(Part-1 & IH-2011

Economics (Hons.) Ques. Papers

22 C. U.

English Version]
Group-A
Part-I
4x3
I. Answer any three questions
(a) Explain how risk
through diversification. (b)
can be reduced
on the inelastic part of his
Prove that a monopolist will never produce
and show it graphi-
demand curve. (c) Define consumer 's surplus
with
cally. (d) Define externilities in production and consumption
examples. (c) Do you think that perfect conmpetition is necessary for
pareto cfficiency?
Part-I1
Answer ny one question
2. Prove that a monopolist can exen his monopoly power only
when the price clasticity of demand is less than unity 8
3. What is a cartel? Usc Prisoncr's Dilemma to
explain Cartcl
instability. 26
4.Definc adverse sclection. Show how adversc
sclcction may
Icad to crowding out of high quality items
by low quality itcms. 2%
Part-IlI
Answer any hvo
5. questions 152
Explain the concepts of perceivcd demand curve
(a)
portional demand curve under inonopolistic and pro-
the two curves intersect at competition. Why must
the equilibrium point?
(b) Suppose a
in short run monopolistically competitive firm is
equilibrium. Describe its suffering losses
process of adjustment to
atcquilibrium the long run.
in arrive
6. (a) Draw a
utility function over income that 7+8
who is a risk lover when his income describes a
income is low
is
high but a risk averter person
when his
(b) Consider a lottery with three
) Rs. 100/- will be
possible outcomes:
received with probabilityO.I (i) Rs. 50/-
received with probability 0.2 and (i1) 10/-will be received will bo
abilty 0.7: with proh.
What is the expected value of the
prob-
lottery'? What would be a
neutral person pay to play the lottery? risk
2+3
 Third Paper-2011 23

()A risk-averse person is offercd a choice between a gamble

paying Rs. 1000/- with probability 0.25 and Rs. 100/-with probability
of 0.75 or a payment of Rs. 325/- Which one would he choose? 6
7. Are the product market imperfections solely responsible for
the exploitation of labour? Can labour unions always eliminate labour
exploitation? 8+7
8 Rent is not the income of a particular factor of production
*

but merely an aspect of the income of any factor of production."

Ex
plain. 15
THIRD PAPER-2011
Group-B
Full Marlks-50

8x

5-47TA R| e ITA Dl TT? (1)) MI, M2. M3

3 o%. TR 2FT I F ? (E) AIGT at13 AIL

+
-

8+8

8I IB CA1|A CAN AAIST1 Sticky Price Model 1B TFTTD| EI

+9+
 22 C:U Economics (Hons.) Ques. Papers (Part-I & )-2012

++

+0
(5) CT11 3AtA 5 | P A ERI sQ=20-P, RHT Q =

++

e T (intuition)G
(E) 1 E q = ' +5L +215 L 9 1n aforat
aTosa TAU7 I() a w= 45 DE A 9R p= 3 G ,

8+3
English Version|
SECTION-A
. Answer any five questions
(a) An expansion in income will always lead 1o the choice ol a
higher amount of commodity. Do you agrec?
(b) Can you account for the shape of the labour supply curve il
 Third Paper 2012 23

lcisure is an inferior good? Suppose that by sone miracle tlhe number

of hours in the day increased from 24 hours to 30 hours. How would
this alfect the budget constraint? 2+2
tc) Stale with brief rcasoning whcthcr the following statements
are true or false: (i) Short-run average total cost is never less than the
is
long-runtheaverage total cost (ii) If the long-run total cost curve
linear. corresponding average and marginal costs will decline
continiously. 2+2
() Is the firm's expansion path always linear? Can you call an
expansion path a produccr's counierpart of a consumer's pricc
consumption curve? 3+1
(e) Different clasticitis do not make price discrimination fcasible.
Explain.
I s Stackelberg equilibrium a Nash equilibrium? Argue in brief 4
(g) Why could economic rent be variable with respect to the owner
of a specific resource ?
h) What are the major sources of market failurc? State briefly why
each of them prevents a competitive market from operating efficiently?
2+2
SECTION-B
2. Answer any five questions 6x5
(a) Vikranm budgets Rs. 18/- a weck for his colfce with milk
consumption throughout the wcck. He prepares his coffec with 4
parts of coffee to one part of milk. Coffee costs Re I per oz and milk
Rs. 0,50 per oz. C and M denote quantitics of coffee and milk
respectively
inObtain the equation of Vikram's budget line. (i) Determine the
quantities of coffee and milk which Vikram purchases weckly. (iii)
Draw Vikram's budgct line with thrce is dillerence curves and represent
his best choice point by E on the budget line. 2+2+2
tbyA consumer is willing to trade Ikg of sugar lor ikgs ofatta per
month. The price of sugar is WICe that ol alla. Should the consumer
reduce his consunnption ol atta and increase sugar consumption or
should he reduce his coisuimption ol sugar and mcrease aua con-
Suinption?
 (Part-I &
(Hons.) Qucs. Papers 12
Economics
24 C. U.

