Part – A (Introductory Microeconomics)
1. Opportunity cost is also known as:
c. Alternative
2. Basic characteristic of a mixed economy:
b. The existence of both public and private sectors
3. What will be the marginal utility when total utility is maximum?
b. 0
4. The equation of a budget line is:
a. P₁x₁ + P₂x₂ = M
5. As long as marginal utility is positive, total utility:
b. Increases
6. In case of Giffen goods, price effect is:
b. Positive
7. The demand curve slopes downward because of:
d. All of these
8. Perfectly elastic demand is represented by a curve that is:
c. Parallel to the x-axis
9. Identify elastic demand, if price elasticity (Ep) is:
b. 1-5
10. Production function refers to the functional relationship between inputs and:
b. Output
11. When AP falls due to an increase in employment or variable factors, then:
c. MP < AP
12. At zero level of output, TC =
a. TFC
13. When AC falls, MC:
c. Initially falls, then rises
14. AFC at 4 units of output is ₹20, AVC at 5 units of output is ₹40. AC of producing 5 units is:
d. ₹60
15. Total fixed cost is presented as a straight line:
b. Parallel to the x-axis
16. Marginal revenue is earned by a firm by selling:
c. An additional unit
17. Price of a commodity is:
c. AR (Average Revenue)
18. A firm earns normal profit when its AR =
b. AC (Average Cost)
19. In the short period, the supply of a good is:
b. Perfectly inelastic
20. If a decrease in demand is equal to an increase in supply, market equilibrium will exhibit:
c. No change in equilibrium quantity
Part – A (Statistics for Economics)
21. Who is known as the father of statistics?
a. Gottfried Achenwall
22. Which of the following is a measure of central tendency?
d. All of these
23. Statistics in a singular sense is:
d. All of these
24. The difference between the largest and smallest value in a data series is called:
c. Range
25. Which of the following measures of central tendency is known as positional average?
b. Median
26. The method involving the study of each and every item of the universe is:
b. Census
27. When data is classified based on area, classification is:
c. Geographical
28. Which of the following statistical measures is calculable in the case of an open-ended
class?
b. Median
29. The value of correlation lies between:
c. -1 to +1
30. In case of two independent variables X and Y, the correlation coefficient (rxy) between
them is:
b. 0
31. A consumer price index number measures changes in:
d. Both (a) and (b)
32. Which of the following is used for the base year?
b. 1
33. If r = -1, correlation is said to be:
b. Perfect negative
34. The other name of the semi-interquartile range is:
b. Quartile deviation
35. Which of the following is measured using the Lorenz curve?
b. Income inequality
36. Mean deviation is determined using which of the following formulas?
d. Σf[d]/n
37. Which of the following is not a pure (unitless) number?
a. Arithmetic mean
38. The algebraic sum of the deviations of a set of n values from their arithmetic mean is
always:
c. 0
39. Which of the following measurements can be calculated using an ogive?
c. Median
40. Median divides the whole series into:
a. Two equal parts
41. Answer the following questions:
a) Positive economics deals with objective analysis and facts, focusing on describing and explaining
economic phenomena as they are. It is based on data and empirical evidence. On the other hand,
normative economics involves value judgments and opinions, suggesting what ought to be done in
an economy. It is prescriptive rather than descriptive, making policy recommendations based on
ethical considerations.
Alternatively, the production possibility curve (PPC) represents the maximum possible output
combinations of two goods that an economy can produce with given resources and technology. It is
concave to the origin due to increasing opportunity costs and illustrates the concept of efficiency,
where any point on the curve shows full utilization of resources.
b) The short run in economics refers to a period where at least one factor of production remains
fixed while others can vary. Firms can adjust output by changing variable factors like labor but
cannot alter fixed factors such as capital or land. In contrast, the long run is a period in which all
factors of production are variable, allowing firms to expand or contract their scale of production
completely. This distinction is crucial in understanding production decisions and cost behavior over
time.
Alternatively, market supply of a commodity is influenced by several factors, including the cost of
production and the price of related goods. Higher production costs reduce supply as firms find it less
profitable to produce, while the availability of substitute or complementary goods can shift supply
depending on price changes and production alternatives.
c) Returns to a factor refer to the changes in output when one factor of production is varied while
others remain constant. In the short run, increasing the quantity of a single factor, such as labor,
while keeping others fixed initially leads to rising output, but eventually, diminishing returns set in.
