NATIONAL INSTITUTE OF TECHNOLOGY ROURKELA

END-SEMESTER EXAMINATION 2023

Subject Code: HS-1340 Dept. Code: HS

Q. N. Section A Marks
Answer any FIVE. 5x6=30
1. Define the following concepts with examples:
(i) Total Cost and Total Fixed Cost
(ii) Total Variable cost and Average Variable Cost
(iii) Marginal cost (MC)
2. Explain the relationship between average revenue, marginal revenue and price elasticity
of demand under the conditions of monopoly.
3. Given the short-run total cost function: TC = 100 + 50Q – 12Q2 + Q3 where TC is total
cost and Q is level of output.
(i) Determine: (a) total variable cost function, (b) average variable cost function, (c)
marginal cost function.
(ii) Calculate total cost, ATC, AVC and MC when the firm produces 10 units of
output.
(iii) Calculate the level of output at which AVC is minimum.
4. Differentiate between price ceiling and price floor. Illustrate graphically the following
cases of price ceiling and price floor, consumer and producer surplus, and deadweight
loss in each case.
(i) Minimum wages
(ii) Rent control.
5. Differentiate between the monopoly and monopolistic market condition. Explain the
profit maximizing price and output determination under both the markets with suitable
diagrams.
6. Distinguish between oligopoly and duopoly? Explain the features of oligopoly market. Do
you think price and output under oligopoly is indeterminate? Elucidate your answer.
7. A competitive firm has the following data:
Output, (Q) TFC (US$) TVC (US$)
0 100 0
1 100 50
2 100 90
3 100 140
4 100 200
5 100 280
6 100 380
(i) If price = $60, how many units will the firm produce?
 (ii) What will be level of profits/losses at this level of production?
(iii) Will the firm operate in the short run?
8. Complete the following table. Plot and explain the relationship between TC, AVC and
MC from your graphs.
Output Total Cost Total Total Average Average Marginal
(US$) Fixed Variable Fixed Cost Variable Cost
Cost Cost (US$) (US$) Cost (US$) (US$)
(US$)
0 50
1 70
2 100
3 120
4 135
5 150
6 160
7 165

Section B Marks
Answer any TEN. 10x2=20
1. Suppose the revenue and total cost of a firm are given as R=60Q and C= 10+5Q2, where
Q is the output. Using the TR and TC approach, find out the profit maximizing output and
total profit of a firm.
2. Derive the relationship between Average Cost (AC) and Marginal Cost (MC)?
3. Explain the types of price discrimination by a monopolist firm.
4. What is kinked demand curve? How does it help to explain price rigidity under oligopoly
market?
5. Distinguish between breakeven point and shut down point under market condition.
6. Why does a monopolistic firm adopt product differentiation strategy? Elucidate.
7. Explain economies of scale, diseconomies of scale and constant return to scale.
8. Given the total cost function as, C= 8+4q+q2
(i) What is the fixed cost of the firm?
(ii) Derive the average variable cost and marginal cost function of the firm.
9. Why is the long run cost curve known as envelope curve? Elucidate your answer with
suitable diagram.
10. Define the followings:
(i) Dominant Strategy
(ii) Nash Equilibrium
11. In a perfectly competitive industry, the long run total cost function is given by
TC=q3−24q2+200q, where q denotes the output of the individual firm. The market
demand is q=1480−5p, where q and p denote the market output and price respectively.
Calculate the optimal output produced by each firm at the long run competitive
equilibrium.
12. Given the fixed cost of a firm as $150 and total variable cost as TVC= 200Q-9Q2+0.25Q3,
find out the marginal cost function and average variable cost function.
13. Monopoly market price is always higher than perfectly competitive market price. Explain.
14. Explain and illustrate isoquants and isocost curves.
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