product oflabourwhcn threc workcr farm:

(c) () The av crage and the narginal produc1
150 bushcls of whcal when
acre
ofland is is employod. is
75 bushels. Vhat is the total
fourth worker minimum efficicn!
oulpu
(u) Wlhat is the Scalc of
with four workers?
long-run average cost? (ii)
Determine
thewhether
prodiuction in
production functions cxhibil increasing. decrcasino.
following
constan returns to scalec:
0-300K +25L
B Q 50Kas 2+242
dA fim ina perfctly competitive industry has the following
long run cost function Cq)=q-60q + 1500q
() Ifthe firm can sellits outpul at p= Rs. 975, how much willit
produce to maúmise profit? ti) Is the outpul of the fim in (ijcompatibke
with industry cquilibrium? qi) If the industry is that of constant
av crage costL derive the cquation for the long run supply curve of lie
industry. 2+2+2
(e) (i) A discriminating monopolist sells in two markcts wiln
elasticities cqual to 4 and 2 at the optimum. Can vou obtain the rauo
of the prices changed in the two markets ? (ii) A monopolist laces
denand cune Q 10- Pand hasa total
=

cost function TC +*0. I

practice perfect price discrimination. how much
monopolist earn? prolit shou
()The demand function in a P where

i s the total output sold duopoly market is Q= 20 cost

functious C =%q .i = 1.2. by the two firms. Thc firnis na

() If the irms e the
collude to act as a what will
industry outpul and profit? (ir) monopoli
a Cournol Wlat will be the price Outputs

cquil1brium' Wlhat will be 1he ts

a
Stackclberg lexder and finm 2 as a profits
?(in) ll nwhat i
the leader s outpul and Stackclberg followe. 2+2+2

(g) State the Firs1

profin
cquilihrim
in

Mention ihe intuition Fundamental

lhieorcm of Wellare
tlicorcm of we Econo 214
belhind the thcorenu.
(h) Let
q=L'+5L
competitive fin. +215Lbe the production fiunctto
perfitl
 Third Paper -2012 25

)For w Rs. 45 and p=Rs. 3. ind the profit maximisingB

=

employmcnt of the fim.(ii) How would the firm behave if a minimum

wage higher than Rs. 45 is imposcd in the labour market? +2
 P (Part-I& I)-2012
24 C.U.Economics (Hons.)Q.
P (deadweight loss)
4T , Ua b4 MIRIAU HVTA
()1 T Y T IaA A s B *PM P= 100 - O a

( )31R A fRSM A RB ADQ, AaAT1 T I EIA

arofar ARE (reaction function) fHs1 I(M) FCN ETAAIGT A

MP
MP

+8
English Version)
Section-A
Answer any five
Answer any five
(a) Rima lives in worldquestions
questions
At the a of 2 time periods: today' and
rate in beginning of each period she earns Rs. 'tomorroW
each
income? Drawperiod
is 0.5, what is the 210/-. If the interest
lher
(b) Consider intertemporal budget line.
present value of lher lifet
output, and L is theproductionoffunction Q = 150 L, where Q is
a
product-curve look
quantity labour employcd. How totat
Product and Marginal like? Can you describe the does the totai
Mc) Decompose the Product Curves? corresponding Averag
and substitution effectscffeci change in relative
of
(d) (i) By governmeniwhen Iwo goods are perfect price into incone
a fixed amount
as tax regulatuion, suppose a fir1m
substitutes.
anytlhing or not. How does everyil ycar, independent of must have to
pay
total cost?
allect frm's whether it
fixed. marginal andproduces
average
 Third Paper-2013 25
(ii) If that tax is.proportional 1o the quantity of output, the firm
produces, how will it aflcct lirm's fixed. marginal and average tola
cost?
(c) In a perfctly compctitive markct why do firms entcr an industry
when they know that in the long-run the economic profit will be zcro.

(D When does exccss capacity exist in a monopolistically

competitive market?
(g) Explain why the labour supply curve is backward bending in a
competitive labour market.
(h) State First and Second Fundamental Theorems of Welfarc
Economics.
Section-B
2Answer uny five questions
Ha) Bibhu is first and foremost interested in tea and would be
willing to forgo any quantity of bread for the smallest, additional
quantity of tea. However. if the tea consumption is given, he
prefers
to have more bread rather than less. Can draw the
you indifference
Curves this
iwitlh preference pattern? Ifyes. draw an indifference curve.
lf no. explain the rcason. Can
you derive a smooth continuous demand
Curve with this prelerence pattern? Justify your answer.
6
) Antara receives an allowance of Rs. 9 per week which she
spends cntircly on chanachur and bhelpuri. Chanachur costs Re.
per 100 grams and bhelpuri Rs. 1.50 per plate. X denotes the
of chanachur and Y denotes that quantity
of bhelpuri.
(1) What is the budget equcation of Antara?
(11) OBtain opportunity cost of a plate of bhelpuri in terms of
chanachur.
(1i) If Antara chooses to
spend her cntire allowance either on
chanachur or on bhepuri. how much of clanachur or how much of
bhelpuri will she consune?
(Iv) Will Antara be budget line. if she chooses to consume
on her
platcs of bhelpuri and 300 grams of
clanachur per week? 1+2+2+1
9) Supposc a consuner consunnes two commodities X and Y
prIces atu
p, 2 and p, I. The consumer has imcome M 8
=

