1. Suppose the demand function .for wheat,.

is Qd "" l O-2p and supply function is

Qs = 3 P - S. The government is concerned that the market equilibrium price of wheat is
too low and would like to implement a price support poLicy to protect the farmers . By
.'implementing the price support policy, the government set s a support price Ps "" 4 and
purchases the extra supply at the' support price. The gain in producer surplu s at the
support price Ps = 1- is
lal 20
(bl 28
Ito!'" 11/2
Idl 22/3
:2. For the problem in Ql, the change in consumer surplus o f implementing sup port
price is
tal 14
Ibl 10

"""*Idl 3
5
3. For the problem in Q 1 the cost to the government of this poHcy is
J

(a) 21
:r ru
\..lb 20 I C~ p:~,~:t:
lei 14
1$
Idl 10
,
r SPACE FOR ROUGH WORK

~s - ~ fl -.t-
Ole! - 10 - I. p
. -t"~ )t)
Qd d ! . <

~ p -C: IO-tp
:: .,I:.
S~ "- 1:;'-
~S"l. :; 1 .. l. '"
L

,t. P '" 3
tjcl 0 10 -'l.l'J
.." to - t
::. ~

~ D :" 1~-l.C~'>·
-;, "·')-e : '). 8' '~q - ,H 66f
'" [ ..N ~ l..
2/54
 4. With regard to Q l. s uppose now the government switches from 'p rice support policy to
. subsid:r. policy_ For each' unit of com produced, the gov+ment subsidizes the farmer
s .. 5 /3. How much money will the govemment . h~ve to ' spend in order to ,implement
this subsidy policy? I

('1 10
•
21'
(bl
,
~(dl
15
10/3 I
5. Which of the following will cause total revenue earned by cell phone producers to rise?
~ The demand is price-elastic and the price falls.
(bl The price falls and demand is inelastic.
(c) D~man d is reduced because consumers learn of new haZards of cell phone use.
(d) The. population in the econ~my increales dramatically.

6. Suppose the elasticity of demand for an iPod is ...3·5. This means that
tal the demand fo r jPods is inelastic
(bl the demand CUlVe for iPods is very steep.
(e) 10 percent increase in the pr~ce of iPods will cause quantity · demanded to rise
by 35%.
~ 10 percent increase in the price of iPods will cause quantity demanded to fall
by 35%. •
SPACE FOR ROUGH WORK

e. - ~ 3->'\-=- ,-I r
Om L .,.." """')

-j.I>"
v.-c< I-< (
I> >oJO
e ~ ~.~
. I .~ r

- l
-- .r X.J. ':' t~'" .
"Z- ·0

~I.\
-;r. P -• .?:.
r
t f'
-3
Q,£
- 1( 't )_r . ~I :oW
:; (0 -~
-.I- 1<"2

.,.
Hl~
-. 1j
-- 41. _l-
~
• - l.!
.3
- Y' .1.- -- ~ ;"'1
. ~/54 ~
•
 =

7. Any point outside the PPF (or PPC)

\..{a~ is not feasible, given current resources and technology
(bl represents efficient use of the economy's resources
(e) represents inefficicI1:tooUs!! of the economy's resources
(d) None of the above
.
8. If Britannia hires another worker. Britannia will be able to deliver an additional
20 packages 'an hour. The price of each package is Rs 5. The marginal revenue product
(MRP) of this additional worker is equa l to
(.) Rs 5
Jb) R. IDO
1' '' N K" w
(e) Rs 4
'"'til ~ "-'Ip
(d) 20 packages

9. If the total outp!Jt of candles in Nick's Wicks shop increases from 20 per hour to 30 per
as he hires the second work~r, then
' h'C:lUT

(a) the marginal product or- the second worker is 20 candles

(b) the marginal product of the second worker is 30 candles
~ if the pric~ of each candle is Rs 2, the marginal revenue product (M RP) of the
second worker is Rs 20
(d) if the price of each candle is Rs 2, the marginal revenue product (MRP) of the
second worker is Rs 30 .

SPACE FOR Ro n(lR' lIJ'nD Ir

M RP _.
t.. -
,'
••

I~
-

--
" .
.\ ,

4/54
 /-
rJ...- .,"'I"' " ' L ~' r"Ill /_ ",11<,':
" _.~,"')

10,

(bl X;" 1/4, X:;=l , •

· (e) x; "" 4, . x; ,. 2
"(dl x~ =1/2, x; =1/4
2
11. The function f: R~ R defined by fix) = x +2x - 3 has
x2-x-2
(al two · points of .discontinuity at x = -2 and x K -1 ~
(b) a single point of d~scontinuity at x:: -1 f
(e) a single point of discontinuity at x = -2 l'
~ two pOints of discontinuity at x "" 2 and x. -1

