\t Year [Link], Semester - | se) gt MICROECONOMICS YW Date: 29/09/2012 (All Rooms) : Time: Ihr.30 mins Marks: 50 Group-A an Answer any FIVE questions (2x5=10) What do you mean by ‘opportunity cost? ‘Substitution Effect is always negative”. Explain. Show that two demand curves with the same slope can have different elasticities. A firm raises the price of its product, but its revenue falls. What can you conclude about the price elasticity of demand for the product? Explain, How is the supply of a commodity affected due to an increase in the price of another “commodity, which is a substitute in production? Explain, Explain the concept of consumer surplus with the help of a suitable diagram. Distinguish between [Link] scale and returns to a variable factor. What do you mean by ‘prohibitive tariff”? Explain with the help of a diagram. \ aeye PND Group-B Answer any FOUR questions (10x4= 40) 9.a) “All Giffen “goods are Inferior but not all Inferior goods are: Giffen”. Explain the statement by using the concepts of income effect and substitution effect. b) State and explain some exceptions to the law of demand, ©) _ Show that price elasticity of demand varies continuously on a straight line downward sloping demand curve. . GH3+4) 10.a) The generalized demand function for a commodity x is given as follows: Dx = 2,500,000 — 5000 Px— 1.50M — 240Pk. Here ‘Px’ is the Price of X, ‘M’ is the average income of the consumers, and ‘Ps is the price of the related commodity. The initial values are Px = Rs. 200, M=Rs 60,000, Pr =Rs. 100. i) Derive the ordinary demand function for X ii) Plot the demand curve graphically. iii) What is the impact of a charge in M to Rs50,000. Show graphically. iv) Calculate the price elasticity of demand at the initial values. Comment on the change in total revenue due to the change in its own price. (1414242419 b) Explain the concept of producers’ equilibrium. oO 11.a) The demand and supply functions of gasoline are given as follows: Qo = 150-50P . Qs = 60+ 40P Here Price is measured in Re/gallon and the quantity in billion gallon/year. i) Determine the initial equilibrium price-quantity combination. ii) Find out the impact on the equilibrium quantity and price of a subsidy of Re. 1 per gallon. (24>1) 12.2) b) i) ii) iii) iv) 13.) i) ii) b) a) b) c) dq) A minithum support price is guaranteed to the farmers producing tice. Show ang explain the market effects and welfare effects graphically. 6) Explain intuitively and graphically the relation between AP, and MP, @) The short run production function is given as: Q=10L + 24L?-L3 Compute the expressions for AP; and MPL At what level of employment, APzis maximum? Verify that at max AP, APL= MP. At what level of employment, MP is maximum? (2+2+142) Under what situations, the burden of a specific tax falls: mostly on consumers? mostly on producers? Explain with the help of appropriate diagrams. (244+2%) Analyse the impact of the imposition of an import tariff and compute the dead weight loss. (5) Write short notes on any two of the following: (545) Baumol’s model of revenue maximization. Properties of Isoquants. Price Control and its effects. Williamson’s model of managerial utility maximization.‘Semester —1 Ma MICROECONOMICS 28.09.13 can oe TIME 1:30 Hrs Answer questions (any Five): |. What do you mean by opportunity cost? G39 > a the principle of marginal decision-making. ne ae of demand is the same as the slope of the demand curve.” State true or false and 4. The price elasticity of demand for two-wheelers is ~ 2.2. Ifthe price is slashed by 10%, what would be the expected percentage increase in the quantity demanded? 5. What do you understand by “deadweight loss", 6. Prove that two isoquants can never intersect. 7. “IFAPL rises, MP, also rises.” State true or false with proper justification. 