= and his
nilial
consumption bundlc is X" =
2, Y" =
4. The consuniers denand
M
function for X is. X=
2P,
Suppose the price of X lalls to l
 P (Part-I& )-2013
26 C.U.Economics (Hons.) Q.
consume
now?
() How imuch X docs he
(i) How docs his evpenditure on Y change
afier the price fall
the total change in demand duc io price fall into
Decompose
(1i)
Substitution cffect and income cllcct +1+4
(d) () Docs the following production function lollow diminishino
relurns lo scale?
marginal productivity principleand diminishing
Q= 100Lo*KO
(i) Can you think ofa siluation in which sliorl-run marginal cost is
less than long-nun marginal cost? H3
(e)A compctitive industry is in long-run cquilbrium. A sales tax is
then placed on all firms in the industry. What do you expect to happen
o the pric ofthe product. the numbcr of firms in the industry and the
output of cach firm in the long-run?
g))Amonopolistcan produce at a constant imarginal and average
cost of Rs. 5. The market demand curve laced by the producer is Q=
53-P.Calculatethe profit maximizing prico-quantity combination and
profit for the monopolist. How do the output level and profit of this
individual change. ifhe opcrates in perfectly competitive structurc?
(i) Can you identify and calculate the dcadweight loss with the
help of a diagram. whien the conditions of producer 's activitics change
from perfect competition to monopoly? 2+242
(g) The duopolists A and B face an inverse demand function P=
100 Q. where P is the price and Q =Q,+Q, is the total output
produced by the two lirms togctlier. Each firm has a constant marginal
cost equal to 10.
A believes that B is going to produce
(i) Suppose
reaction function.
,, Derive As

(ii) Find thc outputs of A and B in Cournot cquilibrium. H3

(h) (i) Under a perfcctly competitivC scenario. suppose the marginal
product of a worker iIs 5 units per hour and each unit is sold in the
markct at Rs. 6. Thc lin owner has to pay Rs. 40 per hour 1o the
worker. Explain whether tlie owner will hire the worker
(i) In an cconomy. clothing and food are produced with the lhelp
of labour and capital. Suppose w =r= Rs. 4 per hour. In clothing

production MP and
MPk
in
food production = Is this

economy eflicicnt in production? MPk

In which sector. relaiive allocation of labour should be
incrcased
244
 Economics Honours Question Papers (Part- I & 2014
22C.U.

ctq)=q-60q + I500Oq

()af afoaG P =
975 D ICUATE TR

++
T73 AC =
MC =3 T I TEIT7 31Cfeta bikAssa
R, RTT Q= 53-PI TRP TOIRET-TT TAe a a

TTR SAR AT R
TY IA, iR AC= MC =5 TTI TE
*E A a fastee TE 5ÍMI YI Q, +Q,=53- P.7Q,=
F A-TsA sAR
Q. FM B-3TeAA, T F A PÍ B-a
=

+O+

(3)
YTI11T 51R1 7Rri z7P=30-QIA
3,

ENGLISH VERSION.
. Answer uny five Section- A
(a)
questions
Examine the statcment
that
corroboraics the Axiom of convexity of indiffercnc curne

6) if left shoes and Dominance'

right shocs are prcference ranking
in

will the perfect

income-consumption curve look likc? complements. "
Ihow
 Third Paper -2014 23
(c) Sunita has
collectod the following information about
Corporation: MP= 10. Alpha
MP= 15. P, Rs. 30. P= Rs. 15.
=

