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CONTENTS
1. Structure of the Olympiad 1
2. Section 1: Economic Concepts 2-13
3. Section 2: Logical Reasoning 14-26
4. Section 3: Data Interpretation 27-35
5. Section 4: Case Studies 36-43
6. Previous Year Question Papers: 44-92
I. NEO 2019: Preliminary Level Exams Class XI 44-54
II. NEO 2019: Preliminary Level Exams Class XII 55-65
III. NEO 2020: Preliminary Level Exams Class XI 66-78
IV. NEO 2020: Preliminary Level Exams Class XII 79-92
STRUCTURE OF THE OLYMPIAD
1. The Olympiad will be conducted in two separate rounds: the first one
being the Preliminary Round and the second one being the Final Round.
Please note that both the rounds will be conducted online and the specific
details in this regard will be shared a few days before the Olympiad.
questions.
which truly have the requisite skill and ability to use economics concepts for
1
SECTION 1: ECONOMIC CONCEPTS
(Please note that students of Class XI can ignore the questions related to Macroeconomics. In
the Olympiad, the Class XI students will not be asked questions which are above their
curricular level. However, the Class XII students can be asked questions from concepts of both
classes.)
Solved Examples
C’s monthly income is spent entirely on purchasing 2 composite consumption bundles, A and B,
Assuming that weight of individual price is equal in both consumption bundles, and constant marginal
I. What will be the slope of the budget line (in absolute terms) if the government imposes an
A. 1.2
B. 0.8
C. ⅔
D. Z/3
Correct Answer - C
Explanation - The intercepts of the budget line will be (Z/30,0) on the X-axis and (0,Z/20) on the Y
axis. So using the slope intercept form the equation comes out to be= xZ/30+yZ/20=1
Solving the equation, slope we get slope = -3/2. This value is independent of changes in Z so the
II. Assuming Coffee and Tea are perfect substitutes, an increase in the price of coffee will lead to-
B. Shift in X intercept
C. Shift in Y intercept
D. No change
Correct Answer - D
Explanation - No change as consumer will substitute coffee with tea as they are perfect substitutes
and belong to the same consumption bundle
2
SECTION 1:
ECONOMIC CONCEPTS
A. -1
B. 0.5
C. 1
D. 0.56
Correct Answer - C
Explanation -
Q3. Suppose the demand and supply of cotton are given by the following-
QS= 450+17p
QD= 690-43p
To aid the distressed cotton farmers, the government imposes a price floor, fixing the price of cotton
at ₹6. The excess supply will be purchased by the government. The expenditure by the government on
procuring cotton is -
A. 542
B. 680
C. 700
Correct Answer - D
Explanation - At price(p) = 6, fixed by the government
The quantity supplied(QS) = 450+17*6=552
Q4. Assuming Ceteris Paribus, what will be the effect of currency depreciation on the National
Income of a country -
A. Likely to rise
B. Likely to fall
3
D. Not affected
SECTION 1:
ECONOMIC CONCEPTS
Correct Answer - A
Explanation - The rise in price of foreign currency is known as currency depreciation. In this situation,
more rupees are required to buy a dollar. Hence, this can lead to a reduction in imports and a rise in
A. 2700
B. 1200
C. 3000
D. Data Insufficient
Correct Answer - A
Explanation - P = Average Revenue = 360-12Q
TR= PQ = 360*Q-12Q2
Therefore, 360-24Q=0
Q=15
Q6. Assume that the consumer’s income and the number of sellers in the market for good X both fall.
Based on this information, assuming X is a normal good, we can conclude with certainty that the
equilibrium:
Correct Answer- D
Explanation - When the consumer’s income falls, demand for a normal good decreases. Similarly,
when the number of sellers falls, supply for the goods decreases. Since the demand and supply both
decrease, we know for sure that the equilibrium quantity will decrease. However, since we do not
know whether the decrease among the demand or supply was sharper, we cannot conclude the
impact on price.
Q7. Some details about Company Y’s performance in the year 2019-2020 are given below:
4
VIII) Closing Balance of Investments in Stocks - Rs. 13,00,000
SECTION 1:
ECONOMIC CONCEPTS
A. Rs. 23,50,000
B. Rs. 20,50,000
C. Rs. 22,80,000
D. Rs. 19,10,000
Correct Answer - B
Explanation - Intermediate Consumption = Opening Stock + Purchases - Closing Stock
= 1,00,000+15,00,000-80,000 = 15,20,000
Increase in investment value is not a part of GDP as it does not lead to production of any good or
service.
A. Only II
C. I, II and III
D. All four
Correct Answer - B
Explanation - TVC initially increases at a decreasing rate then increases at an increasing rate.
Case I- MC for 2nd unit has to be <10. Therefore MC for 3rd unit has to be > 10. showing an increasing
Case II- Possible to display a decreasing trend at 2 units, post which an increasing trend can be
adopted.
Case III- MC for 2nd unit <10. MC for 3rd unit > 16. Post this an increasing trend can be adopted.
Case IV- MC for 2nd unit <10. MC for 3rd unit > 26. In an increasing trend TVC5 cannot be 85.
Q9. The total profit of a firm equals $400. If its average revenue is $10 for 100 units of output and if
the Average Fixed Cost (AFC) is $1 for 300 units of output, what is the Average Variable Cost for 50
units of output?
A. 10
B. 0
C. 20
D. 5
5
SECTION 1:
ECONOMIC CONCEPTS
Correct Answer - B
Explanation - Average Revenue = Total Revenue/ Quantity, therefore total revenue for 100 units of
output equals $(10*100) = $1000.
If at 100 units of output total profit = $400, total cost = $(1000 - 400) = $600.
Now, at 300 units of output, Total Fixed Cost = $(1*300)= $300. Total fixed cost is constant at levels of
output, hence the total fixed cost for 50 units of output is also $300.
Thus, average variable cost for 50 units of output = Average Cost - Average fixed Cost = $6- $6 = $0
Q10. Given the marginal cost function curve faced by an individual producer in an economy is given
by MC(q)=2Q. If total fixed cost is 100, the total cost incurred by a producer when operating at
A. 150
B. 230
C. 200
D. Data Insufficient
Correct Answer - C
Explanation - MC= 2Q, TFC= 100
By integrating MC, we get TC= Q2+C
Q+100Q=2Q
Unsolved Questions
Q1. Suppose a consumer named ‘B’ deposits $300 cash into his checking account. What would be the
immediate impact on M1 money supply and by how much could the money supply expand if the
D. First increases M1 money supply, than decreases and the money supply expands by $1200
6
SECTION 1:
ECONOMIC CONCEPTS
A. 1,55,500
B. 1,04,000
C. 1,50,000
D. 1,54,000
A. On a linear demand curve, all the five forms of elasticity can be depicted.
B. If two demand curves are linear and intersect each other, then the coefficient of elasticity would
C. If two demand curves are linear and parallel to each other then at a particular price the
D. The price elasticity of demand is expressed in terms of relative not absolute changes in price and
quantity demanded.
Q4. In the case of India, we have unemployment in rural as well as urban areas. Consider the
1. Sometimes, people will remain unemployed even during the peak of farming season and this is
unemployment.
3. Educated unemployment is a common phenomenon in urban areas owing to the high levels of
education.
A. Only 3
B. 1 and 2
C. Only 1
D. 2 and 3
Q5. Initially, National Income is Rs. 80 crore and consumption expenditure is Rs. 64 crore. Then,
income rises to Rs. 100 crore and consumption expenditure rises to Rs. 78 crore. Calculate the
A. 0.20
B. 0.70
C. 0.80
D. 0.30
Q6. Medical care clearly enhances people’s lives. Therefore, we should consume medical care untiL
B. The benefit buyers place on medical care is equal to the cost of producing it.
7
SECTION 1:
ECONOMIC CONCEPTS
C. Firms generate small but positive economic profits in the long run.
Q8. Suppose there is an increase in both the supply and demand for personal computers. In the
B. The equilibrium quantity to rise and the equilibrium price to remain constant.
C. The change in the equilibrium quantity to be ambiguous and the equilibrium price to rise.
D. The equilibrium quantity to rise and the change in the equilibrium price to be ambiguous.
Q9. Calculate the Coefficient of Variation of the following - 25, 85, 40, 80, 120
A. 39.76
B. 60 95
C. 48.44
D. 37.84
Q10. From the given options, bring out the one which is not a function/power of Reserve Bank of India
A. To assume the responsibility of meeting (directly or indirectly) all reasonable demands for
accommodation
B. To hold cash reserves of the commercial banks and make available financial accommodation to
them
D. To assume the responsibility of statistical analysis of data related to the macro economy of India
Q11. The economist’s objections to monopoly rest on which of the following grounds?
C. Both A and B There is welfare loss as resources tend to be misallocated under monopoly
Q12. Which of the following equations can correspond to a linear demand curve for a giffen good -
A. P = 15-7Q
B. P = 20 + 8Q
C. P = 31+8Q2
D. P = 24 - 9Q2
Q13. If cabbage is an inferior good and it is observed that with fall in price, the consumer demand
also decreases, then what can be said about the relative size of income effect and substitution
effect?
A. E = P/ Q * 1/ Slope
B. E = Q / P * Slope
C. E = Q / P * 1 / Slope
D. E = Slope
Q15. Price elasticity of demand on a linear demand curve at the y-axis is equal to:
A. Zero
B. One
C. Infinity
D. 0 < Ed < 1
Q16. When AR passes through some point between minimum AVC and AC, it is called -
A. Supernormal profit
B. Loss
D. Minimising losses
Q18. What will an indifference curve of two perfectly substitute goods look like?
D. Horizontal line
Q19. If at 7 units of production the marginal cost and average cost of product X are the same, which
Q20. X is a leading pharmaceutical company in India. After years of research and development, it
came up with a medicine that ensures 100% effectiveness against all types of cancers. The company
charges Rs. 50,00,000 for a course of medicine. In such a situation what options does the government
have?
A. Price Ceiling
B. Price Floor
C. Subsidies to company X
D. Both A and C
9
SECTION 1:
ECONOMIC CONCEPTS
Q21. In an economy, there is a 200% rise in FDI in one year. What is the likely effect of this change on
1. Depreciation of Currency
2. Appreciation of Currency
3. No change
4. Either A or B
Q22. In 2016, X had a salary of Rs. 40,000 per month and he purchased 10 units of commodity Y,
costing Rs. 100 each. In 2019, his salary increased to Rs. 70,000 per month. What could be a possible
1. 12
2. 10
3. 8
4. Cannot be Determined
I) AR=8, MC=8
Options -
1. Only I
2. Both I and II
4. All of these
Q24. Demand of Good X at ₹100 = 67, Demand of Good X at ₹129 = 100. What type of good is X?
1. Inferior Good
2. Normal Good
3. Giffen Good
4. Both B and C
Q25. The supply curve of Good X intercepts the positive y-axis. What can be said about the elasticity
of demand for X?
1. Unitary Elastic
2. Highly Elastic
3. Inelastic
4. Cannot be determined
Q26. A person takes a loan to purchase a car worth ₹10,00,000. He pays an interest of Rs. 50,000
every year for the next 5 years. What will be the addition to GDP in the second year?