8. Explain the shape of AFC curve. a Group-B ‘Answer questions (any four): 4x 10) 9.) Thailand’s chicken population was recently inflicted with bird flu, but the production of mutton, remained unaffected. What is the effect on: (i) the market demand and market supply of mutton.” Gi) the equilibrium price of mutton. e+) b) Explain the difference between shift in the supply curve and a movement along a supply curve. @ ©) “All Giffen goods are inferior, but all inferior goods are not Giffen.” Justify the statement. (3) 10a) Suppose the demand curve fora producer is given by Qxe= 10—2Px + Ps, where Px isthe Price of the product and Ps is the price ofa substitute product. The price ofthe substitute is fixed at Rs 20. a) AtPa=Rs 10, find out point price elasticity of demand and point eross price easiciy of demand. (’+1%) ii). Suppose that Py falls to Rs 5. Caleulate the are price-lasticity of demand, @ Show that output maximization subject to cost constraint and cost minimization subject to output constraint yield the same result. © 11a) In the 1980s it was seen that price controls created large shortages of LPG. Discuss about the welfare effects of this policy, using a suitable diagram. ©)») 12a) by 13.a) 14, b) A large tax was imposed on petrol, both to raise government revenue and to reduce oj, ‘ . ©) Consumption. Discuss about the market effects and welfare effects of the tax. a itable diagram. Compare with Analyse the market effects and: welfare effects of tariff using a suitable diagram. ae quota. a in order to cover the A State Electricity Board wishes to increase the electricity tariff rates in order ae increasing costs. However, the Board is reluctant to raise the tariff rates due to the expect . there might be a decrease in revenue, Comment on’ the price elasticity of demand for electricity. Justify your answer. 9 {Intemational Publishing Agency has kept the following data on labour input and production of textbooks, LABOUR INPUT OUTPUT OF BOOKS (TP) T 50 110 \ 210 280 300 310 @| =] ef of af ey Compute the series of APL. and MP, Does production function exhibit diminishing returns to variable factor? {Identify the level of employment at which AP; attains maximum and verify that APL imax = MPL. iv) Show that MP, attains maximum before AP, GH+I+1) Derive the relationship between AC and MC. 4) Write short notes on (Any two) 6+5) a) Expansion path of the Firm, b) Long Run Average Cost Curve (LRAC). ©) Convexity of Isoquants. 4) Price mechanism.CIA SEMESTER 1 ue DURATION: | Hrs 30 Min MICRECONOMICS-I SV 2409/14 , 9 FULL MARKS: 50. P : Al nswer any 5 of these questions: (2x5=10) xS= 1. What do you You understand by the Opportunity cost of a commodity? 2. What is meant by marginal decision-making? 3. “The demi ity varies di it oc rae ‘and for a commodity varies directly withthe expected price in the next period” 4. State and explain any two factors affecting price elasticity of demand. 5: What is implied by “two commodities being substitutive in prodiction”? 6. What is meant by deadweight loss of any government intervention? 7. State the Law of Variable Proportions, 8. What is meant by returns to scale? GROUP ~B Answer any 4 of these questions: (4x5=20) 9. — State and explain the main characteristics of the price mechanism. 10, “Alll Giffen goods are inferior, but all inferior goods are not Giffen” — Explain using the concepts of substitution effect and income effect. 11. State and explain any three exceptions to the Law of Demand. 12. Analyse the welfare effects of tariff with the help of a suitable diagram. 13, Suppose a chair manufacturer is producing in the short-run (with its existing plant and equipment). The manufacturer has observed the following levels of production corresponding to different numbers of workers (i-¢., variable factor): ‘Number of Workers Number of Chairs 10 18° 24 28 30 28 25 [alps] — | | 2) _Caloulate the marginal product and average product of labour, for this production process. b) _ Show that the marginal product reaches its maximum before average product. ©) Does this production function exhibit diminishing returns to variable factor? Explain,nj . i to become a Expo inuitely about what might have caused the marginal product of labour to bertint 14, State and explain the properties of isoquant. GROUP—C E Answer any 2 of