Explain why
thess data prove that Alpha
How could Sunita improve
Corporation is being run incfliciently.
Corporation? efficicncy if she is pul in clhargc of Alpha
(d) ls the firm's expansion path 2+2
always linear? Can you call an
expansion path a Produccr's countcrparl of a cousumer 's
consumplion curve? price
(c) Why he supply curve does not 3+1
exist for a monopolist firmn?
Explain.
(Show tlhal the Cuornot
(g) Different clasticitics doequilibrium
is a Nash
not make
cquilibrium. 4
Doyou agree? Explain. price discrimination feasible.
(h) State whcther the
following statements are truc. falseor
uncertain. giving brief reasons
i) An IT Company s demand for
computer
not only on the
current salaries of computer programmers depends
how muclh software the programmers but also onn
company expccts to sell. (i) It is wrong to
explain huge ycarly income of several million dollars. which the rock
musicians soinetimes earn, in tenns of cconomic rent.
2+2
SectionB
2 Answer
uny five qucstions :
(a) State whether the followving statcments are tnic.
falsc or
uncertain with reasons
(i) Ram has utility function u (x. y)=x +2y. If the
the price of x is I and
price ofy is 2, thenRam must consume cqual amounts of cach
good in order to maximise this utility. (in)
(N. J)=
Shyam s utility function isu
xy . His marginal rate of substitutionbctwcen x andy docs not
cliangc if you doublc the amount of botlh goods. 3+3
(D) A consuner has income of Rs. I80 per weck and buys tvo

80ods. y
Initially. the prices were (P, .P,) (15.10) and the
and y. =

COISumer clhoose the basket containing (N, y,)= (10, 3). Later. prices
Clhangeto {P P,=(12.12). At these prices the consuer chooses
ncbaskct containing (., y,)= (5, 10). whilc income reains the same
asRs. 180 per weck. Using Revealed Prcference Axionsshow whether
onsumer's choices in these tvo situations maNimizcutility or nor?6
 24C.U. Economics Honours Question Papers (Part-I& )-01
Suppose a chair manufacturer IS producing in the shos
(C)
when cquipment is fixed The manutacturer has
obscrved thaun
.number of labourers employcd by him increascs from I as the
to 7
mumbers of chairs prod1cxd are 10. 18 24. 28, 30, 28 and 25
(i) Docs the production function exhibit
respe
labour? (ii) Has the mxarginal produci of labourdiminishing
bech
rcturne
the production function? What ever ncgative in
might cause such negativity? (i
Canyou idcntify the type of returms to Scale the lollowing
function exhibits? production
q3L+28 where
(d) Consider
q=output: L= Labour: K=Capital 3t142
the cost function ctq)
+1.
=

Find out the average costand marginal cost and depict them in
one diagram. (ü) Find the
of p) and depict it ina
supply function (in terms of q as a function
diagram. (24242
(e)A fim in a perfcctly competitive
long-run cost function. dq)=q-60q + industry
has the following
(i) If the finn can sell 1500q
its outpul at P=Rs. 975. how
produce to mavimise proíit? (0) lsthe output of the firm in i)much will it
with indust1ry
cquil+brium? (in) If the industry is that ofcompatible
average costL derive the equatrons for the constanto
the industr. long-run supply curve
2+2+2
( Firm A is a monopolist who produces at a
and marginal cost of constant average
AC=MC=5 faccs the
Q=53-P. Calaulate profit maximizing
It
market demand cunve
and dctermine A's profn. II Fim B entersprice and quantity of Fim A.
the market ànd can
at the same
marginal average cosi of AC MC= 5
and produce
modified
=

narka deand cune and

Firm A and 0, =output
becomes,+,= 53-P. where Q, output ot
ol FimB.dcieminc the modificd
profit of Firm A id A makes quantity
nis oulput decisions before Firm B
and
Determine also the quan adproll of the ncw entrant BB. 2+3+
(g) The grcaler the degree ofcompetit 2+3+1
Compctitne market. the llatter demand m a monopolistical
increaes wlat will be the cflcca onthedeuto be. As conpetition
finis in thc long run cqul1brum? ucgree of cxcess capacuy ol
h) ThcdeKd lunciO dopoh ar
Is the total aull sold b tlictno lims Tlie t IsP- 0-Q where?
( Ifthe i n scollude to xias monooh e ero nrgal cost
utput and prol1r' (u) Wht wili b the pe Iat will be tle idustrn
i d ouputs ma Cournot
brum WlhLat will be thie prolus it
 II-2015
Part -

1&
C.U. Economics (Hons.) Question Papers
22

O+)

RT AA?

+8
ENGLISH VERSION
Section-A
I. Answer any five questions .
a Your fricnd consumes lassi and ice cube in the
respectively
I : 2. indifference map and direction of
fixod proportion of Draw his
of standard
preference. Which assumption
latcd in this case?
consumer thcory is vio-
l+142
b) Statc whether the following statcments
with reasons
are true or
false.
(i) If prefercnces are transitive, then tangency of indifer
ence curves arc rulcd out. (1i) If the individual's
utility function is
U(W) =Vw,then the person is a risk lover.
242
(c)Doyou agrce with the view that relatively larger fixcd costs
imply that the minimum
average cost occurs at
output level? Explain.
a
relatively lower
4
(d) Ln a pecrfcct compctitive market why, do firms
cntcr an in-
dustry when they know that in the long run the cconomic
be zero? profit will
 Third Paper-2015 23

