INDIAN ECONOMIC
SERVICE (IES)
TEST SERIES - 2025
Test-02 GENERAL ECONOMICS III
Time Allowed: Three Hours Maximum Marks : 200
QUESTION PAPER SPECIFIC INSTRUCTIONS
(Please read each of the following instructions carefully before attempting questions)
There are SIXTEEN questions divided under THREE Sections.
The ONLY question in Section—A is compulsory.
In Section—B, SIX out of NINE questions are to be attempted.
In Section—C, FOUR out of SIX questions are to be attempted.
Candidates should attempt questions/parts as per the instructions given in the Sections.
The number of marks carried by a question/part is indicated against it.
Diagrams/Figures, wherever required, shall be drawn in the space provided for answering the question
itself. Unless otherwise mentioned, symbols and notations have their usual standard meanings.
Candidates are required to write clear, legible and concise answers and to adhere to word limits,
wherever indicated. Failure to adhere to word limits may be penalized.
Attempts of questions shall be counted in sequential order. Unless struck off, attempt of a question
shall be counted even if attempted partly.
Any page or portion of the page left blank in the Question-cum-Answer (QCA) Booklet must be
clearly struck off.
Candidates are required to write clear, legible and concise answers.
Answers must be written in ENGLISH only.
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GENERAL ECONOMICS III
SECTION-A
1. Answer the following questions in the about 100 words each 6 × 5 = 30
(a) Write a short note on green bonds and their associated challenges.
(b) Briefly explain the concept of carbon trading.
(c) Distinguish between Revenue Deficit, Effective Revenue Deficit, Fiscal Deficit and Primary
Deficit.
(d) What is price discrimination and how is it used to increase a monopoly’s profit?
(e) Explain the distinction in pricing of public and private goods.
(f) Calculate the Lerner index for a firm facing demand curve P3Q = 12.
SECTION-B
Answer any SIX out of the following NINE questions in about 200 words each. 15 × 6 = 90
2. Explain the concept of sustainable development. How do renewable energy sources foster
sustainability?
3. Compare and contrast revealed preference method and stated preference method of
environmental valuation.
4. What is the role of cost-benefit analysis in a developing country for public policy formulation?
5. Demonstrate why ad-valorem taxes are more favorable to firms than specific sales taxes for
generating the same revenue.
6. What are the causes of market failure? Explain the relevance of Pigouvian tax in correcting
the externalities in a market.
7. Analyze the positive and negative effects of subsidies on the economy, providing examples
from the Indian context
8. “Price in the long run under monopolistic competition is necessarily higher and output
necessarily lower as compared to perfect competition”. Explain diagrammatically.
9. What is contestable market? What are its determinants? What are the operational setbacks of
the market?
10. (a) What is collusive oligopoly and what are its objectives?
(b) We have the demand and cost functions of two firms A and B:
P = 100 – 0.5Q = 100 – 0.5(QA + QB)
CA = 0.5Q A
CB = 0.5QB2
Calculate the maximum joint profit of the colluding firms on the basis of the above
information.
Indian Economic Services (IES)
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TEST - 02
SECTION-C
Answer any four out of the following six questions in about 300 words. 20 × 4 = 80
11. What is Green GDP? How is it an improvement over conventional GDP?
12. Use an oligopolistic model of price domination to determine the price decision of a cartel.
Discuss the necessary assumptions required for maintaining the price so determined.
13. What are fiscal multipliers? Explain their importance in context of public expenditure in India.
14. What are India’s Green transition challenges? Outline major steps taken by the Government
of India in this regard.
15. Do you agree that the role of state and markets is complementary? Justify.
16. Briefly explain Domar Approach, Solvency Approach and Ricardian Equivalence for the
problem of sustainability of public debt. Which of the three will you prefer and why?
(12 + 8)
Indian Economic Services (IES)
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