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I B-JFT-M-HF A I
GENERA L ECONOM ICS - I

T ime Allowed : Three /lours J Maximum ｍ ｡ ｲｬｾｳ＠ : 200 J

INSTRUCTIO NS

The question paper consist.<; of three Section.<;.

Candidates should attempt EIG1/'J' paris of the
question in Sec tion 1, ｔｉｾｎ＠ que.r.;tions from
Section II and TWO questions from Section III.
Candidates should attempt questions as per the
in.r.;lructiom; given in each Section.
The number of' marks carried by ＼ｾ｡｣ｨ＠ question
is indicated in each S ection.
Answers must be written only in ENGLISH.
Any as.r.;umptions made for answering a
question must be mentioned clearly.
Any diagrams/gra ph.-; to be drawn for
answering any question are to be made on the
answer book itself' and not on a separate
graph sheet.
All parts/sub-pa rts of a question being
attempted must be completed before moving on
to the next question.

B-JFT-M-HFA !Contd . l

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 ' ....
SECTION I

1. Answer any eight of the following parts. Each answer

should be in about 50 wor·ds. 5x8=40

(a) Distingui sh between Mars hallian and Wah·asian

stabili ty analysis.

(b) Discuss "!\'"ash-equ ilibrium" for non-collu sive

firms.

(c) What a re the basi c features and the limitation s

of Leontiefs input - output model ?
(d ) How can you measure income ineq uality by using
Lorenz curve method ?

(e) Suppose you have a demand fun ction for milk of

m
the form x 1 = 100 + - - - and your weekly
100 pl
income (ml ｩｳｾ＠ 12,000 and the price of milk (p 1l
is ｾ＠ 20 per lit re. Now suppose the price of m ilk
falls ｦｲｯｭｾ＠ 20 ｴｯｾ＠ 15 per litre , then what will be
the substituti on effect ?

(D Explain 'dead-wei ght' loss in a monopoly

situation.
'.
(g) Define the terms ' white noise' and 'random walk'
in time series analysis.

(hl Show gyaphical ly on your answer-bo ok that if a

consumer buys only two goods, both cannot be
inferior at the same time.

(i) Highlight the role of market signa lling whe n

there is asymmetr ic informatio n.

8-JFT-M- HFA 2 [Contd.l

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 SECTION II
Ans wer any ten of the follo wing questions in about
150 words each. 12x I 0=120

2. Separate income effect from substitution effect for a

price change us ing (i) Hicks' method (ii) S lutsky'»
method. lien ee expla in the ､ｩｬ ＢｦＨｾｲ･ｮ｣＠ be tween the two
compe nsated demand curves.

3. Assume that the market demand is

P == 100 - 0·5 (X1 + X2 l and the two collus ive firm s
have costs given by C 1 = 5X 1 and C2
Calculate the joint profit of the firms.

4. Compare different methods of m easu ring risk

aversion .

5. What are '1·idge lines'? What arc their implications in

the th eory of the firm ?

6. Distinguish between compensating variation and

equivalent variation of the budget line. How can you
measure consum er's surplus us ing thf!Se t wo
concepts?

7. Derive a n expression for elasticity of factor

substitution for C.E.S. production fu nction and use it
to establis h that Cobb- Dougl as production fun ction is
a specia l case of C.E.S. production function.

B-J FT-M-HFA 3 [Con td .J

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8. Why is the convexity assumption so important in
indifference curve a nalysis ? In particular, would a
consumer equilibrium exist, if indifference curves were
concave? Explain.

9. Wha t is the dual problem in Linear programming ?

Explain its use with suitable exam ples.

10. Expla in the relationship between s lope and elasticity

of a straight lin e demand curve.

11. "In the long run, a perfectly competitive firm will be

earning just normal profit. " Discuss .

12. What is 'Prisoner's Dilemma' ? Discuss its importance

and implications in Game theory .

8-JFT-M-HFA 4 [Contd .]

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 SECTIO N III
Answer any two of' the f'olluwing question s. Each
answer should he in ahout 250 words. 20><2=40

13. What is 'moral ha zard' problem ? Ho w does it lead to

inefficie nt all o<:ation of r esources ? Suggest r emedia l
measun.!s.

14. In a discrimi nating m onopoly, th e total demand

function is P = 100 2X and demand fun ction of
segmen ted markets are
P1 = 80 - 2·5X 1 and

ｐｾ＠ = 180 - lOX:!:

The <:ost fun ction is
C + 10 (X 1 + X 2 ); where X 1 + X 2 = X.
= 50
Calculate the profi t of th e mono poli st; (i) wi th
di scri mination a nd (ii) with out. discr iminatio n.

15. Com pare ami contra::;l t he theories of socia l choi ce

a s propoun ded by P rofessor A. K. Sen an d Professo r

,.
K.J. Arrow.

8 -JFT- M -HFA 5

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