(c) A monopolist faccs a lincar inverse demand function:

p a- bQ. Which of the following describes a correct relation be
tween price clasticity of demand and marginal revenuc? Explain. 4
) Demand is elastic when Q>a/2b. (n) Demand is inclastic
when Qa/b. (ii) Demand is unit clastic when P-a/2b. (iv) Demand
when Q<a/2b.
isclastic Ifa
() monopsonist's inverse demandfor labour is given by
w 80-L, supply of labour is w=4L and MEC curvc is w=8L, what
is optimal level of labour cmploycd and what is the wage paid? 2+2
(e) Why docs differentiating its product allow an oligopolist
to charge a higher pricc? 4
(h) Explain the difference between adverse selcction and moral
hazard in insurance markcts. Can one exist without the other? 3+1
Section-B
2 Answer any five questions: 6x5
* (a) Radha views x, and x, as perfect substitutes. She is indiffer-
ent as to which one she consumes. The price of a '12 ounce can' of
. P is less than the price of a *12 ounce can' of x, which is p,.
(i) What does Radha's income-consumption curve for X,
look like? (ii) How much does hcr income have to rise so that she can
buy onc additional unit of x? 4+2
chocolate and Price of
electricity.
b ) Suppose you consume

chocolate is Re.1, no matter how much of it you çonsume. Price of

to Rs.3 till
elctricity is Rs.2 till the 100th unit, thercaftier t increascs
200th unit and finally to Rs.4 beyond the 200th unit. Draw your
constant sum of income.
6
budget linc for a conform more closely to
(c) (i) Docs the soft drink industry
(u) Suppose minimum Long
monopolistic compctition or oligopoly? for chicklet. Show that, if
Run Average Cost (LRAC) Rs.3 per kg.
=

in thc long run

the chicklet industry is monopolistically competitive,
will exceed Rs.3. 3+3
Cquilibrium, the price per kg
(d) Consider the production function
Q-5L+ 1OK,
L 1s the quantity of labour cm-
whcre Q is the total outpul,
employed.
ploycd, and K is the quantity of Capital like
the isoquant look graphically? (ii) What
(i) What does the isoquant for
does (ii) Find iwo inpul bundles on
law it violatc?
isoquant? 1+142+2
100. (iv) What is thç slope ofthis
4C.U. Economics (Hons.) Question Papers Part-1&ll-2015
B are
(e) The inverse demand functions for two firms A and
as follows:
PA 197-15.1q-0.3q
Pp 490-HOq,-64
where Pand q are the pricesand quantitics of twofirms
ASSume cach firm faces a constant marginal cost of Rs. 40 per unit
Solve for the quantities and prices under
Cournotcquilibrium.5
OShould a competitive firm cverproducewhen it is making
negative cconomic profit? Explain. (i) How can a price ceiling make
consumers better off? Under what conditions might it make them
worse offT? 3+{2+ 1)
(g) Oifthe production functions ofall the constitucnt firms of
a perfectly compctitive industry exhibit increasing returns to scale
only, account for the long run implication ofthe markct and its cqui-
librium. (i) Is the wage paid by a monopsonistic employcr higher
than that offered by a ocompetitive employer? Are the numbers of
workers hired by thcm equal? 3+3
(h) Define Parcto cfficiency. Joy has 16 litres of coca-cola and
4 sandwiches. Bitan has 4 litres of coca-cola and 8 sandwiches. With
of coca-cola-for sandwiches is 2 and
these endowments, Joy's MRS
sandwiches is 1. Draw an Edgcworth box
Bitan's MRS of cola for
whether this allocation is Parclo-eflicient. Explain
diagram to show
your answer. 244
THIRD PAPER-2015
 Third Paper-2016 21

5171 p=12-(4 +92) 9 afdoa cao a

P-16-Q A QRT1 CATG PTATRATl 9R A07T arsoiAa ATT T

T F TC; =40,(i= 12) IBertrand 114 4 FO ZA?

+
ENGLISH VERSION
Section-A
1. Answer any five questions:
(a) Draw the indifference maps indicating the direction of
preferences in the following cases:
.x(i) Ria does not like apple juice or pineapple juice alone but
likes to have a mocktail of them. (1i) Raja likes more
money to less. He
also likes to watch good movies but only up to 3 movies a day, after
which he gets sick. 2+2
(b) Docs Slutsky Compensation efifct measure the movement between
wo points on the same indiflerenc curve? Argue with reasons: 4
C) Should an employer hire another worker, if the new person
causes diminishing returns'? Give reasons for your answer.
d) A competitive firm should always produce al an output at
*RIch long- run average cost is minimised"- True or False? Explain. 4
e) The more elastic the demand, the more price exceeds marginal
OSt in monopoly. Justily your agreement or disagreement.