A. ₹0
B. ₹50,000
C. ₹2,00,000
D. ₹2,50,000
10
SECTION 1:
ECONOMIC CONCEPTS
Q27. Haryana is one of India’s highest wheat producing states. However, due to a severe drought ,
the entire wheat crop gets destroyed. In order to deal with the crisis the government makes use of its
A. Increase
B. Decrease
C. No Change
D. Cannot be Determined
Q28. X,Y, Z are three goods. When the price of X rises, demand for Y falls. Similarly, when the price
of Y rises, demand for Z falls. What is the relationship between good X and good Z?
A. Complementary Goods
B. Substitute Goods
C. Inferior Goods
D. Cannot be Determined
Q29. The tariffs imposed by the Russian government on Indian goods have led to a reduction in total
C. No change
Q30. A person deposits ₹10,000 in his bank account, which is immediately transferred to Y. If the bank
is required to keep a combined CRR and SLR of 40%, what can be said about the money multiplied by
the bank?
A. ₹0
B. ₹4,000
C. ₹25,000
D. Cannot be determined
B. Excess Reserves
Q33. What among the following accounts for market changes resulting in increased price and
unchanged quantity exchange (assuming that both demand and supply are neither perfectly elastic
11
SECTION 1:
ECONOMIC CONCEPTS
Q34. If the opportunity cost of producing two goods is constant, then which of the following
statements is true -
Q35. If the tariff on an imported laptop increases, then what are the possible effects on consumer
C. Consumer Surplus remains unchanged, producer surplus increases, net welfare decreases
Q36. Suppose the total population of a country is 200 million. The labour force is 100 million. If 10
million people are discouraged workers that means those workers who are not currently looking for
work, but if given would take up the job. Out of the labour force, 80 million are employed full time and
10 million are employed part time. What is the current unemployment rate?
A. 10%
B. 50%
C. 90%
D. 80%
Q37. If the demand for a commodity is perfectly elastic and the cost of producing the commodity
falls, what will happen to the equilibrium price and quantity of the commodity?
Q38. If a perfectly competitive firm is operating where the price is greater than Average Variable
Cost but less than Average Costs, what should the firm do?
B. Continue operations in the short run even though there’s an economic loss
C. Continue operations only in the short run and shut down in the long run
A. Perfect Complements
B. Giffen goods
C. Perfect Substitutes
D. Inferior goods 12
SECTION 1:
ECONOMIC CONCEPTS
Q40. Choose the statement or statements which satisfy the conditions when the economy is running
3. More demand for goods and services and hence increased production.
Options:
A. 2 and 3 only
B. 1, 3 and 4 only
C. 1, 2 and 3 only
Answers:
13
SECTION 2: LOGICAL REASONING
Solved Examples
Q1. In the following series, one term is wrong, i.e. it doesn’t follow the general rule followed in the
series. Identify
A. AZ25
B. DW19
C. GT10
D. JQ7
Correct Answer- C
Explanation- The first alphabet moves in the series
The second alphabet moves in the series
The term GT10 should have been GT13, hence it is the wrong term
D. It is a prime number
Correct Answer- B
Explanation- k = 2, 3, 4, 5, 6, 7. Hence if k is added to p, it becomes a factor of that number and
thus, p is not a prime number.
Q3. Starting from the same point, Parth and Himanshu are walking in opposite directions. Parth covers
7 km and Himanshu covers 5 km. Then, Parth turns to his right and walks 4 km. Himanshu turns to his
right and walks 5 km. What is the distance between them now? (Hint: Use techniques of Coordinate
geometry)
A. 15 km
√
B. 12 km
C. 145 km
D. 12 km
Correct Answer- A
Explanation- Their route can be sketched as follows
14
SECTION 2:
LOGICAL REASONING
Q4. In a Coding system, the first 5 alphabets are used in uppercase, the next 5 in lowercase, again the next 5 in
How will you code the last month in a year which has 30 days?
A. NoVeMber
B. NOVEMBEr
C. novembeR
D. octobeR
Correct Answer- B
Explanation-
The coding-series will be A,B,C,D,E,f,g,h,i,j,K,L,M,N,O,p,q,r,s,t,U,VW,X,Y,z
Q5. A,B and C are three friends standing in a line of 41 students. A is 15th from the front, B is 23rd from the back
and C is standing in the middle of the row. C moves 6 places towards the front. B then moves 4 places to the
Correct Answer- C
Explanation-
A - 15th
B - 19th
C - 21st
C - 15th
A - 16th
B - 20th
C - 15th
B - 16th
A - 17th
A. 3
B. 4
C. 6
D. 8
15
SECTION 2:
LOGICAL REASONING
Correct Answer- A
Explanation- PEMDAS is a standard rule for arithmetic operation that stands for Parentheses,
Exponents, Multiplication & Division, Addition, Subtraction. The given expression can be simplified as
follows.
Q7. In the following figure, what does the region marked A indicate? (Read the options carefully)
Correct Answer - D
Explanation -
Region A lies in the intersection of “Police” and “Males”. It is outside both “Hardworking” and “Honest”.
Therefore the region indicates Male Police officers who are neither Hard Working nor Honest, i.e. Lazy
and Dishonest Policemen. Hence, the answer is “None of the Above”.
Q8. Observe the given figure and choose the right option.
16
SECTION 2:
LOGICAL REASONING
Options
Correct Answer - C
Explanation -
The innermost figure in cell1 gets retained in cell C.
Q9. Suppose a train ‘G’ leaves Mumbai at 4-00 AM and reaches Surat at 8-00 AM. Another train ‘H’
leaves Surat at 6-00 AM and reaches Mumbai at 10-30 AM. At what time do the two trains travel in
A. 7-04 AM
B. 6-56 AM
C. 8-10 AM
D. 7-30 AM
Correct Answer- A
Explanation - The time (t) is calculated only after 6-00 AM, since between 4-00 AM to 6-00 AM only
train G is travelling. Speed of G = d/4, speed of H= d/4.5 and the distance covered by both the
trains after G has reached half of the distance at 6-00 AM and when H is about to start is d/2.
d/2 = (d/4*t)+(d/4.5*t), solving the equation t comes to 18/17 hours which is equal to 64 mins
(approx). Thus, the time at which the two trains travel in order to cross each other is 7-04 AM.
Q10. From the given options, choose the one that has the given problem figure embedded in it.
Correct Answer- D
Explanation - Can be identified through observation
17
SECTION 2:
LOGICAL REASONING
Unsolved Questions
Directions Q1-Q2
Carefully study the following information to answer the questions given below-
1. Eight people E, F, G, H, I, J, K and L are seated around a square table, two on each side.
2. There are three women and they are not seated next to each other.
3. J is between L and F.
4. G is between I and F.
A. G
B. J
C. F
D. K
A. E, H and J
B. E, G and J
C. G, H and J
.
D None of these
Q3. Mahendra owns two businesses, X and Y. He provides Rs. 15,000 as monthly salary per employee
in business X, and Rs. 10,000 as monthly salary per employee in business Y. There are 27 employees in
employees, distributed between both the businesses in such a way that the average salary turns out to
A. 9 in X and 16 in Y
B. 13 in X and 12 in Y
C. 18 in X and 7 in Y
D. 10 in X and 15 in Y
Q4. If A + B means A is the brother of B; A - B means A is the sister of B and A x B means A is the
A. M - N x C + F
B. F - C + N x M
C. N + M - F x C
D. M x N - C + F
Q5. Six boys A, B, C, D, E and F play a game of cards. Each has a pack of 10 cards. F borrows 2 cards
from A and gives away 5 to C who in turn gives 3 to B while B gives 6 to D who passes on 1 to E. Then
the total number of cards possessed by D and E is equal to the total number of cards possessed by–
18
SECTION 2:
LOGICAL REASONING
A. A, B and C
B. B, C and F
C. A, B and F
D. A, C andF
Q6. A clock is set correctly at 8 A.M. The clock gains 10 minutes in 24 hours. What will be the true time
A. 48 min. past 12
B. 46 min. past 12
C. 45 min. past 12
D. 47 min. past 12
Q7. A man is standing on a railway bridge which is 180 m long. He finds that a train crosses the bridge
in 20 seconds but crosses him in 8 seconds. Find the length of the train and its speed.
A. 120 m, 54 kmph
B. 140 m, 60 kmph
C. 140 m, 66 kmph
D. 160 m, 60 kmph
Q8. This question consists of a question and two statements numbered I and II given below it. You
have to decide whether the data provided in the statements are sufficient to answer the question.
Question-
Statements-
I. C, who is third to the left of D, is to the immediate right of A and second to the left of E.
II. C is second to the left of E, who is not at any of the ends and who is third to the right of A. D is at
Options-
C. Either I or II is sufficient
Q9. There is a point M which is 14m east of point N. Point E is 4m west of point B. Point G is 10m east
of point F. Point F is 15m south of point N. Point C is 7m north of point G. Point A is 2m east of point C.
A. South-West
B. North-East
C. North-West
D. South-East
19
SECTION 2:
LOGICAL REASONING
Directions Q10-Q12
A,B,C,D,E,F,G and H are 8 students in a class. In a test, the following statements hold true-
A. A
B. C
C. E
D. Cannot be determined
Directions Q13-14
Study the following information carefully and answer the questions given below.
If
A. 4 81 16
B. 25 43 6
C. 67 89 15
D. 7 91 34
A. 125 36 5
B. 121 4 81
C. 100 49 100
D. 4 25 36 125
20
SECTION 2:
LOGICAL REASONING
A. 6
B. 10
C. 7
D. 13
A. 12
B. 6
C. 18
D. 10
I) A is a prime number.
III) D is 3
A. 6
B. 2
C. 4
D. Cannot be determined
Q18. Krishi works in a famous firm as an executive manager. He earns a respectable income, a part of
which he uses to meet his current consumption demands and saves the remaining part for the future.
After a month of dedicated and consistent work, Krishi's employers are impressed and raise his income
by 6%. Krishi decides to keep his consumption at the same level as in the previous month. Hence, his
savings rose by 21,000. Calculate the amount of his consumption, which was 60% of the income he
A. Rs. 1,50,000
B. Rs. 2,10,000
C. Rs. 1,60,000
D. Rs. 1,80,000
Statements-
Inferences-
1. All the economically powerful countries in the world have high inequality
3. United States, the most developed country has high levels of inequality
Options:
A. None is appropriate
B. Only 4 is appropriate
D. Only 2 is appropriate 21
SECTION 2:
LOGICAL REASONING
Q20. A, B, C, D, E, F and G are from the same family. 4 people are married in the family. Parents of
all the children in the family are alive. C is the sister of B. E is the brother of F. F is a female. A is
How is B related to E ?
A. Son
B. Nephew
C. Daughter
D. Cannot be determined
Q21. In a die, A is the top side and B and C are two sides adjacent to it.
What is A?
A. 2
B. 4
C. 5
D. 6
Q22. If MOUNTAIN is coded as NPVMGBJM and TEACHER is coded as GFBXSFI, then how is
A. DIJKWSFM
B. XIJOEIVM
C. XSJOWIFM
D. DSRKESVM
Q23. A woman introduces Rohit to a gathering as follows- ‘He is the brother of the only daughter of
the only child of my uncle. At the same time another man introduces Rohit as follows- ‘He is the
A. Siblings
B. Cousins
C. Siblings or Cousins
D. Cannot be Determined
Q24. A girl was born on September 1, 1970, which happened to be Tuesday. The next birthday will be
A. 1975
B. 1981
C. 1977
D. 1982
Q25. If Ram has 3 parcels having a combined weight of 50 pounds, what is the weight of the heaviest
parcel?
