for the commodity, Y = Income
of the consumer per month). If a
consumer’s monthly income is ₹
42,000 per month, then income
elasticity of demand is ----------.
(a) 0.5 (c) 0.7
(b) 0.9 (d) 0.4

MCQ 7. If demand for coffee increases form CO2 (c)

5000 units to 6000 units due to a rise in
 the price of tea from ₹ 300 to ₹ 350 per
250 grams pack, then cross elasticity of
demand between tea and coffee will be
--------.
(a) 4.5 (c) 1.2
(b) 1.5 (d) 3.2

MCQ 8. If with the increase in the price of a CO2 (c)

good from ₹ 30 to ₹ 50, quantity
demand for that good decreases from
1000 units to 800 units, then price
elasticity of demand will be -----------.
(a) 0.8 (c) 0.3
(b) 0.06 (d) 0.5

[Link]: MCQ 9. A person invests an equal sum of ₹ CO2 (a)

3 20,000 at the end of every year for 15
years. If the interest rate is 8%
compounded annually, then the maturity
value of his account is-----------------.
(a) ₹ 5,43,042.2 (c) ₹ 4,23,050.3

(b) ₹ 7,35,060.7 (d) ₹ 6,20,040.5

MCQ 10. A company takes a loan of ₹ 60,00,000 CO2 (c)

at 9% interest rate compounded
annually. The installment amount is
--------------- as the number of
installment s 20.
(a) ₹ 5,26,275 (c) ₹
6,57,150
(b) ₹ 4,30,000 (d) ₹
5,20,160

MCQ 11. If a credit plan charges 25% interest rate CO2 (d)
compounded annually, then the
effective interest rate is---------------- as
the compounding is quarterly.
(a) ₹ 25.23% (c) ₹26.45%

(b)₹ 24.62% (d) ₹ 27.44%

MCQ 12. --------------- is the future value of ₹ CO2 (b)

3,00,000 after 10 years at11% interest
rate compounded annually if the
compounding is monthly.
 (a) ₹ 7,52,432.5 (c) ₹ 9,45,856.8
(b) ₹ 8,96,672.6 (d) ₹ 6,23,678.9

[Link]: MCQ 13. When plotting marginal and average CO5 (d)
4 product curves, the ------------ product
curves always crosses the ------------
product curve at its -------------- point.
(a) average, marginal, minimum
(b) marginal, average, minimum
(c) average, marginal, maximum
(d) marginal, average, maximum

MCQ 14. When output increases in higher CO5 (b)

proportions than the increases in inputs,
the returns to scale are -------------.

(a) decreasing (c) negative

(b) increasing (d) constant

MCQ 15. Which of the following statements on CO5 (c)

the relationship between total product
(TP), average product (AP), and
marginal product (MP) is incorrect?
(a) TP reaches a maximum when the
MP becomes zero.
(b) AP reaches a maximum, before TP
reaches a maximum.
(c) AP continues to rise, so long as TP
is rising
(d) MP cuts AP at the maximum point
of AP.

MCQ 16. In the short-run, product curves have all CO5 (b)
the following characteristics, except
------------
(a) total product is at its maximum
when marginal product equals zero.

(b) total product begins to decrease

when average product begin to
decrease.
(c) average product is at its maximum
when average product equals
marginal product
(d) when the average product equals
the marginal product and both are
positive, then total product must be
 rising.

[Link]: MCQ 17. In the short-run, a firm which produces CO5 (a)
5 200 units of output has an average total
cost of ₹ 500 and average variable cost
of ₹ 300. The firm’s total fixed cost
is-------------.
(a) ₹ 40,000 (c) ₹ 4,000

(b) ₹ 30,000 (d) ₹ 50,000

MCQ 18. A firm has total cost of production of ₹ CO5 (c)

200,000 by producing 500 units of
output in the short-run. If average fixed
cost is ₹ 100, then average variable cost
is--------------.
(a) ₹ 500 (c) ₹ 300

(b) ₹ 400 (d) ₹ 600

MCQ 19. A firm has average cost of ₹ 50,000. If CO5 (a)

the total fixed cost and total variable
cost of the firm are ₹ 60,00,000 and ₹
40,00,000 respectively in the short-run,
then the firm produces ----------- units of
output.
(a) 200 (c) 300
(b) 400 (d) 600