() Does each of the following phenomena lead to a Nash

cquilibrium?
1) The members of a product group opt for non-price competition;
(ii) Both the duopolists act as followers. Give reasons. 2+2
g)Why could economic rent he variable with respect to the owner
a specific resource?
(h In an economy. clothing and food are produced with the help
MPL cquals 2 in
labour and capital. If w =r= Rs.4 per hour and MP
 22 C.U. Economics Hons. Question Papers (Part-I& il)-2016

clothing production and in food production. comment on th

he
efficiency of the economy's production. Should the cconomy rellocati
its inputs? Justify. 2+2
Section B
Answer any five questions
Shyam is a poor person who takes care of his family. With his
income, he consumes potato for six days and chicken on Sunday when
price of chicken is higher than that of potato. Now suppose hat the
it is still less than price of chicken.
although
price of potato increases
However. with the increased price of potato, his given income does no-

him the old basket of goods. How will he adjust and

permit to consume
what will be his denmand curve for potato0? 3+3
3. A consumer purchases q, = 20, 9, = 10 at prices P, =2, P, =6. Later
on, it is observed that he purchases those two goods q, = 18, q, = 4 at

prices P=3 and P, = 5. Is his behaviour consistent with the axioms of

revealed preference theory?
4. (a) The average product of labour when three workers farm an acre
of land is 200 bushels of wheat, and the marginal product of fourth
worker is 80 bushels. What is the total output of four workers? 2
(b) function is Q= K"23 L5, then derive the
If the production
expression for the long run total cost function, noting that MRTS at any

point of an isoquant is equal tofor this production function.

5. The short-run cost function of a company is given by the equatton
TC= 200+55q, where TC is the total cost and q is the total quantity of
output. both measured in thousands.
(a) What is the company's fixed cost? (b) If the company produceu
(e)
1.00,000 units of goods, what would be its average variable cost?
What would be its marginal cost of production? (d) What would be is
average fixed cost? (e) Suppose the company borrows money an
expands its factory. Its fixed rises by Rs. 50.000 but its variable coi
cost
falls to Rs.45.000 per thousand units. The cost of interest (i) also cnnn
into the equatüon. Each one pointinerease in the interest rate r
+I+I+1+
costs by Rs.3,000. What is the new cost equalion?
6. (a) The cquation of the total cost curve of a perlectly competit
lum in the short run is TC = 50 + 2q. Explain why this firm will nev
 Third Paper-2016 23
shut down ils production in the
short run. Determine the least cost outpul.
If the market price is Rs.l 00 per unit, determine the profit maximizing
level of production. 2+ I+I
(D) a
in perlectly competitive industry
no external elfecls on
with N identical firms and
factor prices, is the long run industry
curve more or less suppiy
steep than the firm supply curve? Justify.
. A
monopolist selling in two markets faces the demand curves P,=
164-
2q,and P, =
108 5q, in the two markets. is marginal cost
function is MC =
8. He hds no fixed costs. If the
different
monopolist can charge
prices in the markets, what prices will he charge in each?
two
Do you consider
scarcity to be an inevitable consequence of imposing
price ceiling on a single market monopolist? 4+2
8. (a) There are
only two firms in an industry labelled I and 2. The
equation of the market demand curve is p 12-(9, and the total
cost functions
=
+9,)
facing the firms are C =44, for i 1,2. Firml acts as a
=

leader and firm 2 as the follower. What are

the quantities that the tw0
firms will produce? What
profits will they earn? 3
(b) The demand function
facing firms in a duopoly is P 16-Q.
the
where Q is the industry output. Each firm's
=

total cost function is

4Q, for il.2. What will be the price in Bertrand TC, ==

9.Compare the hiring choices of a monopsonistic and aequilibrium? 3

employer of workers. Which will hire more workers.and competitive

higher wage? Explain. which will pay
THIRD PAPER-2016 3+3
28 C. U. Economics (Hons.) Qucs. Papers (Part-I & II)-2017

(LRAC)= Rs. 3/-1 R ÍCI TÍT AsbibA1 21NTTA Ut A, Ea

CRRIE fo. afe veaa erxAT) MA Rs. 3/-94 AI

Rs. 2/-1 +

English Version]
Section-A
Part-I
1. Answer amy five qucstions:
a) A student is first and forcmost
interested in cold drink and
would be willing to forcgo
any quantiy of milk for the snmallest
3dditional quantity of cold drink.
However. if the
consurmpion is given. the student prefers to have nmorecold drinks
than less. Can vou draw an milk rather
índiffcrencc curve in this casc? Justily. +
(b) Suppose that an
individuals utility function is
person a risk lover? Will he accept a u(w)= w*. Isthe
gamble where three is a chance o
winning Rs. 20 and of losing Rs. 20 with
wcalth is Rs. 10X0? equal prohability, if his initial
(c) A firm produces 4
bicycles
frames and wlhcels. IDraw ilhe using two variable inputs bicycle
-