22
SECTION 2:
LOGICAL REASONING
A. Statement 1 is alone sufficient to answer this question but Statement 2 is not sufficient alone
C. Statement 2 is alone sufficient to answer this question but Statement 1 is not sufficient alone
Directions Q26-27
Five Boys Nobita, Ashwin, Dipayan, John and Bheem and five girls Radha, Yuvika, Yuvana, Sneha and
Khushi are sitting in two rows facing towards each other. All the boys are in one row and all the girls
are in the other row. Bheem, who is to the immediate left of Ashwin and opposite to Radha, is not at
any end. Yuvika, who is at the immediate right of Yuvana and opposite to Nobita, is at one of the
ends. John is opposite to Yuvana who is the first to the right of Sneha. Khushi and Dipayan are not
A. 0
B. 3
C. 1
D. 2
A. Sneha
B. Khushi
C. Yuvana
D. Yuvika
Q28. In view of the stiff competition faced by companies ABC ltd and MN Ltd, Dwarka Ltd is
Which of the following can be a possible consequence for the fact mentioned in the above
statement.
A. Dwarka Ltd will stop manufacturing bottles and concentrate on the other businesses.
B. Dwarka Ltd will start attracting new talent to improve its bottle manufacturing, by employing top
notch talent.
C. Dwarka Ltd will increase the prices of its bottles so as to earn higher profit and use it for
investment.
D. Both 2 and 3.
Q29. How far, in kilometers, can Robin drive into the desert if he drives out at 50 kilometres per hour
(kph), returns over the same road at 20 kph, and spends 8 hours away from home, including a 1-hour
A. 150
B. 100
C. 120
D. 90 23
SECTION 2:
LOGICAL REASONING
Directions Q30-32
A team of 6 has to be selected from five boys - A,B,C,D and E and five girls - V,W,X,Y,Z. The following
Q30. If there have to be 4 boys on the team, who cannot be a part of the team?
A. V
B. W
C. X
D. Cannot be determined
Q31. If the team has 3 boys, who cannot be a part of the team?
A. A
B. C
C. V
D. W
Q32. If the team has 2 boys, who can be a part of the team?
A. A
B. B
C. C
D. Y
A. WURQVB
B. YZRKGM
C. DYUIFL
D. WXGMVB
Q34. Rajesh is facing the South . He drives straight for 5 kilometres. He then turns left and drives 12
kilometres. Then he turns to his right and drives 5 kilometres. He then turns to his right and drives 10
kilometres. After that, he takes a left and walks 5 kilometres. Here, he meets his friend, who tells him
about a famous restaurant that has recently opened. He decides to go to the restaurant and taste
some delicious food. So, he again turns to his left and walks another 6 kilometres. Finally, he takes a
left and drives another 9 kilometres to reach the restaurant. If there existed a straight road
connecting his house to the restaurant, what could have been the minimum distance he'd have to
travel?
A. 15 kilometres
B. 10 kilometres
C. 13 kilometres
D. 20 kilometres 24
SECTION 2:
LOGICAL REASONING
Q35. At 6 am, A is standing 25m on the right of B. A is facing East and B is facing North. The two take
Once they meet, both A and B rotate 180 degrees. Where is B now with respect to A’s starting
position?
A. 50m North
B. 50m East
C. 50m West
D. 50m South
A. 101
B. 17
C. 49
D. 23
Q37. Thirty five vehicles are parked along a line in a parking lot. After the first car, there is a scooter.
After the second car, there are two scooters. After the third car, there are 3 scooters and so on. How
A. 6
B. 10
C. 8
D. 7
25
SECTION 2:
LOGICAL REASONING
A. 5
B. 7
C. 10
D. 8
Options:
k a l _ _ l a l _ a k a _ l a l a _ l a
1. lalal
2. alall
3. lalll
4. allal
Answers:
26
SECTION 3: DATA INTERPRETATION
Solved Examples
Q1. The given graph represents the movement of cryptocurrency prices before and after a particular
→
The value at t=0 in the graph represents:
→
A. Increase in prices and Increase no. of trades stable growth
→
B. Increase in prices but constant no. of trades Volatility
→
C. Increase in prices and increase in no. of trades Volatility
Correct Answer- C
Explanation - There is a coordinated rise in prices and number of trades at t=0 which reflects
volatility in prices
Directions Q2-Q5: The graph below signifies the unemployment rate in India from June 2020. It
provides comparison figures for Urban, Rural and National levels.
Q2. In what months was the total urban, rural and national unemployment rate same?
I. October 2020
A. Only II
B. Only I and II
27
C. I, II, IV
D. All I,II,III,IV
SECTION 3:
DATA INTERPRETATION
Correct Answer- C
Explanation-Very evident
Q3. If the government were to announce expansion in the scope of MNREGA in May
2021, where can we expect the maximum variation in the rate of unemployment?
Correct Answer- B
Explanation- Rural will have maximum impact
Q4. At what points are their maximum variation between the urban and rural rates of
unemployment?
A. June 2020
B. August 2020
C. April 2021
D. May 2021
Correct Answer- D
Explanation- May 2021 - Difference of 4.10
Q5. You are the economist calculating the rate of unemployment, how do you
accommodate it? Housewives working on their own fields in rural areas ii. Housewives
in urban areas?
Correct Answer- D
Explanation- Neither are included. Women participation on their own farm is not part
of labour participation. Similarly, housewives are not part of unemployment rates
28
SECTION 3:
DATA INTERPRETATION
Directions Q6-8- The diagram below shows Country X's exports and imports of goods and services
from 2015-16 to 2018-19.
A. Surplus BOP
B. Deficit BOP
C. Balanced BOP
D. Cannot be Determined
Correct Answer- D
Explanation- Since the graph only shows exports of goods and services it can be used to determine
BOT but not BOP.
Q7. In 2016-17, Country X had a positive current account balance. Which of the following statements
are true?
D. Both B and C
Correct Answer- A
Explanation- Unilateral Transfers and Net Income from Abroad are two components of Current
Account Balance. In 2016-17, country X has a BOT deficit. But a positive current account balance does
not necessarily require both unilateral transfers and net income from abroad to be positive.
Q8. Which of the following does not move the trade situation in the opposite direction in 2017-18?
Correct Answer- B
Explanation- In order to move in the opposite direction inflows should be higher than outflows. Only
option B meets the requirements.
29
SECTION 3:
DATA INTERPRETATION
Directions Q9-10: The rupee-dollar exchange rate for the first 6 months of 2020 has been given
below. Based on it, answer the questions that follow.
D. Both B and C
Correct Answer- A
Explanation- The period of April-May leads to fall in the foreign exchange rate implying appreciation
of the Indian Rupee. An appreciation of the Indian rupee means a depreciation of the US Dollar.
Q10. Which of the following cannot be a reason for the change in Rupee-Dollar Exchange Rate in the
April-May period?
Correct Answer- B
Explanation- If the supply of Indian Rupee (Foreign Exchange) falls in the US market, the supply curve
shifts leftwards, resulting in an increase in price of foreign exchange i.e. depreciation of the US
dollar. Depreciation of the US dollar means appreciation of the Indian currency, as depicted by the
graph.
Unsolved Questions
Directions Q1-3
Set 1- The given chart depicts the composition of Country A, B, C, D and E’s budgetary expenditure.
30
SECTION 3:
DATA INTERPRETATION
Q1. One of the advisors of Country A suggested that the government should increase expenditure on
the defence sector due to increasing hostility with neighbouring countries. He also suggested that
A. Opportunity Cost
B. Sunk Cost
C. Implicit Cost
Q2. Assuming that resources in different countries are equally efficient, total expenditure in all
countries is equal and all productive activity in the economy is proportional to government
A. Country A
B. Country B
C. Country C
D. Country D
Q3. If the government of Country X wants to increase its expenditure on education without
Directions Q4-6
Set 2-
31
SECTION 3:
DATA INTERPRETATION
Q4. Choose the period in which the United States faced the same or similar inflation rate as shown
1. 1873 to 1879
2. 1812 to 1815
3. 1930 to 1933
Options
A. Only 4
B. 1 and 3
C. 2 and 3
D. Only 3
Q5. Suppose the required reserve ratio is 10% during the 1980s and during this period one of the
economists suggested that the Central Bank should buy a $5000 bond from the commercial banks.
What is the money supply in the economy after the Central Bank buys the bond and how does it affect
B. The decrease in the money supply by $50000 and a decrease in the inflation rate
D. The decrease in the money supply by $5000 and an increase in the inflation rate
Q6. For any country, which of the following contributes to a situation as depicted by the part of the
A. Decrease in Consumption
C. Excess Production
Directions Q7-9
Set 3-
Q7. If Netherland’s manufacturing constitutes more capital goods compared to Japan, then according
to the bar graph shown above, which country will have the maximum shift in the production
32
SECTION 3:
DATA INTERPRETATION
Q8. Suppose all the countries are operating in a closed economy wherein private saving is 20% and
consumption expenditure on goods only is 80% in all the countries. Assuming this, choose the country
which will have the highest M1 money supply in the economy and also the country with the highest
Q9. What type of exchange rate will allow a country to exchange its domestic goods for foreign
goods? Also, if Japan has a comparative advantage for all capital goods over other countries, then
which country should most likely trade its capital goods for common welfare?
Directions Q10-11
Set 4- The graph below shows the data for Reverse Repo Rate
Q10. Why do you think RBI is reducing the reverse repo rate?
B. A low reverse repo rate might allow banks to lend more to the public
Q11. Taking into consideration the economic catastrophe the current pandemic has caused , what do
you think is the possible outcome in case the RBI raises the interest to the same level as per in July
2019
A. A high reverse repo rate will lead to an increase in lending rates by banks
B. A high rate will induce consumers and firms to take more loans from banks
C. A high rate will demotivate banks to keep their money with RBI
Directions: Q12-14
Q12. The inflation rate has peaked several times in the past and is rising again in 2020-21. In order to
keep the inflation in check, what are possible monetary policy measures that the government can
take?
Q13. As a consumer planning your retirement savings for a given set of years, what time period would
A. 1989-1991
B. 1997-1998
C. 2007-2009
D. 2002-2004
Q14. During the downward dip of the world GDP growth rate, which were the countries least
affected?
34
SECTION 3:
DATA INTERPRETATION
A. US, UK
B. African Countries
Q 15. For any given country, what could be the possible reasons for the graph turning below the 0-
line?
A. Increase in exports
B. Increase in consumption
Answers:
35
SECTION 4: CASE STUDIES
Solved Examples
Directions Q1-3
Case 1- In Moscow, there exists a restaurant chain, ABC, that uses the following pricing mechanism.
A consumer must pay some entrance fee, after that they can order whatever they want for the price
that is equal to the cost of ingredients. The price of an entry ticket depends on the time of the day
(being higher in the evening than in the morning), but prices of menu items remain the same and are
For instance, a portion of pasta costs only about $2–2.5, the price of a steak is about $4, a burger
with grilled prawns can be purchased for merely $3. For only $3–4 a customer can drink a glass of
decent wine. These prices at ABC are very low as compared to other restaurants in the city.
Customers must eat and drink inside; if they want to take something away, the price doubles.
Now, based on the basis this information, answer the questions given below:
A. Product Differentiation
B. Choice Architecture
C. Price Discrimination
D. Dual Pricing
Correct Answer- C
Explanation - Price Discrimination. A two-part tariff (TPT) is a form of price discrimination wherein the
price of a product or service is composed of two parts - a lump-sum fee as well as a per-unit charge.