MCQ 20. If a firm produces 1000 units of output CO5 (a)

having average fixed cost of ₹ 600 and
average variable cost of ₹ 400 in the
short-run, then firm’s total cost of
production is --------------.
(a) ₹ 10,00,000 (c) ₹
12,00,000
(b) ₹ 15,00,000 (d) ₹
20,00,000

[Link]: MCQ 21. A firm has a cost function of C = 10 + CO4 (a)

6 30Q – 2Q2 in the short-run under
perfectly competitive market. If price of
the product prevailing in the market is ₹
10, then firm will maximize its profit
with --------- units of output.
(a) 5 (c) 8
 (b) 6 (d) 10

MCQ 22. If a firm under perfectly competitive CO4 (b)

market has a revenue function of TR =
5Q and cost function of TC = 50 + 15Q
– 5Q2, then at ---------- level of output
firm will maximize its profit.
(a) 2 (c) 4
(b) 1 (d) 6

MCQ 23. A monopolist has a demand function of CO4 (a)

P = 20 – 5Q and cost function of TC =
500 + 160Q – 40Q2 in the short-run. At
--------- level of output the monopolist
will earn maximum profit?
(a) 2 (c) 6
(b) 4 (d) 8

MCQ 24. A firm has a cost function of C = 10 + CO4 (a)

30Q – 2Q2 in the short-run under
perfectly competitive market. If price of
the product prevailing in the market is ₹
10, then firm will maximize its profit
with --------- units of output.
(c) 5 (c) 8

(d) 6 (d) 10

[Link]: MCQ 25. ----------- - Depreciation is NDP. CO6 (c)

7 (a) GNP (c) GDP

(b) NNP (d) GNPFC

MCQ 26. GDPMP + NFIA is ------------------. CO6 (d)

(a) GNPFC (c) NDPMP
(b) NNPMP (d) GNPMP

MCQ 27. GNPFC + ----------------- = GNPMP CO6 (b)

(a) Depreciation
(c)NFIA
(b) Net indirect taxes (d) Subsidy

MCQ 28. NNPFC + ----------- = GNPFC CO6 (a)

(a) Depreciation
(c)NFIA
(b) Net indirect taxes (d) Subsidy
 SECTION-B(Answer Any Three Questions. Each Question carries 12
Marks)

Time: 1 Hour and 30 Minutes

(3×12=36 Marks)

Questi Question CO
on No Mappi
ng
(Each
questio
n
should
be
from
the
same
CO(s))
[Link] (a) Explain the Law of Demand. [2x6] CO2
(b)From the following information forecast sales for the year 2021 and 2024.
Year 2015 2016 2017 2018 2019 2020
Sales(in 25 32 47 53 70 85
000)
(a) Explain Degrees of elasticity of demand with suitable diagrams.
(b) Distinguish between percentage method and Arc method of
measuring elasticity of demand.
(a) A firm is facing the following demand function:
Q = 2,00,000 – 500P(Where Q is the quantity and P is the price of the
commodity per unit)
Find out:
(i) MR function
(ii) AR function
(iii) Price and quantity at which TR will be maximum.

(b) Distinguish between change in supply and change in quantity

supplied with suitable diagrams.

[Link] (a) Explain the law of variable proportion with suitable diagrams. Co5
[2x6
]
 (b) (i) From the following table find out MRTSLK and MRTSKL
Combination Labour(L) Capital(K)
A 10 20
B 15 19
C 19 18
D 22 17

(ii) Distinguish between increasing returns to scale and constant returns to

scale.
(a) Explain short-run equilibrium of a firm under perfectly competitive
market with suitable diagrams.
(b) A company has following sales and profit in 2010 and 2011.
Year Sales(in ₹) Profit(in ₹)
2010 2,50,000 50,000
2011 2,90,000 70,000
Find out:
(i) P/V ratio
(ii) Fixed cost
(iii) Variable cost in 2010
(iv) BES(Break Even Saes)
(v) Margin of safety in 2011
(vi) Sales required to have a target profit of ₹ 30,000