these questions: @x10=20) 15, a. A large tax was imposed on gasoline by the US, both to raise government revenue and to reduce oil consumption (to reduce US dependence on oil imports). ‘The Gasoline demand and supply functions are estimated as follows: Qo = 150'-S0P D : Qs = 60440 P is measured in dollars and quantity in billion-gallon / year. Determine the equilibrium price and quantity in the pre-tax situation. Determine the impact on price and quantity of a per-unit tax of 50 cents — per gallon. q 14455 b. Analyze the market effects as well as the welfare effects of a prige support given to the farmers producing wheat. 16. a, Explain using a suitable diagram, the three stages of a short-run production process. Why is it ‘that a producer always operates in the second stage? S+1=6 . Show diagrammatically, the determination of the optimum input combination in the long-run, when the producer maximizes output subject to the cost constraint. 4 17, Assume that there is a well defined geographic area of a city. The area is composed exclusively of apartments and is populated by low-income residents. The people who live in the area tend to stay in that area because 1) They cannot afford to live in other areas of the city” 2) They prefer to live with people of their own ethnic group or 3) There is discrimination against them in other areas of the city. Rents paid are a very high percent of people’s income. a) Would the demand for apartments in that area be relatively elastic or relatively inelastic? ‘State with reasons. b) Would the supply of apartments in that area be relatively elastic or relatively inelastic? State with reasons. ¢) Draw the demand and supply curves as you have described them showing initial equilibrium price and quantity, 4) Now assume that the Government decides to provide a building subsidy to people who build apartments in this low income area, A certain percent of their costs will be paid by the Government. Analyze the results of this programme, Show the results on the graph and explain what will result, 2424244)CONTINU! RNAL ASSESM1 MICROECONOMICS I SEMESTER, _B.COM (MORNING) ST. R’S. LEGE (AUTONOMOUS), KOLKATy TIME:1 %HR DATE : 03/10/15 FM. :50 marks . Answer any FIVE questions: (2x5=10) 1. Explain the relation between the concepts of scarcity and choice. % 2. Wint do you understand by ‘thinking at the margin’ ? by 3. What is meat by MRTS in the context of long run production ? 4. How is the supply ofa good X changed if there i a change in the price of another an good which is its substitute in production, say ¥?—« Ryha Ayr aoe and interpret the relation between the slope ofthe démand curve and the price elasticity of demand. State the Law of Variable Proportions. « ‘What ‘do you mean by ‘homogenous production function’ ? If TC= 100+4Q, compute the expfession of AFC and comment on its shape. 3m GROUP -B (x42 20) codele te combed Jere abutick HPL PL Ae q ify th sonont a:ing 11. Diseuss the welfare effects of a minimum support price provided to the farmers producing rice. 12, ‘The generalised demand function for a good Xis given as: Qu= 60 - 2P, + 0.01M + TP ’) Is good X normal or inferior? Explain. = N ii) Are goods X and R substitutes or complements in consumption? Explain. clesticity of demand at P,=$ 100, M = $40,000 and Px = S 0 is prices? RTS) is less than the slope of isocost ¢ w explain the necessary adjustment to ensure producers’ 13. If the siope of iseau: using suitable diagr equilibrium. 14, Derive mathematically the relation between AC and MC and interpret =) pmAnswer any TWO questions : (lo x2=20) 15, a) The market for a commodity is represented by the following functions: py 5. 3 Demand : Go> FH ‘Where, P is the price in dollars and Q is the quantity in thousands of units. 022 i) ‘Determine the market clearing price and quantity during pre subsidy context. 5° ia} s ii) A subsidy of $ 1 is provided by the government to the producers of the 85 2 commodity. Find out the new equilibrium price ad quantity. § 225 joi), Comment on your results. . (2+34+2=7) v KT b) If the demand curve is relatively inelastic, analyze the distribution of ‘specific o pp tax burden on producers and consumers in the context of demand-supply oN? framework. 