In general, such a pricing technique only occurs in partially or fully monopolistic markets, but can also
Q2. What happens if other restaurants in the area also adopt a similar strategy?
A.Increases the competition among the producers and reduces the profits of the ABC restaurant
chain.
B. Some consumers shift to the other restaurants that offer lower prices.
C. The entry fees at ABC restaurant chain falls, establishing and reinforcing competition.
Correct Answer- D
Explanation - If other restaurants also adopt a similar strategy of two-part tariff, this will reinforce
the competition between all producers in that area and as a result reduce the profits of ABC chain of
restaurants since some consumers will move to new restaurants offering lower prices.
36
SECTION 4:
CASE STUDIES
Correct Answer - B
Explanation - The concept of price dicrimination is designed to enable the firm to capture more
consumer surplus than it otherwise would in a non-discriminating pricing environment. The consumer
surplus is captured totally from the entrance fees and hence keeping the per unit price low attracts
the consumers.
Directions Q4-6
Case 2- A condition where a person is deprived of minimum standard of living and challenges human
dignity and world peace is defined as “Poverty”. But with economic development comes economic
prosperity and thus, for the first time in the history of mankind, most people who live in this World are
no longer poor. According to the Brookings Institute and World Data Lab’s estimates (2018), 50% of
the world’s population belong to the middle class or wealthy accommodations. As per 12th President
of the World Bank, Jim Yong Kim - “Over the last 25 years, more than a billion people have lifted
themselves out of extreme poverty, and the global poverty rate is now lower than it has ever been in
recorded history. This is one of the greatest human achievements of our time”.
The highly developed and developing economies of the world are even showing a positive correlation
between economic growth and environmental awareness. As per Steven Pinker - “Again and again,
environmental improvements once deemed impossible have taken place. Since 1970, when the
Environmental Protection Agency was established, the United States has slashed its emissions of five
air pollutants by almost two-thirds. Over the same period, the population grew by more than 40%,
and those people drove twice as many miles and became two and a half times richer”. European
Union reduced its CO2 emissions by 54% between 1991 and 2014. Over the past 4 decades even
China (one of the worst exploitant of coal) has reduced CO2 emissions by 75%. Efficient allocation of
resources and technological development has driven more environmental awareness and protection.
Based on the above case study, answer the questions given below-
Q4. In Japan, due to declining world poverty rates and a broadening economy, new competitors are
entering the market of a monopolistic competitive firm. What two changes are likely to happen to the
Correct Answer - B
Explanation - When new competitors are entering the market of a monopolistic competitive firm, the
downward sloping demand curve of a monopolistic competitive firm becomes more elastic because
of an increase in the supply of differentiated products and hence the demand curve shifts to left,
Q5. Suppose “economic growth” and “poverty” are two goods. The above case study by the World
Bank Report depicts a negative cross price elasticity of demand between economic growth and
37
SECTION 4:
CASE STUDIES
Correct Answer - A
Explanation - A negative cross price elasticity of demand indicates that two goods are
complementary which means that an increase in the price of one good decreases the demand for the
other. Hence, “Economic growth” and “poverty” are complementary goods according to the question
Q6. According to Robert Shiller, what was one of the causes behind U.S. Poverty?
A. Ecological Fallacy
B. Mass Incarceration
C. Flawed Character
Correct Answer- C
Explanation - According to Robert J. Shiller, Big Brother Theory, Flawed Character and Restricted
Opportunity are the three main causes of poverty in the United States. Flawed Character refers to
people’s or particularly employers’ perception about a community or class. For example - they may
believe that children belonging from black families never complete their homework. This assumption
Directions Q7-9
Case 3- China, the country described by the World Bank as “the fastest sustained expansion by a
major economy in history” has raised millions of its citizens out of poverty and is one of the World’s
largest economy on purchasing power parity basis and also the largest holder of foreign exchange
reserves. But the manufacturing superpower has faced slower economic growth over the past years
and economists fear that this diminishing rate might engulf China in the middle-income trap. This has
made it even more important for China to acknowledge their reliance on exports and fixed investment
and the need to shift attention towards innovation, private consumption and services. Sustainable
economic growth in the long run will require consumer spending to increase. As per the National
Economic Accounting, Chinese household consumption is relatively low. Now, based on the basis this
Q1. Chinese Government launched the “Make in China” initiative in 2015 to foster innovation in 10 key
sectors. If we suppose that technological advancement has increased productivity over the past 5
years, than there has been a change in the price of the products. Now, this change in price will make
A. Increase
B. Decrease
C. No change
D. Cannot be determined
38
SECTION 4:
CASE STUDIES
Correct Answer - B
Explanation - Technological advancement increases consumer surplus. This increase in consumer
surplus is because of the decrease in price resulting from an increased supply of products at any
given price level. Additional purchase of product due to increased supply will be of decreasing utility
or benefit to the consumers (Marginal Utility of a consumer decreases as he/she purchases more and
Q2. If due to government efforts, there is an initial change in total spending in the chinese economy,
then it will have the smallest overall short run effect on total expenditure if -
A. Imports are large, Savings are high and Government expenditure is also high.
B. Imports are small, Savings are high and Government expenditure is low.
C. Imports are small, Savings are low and Government expenditure is also low.
D. Imports are large, Savings are low and Government expenditure is high.
Correct Answer - A
Explanation- Due to government efforts an initial increase in total spending will have the smallest
overall short run effect on total expenditure if -
2. Imports are large in comparison to exports so that domestic spending on goods is low.
Q3. Suppose due to technological advancement, employers in China reduce their number of existing
employees so that they can hire newly skilled workers. What do you think- are the fired employees
Correct Answer - C
Explanation- Frictional unemployment refers to the unemployment time period where workers are
searching for a job or are in the process of transition from one job to another. Hence, frictional
unemployment can be experienced even in a growing economy. Thus, the fired employees are
unemployed but for a time period until which they are able to find new work.
Unsolved Questions
Directions Q1-3
Case 1 - According to the World Tourism Organisation, tourism refers to travelling to and staying in
places outside the usual environment for not more than one consecutive year. With increased mobility
among nations as well as within nations, the tourism industry has been booming with 1.36 billion
international arrivals in 2017. Globally, travel and tourism directly contributed approximately $2.9
trillion to GDP in 2019. The following map shows tourism arrivals across select nations in 2018.
39
SECTION 4:
CASE STUDIES
Q1. As shown in the map, European countries have typically seen higher tourists. In this regard, what
do you think holds true for European countries as compared to other countries?
D. Both A and C
C. Domestic Income
D. International Income
Q3. Which of the following advantages of tourism directly contributes to economic well being of the
host nation?
C. Knowledge Expansion
Directions Q4-6
Case 2- Tobacco and Cigarettes are considered socially harmful goods. The government and other
institutions attempt to reduce the consumption of tobacco and cigarettes by a number of ways. This
can be done by reducing the demand for and/or reducing the supply of these commodities.
For most cases there is an inverse relationship between price and demand, however, some goods
command less price elasticity. Controlling the demand for these commodities by price changes
becomes difficult.
Q4. What impact will health advisories and targeted advertisements against usage of these products
D. Both A and B
40
SECTION 4:
CASE STUDIES
Q5. A sin tax is levied by the government on these goods What effect does this tax have on the
consumption of cigarettes?
A. This results in a reduction in the quantity supplied due to higher cost of production.
B. This will cause an increase in the price of the commodity and hence the consumers demand less
quantity.
C. There will be an upward movement along the demand curve after imposition of the tax.
Q6. It was noted that there was only a marginal shift in the consumption patterns of consumers post
introduction of the sin tax. While the law of demand holds, why do you think this was the case?
A. People’s tastes and preferences (habits) do not change easily given a small price change.
B. There are no substitutes of cigarettes and tobacco, making their demand highly inelastic.
D. The targeted consumer base has an income high enough to make them not shift away from their
preferences.
Q7. What impact does an increase in the price of alcohol have on cigarette consumption?
A. The two goods are not related hence, there will be no change.
B. The two goods are not related hence, there will not be a significant change in quantity demanded.
C. The two goods are substitutes hence, the quantity demanded of cigarettes will decrease.
D. The two goods are substitutes hence, the quantity demanded of cigarettes will increase.
Directions Q8-10
Case 3- In a distant country called Naviaxainia, there are only four firms, namely Accor ltd., Beat ltd.,
Crobeau ltd. and Drenio ltd., which dominate the market for mobile phones. All these companies have
strongly maintained their position so as to not allow any other player onto the market. Moreover, the
market share of each of them is almost similar, with Accor at 27%, Beat at 23%, Crobeau at 24% and
Drenio at 26%. There exist serious impediments to entry for new firms, hence the mobile phones
market works entirely under the aegis of these 4 firms only. On the basis of the above information,
Q8. Which three of the following characteristics apply to the type of market that is indicated above?
II. Many small firms account for a high percentage of industry output
Options:
1. I, III, V
2. II, III, IV
3. I, IV, V
4. I, II, III
41
SECTION 4:
CASE STUDIES
Q9. Which two of the following assumptions are essential parts of the 'kinked demand' curve analysis
Options:
1. I, III
2. II, III
3. II, IV
4. III, V
A. Each of the above-mentioned firms can earn greater profits if they collude, rather than engaging
in a price competition
C. Accor can reduce its prices drastically in order to enhance the demand for its mobile phones
Directions Q11-12
Case 4- Food prices often rise or fall with good or bad harvests or because of a change in demand.
A recent example is the price of brazil nuts, which by May this year had risen over 60% on European
markets. Part of the reason for the price rise has been on the demand side. Consumption of brazil
nuts has increased as more people switch to healthier diets. This includes the purchase of the nuts
themselves and as part of healthier snack foods. With supply being relatively inelastic, any rise in
demand tends to have a relatively large effect on price. A more acute reason is on the supply side.
There has been a very poor harvest of Brazil nuts. The nuts are grown largely in the Amazon basin
which has been hit by drought linked to the El Niño effect. This, however, is only a temporary effect
and future harvests should increase again as rainfall returns to normal. The price rise in the UK has
also been aggravated by the depreciation of the pound since the Brexit vote, which has fallen some
13% against the dollar since June 2016. A rise in the dollar price of Brazil nuts has thus led to an even
Q11. Which of the following is not a reason for the rise in prices of nuts?
42
SECTION 4:
CASE STUDIES
Directions Q13-15
Case 5- A country has a current account deficit and the balance of payments balances. The country
is faced with heavy floods and has witnessed a huge multitude of deaths, outrages of the public and
fluke by the opposition parties. The country receives donations from multiple nations and
A. Capital Account
B. Current Account
C. This will not be recorded in any account since no service has been provided in exchange for these
donations.