(a) A machine has been purchased at ₹ 1,00,000 with estimated

salvage value of ₹ 10,000 at the end of 7 year of its service life.
Find the depreciation amount and book value of the machine for
various years using straight line method of depreciation.
(b) An equipment has initial cost of ₹ 2,00,000 having an estimated
life of 5years. Find out the depreciation amount and book value for
various years using declining balance method of depreciation if a
fixed rate of depreciation is 20%.
[Link] (a) From the following table find out which project will be selected on the Co4
basis of present worth method if i = 12% compounded annually.
[2x6]
Particulars Project1 Project 2
Initial Cost(in ₹) 5,00,000 6,00,000
Life(in years) 20 20
Annual equal income(in ₹) 60,000 70,000
Salvage value(in ₹ ) 2,000 3,000

(b)From the following information find out which alternative will be

selected on the basis of annual worth method if i = 20% compounded
annually.
Particulars Alternative Alternative Alternative C
A B
Initial 2,00,000 3,00,000 4,50,000
Cost(in ₹)
Life(in 15 15 15
years)
Annual 40,000 55,000 60,000
maintenance
cost(in ₹)

(a) From the following table find out which machine will be selected
 on the basis of future worth method if i = 15% compounded
annually.
Particulars Machine A Machine B
Initial cost(in ₹) ₹ 6,00,000 ₹ 7,00,000
Annual equal ₹ 8,00,000 ₹ 2,50,000
return(in ₹)
Life(in years) 20 20
Salvage 3,000 4,000
value(in ₹)

(b) Consider the following table which summarizes data for two
alternatives.
Particulars First cost Annual return Life
Alternative 1 ₹ 5,00,000 ₹ 1,50,000 10 years
Alternative 2 ₹ 8,00,000 ₹ 2,50,000 10 years
Find the best alternative based on the basis of Net Present value method
if i = 15% compounded annually.
(a) A producer wants to purchase a machine. There are two machines
available in the market whose initial cost is ₹ 10,00,000 each. From
the following information find out which machine will be selected
on the basis of Pay-back period method.
End of year Cash inflow from Cash inflow from
machine A(in ₹) machine B(in ₹)
1 50,000 90,000
2 2,50,000 1,20,000
3 4,00,000 3,50,000
4 6,00,000 7,00,000
5 8,50,000 9,00,000

(b) A government is planning a hydroelectric project for a river basin.

Besides the production of electric power, this project will provide
flood control, irrigation and recreation benefits. The estimated
benefits and costs expected form the three alternatives under
consideration are listed in the following table:
Particulars A B
Initial cost(in ₹) 10,00,00,000 15,00,00,000
Annual equivalent benefits
and cost
(i) Operating and
maintenance
cost
20,00,000 30,00,000
(ii) Power
sales/year

1,00,00,000 1,50,00,000
(iii) Flood control
savings

30,00,000 40,00,000

(iv) Irrigation
benefits 40,00,000 55,00,000

(v) Recreation
benefits
15,00,000 35,00,000
 If the interest rate is 10% and the life of the projects is estimated to be 40
years, by comparing thee BC ratios, determine which project should be
selected.

[Link] (a) Explain the monetary policy of controlling inflation. CO5

[2x6]
(b) From the following information find out GNPFC and NNPMP.

Particulars ₹(in crore)

GDPMP 400

Net Factor Income

from Abroad 100

Depreciation 50

Net indirect taxes 150

(a) What is inflation? Explain causes of inflation.

(b) A country has GDPMP of ₹ 200 crore, Net factor income from abroad of
₹ 70 crore, subsidy of ₹ 20 crore and tax of ₹ 30. Find out GNPMP and
NNPFC if consumption of fixed capital is ₹ 25 crore.
(a) Explain the fiscal policy of controlling inflation.

(b) From the following information find out GNP and NNP.

Particulars ₹(in crore)

Consumption 2000

Investment 1500

Government expenditure 500

Net export 1200

Depreciation 80

Net Factor Income

from Abroad 400

Paper Setter: Mamita Dash

Moderator: Dr. S. Palit