16, a) Explain why isoquants are convex to the origin. b) Using suitable diagram, derive the expansion path. ) Compute the nature of returns to scale for the production function given by, Q=K"L 2 (444 42=10) 17. a) If Q=KL and w=Rs2& r=Rs5, calculate the minimum cost when the output (Q) is 80 units. 5 b) Construct and explain intuitively the nature of short run cost curves 5CONTINUOUS INTERNAL ASSESMENT [ICROECONOMICS I SEMESTER ],__B.COM (MORNING) ‘T. XAVIER’S COLLEGE (AUTONOMOUS), KOLKATA TIME :14HR. F.M. : 50 marks DATE : 29/ 09/16 GROUP-A Answer any FIVE questions: @x5=10) 1. Explain the concept of opportunity cost. 2. What do you understand by marginal decision making? 3. “The demand for a commodity increases with an increase in its expected price, ic., Pe”. Is this a violation to the Law of Demand? Give reasons for your answer. 4. How is the supply of a good X changed if there is an increase in the price of another good which is its substitute in production, say Y? 5. Determine the point elasticity of supply on @ straight line Supt intercept on the vertical axis. ply curve having @ positive 6, The price elasticity of demand for cars is 1. Iter sa desreass in its price, what will be sts effect on the total revenue of a firm producing cars? qLag THY TA? 7. A demand function is given as : = 30-4. Determine are price elasticity of demand when price increases from $3 to $5. jea\> Wer xr 8, Explain the nature of AFC curve. GROUP -B Answer any FOUR questions : (6x4=20) 9. Prove that the price elasticity of demand varies from point to point along a linear demand curve. 10, “All Giffen goods are inferior, but all inferior goods are not Giffen” - Justify this statement using substitution effect and income effect. 11. Analyse (using a proper diagram), the welfare effects of @ per unit tariff on the importing country. 12, The generalised demand function for a good X is given as: Qy= 60 ~ 2P; + 0.01M + 7Pa. “The values are given as follows : P, =$ 100, M = $40,009 and Px = $20. i) Is good X normal or inferior? Explain. wv ii) Are goods X and R substitutes or complements in consumption? Explain. 5 iii) Find out the price elasticity of ‘demand at the given set of values. iv) Find the cross-price elasticity and income elasticity at the given situafioh. L y (1414142 = 5) a y PTO a?a : ‘ cess. 13-Explain the stages of production, as relevant in a short-run production Pr. r inal cost. 4. Derive mathematically the relationship between average cost and mare} GROUP —C Answer any TWO questions : Ce 15. a) The market for a commodity is represented by the following functions = Demand : Qp = 600 - 4P. Supply: Qs =- 600+ oP. 1? where, P is the price in dollars and Q is the quantity. yd oe i) Determine equilibrium price and quantity at the free market equilibrium. we” ii) A subsidy of $ 5 per unit is provided by the government to the producers of the a iS commodity. Find out the effects. Wwe ee ili) Show the sharing of the benefits of this subsidy between the buyers and sellers. Q+3+2=7) b) State and explain any three exceptions to the Law of Demand, GB) 16. a) Discuss the property of convexity of an isoquant. | b) Explain the attainment of producer’s equilibrium in the long run by minimising cost subject to output constraint. ot ¢) Ifa production function is Q = 8L'? + 20K"? and w=l, r=5, find out the equation of 1 oe expansion path. wo - ar aer roy” Re 17. a) Determine the retums to scale of the following production functions: i) Q=SL4+3K*.. gtd ii) Q=LI4K, Os b) Represent diagrammatically the derivation of the SAC curve from the AVC and AFC curves. ©) A cost function is given as follows: TC = 10Q ~ 40Q?