Q14. A current account deficit barely means that, as a country they are _____ more than they
_______.
A. Producing; Consume
B. Importing; Exporting
C. Exporting; Importing
D. Contracting; Expanding
Q15. A current account deficit and a balanced balance of payment account entails the following:
Answers:
43
SECTION 4:
Previous Year Question Papers
CASE STUDIES
NEO 2019
Preliminary Level Exam: Class XI
Section I: Economic Concepts
Q1. Tom gets x as pocket money every month. Regardless of anything, he spends 1/4th of this pocket
money on Ice Cream (assumed to be an infinitely divisible good). What is the price elasticity of Tom’s
Demand for the Ice Cream? (Other things remaining constant, price elasticity measures the impact of
A. 0
B. 1
C. 0.5
D. Infinite
Q2. A currency crisis is a situation where a country tends to run out of the foreign exchange reserves
it has. In the context of India, which of the following factors is/are contributor/contributors to
III. Remittances from Indians abroad. Select the correct answer using the code given below.
A. 1 only
B. 1 and 2 only
C. 2 only
D. 1, 2 and 3 only
D. A and B both.
Q4. Marginal Cost (or MC) refers to the additional cost incurred by a producer when he produces one
more unit of his output. Mathematically it is - the change in total cost divided by change in the
number of units produced. When a train with a seating capacity of 600 passengers is carrying only
Q5. A consumer always wishes to pay the least amount for a product. The lower they pay for a
product, the higher is their surplus. Assume that a consumer is willing and able to pay $5 for a latte
and that the price of the latte is $3.Which of the following is equal to the surplus enjoyed by the
consumer?
44
NEO 2019
Preliminary Level Exam: Class XI
A. $8
B. $2
C. $15
D. $1
Q6. Depreciation of a currency refers to a fall in the value of that currency as compared to another
currency, whereas appreciation of a currency refers to a rise in the value of that currency as
compared to another currency. For example - Assume 70 rupees are required to make 1 dollar. Now, if
75 rupees are needed to make a dollar, it would be said that the rupee has depreciated. If 65 rupees
II. Sri Lankan Rupee is appreciating against the dollar. How are the following statements related-
Q8. A free economy is a system where there is no/negligible government control influenced as the
forces of demand and supply decide the market price of goods and services. In such an economic
system, if inequalities in income prevail, what among the following can be a reason for such
inequalities?
A. Free competition
Q9. Last year India saw an exponential growth in tourism with a 15% growth in foreign tourists and
25% in foreign tourist spending in India. What would this likely lead to in the current year?
A. Increase in Imports
B. Increase in exports
Q10. Economic slowdown in some parts of the world has adversely affected demand for Indian
45
D. None of the above
NEO 2019
Preliminary Level Exam: Class XI
III. If the bank loans him money, he will not go bankrupt. Select the statement that is consistent with
A. The contract is valid and the bank will loan him money.
B. The contract is valid and the bank will not loan him money.
Q12. In all family photos, if Ramu is present, his two brothers are also present. A certain photo
features five members of his family. Among the people in that photo are a set of parents with their
D. None of these
Q13. 3 couples sit on an oval bench where none of the couples are sitting adjacent to each other. The
males are Rakesh, Rajesh and Suresh, while the females are Rani, Rosy and Surbhi. They sit in the
following manner:
A. Surbhi
B. Rosy
C. Rani
Q14. John has 3 sacks containing 10 coconuts each. He is taking these to a different state and is
required to pay toll tax at 9 poll booths. He is required to pay 1 coconut as toll tax for every sack of
coconut he is carrying with him. How many does he have left with him at the end of the journey?
A. 6
B. 8
C. 10
Q15. How many pairs of letters are there in the word SECURITY each of which has as many letters
A. 2
46
B. 3
C. 4
D. More than 4
NEO 2019
Preliminary Level Exam: Class XI
Directions Q16-Q18
Case 1- The proposed Regional Comprehensive Economic Partnership (RCEP) is gigantic in
size and scope. It aims to create a free trade zone of 10 ASEAN nations and Australia, China,
India, Japan, South Korea and New Zealand. This means a zero-customs duty zone in
geography that contributes 34% of global gross domestic product (GDP) and 40% of world
trade. The region is also home to almost half of the world’s population. Currently, many
pharmaceutical companies have to obtain elaborate licenses to export their goods to China.
The government hopes to change this. However, many analysts believe that there would be
little for India to gain from this agreement. Many industries like steel are also worried that
cheap imports from China would harm their business, as the cost of producing steel in India is
Q16. What would happen if Government of India creates a Special Economic Zone (SEZ) for
steel manufacturers in Manesar? (Where SEZ is a designated area in which the business laws
C. Cannot say
Q17. What would happen if INR becomes weaker/depreciates with respect to Yuan?
(Depreciation implies a fall in the value of Indian Rupee in comparison with Yuan. For
example, when earlier 10 rupees made a yuan, after depreciation, we need 15 rupees to make
a yuan)
D. Both A & C
Q18. An Intellectual Property case has been put forth by Japan in order to protect its
pharmaceutical industry, which of the following is likely to happen after the RCEP Agreement
is struck:
47
NEO 2019
Preliminary Level Exam: Class XI
Directions Q19-Q21
Case 2- Alphabet Inc’s Google moved $19.2 billion to a Bermuda shell company in 2016,
regulatory filings in the Netherlands show -- saving the company billions of dollars in taxes
that year. Google uses two structures, known as a “Double Irish” and a “Dutch Sandwich,” to
shield the majority of its international profits from taxation. The setup involves shifting
revenue from one Irish subsidiary to a Dutch company with no employees, and then on to a
Bermuda mailbox owned by another Ireland- registered company. Google is under pressure
from regulators and authorities around the world for not paying enough tax. In 2017, the
company escaped a 1.12 Billion Euro French tax bill after a court ruled in its Irish subsidiary,
which collects revenue for ads the company sells in France, which had no permanent base in
the country.
Q19. What would happen if Google does not engage in such activities?
Q20. What is the nature of the strategy which was used by Google in the given case?
A. Tax Evasion
B. Tax Avoidance
C. Tax Appropriation
Q21. What should the government NOT do to curb such activities by a large corporate like
Google?
D. Make all Tax Payable data of the corporate public to induce Public Pressure for higher and
Direction Q22-Q24
Case 3- The Intergovernmental Panel on Climate Change (IPCC) has reported to the United
Nations that the Earth's climate system is undoubtedly getting warmer and concluded that it
is more than 90 percent likely that the accelerated warming of the past 50-60 years is due to
human contributions. As the levels of carbon dioxide (CO2) and other greenhouse gasses
increase, more heat is “trapped” in the earth's atmosphere and global temperatures rise.
Suppose a large city has several power stations which all emit CO2. The government wants
to reduce CO2 emissions but knows that it will cost some power stations more than others to
48
NEO 2019
Preliminary Level Exam: Class XI
Q22. In order to secure the most reduction from the stations which would find it cheapest to
A. A regulation limiting how much CO2 a power station can emit per megawatt of electricity
generated
B. A tax on electricity
D. Giving power stations the property right to emit CO2, and relying on people affected to
Q23. Suppose the government wishes to reduce the overall CO2 emissions. Which of the
A. A regulation limiting how much CO2 a power station can emit per megawatt of electricity
generated.
B. A tax on electricity.
D. Giving power stations the property right to emit CO2, and relying on people affected to
Q24. When the Government decides to tax the power stations it assumes that the price
A. Inelastic
B. Unit Elastic
C. Elastic
D. Perfectly elastic
Directions Q25-Q27
Case 4- In a bold move to reverse the economic downturn and make India an attractive
investment destination, finance minister Nirmala Sitharaman slashed corporate tax rates
worth 1.45 trillion paid by domestic manufacturers, making the country one of the lowest tax
regimes in Asia. Manufacturing companies not availing of tax sops can now opt for a 22%
corporate tax rate, while new manufacturing companies that register and start production
between 1 October and March 2023 can avail an even lower tax rate of 15%. At present,
business income is taxed at 30%, exclusive of cess and surcharge, other than in the case of
companies with sales of up to 400 crore and new manufacturing companies which are taxed
at 25%. Now, the effective tax rate, including cess and surcharges, for the existing
companies comes down from 34.94% to 25.17%, while for new companies, it falls from
29.12% to 17.01%.
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Q25. What effect will this reduction in corporate tax have on the fiscal deficit of the country
in the short run? Note: Fiscal Deficit is the difference between the total revenue and the total
Q26. The benchmark Sensex rose 5.09%, or 1837.52 points, to 37,930.99, while Nifty 50 was
Q27. What impact will this news have on supply curve in the short run?
Directions Q28-Q30
Case 5- In franchising a franchisor licenses its know-how, procedures, intellectual property,
use of its business model, brand, and the rights to sell its branded products and services to a
franchisee. When we talk about companies using this business model the name of Subway
comes at the forefront. With 42,000 stores, Subway is the largest franchise owner on the
planet, one of the primary reasons for this being that it's cheaper to own a subway franchise
than any other fast food chain. In the financial crisis of 2008 when the entire USA faced a
recession Subway witnessed a 17% growth because of its 5$ footlong. But this 5$ footlong
became a problem for the company in the long run. But in recent years the company has
witnessed a slowdown in growth and a 25% decline in its business. One of the major reasons
for this is lack of innovation in the menu in recent years as compared to other chains. Also
Subway has no restrictions on where one can open a franchise because of which we find
Q28. Why has more franchises become a bad thing for Subway?
A. The franchises are competing with each other, and there has been saturation
B. Because they are selling the franchise agreements at a very low price
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Q29. Why do you think the 5$ footlong became a problem for Subway in the long run?
Q30. What should the subway do to avoid the impending slowdown in the company?
Directions Q31-32
Set 1- If the firms in the Automobile industry have the following market shares:
A. Monopolistic Competition
B. Oligopoly
C. Monopoly
D. Perfect Competition
Q32. Assume that Maruti Suzuki acquires all other companies & starts selling cars under its
A. Monopoly
B. Monopolistic Competition
C. Perfect Competition
D. Oligopoly
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Directions Q33-Q34
Set 2- Answer the following questions on the bar diagram below:
Q33. Which event in the economy led to a sharp fall in Indian exports in November 2016?
Q34. What will the Indian government not do to cover the trade deficit? (where trade deficit
Directions Q35-Q36
Set 3- A Consumer Price Index measures changes in the price level of a selected market
basket of consumer goods and services purchased by households. There are other price
indices like the wholesale price index that measures changes in the price level of a selected
market basket of wholesale products and the producer price index that measure the changes
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B. Increase in demand
D. Rise in WPI
Q36. A Consumer Price Index measures changes in the price level of a selected market
basket of consumer goods and services purchased by households. There are other price
indices like the wholesale price index that measures changes in the price level of a selected
market basket of wholesale products and the producer price index that measure the changes
in the price level of a selected market basket of producer goods. Which of these is a false
statement?
D. There is a perfect correlation between the Wholesale Price Index and CPI.
Directions Q37-Q38
Set 3-
Q37. What rate of economic growth is estimated by the Government of India by the following
A. 6%
B. 8%
C. 10%
D. Cannot say
A. 2015
B. 2016
C. 2018
D. 2019
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Directions Q39-Q40
Set 4- You are the manager of a firm that sells output at a price of $40 per unit. You are
interested in hiring a new worker who will increase your firm's output by 2,000 units per year.
Q39. What is the most you should be willing to pay this worker to come to your firm?
A. 80000
Q40. How much will you actually have to offer the worker to induce him to join your firm if his
A. 60000
C. 80000
Answers:
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Section I: Economic Concepts
A. On a linear demand curve, all the five forms of elasticity can be depicted.
B. If two demand curves are linear and intersecting each other, then the coefficient of
C. If two demand curves are linear and parallel to each other, then at a particular price the
D. The price elasticity of demand is expressed in terms of relative not absolute, changes in
Q2. The price of commodity X increases from Rs.50 to Rs.70, but its quantity demanded also
A. X is an inferior good.
B. The income effect and substitution effect for X act in opposite directions and the income
C. The income effect and substitution effect for X act in opposite directions and the
D. Both A and B.
Q3. In 2002, the Atkins diet, which emphasized eating more meat and fewer grains, became
very popular. What do you suppose that did to the price and quantity demanded of bread?