. 12. The rank of the matrix C· AS. where A:: 1

.. (3
1"
(al 0
,.
(bl 1 r
.j.cl/~
(dl 3 ')t

. '\t l_x.. - ,.: .~ ,.,.. C ~ A r1

II
'A L - "2x. +"M. - 2..- ~ G3I I
l... ")l r rO) ) l.
X ( "X -'-) foi L'\{. - L) o 6
l 'l.\.- L) (V-t \ ') .
S'I'H IYI-I I;<'.l. ~Yj- 4(l(ih'X/ JX~~\
/V'-
Y1: 1.,-1 + 6)(1

' '\A)~).'X - ~
(y~ pxl t'x/ I>( l F~3-1 (Xl)
{'to +- 2.'JC:1. - J I )(
J
){ '+?-')(-I<. -3
'>, ( 11.45) -Ie. 'A~.3 )
( l + (,),1. 1{+H o O~ L+( )
"'" ~ :?)c){ - 1) -
I •
\.i l l+).. ,- ~ b lo 0. \,t l ~
,
'\01 -- -~ '2..

- (- .
.~
1g

I1
~
10
)
5/54
8(,,,,-)
~
~ 1&( (-!"
1t , ij
13. The probabilities that A and B speak the truth independently are p and q respectively.
If they make the same statement, the probability that the statement is indeed true is

(a) . pq ~ P( fl ) = r ftg): "v

pq + l'(l-p}(l+qj IIl 'G'' ' }_" ,_ 0
-V" ", CVrf.)-;..I-l£.

pq
(e)
pq+(I- P}(l+qj

(d) 2pq
pq+(I - P}(I+qj

14. The probabiliti,e s of solving a problem by 3 students are~. i and ! res~tively. If each
one of them tries to solve it independently, then the probability that the problem is not
solved is ft~):: lh p(!1 J;: 5/& P'<"F 'I J
(a) 2/8
(b) 3/ 7 ~ ('Il ~ lfh. itlll =- 5/ f 'VLC): 2/~
(e) 4/21 p( So t=J) , .i)< ·4-X ~l. ".1.
~ ? ~. r(,
t.J9V 5/21 f( 1J)l~ twr'): lft'+-.,. 'f/G-,)' 1/3 ~ ~/l l
8PACR mil. vnnfta...1II't)DIl ..

6/54
 r
~,-1 -.s c.. 1- 2 C-C) \

k~- 3t-LC.j..J. · 0 .
u
) c ( C.- I ) • L ( '- ":' 1) '" C
l S. The probability mass function p(x) of a random variable X is zero except at points
X =0, 1,2 and 3. If C is a constant such that - 1.) ( (-I) -:...u Ck I
C C . ,
p(O)=-, p(I)=2C-3C2 , P(2)=2C - I, P(3)=- 1.. 'I, ) (~
' 2 .' .. 2 >
then f +- 2.(. - h " 1- +-:t ( - I +i.:: \ j

~ = I and C=2 / 3 ( t VC. - 6 (..2. + '-I e. - 2. -/.C =

,
(h) C= I
(e) C.2/3
(d) C= 3/2
- 6 (. l. I- tOc.. ... 4
-).. 1 C :
0 1:)
-
16. The mean daily profit of a shopkeeper in a month of 30 days was Rs 650 . The mean
profit for the first two weeks was Rs 575 and the mean profit for the third week was
Rs 400. His mean profit for the remaining days was
(a) Rs 325·20 ~Rs 961-11

(e) Rs 100-00 (d) Rs 923· 25

17 . The distribution of the. number of printing mistakes per page of a book is Poisson with
mean 3. Given that e- 3 "" 0 · 049787, the probability that there is so'me mistake in a
page is -
~ 0'049787 (h) 0·950212

(e) 0 ·905020 (dl None of the above

~(6 M() ·•• n , ~ t.J. 0 " ; 30

t r ~ :;~l- )(' l ~ , go ~-o
; <J..<;.L :: 1./</'0 +- -
, 1.6CI'Q

X ~x.
VI
~> Iq~"'I1l - 1J'S~,fJ '" ((j l'J'O • ( 0 d'.11 :::,~ I. K.
J
X " lqlVO ~ 36.> -0_ :0 l: '\.\.
, "I
,
"
~ 1'1- ? ,. ~ J 0 4 ,<1 i-(? 1-
., ,

7/54

,
-
 ~I~
- - - ). '16
0 · 1. og.
18. The score of students in a certain exam'ination is nonnally distributed with mean 46
and variance 400. Given $ (. 8) == 0 . 188, where ¢ denotes the standard nonnal
cumulati~e distribution function , the probability of a student scoring les s than 30 is

uar 0·212 • (b) 0,112

(e) 0 ·222 (d) 0·111

19 . Suppose equilibrium output is YO and the price level is Po for an aggregate demand
f;t.<;. curve and a classical , aggregate supply curve. A technological advance will result in
""1 (a). an increase in the price level and no change in the eqUilibrium level of output
\ (b) an increase in the eqUilibrium level of output and the price level

