Subject Code - MGT207
Model Question
Set - A
2019
FM:100
PM:35
Time: 3hrs

### Group A

Brief Answer Questions (Attempt all Questions) [10x2=20]

1. What is incremental analysis in economics?

2. What is the effect of increase in tax in equilibrium price and quantity?

4. Differentiate between cardinal approach and ordinal approach for demand analysis.

5. Draw the budget line if income of consumer is Rs. 20,000, price of good X is 100 and Price of good Y is 200.

6. Why does isoquant slope downward?

7. Differentiate between explicit cost and implicit cost.

8. Define predatory pricing.

9. Calculate the equilibrium level of output of the firm when marginal revenue is MR = 300 – 0.002Q and marginal cost is MC = 20 + 0.0008Q

10. Prepare a list of factors that cause wage differentials.

### Group B

Descriptive Answer Questions (Attempt any five) [5x10 = 50]
11. How the production possibility curve is useful to illustrate the economic concepts?

12. What is demand function? Explain its types.

13. Explain the degrees of price elasticity of supply. Value of price elasticity of demand of milk is calculated as -0.7 and price elasticity of demand of coffee is calculated as -2.0, interpret the result and explain the nature of the goods. (6+2+2)

14. Explain the law of returns to scale.

15. Explain the consumer's equilibrium in cardinal approach under one-commodity model. Find the consumer's equilibrium if the price of apple is Rs 20, price of banana is Rs. 10 and the consumer spends whole income Rs. 110 on apple and banana with following marginal utility (MU) schedule: (4+6)
Costumer's Equlibrium
Units of consumption1234567
MU of apple800700600500400300200
MU of banana500450400350300250200

16. Consider the following table of labor productivity:
Labor Productivity
Labor012345
Total product01018242830
Price of product is Rs 5 and wage rate Rs 30. Find the marginal physical product and marginal revenue product of labor. How does a firm employ profit maximizing number of labor? If wage rate increases to Rs. 40 what will be the equilibrium situation?

### Group C

Analytical Answer Questions (Any Two) (2x15=30)
17. Define cartel. Explain its types. How price is determined under centralized cartel? (2+3+10)
18. Consider the following schedule of a competitive firm: (10+5)
Schedule of a competitive firm
Output12345678
AVC302724243039.953.167.5
AC300117123.999909096105
MC302418245490132168
a. Graph AVC, AC and MC. What is the position of firm's profit at price Rs. 132, Rs.90, and Rs. 54? What is the position of firm at price Rs. 24? Does this point refer to the shut down point? Give reason.
b. Using the cost schedule, explain the relationship of AC with AVC and AFC.

19. "Price effect is the sum of income effect and substitution effect." Explain with the example of Giffen goods.