Q4. What is the impact of excess demand or over full employment equilibrium on the output
Q5. Tom gets ‘x’ as pocket money every month. Regardless of anything, he spends 1/4th of
this pocket money on Ice Cream (assumed to be an infinitely divisible good). What is the price
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A. 0.25
B. 1
C. 0.50
D. Infinity
Q6. There are two commodities, a normal one (P) and an inferior one (Q). A consumer’s
income increases which shifts the budget line from B to B’. What shall be the new equilibrium
A. X
B. Y
C. Z
Q7. Which of the following situations does not lead to an increase in equilibrium quantity
assuming that demand and supply are not perfectly elastic or inelastic.
Q8. One of the homebuyers sold his house costing Rs 5 crores to another person for Rs 8
crores. The broker charged a commission of Rs 30 lakh on the sale. What should be the
A. 8.3 crores
B. 5.3 crores
C. 3.3 crores
D. 0.3 crores
Q9. Suppose that one year a country had a balance of trade deficit. Also, suppose that the
balance for invisibles was zero. Then which of the following statements is false?
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Q10. What would be the impact of corporate tax reduction on supply in the short run?
A. The contract is valid and the bank will loan him money.
B. The contract is valid and the bank will not loan him money.
Q12. In all family photos, if Ramu is present, his two brothers are also present. A certain photo
features five members of his family. Among the people in that photo are a set of parents with
Q13. 3 couples sit on an oval bench where none of the couples are sitting adjacent to each
other. The males are Rakesh, Ramesh and Suresh while the females are Rani, Rosy and Surbhi.
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A. Rosy
B. Rani
C. Surbhi
Q14. John has 3 sacks containing 10 coconuts each. He is taking these to a different state
and is required to pay toll tax at 9 poll booths. He is required to pay 1 coconut as toll tax for
every sack of coconut he is carrying with him. How many does he have left with him at the
A. 6
B. 8
C. 10
Q15. How many pairs of letters are there in the word SECURITY each of which has as many
A. 2
B. 3
C. 4
D. None
Q16. How many pairs of letters are there in the word SECURITY each of which has as many
A. 2
B. 3
C. 4
D. None
Set 1- Answer the following questions based on the graph given above:
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Q17. What do you think is the most likely condition of the Japanese economy from 1992-1995?
Q18. What effect may the low interest rates have on Financial Institutions in the long run?
C. Financial Institutions are taken over by the Central bank after incurring huge losses
Set 2- The graph given above shows the Reverse Repo rate in India:
Q19. The RBI is regularly revising downwards the repo & reverse repo rates. Why is this being
done?
Q20. When the repo rate is increased by RBI, it directly leads to:
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Set 3-
Q21. What does the diagram above indicate about the trade balance of India?
Q22. What will the Indian government not do to cover the trade deficit?
Set 4-
Q23. Which of these problems, faced by countries like Nigeria and DR Congo, is not caused
D. Fall in investments
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Q24. Which of the following parameters does not play a significant role in determining the
standard of living?
A. Sanitation
B. Education
C. Employment Opportunities
D. Healthcare
Set 5-
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Directions Q27-28
Case 1- Assume 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
3) There is discrimination against them in other areas of the city. Rents paid are a very high
Q27. Now assume the government creates a rent supplement program. Under this program,
the rentee is required to pay 30% of income in rent. Any additional rent is paid by the
government. For example, a low-income person with an income of $1,000 a month would be
required to pay $300 in rent (30%). If the rent is $500, the other $200 would be paid by the
government. Analyze the results of this program on the rent of the apartments:
A. Rent remains the same as both demand and supply are inelastic.
Q28. Instead, now assume that the government decides to provide a building subsidy to
people who build apartments in this low-income area. A certain percentage of their costs will
be paid by the government. Analyze the results of this program on the rents of apartments:
C. Rent remains same as there is proportionate change in demand & supply of apartment
D. Rent rises as with subsidy there is a drastic increase in demand of the apartment.
Directions Q29-31
Case 2- Vietnam is a country situated in Southeast Asia which is famous for its beaches,
rivers and cities. The economy of Vietnam witnessed marvellous growth rates from 2000 to
2007. But by 2008 the economy started slowing down. The global financial crisis of 2008
further aggravated the situation. Vietnam was facing financial problems like that of trade
deficit. Thus, the State Bank of Vietnam undertook a series of measures, the prominent one
being devaluation of Vietnamese currency- The Dong; in order to deal with the problems that
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Q29. What aim must not have guided the State Bank of Vietnam to devalue Vietnamese
currency- Dong?
Q30. Consider that Chinese Yuan had been devalued last year. Still, Vietnam devalues the
Directions Q32-34
Case 3- The United States imposed sanctions targeting the oil, energy, banking, metals, and
shipping industries last year after withdrawing from the landmark 2015 nuclear agreement
that had given Iran sanctions relief in exchange for measures aimed at preventing it from
obtaining materials that could be used to produce a nuclear weapon. Since then, the US has
imposed more sanctions in retaliation to the retaliatory moves of Iran. Oil exports, Iran’s main
source of income, have fallen 80% since the sanctions were put into place, and the
International Monetary Fund predicts that Iran’s economy will shrink by 6% this year. Iran
controls 40% of the world’s oil supply. The sanctions have been felt heavily on the streets of
Iran. No longer able to afford fresh food, some Iranians in middle-class neighborhoods in
Tehran have resorted to buying withered fruits and vegetables. Iran’s “resistance economy,” is
Q32. What will the Rouhani government not do mitigate the crisis in the economy?
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Q33. What should happen to the price of Oil after the sanctions in the short run?
Q34. What is the most direct impact of a sharp fall in exports of petroleum on Iran?
Directions Q35-47
Case 4- In 2010 the Greek government had to inform the European Commission on how it
would control its budget deficit and improve the performance of its economy. The
government’s debt is so high that agencies assessing the creditworthiness of the government
downgraded it (which would mean more interest has to be paid to raise finance). Proposals
Q35. What would be the effect if the government cut public spending by 10%?
Q36. What actions can the government take to increase national income growth in Greece?
C. Increase Tax
Q37. If the Greek economy is in recession, what would you expect to be the effect on
Inflation?
B. Hyperinflation
C. Stagflation
D. Cannot be determined
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Directions Q38-40
Case 5- India’s battered automakers are dragging down jobs in allied industries as well.
Domestic passenger vehicle sales have been falling for nine months now, according to data
released by the Society of Indian Automobile Manufacturers (SIAM) yesterday (Aug. 13). Sales in
July fell 30.9% year-on-year, making it the worst month for the industry in over 18 years. Car
dealerships have cut down around 200,000 jobs in the last three months in response to the
slump, according to Ashish Harsharaj Kale, president of the industry group Federation of
Automotive Dealers Association. That is close to 8% of the total estimated workforce. Hundreds
of dealerships have also shut shop. Automobile component manufacturers have also terminated
between 10% and 15% of their estimated 5 million workforce, according to Vinnie Mehta,
director general at the Automotive Component Manufacturers Association of India. The industry
body has warned of 1 million job losses if sales don’t pick up.
Q38. What do you think are the major reasons for the economic slowdown in the automobile
sector?
B. Credit crunch that has crippled lending in India’s non-banking financial companies (NBFCs).
Q39. The government has reduced the repo rate. How do you think is it going to affect the
automobile sector?
A. Promote savings
B. A deflationary stance
Answers:
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Section I: Economic Concepts
Q1. The mean of a set of 10 numbers is 20. The mean of another set of 10 numbers is 15. What
is the mean of the 20 numbers when each of the numbers in the first set is replaced by 2x+3,
A. 38
B. 73
C. 29
Q2. If a disease wipes out 35% of ‘H’ growers' crops and the society finds new uses of H at
the same time then what will happen to the equilibrium quantity of H sold and to the
equilibrium price of H ?
Q3. If the correlation between the total revenue of the illegal drug industry and quantity of
theft is positive and government crackdown on drug suppliers leads to higher prices of drugs,
what will happen to the amount of theft if the demand for drugs is elastic?
D. Cannot be determined
Q4. A wheat farmer goes to an APMC (Agricultural Produce Marketing Committee) to sell his
produce i.e. 10,000 kgs of wheat. At the APMC, he meets Ram, who offers to buy 50% of the
produce at Rs. 8/kg and the rest at Rs. 6/kg. Raghav, another trader, offers to buy the entire
produce for Rs. 72,000. A third trader offers to buy 10% produce at Rs. 10/kg, 50% produce
at Rs. 8/kg and the rest at Rs. 4.50/kg. Assuming that the farmer goes for the best option,
A. 68000
B. 70000
C. 72000
D. Cannot be Determined
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Q5. A wizard casts a spell on a farmer, such that the farmer has unlimited land. As soon as
the productivity on a piece of land falls, he shifts the excess workers to a new location. If
land and labour are the only two inputs used for production, how would the cost curve look
like?
Q6. Indusland, a country is struck by a massive drought. As a result of the drought, food crops
are severely damaged and it has been alleged that 10% of the population died due to the
subsequent famine. At the same time, a massive oil reserve (50% of current oil capacity) has
been found, the sale of which is seen as a very attractive option to come out of this crisis.
What impact would this have on the Production Possibility Frontier of the country? (Assume
the country produces only 2 goods, both of which require labour and oil as inputs)
D. Cannot be determined
Q7. Raghav, a statistician, has constructed an index, IA by taking the weighted average of
three different indices, i.e. I1, I2 and I3. IA for June 2007 turned out to be 128.82. For the
same period, I1 was 120, I2 was 130 and I3 was 135. Moreover, Raghav gave I3 twice the
weight he gave to I2. Find out the weight (in percent) he gave to I . ₁
A. 22 %
B. 60 %
C. 34 %
D. 8 %
Q8. Consider that in a perfectly competitive market there are 100 firms, the Marginal Cost
(MC) of each of them is 50. Each of the firms is faced with a demand function given by Q =
100−P. Now consider that all the firms want to create a cartel in order to maximize their joint
profit. If this happens, how much will the market price increase?
A. 15
B. 35
C. 25
D. 50
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Q9. Amit wants to buy a new smartphone and he prefers to buy one from the new iPhone 12
series. Assume that all the batches of iPhone 12 series are directly imported from the US. Now
the government has imposed a new trade tariff and the price of iPhone 12 has further
increased in India. Producer surplus is the difference between how much a person would be
willing to accept for a given quantity of a good versus how much they can receive by selling
the good at the market price. The difference or surplus amount is the benefit the producer
receives for selling the goods in the market. The increase in producer surplus in this case will
be:
Q10. SpaceX has successfully initiated their programme for space tourism. SpaceX has
received exclusive authorization from NASA to provide this service for the next 2 years. The
demand for its service is discrete: consumers in India are eager to pay 130 crore INR for the
first trip, 120 crore INR for the second trip, etc., up to 10 crore INR for the 13th trip. To organise
a trip, the firm must spend 40 crore INR. What is the difference between the maximum profit
that the SpaceX can obtain with the perfect price discrimination compared to linear pricing?