+ 2Q°. Determine the levels of output at which MC andAC are minimised, (2+5+3=10) 3 UTD aA, Q 28 45/ De -L Tet : 3HRS CONTINU DEPAR’ eta INTERNAL ASSESSMENT OF COMMERCE (MORNING) MICROECONOMICS GROUP-A y - Answer any FIVE 1) What is [5X3=15] 2) Sow i aoe eneta Geee 3) es can never intersect. d head do you mean by the Axiom of Dominance? he relationship between the average product of a variable factor and average variable 5 cost with the help of a suitable diagram. . )) What is an expansion path? Or ‘What is production externality ? 8) an ror ‘a current affairs book is given by Q = 20,000 ~ 300P. The book is initially priced a) Compute the point elasticity of demand at P = Rs. 30/- ) Ifthe objective is to increase total revenue, should the price be increased or decreased. 7) Why a perfectly competitive firm is a price taker? Or State the features of public goods. 8) Drawthe indifference curves for : i) Perfect complements. ii) Air and Pollution iii) Dust and Noise GROUP :B ‘Answer any SEVEN [7X5=35] 9) What is Price Consumption Curve ( PCC)? Derive using suitable diagram the nature of PCC incase of Giffen good. 10) 1Q=K°L* be the production function and 100 = 4K + 2L be the cost function. Compute the equilibrium levels of capital and labour so as to maximize output. 11) Construct the short-run average cost curves and explain their shapes. 12) Using the Axioms of Ordinal Utility Analysis, derive the Indifference curve. 13) The average variable and marginal cost functions ‘of a competitive firm are :- AVC = Q- 10Q+30 Determine the price below which the firm will shut down production. 14) Using indifference curves and budget. line, explain the impact of a rise in spendable ineome on equilibrium purchases of good X and good Y , when both are Normal goods. 15) Explain mathematically the relationship between ‘Average productivity of labour (AP) and marginal productivity of labour (MP1). PTOvo , 16) A firm’s cost curve is C= 104 ~ bq? + @, where b> 0 At What level ofoutput isthe AC minimized. (2) Dota thet level of output is MC mini GI '7) Explain the short run equlibies analysis for a perfectly competitive firm o What do you mean by, “Tragedy of Commons’ ? GROUP: C Answer any THREE [3X 10=39] '8) Consider the following demand funtion: ; 4‘x =-10P.+0.02M+5 P, +27 tae P= Price ofthe good x ; Me income = pce fs related good ; T = A quantitative index of taste 7) othe demand function when M= 10000, P= 20 .T=5 il) Hen PaPPens tothe demand curve when inom rset 12000 9 iii) How are Py and quantity demand ) Compute own price, cross price 10000, P= 20 ,T=5, v) Comment on the results, led for good X related ? and income elasticity of demand at Px= 10, M= [242414441] 19) Derive the long run average cost (LAC) with the help of short run average cost (SACs), Relate the shape of LAC with returns to scale, [644] 20}. Define income effect and explain the decomposition substitution effect . With the hel n of price effect into income effe case of normal good. Ip of a proper diagram -ct and substitution effect in B+] of Variable Proportion with a diagram. lain the three stages of production in the short run, (e) What is the operative stage of the producer and why 2 22), (@) Let U = XY be the utility function and Py= the equilibrium quantities of X and Y. If levels of X and Y, [54349] 5 and Py= 1 and M= 120 . Determine Mises to 1 60 , determine equilibrium b) Distinguish between the [3+3] and rotation of the is concepts related to shift of the isocost line. isocost line (4)ci st ae INTERNAL ASSESMENT WY = SS COLLEGE (AUTONOMOUS), KOLKATA 7 MICROECONOMICS (BCHGE130) SEMESTER 1. COMMERCE (MORNING) TIME : 3 BRS. ' : 18 Full Marks : 80 marks ee GROUP=A Answer any FIVE questions: (@x5=15) 1. What do you understand by marginal decision making in economics? Ilustrate with examples. 2. Differentiate between explicit costs and implicit costs. In this context, define opportunity cost Py Qt= 3. State the Law of Variable Proportions. 4, A demand function is given as : P(Q) = 200- 4Q. Determine the price elasticity of demand : i) At P = $20, and ii) When price changes from P = $20 to P= $30. (5+1.5=3) 5. “A Giffen good is always an inferior good but not vice versa” Justify the statement. 