" .M>o·{c;:y
(d)
an increase in the equilibrium level of output and a decrease in the price lev.el
an increase in the equilibrium level of output and no change in the price level

20. Suppose eqUilibrium output is YO' which is below the full employment level, and the
price level is Po (or an aggregate demand and a Keynesian a~ega te supply curve. An
increase in government spending will result in
i? J r--y..,. M
• (a) an increase in the' price level and no change in the equilibrium level of output
~
+--1."""':' (b) an increase in the equilibrium level of output and the price level
'I ~
'10 r (e) an increase in the equilibrium level of output and a decrease in the price level
u p) an increase in the equilibrium level of output and no change in the price level

SPACE F OR ROUGH WORK

$..' 10

< 30 • ~ 6
'2.
~o
- -j.:
~o

'2 L'~ Q . S
,
0'· - rfC Q.g)
-
0 , O ·~&
,

o. '2.1 "'
•

8 / 54
 ~
21. Consider the following (orm of the IS-LM model, where expected inflation is zero (rt e = 0) )
and net exports INX) are also zero:
C~ Co +c,.(Y-7)

l~bo + ~ ;: -b, i
d '
~ ,~~ -d,i
MS = M
where Cis the consumption, Y is the income, T represents taxes, I is the investment, i is
th~ rate of inter"e st, Md is the money demand, P is the price level and M S is money
supply. Let G denote government spending, Then, the short-equilibrium (pair (y, i)) that
makes goods and money matket to be in equilibrium at the same time is

md,'(C o - c,.T+Gi- M" 1 [M mdt(co - c,.T+Gi - M ]

(a) 'i" = P; y. = - - +d 2 p
, b 2 mrit +d 2 ~ P b,md t +d 2

1
Note that we define m '" ,b + '1 < 1
l-bl -'1 1 "
 22,
I
The optimal trade policy for ~ country .s always
, (a) free trade

®(b)

(d
restricted trade with-'tariff

subsidies
Can't say

23. The maximum amount of food and cloth that two countries A and B can produce by
of
using all the factors of production in their respective countries with the best available
technology is given below in the table :

' A B
Food 500 1200
Cloth 700 800
Suppose A and B agree to a terms of trade ratio of 1 : 1 (Le ., 1 u nit of food to be
exchanged for 1 unit of cloth). then the specialization and trade pattern would be
as follows .
(aJ A will specialize in food and export food , and import cloth from B
A A will specialize in cloth, and export cloth and import food from B
Ie) A and B will not trade
(dl A has no comparative advantage and will import food and ,cloth from B

SPACE FOR ROUGH WORK

- ,
JjO ..L- f> ') ..L- l I~ : '/ f
.--
j'\'l1)F' ~t .L
~
''''''
...L.
r 1.lJO
\ LH :: ) t..-o('
~",... ,

).,.Jr- ~t
'?
,• r < {.
~
-
}N
y
>'('tJ
t ~T
I ,, ~vO

\
..L l H :.
~N ,
r LN - <I'\I'OL
I e:

.(
j
I-~ 0-66 I. lJ.I¢ r- ~ 800 c.
.l. c.. I~ 1\ -<-
':: I (:
r F =J""c
l~ fl - 1- I~.O

..L c..tJ ~ Ie ':1 "" t -:: I"Un> F

)vJ s.~~ F ':fG::'~F - •
I (... It " •
I I..H =l1Jil c. Ie :l2;F ;:" , PI:. 1:(
~ J t"
.!oW \~ ::. ~ C. IC:I'~~ LO.66'2 r-~ HIe. J
( -:: 10/54, - --"
O-I l- - - - ''-

[
, iJ ' '+/ F t.. c L. t, {' F
24. The table below gives the demand and, supply schedules for computers in a small
country :
Price per Quantity Quantity
Computer ($) Demanded _.Supplied
100 \/"" 900 0
200 . 700 200
,
;JQQ... 500 400
400 V W. 600
500 100 BOO
Under free trade the country was importing c~mputers at a pric~ of 100, but now
imposes a quota that limits imports to 300 computers. The price will go up 'by
lal $ 250
Ibl $ 200
-.;.,r $ 150
(d) $ 100

25. lfthe marginal p ropensity to save is 0·15 and the marginal propensity to import is 0 ·05,
. then the multiplie, effect on GDR is H PI ~ O. / ... - '" p(
I fJ ~ I P!
•
(a) 6'67 IJ P" n O · O~ - M p( ~_ / - OF.
~·oo A~ I .- 0·4' ... •
(c) 4'3 1
(d) None of the above

SPACE FOR ROUGH wnRIl

-

() 6(l{) ~ IJQ 11i'O

6o C' - ~ ='" sCO "

j l}1) 'It ( i ttO - "\A.. )

L ,
•
)~
11/54