Perfect price discrimination occurs when a firm charges a different price for every unit
consumed.The firm is able to charge the maximum possible price for each unit which enables
A. 100 crore
B. 60 crore
C. 200 crore
Q11. Following are the monetary values of consumption per year done by a country named
Year 7: ?
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A. ₹73 billion
B. ₹62 billion
C. ₹56 billion
D. ₹58 billion
Q12. If A+B means A-B; A-B means A+B; A*B means A/B and A/B means A*B:
A. 10/7/(4+2)
B. 37/(5+2-7)
C. 10+7-(4*2)
D. 37*(5+2-7)
Q13. ABC is a group of x countries. A, a country in the group trades with 10 other countries in
the group. B, another country in the group also trades with 10 other countries in the group.
Similarly, all countries in the group trade with 10 other countries within the group. What is the
A. 10
B. 100
C. Cannot be determined
D. None of these
Q14. Gordon is facing the south direction. He drives straight for 5 kilometres. He then turns
left and drives 12 kilometres. Then he turns to his right and drives 5 kilometres. He then turns
to his right and drives 10 kilometres. After that, he takes a left and drives 5 kilometres. Here,
he meets his friend, who tells him about a famous book store that has been recently opened.
He decides to go to the bookstore to buy 'Poor Economics', a book by Nobel laureates Abhijit
Banerjee and Esther Duflo. So, he again turns to his left and drives another 6 kilometres.
Finally, he takes left and drives another 9 kilometres to reach the bookstore. If there existed a
straight road connecting his house to the bookstore, what could have been the minimum
A. 15 kilometres
B. 10 kilometres
C. 13 kilometres
D. 20 kilometre
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(Q15-16)
Read the given information carefully and answer the questions that follow.
Eleven economists, namely Manpreet, Nakul, Orlando, Peter, Quinton, Rashid, Shriya, Tiffany,
Umar, Vanessa and Walter are sitting in the first row of a conference room.
Tiffany is to the immediate left of Peter and third to the right of Umar.
Vanessa is the immediate neighbour of Manpreet and Nakul and third to the left of
Shriya.
Manpreet is the second to the right of Quinton, who is at one of the ends.
Rashid is sitting next to the right of Peter and Peter is second to the right of Orlando
A. Nakul
B. Orlando
C. Shriya
D. Umar
Q16. Which of the following statements is true with respect to the above arrangement?
D. Shriya and Orlando are neighbours sitting to the immediate right of Tiffany
Q17. Archana's mathematics teacher has asked her to identify a rule that is applicable in all
the four cases in the following diagram. She guessed the rule to be as follows:
Rule: Closed figures become more and more open and open figures become more and more
closed.
Her teacher told her that she was correct for only one of the four given cases. For which of
A. 1
B. 3
C. 2
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Q18. A's great grandfather was born 75 years after the European Credit Crisis originating in
London (1772) and the difference between the age of A and his great grandfather is 25
years. Also, A’s grandson is born 120 years after A’s year of birth and B, the daughter of his
grandson, is born 30 years after her mother who is 20 years smaller than her sister Q. Q is 2
times the age of her sister’s husband during the 2008 financial crisis. Then B has lived
A. 3%
B. 5%
C. 2%
D. 7%
Q19. There is a number X such that X is >= 5000 but <= 5100 and X is evenly divisible by every
integer between 1 and 10. Now find the missing number Y in the series.
A. 7540
B. 7940
C. 7640
D. 7840
Q20. Suppose in a statistics class at MIT, there are 4 boys and 6 girls. Yuvika’s rank is 4
among the girls and Pth in the class. Where does Yuvika stand in ranking among the boys in
the class? Here P is equal to the Marginal Cost when a firm's profit is maximum and Total
A. 3
B. 5
C. 4
D. 2
(Q1-Q3)
In a hypothetical economy, Atlantis, the government conducted a survey to figure out the
Construction. The data was collated and presented graphically. Based on this, answer the
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Q21. Which type of market is the Construction sector most likely going to be?
A. Monopolistic Competition
B. Monopoly
C. Perfect Competition
D. Oligopoly
A. <1
B. >1
C. 1
D. Cannot be determined
Q23. What cannot be a reason for the price elasticity of the automobile sector?
A. Luxury Commodity
B. Monopolistic Competition
C. Multiple-Use Commodity
D. Giffen Good
(Q24-Q26)
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The above is a graphical representation of the Marginal Product curve of a firm named
Q24. Assuming that ECON firm operates rationally, what is the wage per unit per day of the
firm (approx) when it employs a worker and pays ₹149 per worker per day ?
A. 30
B. 28
C. 35
D. 40
Q25. With which worker does the Law of Diminishing Marginal Returns set in ?
A. 5
B. 3
C. 4
D. 2
Q26. If Depreciation Cost = ₹5000, raw material costs per unit = ₹5, rental expenses = ₹2000
and Econ firm produces 1000 units of output when 4 workers are employed. Calculate the
Suppose India has high costs of hiring and firing. With this condition, what do you think during
economic fluctuations, ECON firm will have a more difficult time in ----------- its labour
resources ?
A. ₹15000; Paying
B. ₹10000; Training
D. ₹12000; Reallocating
(Q27-Q28)
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Q27. If the firm does not shut down, the least amount of output that it will produce is
A. 10 units
B. 8 units
C. 5 units
A. point c to point e and continuing on past point e along the ATC curve
(Q29-Q30)
Q29.In the above figure, if the price is P1, the firm will produce
C. nothing.
Q30. In the above figure, if the firm produced Q1, the firm's economic profit is ________
A. more; less
B. less; more
C. more; more
D. less; less
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(Q31-Q33)
numerous tea plantations. Because Laxitania is the world's largest tea producer, the result is
a decrease in the supply of tea and a sharp increase in its price. In July 1980, for example, a
drought destroyed most of its 1981-82 tea plantations. The price of a pound of tea in Colteria,
a neighbouring country dependent on Laxitania for tea, went from $0.68 in 1980 to $1.23 in
1981 and $2.70 in 1982. Prices fell but then jumped again in 1991, after a drought in 1990
ruined much of Laxitania's crop. Finally, starting in June 1999, bad weather followed by a
drought destroyed nearly half of Laxitania's crop. As a result, the price of tea in 1999-2000
was about double its 1998 level. By 2007, however, the price had touched its lowest point in
30 years.
Q31. During the years 1980 and 1981, the supply shifted due to drought, the equilibrium
quantity fell from 90,000 units in 1980 to 50,000 units in 1981. Taking into account the price
data from the case study, comment on the price elasticity of demand of tea.
Q32. Keeping in mind the elasticity of tea as calculated in the previous question, how does
the total revenue of the tea producers change due to drought in the short run?
A. it increases
B. it falls
C. it remains constant
D. it becomes negative
Q33. Suppose the quantity demanded of tea in the year 1981 was 50,000 units. It became
30,000 units in 1982. Taking price data from the case study, what is the absolute value of
A. 0.33
B. 1.87
C. 0.98
D. 1.83
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(Q34-36)
‘A’ is an apparel brand that recently started operations in India. It started off with a small
factory in the southern part of the country, where it employed 100 people - the optimum
capacity. At the same time it opened up 10 retail stores to get the products to the customers.
The brand was very well taken by the customers and demand skyrocketed. Seeing this
increased demand, the company employed 50 more people in the same unit. It also started a
new factory employing an additional 500 employees and opened up 20 more stores. The
brand is doing well and is thinking of expanding across India and accordingly has set plans to
Q34. Identify the trajectory that the total cost curve will have when only 100 people are
employed?
C. Downward Sloping
D. Cannot be Determined
Q35. What is the shape of the average cost curve in the 100-150 employee phase?
A. Downward Sloping
B. Upward Sloping
D. Cannot be Determined
Q36. What would be the impact on the marginal revenue of the company after the new
factory has been established, given that the company was running out of stock even after the
A. MR will fall
B. MR will rise
(Q37-Q38)
In India, the automobile industry is dominated by players such as Maruti, Hyundai, Mahindra,
Tata and Toyota having a cumulative market share of 84.3% Assume after a few years a new
company, Nariox comes up with the technology for flying cars. In order to protect itself from
competition, it also takes over control of the raw material essential for the production of
flying cars. It even got itself a patent to further protect its interests.
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Q37. Which of the following is a characteristic of the automobile market right now?
A. Perfect Information
B. Stiff Advertising
D. Homogenous Products
Q38. Identify the type of market structure for flying vehicles. Which of the following is not a
barrier to entry in the type of market so identified? (Note: Consider the barriers for the type
B. Patents
(Q39-Q40)
Amit is a frequent traveller. He has two months of holidays and is thinking of taking multiple
trips across the country during this time. However, he is confused about where he should go
during this time. He prefers beaches and hence is indifferent about going to Andaman and
Goa. However, he does not want to travel to Mumbai as he has been there a lot of times. He
was sure to travel by train, however, he has now won a lottery of ₹50,000 and now wants to
travel by flight.
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Answers:
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NEO 2020
Preliminary Level Exam: Class XII
Section I: Economic Concepts
Q1. If a disease wipes out 35% of ‘H’ growers' crops and the society finds new uses of H at the
same time which increases its demand then what will happen to the equilibrium quantity of H
Q2. If the correlation between the total revenue of the illegal drug industry and quantity of
theft is positive and the government crackdown on drug suppliers leads to higher prices of
drugs, what will happen to the amount of theft if the demand for drugs is elastic?
D. Cannot be determined
Q3. Raj is a builder. He bought 10 houses in a neighbourhood for Rs.2.5 crores each and hired
a contractor to raze all the houses. On the same plot of land, he constructed a lavish
bungalow which he sold to a rich businessman for Rs.100 crores. In the process of
construction, he paid Rs.5 crores to the workers and bought material worth Rs.15 crores. What
A. Rs100 crores
B. Rs120 crores
C. Rs.125 crores
D. Rs.145 crores
Q4. Narnialand, a country is one of the largest exporters of computer hardware and other
parts. In the year 2019-20, it exported $100 million worth of computer hardware, accounting
for 20% of its exports. During the same period, it imported $10 million of computer hardware
accounting for 1% of imports. All other things constant, what would the likely impact of
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D. Cannot be determined
empirically finds that we have unemployment in rural as well as urban areas and makes
certain conclusions regarding the same. But while doing his analysis, he mistakenly makes
1. Sometimes, the people will remain unemployed even in the peak of farming seasons and
unemployment.
levels of education.
A. Only 3
B. 1 and 2
C. Only 1
D. 2 and 3
Q6. Suppose, in the light of COVID-19 The Indian Government passes a Medical Act at the
end of 2020. This Act authorises districts to regulate the prices of most of the essential
medical services. This type of regulation is most likely to result in which of the following
options?
A. Consumption of medical services such that the marginal benefit is less than the marginal
cost
D. None of them
Q7. SpaceX has successfully initiated its programme for space tourism. SpaceX has received
an exclusive authorization from NASA to provide this service for the next 2 years. The demand
for its service is discrete: consumers in India are eager to pay 130 crore INR for the first trip,
120 crore INR for the second trip, etc., up to 10 crore INR for the 13th trip. To organise a trip,
the firm must spend 40 crore INR. What is the difference between the maximum profit that
the SpaceX can obtain with the perfect price discrimination compared to linear pricing?
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Perfect price discrimination occurs when a firm charges a different price for every unit
consumed. The firm is able to charge the maximum possible price for each unit which
enables the firm to capture all available consumer surplus for itself.