6. Draw an indifference curve between red body coloured and black body coloured pens, both having blue coloured ink, and the consumer having no preference for any particular body colour of the pens. Justify. .. Styo ssoguants can never intersect or touch each other”. Explain, using a proper diagram. 7 8. Draw and explain the shape of the Average Fixed Cost (AFC) curve. 5. “The Government of India decides to implement a prostate of minimum support prices (MSPs) for cotton production”. Represent this, using = suitable diagram. GROUP -B ‘Answer any SEVEN questions : (5x7=35) 10. Explain the Axiom of Dominance and hence show that an indifference curve is negatively sloped. 11, The utility function of a consumer is taken as + U(x 9) = @t1)(9#2)- The prices are given as Py = $8, Py = $4. The nominal income of the consumer is M=$240. i) Determine the equilibrium levels of purchases of x and y. ii) Find out the maximum utility that is attainable, given the prices and nominal income. (441=5) 12. a) What do you understand by income consumption curve? ») Plot an income — consumption curve when good X is a normal good, but good ¥ becomes an inferior good after a certain level of income. ¢) Plot the Engel curves for the two goods — X and Y. (14+24+2=5) 13, Prove the following : 2) Two parallel linear demand curves have different price elasticities of demand at a particular price level. 5) A Linear demand curve has a constant slope at all its points, but the price elasticity of demand varies from point to point. (Q25+25=5) PTO14. a) Det ) Define returns to scale. How is it different from retums toa variable factor? b) i : NQ=25 ou S to scale for the following production functions: DOs Ces LV KL (14+2+2=5) 15. Consider the followin, 7 d 1g long-run total cost function: C = 1000Q - 40Q* + 20°. a) Determine the LAC and LMC functions. b) Find out the level of output at whi nimi it ©) Show that: min LAC= EMC. “ACs minimised owen ee three stages of short-run production, with the help of a suitable diagram. Also ‘on the reason for the second stage to be considered as the most efficient stage of short-run production, re 17a) pa mathematically, the relationship between average cost (AC) and marginal b) Represent this relationship between AC and MC curves, using a proper diagram. : ; (44+1=5) 18. Using a suitable diagram, discuss the welfare effects of a price control policy implemented by the government of a country, GROUP ~C Answer any THREE questions ; (10x 3=30) 19. a) Define Price Effect, Substitution Effect and Income Effect. b) “ Substitution Effect is always negative” — Justify. ¢) “Income Effect is positive for normal goods, but negative for inferior goods” — Why ? 4) Represent using a diagram and explain, the decomposition of price effect into the substitution and income effects, for a normal good. G+1+1+45=10) 20. a) The generalised demand function for a good X is given as Qu = 60-2Px + 0.01M + 7Pr. i) Is good X normal or inferior? Explain. ii) Are goods X and R substit. tes or complements in consumption? Explain, iii) Find out the point price elas.'city of demand at P, = $ 100, M=$40,000 and Pa=$20. iv) _Isit justifiable for the firm to increase its price? Why? (1414242 = 6) ») Represent diagrammatically, any two shapes of the price-consumption curve (PCC) of X and determine the price elasticity of demand for X , for the two cases. “a 21. a) Define MRTS ix - b) “ An isoquant is strictly convex to the origin” ~ Explain. ©) Can an isoquant be a negatively sloped straight line? Why, or why not? (2+6+2=10) 22. a) Represent diagrammatically and explain the attainment of producer’s equilibrium on the basis of output maximisation subject to a cost constraint. b) Discuss expansion path. (6+4=10) 23. The market demand and supply functions of a commodity are given as follows — Q? = 150-5P_ and Q°=60 +4P. a) Determine the free- market equilibrium price and quantity. 'b) ‘The Government now decides to impose a tax of $5 per unit of the commodity, Determine the price paid by the buyers, price received by the sellers and the post-tax equilibrium quantity. ¢) Determine the burden of tax on the buyers and the sellers. (24642 =10)