Win do tihcy look like this? isoquants for 100 and 200 units of output.
(d) Supose thiat a 2+2
TC= 300+ 3Q4002Q producer s total cost function is as
folloWS.
where
Oisthe number ol cases ol the product TC is the toal cost in dollars
TVC. AVC and NiC Iunclions. Calculateproduced. Obtain TFC. AFa
MC for firs1 two
units. T
 29
Third Papcr-2017
(c) (1) Hov can onc mcasure monopoly power of a producer' Is

this power relatd to

mark-up pricing?
(11) For a prolt maximising monopolist, how docs this markup
dcpend on the clasticity of demand?
(0 Usc Pnsoners Dilemma game to dctcrminc why individual max-
imization docs not result in the 4
best outconmcs for thc players.
(g) An crease in thc demand for jari works incrcascs wages of
women workers engagcd in such work. Is the long run supply curve
forjari works likely tobe horizontal or upward sloping? 4
(h) Why docs excess capacity exist in
a monopolistically
conpctitive marke? 4
Section- B
Answer any five qucstions
2. (a) If thc demand fora product is perfectly inclastic. what is the
shape of the corresponding price-consumption curve? 2
(b) Jaya ahways geis twice as much utility from an extra ballct
tickct as slhe does from an extra basket ball ticket regardless of how
many tickcts of cither ype she has. Draw Jaya's income-consumption
curve and hcr Engel cune for ballet tickeis. 2+2
3. State whether the following statcments are true or falsc or
unccrtain with reasons: 3+3
(a) Relatively larger fixced costs imply that the minimum average
cost occurs at á rclatively lower output levcl.
(b) In the short nun. the producer will avoid producing in the
Tegion where marginal product of labour is positive.
4. (a) Under what conditions would the LTC curnebe a positivch
Ssloped straight livc through the origin?
(b) What wouid then he the shape of the LAC and the LMC

Curves?
cunes' 2+2+2
(c) Would this be consistcnt wiuh U-shaped SAC
the curve L=
5.The demand for labour of an mdustry ginven by
is
200-10 V. whereL is tle labaur dcinandcd per day and wis the wage
201W. What is ilhe
C. The labour supph curvc is given byL=
labour hired? What is the
and quantity of
uilbrium uage ratc
Wlial would be the nature of
LOnomic earncd by workers?
rent
supply becomes lully clastic? 2+2+2
Onomic rent wlen the labour
 (Part-I & II)-2017
30 C.U. Economics (Hons.) Qucs. Papers
competitive
firm's marginal of producin.
cost

6. Suppose that
Assumethat the markct price ol
a

output Q isgiven by MC(Q)=3+2Q.

Rs. 9-.
The firm's product is
thc firm producc? (b) What is he
(a) What levcl of ouput will that the average variable cosi
fim's producer surplus? (c) Suppose
=3+Q. Supposc thiat the firm's fixcd
ofthe firnm is given by A VC(Q)
to be Rs. 3/-. Will the irm be carning a positivc
costs arc known
in the slhort run? 2+2+2
ncgctive or zero profji and marginal
at a constant average
7. A monopolist can produce
o s t of AC=MC 5/-. II faccs a market dcmand curve
=
given Q=53 by
-P.
and quantity of the monopolist
profit maximizing price
(a) Obiain
2
and calculate monopolist's profit.
the market. Let Q, be the output
(b) Supposc a second firm entcrs
of the second firm. Market
of the first finn and Q, be the output
dcmand is now given by Q,
+
Q.= 53 -P. The second firm has the
ils profit-imaximizing
same costs as he first firm. Each firm chooses
level of output on the assumption that its
competitor's output is
Calculate the values of
fixed. Find rcaction c u r e s of both the firms.
and Q, for which cach firm can profitably operate given its
Q,
competitor s output. Obtain resuling niarkcl price and profits of cach
2+2
firm
8. Suppose minimum Long Run Average
Cost (LRAC)= Rs.3 per
is monopolisticlly
kg for chicklet. Sliow that. if the chicklct industry
will exceed
conmpctitive. in the long run cquilibrium the price per kg
in chicklet
Rs. 3. Also show howa decrcase in the pricc ofinputs used
in
pruduction will aflcct the industry. Assume that. aficr the decrcase
3+3
costs. nunimum LRAC= Rs. 2.
9. Palash has 3 liures of soft drinks and 9 sandwiches. Pallabi o
the other hand. has 8 litres of sofi drinks and 4 sandwiches. Wi
thesc cndownmcnts. Palaslh's narginal rate of substitution (MRS) O
sof drinks for sandwiclhes is 4 and Pallabi's MRS is cqual to 2. Dr
an Edgeworth box diagram to show whether tlhis allocation o
resources is clliciCt. l il iIs. cxplain why and if it is nol. vi
3+3
cxchangcs uill makc both parties better off?
 22C.U. Economics Honours Qusion PapTS (Part-I& I)-2018