Alternatively, marginal cost is the additional cost incurred in producing one extra unit of a good. For
example, if the total cost of producing 10 units is Rs. 500 and producing 11 units increases the cost
to Rs. 520, the marginal cost of the 11th unit is Rs. 20.
42. Answer the following questions:
a) A ceiling price, or controlled price, is set by the government below the equilibrium price to make
essential goods affordable for consumers. While it benefits consumers by lowering costs, it often
leads to shortages, black marketing, and reduced production incentives. Since suppliers find it less
profitable, they may cut back on production, causing long-term inefficiencies and misallocation of
resources.
Alternatively, a floor price, also known as the minimum support price, is set above the equilibrium
price to protect producers, especially farmers, from losses due to price fluctuations. It ensures fair
income for producers and stabilizes markets, but if set too high, it can lead to excess supply and
wastage, requiring government intervention in procurement and storage.
b) Market equilibrium occurs when the quantity demanded equals the quantity supplied, ensuring
price stability. If the price is above equilibrium, excess supply leads to downward pressure on prices.
If below equilibrium, excess demand pushes prices up. Graphically, equilibrium is represented where
the demand and supply curves intersect.
Alternatively, solving for equilibrium:
Given: d = 25 - 2p s = -5 + 3p
At equilibrium: d = s
25 - 2p = -5 + 3p
25 + 5 = 3p + 2p
30 = 5p
p=6
Substituting p = 6 in d or s:
d = 25 - 2(6) = 13
Thus, equilibrium price is Rs. 6, and equilibrium quantity is 13 units.
c) The law of diminishing marginal utility assumes that consumer tastes remain constant, the
commodity is consumed continuously without long breaks, and all units of the commodity are
identical. As more units are consumed, satisfaction decreases with each additional unit.
Alternatively, the indifference curve assumes that consumers are rational, have consistent
preferences, and always prefer more to less. The curve is downward sloping and convex to the
origin, indicating diminishing marginal substitution.
43. Answer the following questions:
The law of demand states that, keeping other factors constant, when the price of a good falls, its
demand increases, and when the price rises, its demand decreases. This inverse relationship is due
to factors like the income effect and substitution effect. A demand schedule illustrates this
relationship with a table showing different quantities demanded at various prices. For example:
Price (Rs.) Quantity Demanded
10 50
Price (Rs.) Quantity Demanded
20 40
30 30
40 20
50 10
The demand curve, plotted using these values, slopes downward from left to right, illustrating the
inverse relationship between price and quantity demanded.
Alternatively, the market demand curve is derived by horizontally summing individual demand
curves. Each consumer's demand at a given price is added to obtain total market demand. The
resulting curve also slopes downward, indicating that market demand follows the same inverse
relationship as individual demand.
44. Answer the following questions:
a) Mean deviation is affected by extreme values and does not consider algebraic signs, leading to
less precise dispersion measures.
Alternatively, geometric mean gives a more accurate representation of proportional growth and is
useful in calculating rates of change in finance and economics.
b) Sample surveys are cost-effective and take less time compared to census surveys, which require
studying the entire population.
Alternatively, a questionnaire is filled by respondents themselves, while a schedule is filled by an
investigator, making schedules more reliable in data collection.
c) Classification of data involves organizing raw data into meaningful categories. One type is
geographical classification, which groups data based on location.
Alternatively, in a symmetrical distribution, mean = median = mode, while in an asymmetrical
distribution, they differ, with mean usually greater than mode.
45. Answer the following questions:
a) Dispersion measures the spread of data. The four main measures are range, mean deviation,
standard deviation, and variance.
Alternatively, standard deviation is considered the best measure as it considers all data points and
provides a precise measure of variability.
b) A good measure of central tendency should be simple, easy to understand, and based on all
observations.
Alternatively, mode is the most frequent value in a dataset but has limitations, such as not being
uniquely defined and not applicable for all data types.
c) Graphic presentation of data includes diagrams like histograms, bar graphs, and frequency curves.
A frequency polygon uses points joined by lines, while a frequency curve is a smooth curve
representing the same data.
Alternatively, correlation measures the relationship between two variables. It has properties like
direction (positive or negative) and strength (high or low correlation).
46. Answer the following questions:
Index numbers measure relative changes in variables like prices, costs, or output over time. They are
essential for economic analysis, helping policymakers track inflation, wage trends, and cost-of-living
changes.
Alternatively, to calculate the median:
The cumulative frequency for 40 values gives a median class of 20-30. Using the median formula, we
find the exact median value. Arithmetic mean would be difficult due to class intervals requiring
midpoint calculations.