A. 100 crore
B. 60 crore
C. 200 crore
Q8. Novacroxon is a country on a distant planet, where each seller in the market has no
control over prices. In more technical terms, each seller is a perfect competitor. One fine day,
a market researcher plans to derive the demand curve for a certain product (the sellers being
perfect competitors). He finds a surprising element in his analysis. We on planet Earth are
aware of that surprising element, and can surely figure it out. Which of the following could be
A. The demand curve, average revenue curve, and marginal revenue curve coincide
B. The demand curve and the average revenue curve coincide, but not the marginal revenue
curve.
C. The demand curve and marginal revenue curve coincide, but not the average revenue
curve.
D. The average revenue curve and the marginal revenue curve coincide, but not the demand
curve.
Q9. The poverty line is revised periodically taking into consideration the rise in prices.
1. The poverty line is estimated periodically by conducting sample surveys normally every
five years.
2. The surveys are carried out by the National Sample Survey Organisation.
A. Only 2
C. Only 1
D. 1 and 2
Q10. The mean of a set of 10 numbers is 20. The mean of another set of 10 numbers is 15.
What is the mean of the 20 numbers when each of the numbers in the first set is replaced by
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A. 38
B. 73
C. 29
Q11. Following are the monetary values of consumption per year done by a country named
Year 7:?
A. ₹73 billion
B. ₹62 billion
C. ₹56 billion
D. ₹58 billion
Q12. If A+B means A-B; A-B means A+B; A*B means A/B and A/B means A*B:-
A. 10/7/(4+2)
B. 37/(5+2-7)
C. 10+7-(4*2)
D. 37*(5+2-7)
Q13. ABC is a group of x countries. A, a country in the group trades with 10 other countries in
the group. B, another country in the group also trades with 10 other countries in the group.
Similarly, all countries in the group trade with 10 other countries within the group. What is the
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A. 10
B. 100
C. Cannot be determined
D. None of these
Q14. Gordon is facing the south direction. He drives straight for 5 kilometres. He then turns
left and drives 12 kilometres. Then he turns to his right and drives 5 kilometres. He then turns
to his right and drives 10 kilometres. After that, he takes a left and drives 5 kilometres. Here,
he meets his friend, who tells him about a famous book store that has been recently opened.
He decides to go to the bookstore to buy 'Poor Economics', a book by Nobel laureates Abhijit
Banerjee and Esther Duflo. So, he again turns to his left and drives another 6 kilometres.
Finally, he takes left and drives another 9 kilometres to reach the bookstore. If there existed a
straight road connecting his house to the bookstore, what could have been the minimum
A. 15 kilometres
B. 10 kilometres
C. 13 kilometres
D. 20 kilometres
(Q15-Q16) Read the given information carefully and answer the questions that follow.
Eleven economists, namely Manpreet, Nakul, Orlando, Peter, Quinton, Rashid, Shriya, Tiffany,
Umar, Vanessa and Walter are sitting in the first row of a conference room.
Tiffany is to the immediate left of Peter and third to the right of Umar.
Vanessa is the immediate neighbour of Manpreet and Nakul and third to the left of
Shriya.
Manpreet is the second to the right of Quinton, who is at one of the ends.
Rashid is sitting next to the right of Peter and Peter is second to the right of Orlando
A. Nakul
B. Orlando
C. Shriya
D. Umar
Q16. Which of the following statements is true with respect to the above arrangement?
D. Shriya and Orlando are neighbours sitting to the immediate right of Tiffany
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Q17. Archana's mathematics teacher has asked her to identify a rule that is applicable in all
the four cases in the following diagram. She guessed the rule to be as follows-
Rule: Closed figures become more and more open and open figures become more and more
closed.
Her teacher told her that she was correct for only one of the four given cases. For which of
A. 1
B. 3
C. 2
D. 4
Q18. A's great grandfather was born 75 years after the European Credit Crisis originating in
London (1772) and the difference between the age of A and his great grandfather is 25
years. Also, A’s grandson is born 120 years after A’s year of birth and B the daughter of his
grandson is born 30 years after her mother who is 20 years smaller than her sister ‘Q’. Q is 2
times the age of her sister’s husband during the 2008 financial crisis. Then, B has lived
A. 3%
B. 5%
C. 2%
D. 7%
Q19. There is a number X such that X is >= 5000 but <= 5100 and X is evenly divisible by every
integer between 1 and 10. Now find the missing number Y in the series.
A. 7540
B. 7940
C. 7640
D. 7840
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Q20. Suppose in a statistics class at MIT, there are 4 boys and 6 girls. Yuvika’s rank is 4
among the girls and Pth in the class. Where does Yuvika stand in ranking among the boys in
the class? Here P is equal to the Marginal Cost when a firm's profit is maximum and Total
A. 3
B. 5
C. 4
D. 2
(Q21-Q23)
Q21.Which of the following could be directly responsible for the fall in National Income of
Q22. Which factor could have been responsible for the rise in Country A’s National Income as
C. Both A and B
Q23. In the year 2020, which country has the highest Domestic Income?
A. Country A
B. Country B
C. Country C
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(Q24-Q26)
In a hypothetical economy, Atlantis, the government conducted a survey to figure out the
Construction. The data was collated and presented graphically. Based on this, answer the
Q24. Which type of market is the Construction sector most likely going to be?
A. Monopolistic Competition
B. Monopoly
C. Perfect Competition
D. Oligopoly
A. <1
B. >1
C. 1
D. Cannot be determined
Q26. What cannot be a reason for the price elasticity of the automobile sector?
A. Luxury Commodity
B. Monopolistic Competition
C. Multiple-Use Commodity
D. Giffen Good
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(Q27-Q28)
The data regarding the production of and demand faced by six companies is given above.
Q27. The production of company E is approximately what percentage of the total demand
A. 19.52
B. 23.94
C. 16.13
D. 17.01
Q28. What is the ratio of the companies having more production than demand to companies
A. 1: 2
B. 2 : 3
C. 2: 1
D. 3: 2
(Q29-Q30)
The following diagram is taken from the report 'A Performance Analysis of Mohalla Clinics',
published by The Economics Society, Shri Ram College of Commerce. It illustrates the division
of various diseases for which the respondents visited the Mohalla Clinics.
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Q29. Consider that the number of patients visiting for Joints Pain has increased by 25% in
comparison to the previous year. The number of patients visiting for treatment of
Diabetes/Sugar is 750. What was the number of patients visiting for Joints Pain last year?
A. 600
B. 200
C. 250
D. 500
Q30. Let the following provide values of expected percentage increase/decrease in the
visitors per disease in the next year (negative sign indicates a percentage decrease).
Diabetes/Sugar: 3%
Fever/Cough/Cold: -2%
Thyroid: 8%
Acidity/Stomach Ache: 5%
What should be the value of expected increase/decrease for Joints Pain so as to keep the
A. -35%
B. -25.2%
C. 12.76%
D. 35%
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(Q31-Q33)
The 1997-98 South-East Asian Financial Crisis saw a massive currency depreciation of a lot of
the South-East Asian Economies. For example, the Indonesian Rupiah depreciated by
83.20%, Malaysian Ringgit by 45%, Thai Baht by 40.20% and Phillippine Peso by 37.40%.
However, this was only the fallout of the crisis and there were a lot of reasons which
cumulatively led to the crisis. Initially, higher interest rates in these economies led to an influx
of foreign capital into these economies which were invested in the domestic market. Due to
certain fundamental issues in these economies, this money was invested into risky assets
creating an asset bubble which collapsed due to a fall in exports of these South-East Asian
Economies.
Q31. The foreign lenders made the lendings in dollars. Which party would be the worst
A. Lenders
B. Borrowers
C.Regulatory Authorities
D. Cannot be determined
Q32. Indonesia had higher interest rates than most of the global economies. Assuming
ceteris paribus, what would be the likely impact of high-interest rates on the Indonesian
Rupiah?
A. Currency Devaluation
B. Currency Appreciation
C. No change in Currency
D. Cannot be Determined
Q33. Assume that Thailand, Indonesia and Malaysia had the same imports before the crisis.
Which economy would most likely have the highest imports after the devaluations?
A. Indonesia
B. Malaysia
C. Thailand
D. Philippines
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(Q34-Q36)
Since the first half of the 1990s, when India began liberalising its economy, it started opening
up most of the sectors for Foreign Direct Investment (FDI). Export was given prime
importance. Structural change in the economy was evident with the boom of the service
sector. Consequently, GDP grew steadily, foreign investments increased and foreign
exchange reserves were in a stable position. Economists predicted that by 2050, India would
become the third-largest economy in the world. However, although there was a sharp
improvement in economic performance, India faced a growth paradox. The contrast was
evident as even basic amenities were not provided to a large proportion of its citizens. The
benefits did not trickle down to the majority of the population. Crumbling infrastructure and
social impoverishment were becoming major obstacles for the future development of India.
Q34. How did the process of liberalisation impact the Indian Rupee with respect to that of
the US Dollar?
A. The value of Rupee increased post-liberalisation and then declined again after the
economy stabilised
D. Nothing can be said about the changes in the value of Rupee due to lack of information
Q35. What are the ways in which the Indian Government can ensure that the inequality
1. Progressive taxation
2. Agricultural subsidies
B. 2, 3 and 4
C. 1, 3 and 4
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Q36. Which of the following are correct with reference to the economic reforms?
1. Economic reforms have placed limits on the growth of public expenditure, especially in
social sectors.
2. The reform policies involving tariff reduction have curtailed the scope for raising revenue
3. In order to attract foreign investment, tax incentives were provided to foreign investors
A. 1 and 2 only
B. 2 and 3 only
C. 1 and 3 only
(Q37-Q38)
In India, the automobile industry is dominated by players like Maruti, Hyundai, Mahindra, Tata
and Toyota having a cumulative market share of 84.3% Assume after a few years a new
company, Nariox comes up with the technology for flying cars. In order to protect itself from
the competition, it also takes over control of the raw material essential for the production of
flying cars. It even got itself a patent to further protect its interests.
Q37. Which of the following is a characteristic of the automobile market right now?
A. Perfect Information
B. Stiff Advertising
D. Homogenous Products
Q38. Identify the type of market structure for flying vehicles. Which of the following is not a
barrier to entry in the type of market so identified? (Note: Consider the barriers for the type
B. Patents
(Q39-Q40)
In a distant country named Laxitania, weather conditions occasionally destroy or damage
numerous tea plantations. Because Laxitania is the world's largest tea producer, the result is
a decrease in the supply of tea and a sharp increase in its price. In July 1980, for example, a
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The price of a pound of tea in Colteria, a neighbouring country dependent on Laxitania for
tea, went from $0.68 in 1980 to $1.23 in 1981 and $2.70 in 1982. Prices fell but then jumped
again in 1991, after a drought in 1990 ruined much of Laxitania's crop. Finally, starting in June
1999, bad weather followed by a drought destroyed nearly half of Laxitania's crop. As a
result, the price of tea in 1999-2000 was about to double its 1998 level. By 2007, however, the
Q39. In 1980, the price of tea rose at a rate that was greater than the rate at which supply
reduced due to drought. Comment on the price elasticity of demand for tea.
Q40. Keeping in mind the elasticity of tea as calculated in the previous question, how does
the total revenue of the tea producers change due to drought in short-run?
A. It increases
B. It falls
C. It remains constant
D. It becomes negative
Answers:
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