150-OtQ-0, 0

w =r=4Det (DI afs) IT-BerMA CFLT

eTRTA MP*/MP"=
MP,7 MP"=2s 3
1/21uAATMA PFI3*1 7, K
+8

The figures
ENGLISHVERSION.
inthe margin indicate full marks.
Section-A
I. Answer any five
questions. 4x5
(a) ) Examine whether convexity of Indifference curve
from the axiom of 'more is better' in follows
preference
the effect of
change in relative price into incomeranking. (ii) Decompose
and substitution
when two goods are perfect Complements. ettects
(b) Dan lives in a world of time 2+2
At the 2 periods: "today' and tomorrow
beginning of each
each period is 0-5, what is period
he earns 210. If the interest rate in
the present value
his intertemporal of his lifetime income? Draw
budget line. 2+2
(c) Suppose that a product
Is it correct to say that
if the
requires two inputs for its production.
prices of the inputs are equal,
optima"
 Third Paper 2018 23
behaviour on the part of the producer requires that the two inputs D
used in equal amounts? 4
it
(d) the firm's ave.age cost curves are
U-shaped, why does s
average variable cost curve achieve its minimum at a lower level of
output than that of the average total cost curve? 4
(e)why is there no market supply curve under monopoly 4
(1) SuppOse the supply curve for a good was
completely inelastic.
If the government imposed a price ceiling below the
level, would a deadweight loss result? Explain. market-clearin84
( Can economic rent be variable with respect to the owner or a
speciticresource? Argue in favour of your answer. 4
(h) What is pareto efficient allocation? How is a contract curve
related to such allocations? 242
Section-B
Answer any five
questions. 6x5
2 (a) A consumer derives utility from the consumption of the
characteristics of a commodity, say, protein (P) and carbohydrate (C
content ofa commodity. Let the food item x contains 2 units of C and
0-25 unit ofP, and the food item y contains 0-25 unit of C and 2 units of
P. The prices of x and y per unit are same, say, ? 1;, and the money income
ofthe consumer is 8. Prepare the budget line of the consumer in (C, P)
plane. (b Use budget lines to show that a gift in kind increases
consumption opportunities less than the equivalent cash gifts.
4+2
3.Suppose Shera views butter and margarine as perfectly
Substitutable for each other in any of their uses.
(a) Draw a set of indifference curves that describes Shera's
preferences for butter and margarine. (b) Are these indifference curves
convex? Why? (c) Ifbutter costs 2 per package, while margarine costs
only Rs. 1 and Shera has a 2 0 budget to spend for the month, which
butter margarine market basket will she choose'? Can you show this

graphically? 2+242
4. Consider the production
functionQ150L, where Qis total output,
and L is the quantity of labour emplayed.
(a) What does the total product curve look like? (b) Describe the
CoTesponding AP and MP curves, (c) Why is it unlikely that a true
production function would have this form?
5. you are the
or 1+(2+2)+1
Suppose
Competitive market.
manager a wachmaking firm operating in a
Your cost or production is given by C = 100 + 03
where Q is the level of output and Cis total cost.
(a) If the price of watcnes opeT unit how many watches
would you produce to max1mize pro Dwhat will be the
profit level?
(c)At what minimum price will tne in
produce a positive
output? 2+2+9
 24 C.U. Economics Honours Question Papers (Part- I & I)-2018

which to be fulfilled for :!

6. (a) State the principal conditions are
multimarket operations of a monopoly firm. (b) A monopolist selling in

two markets faces the demand curves p164- 2q, and p,= 108-5q,. His
marginal cost is 8. He has no fixed costs. If the monopolist can charge
different prices in two markets, what prices will he charge in each? 2+4
7. Supposethat two identical firms produce widgets and that they
are the only firms in the market. Their costs are given by C, 300,and C, 5
300, where Q, is the output of Fim l and Q, the output of Firm 2. Price
is detemined by the following demand curve:
P=150-Q where Q=Q,+Q,
(a) Find the Cuornt - Nash equilibrium and calculate the profit of
each fim at this
equilibrium. (b) If Firm 1 and Firm 2 form a cartel to
maximizejoint profits, determine the number of widgets to be produced
by them. Calculate each firm's profit. 3+3
8. Under a
perfectly competitive scenario, the marginal product of a
worker is 5 units per hour and each unit is sold in the
firm owner has to payR 40 market at6. The
per hour to the worker.
(a) Explain whether the owner will hire the worker.
the owner's decision, what will (b) As a result of
additional hired worker? happen to the productivity with each
9. In an 3+3
economy, clothing and food
produced with
are
labour and capital.
Suppose that w =r =* 4 per hour. Inthe help of
production MP7MP is supposed to be 2 and that in clothing
MP MP is supposed to be 1/2. Is the food production
production? If not, how should it reallocate its economy efficient in
THIRD PAPER-2018resources? 2+4

(GROUP-B)