MANAGE

PGDM ABM – 2019-21 Batch

Subject: Microeconomics Time: 3.00 Hrs

Maximum Marks: 50
Note:
 Read the instructions carefully and answer accordingly
 Show the working notes wherever necessary
 Section-A to be completed within 15 minutes
________________________________________________________________

SECTION – A (Marks = 10)

Round the Correct Answer as per your choice (Marks =10) There will be minus marks of
0.5 for every wrong answer

1. Which of the following will cause a decrease in quantity demanded while leaving
demand unchanged?
An increase in the price of a complementary good.
An increase in income when the good is inferior.
A decrease in the price of a substitute good.
An increase in the price of the good.

2. If the consumption decisions of individual consumers are independent, then

 the market demand curve will be flatter because of the bandwagon effect.
 the market demand curve will be steeper because of the snob effect.
 the market demand curve will not be equal to the horizontal summation of
the demand curves of individual consumers.
 none of the above is correct.

3. If the price elasticity of demand for a firm's output is elastic, then the firm's
marginal revenue is
 a. positive, and an increase in price will cause total revenue to increase.
 b. positive, and an increase in price will cause total revenue to decrease.
 c. negative, and an increase in price will cause total revenue to increase.
 d. negative, and an increase in price will cause total revenue to decrease.

4. If a firm that produces carrots operates in a perfectly competitive industry, then

  a. the demand for the firm's carrots must be horizontal.
 b. the demand by individual consumers for carrots must be horizontal.
 c. the market demand for carrots must be horizontal.
 d. all of the above must be true.

5. The cross price elasticity of demand between two differentiated goods produced
by firms in the same industry will be
Negative & large
Negative & small
Positive & large
Positive & small

6. Given the demand equation Qx = 300 Px -0.4

I 3.0

For a one percent increase in price of X, quantity demanded will decrease by 3

percent
For a one unit increase in price of X, quantity demanded will decreased by 4
units
For a one percent increase in price of X, quantity demanded will decrease by 4
percent
For a one unit increase in price of X, quantity demanded will decreased by 3
units

7. Exponential Smoothing is appropriate when the time series shows

Little trend and more of irregular or random variations
Strong upward trend
strong upward trend along with seasonality
None of the above

8. If a firm moves from one point on a production isoquant to another, which of the
following will not happen
A change in the ratio in which the inputs are combined
A change in the marginal product of the inputs
A change in the rate of technical substitution
A change in the level of output

9. Which among the following is not a characteristic feature of monopolistic

competition
Product differentiation
Significant barriers to entry
Firms’ marginal revenue curve is below the demand curve
 Zero economic profits in the long run

10 International price discrimination is called

a) Transfer pricing
b) Cost plus pricing
c) Dumping
d) Incremental pricing
e) Optimal pricing

Section – B

Answer any Five questions Each question carries 4 marks.

(5 x 4 = 20 Marks)
!. Explain the concept of shift in the demand curve and the change in the demand. Analyse
these concepts with the help of some live market examples that you might have come across in
the near past

2. Assume that demand is unitary elastic. Do you think that the decline in prices will impact the
total revenue? Give reasons in support of your answer

3. Discuss the following conepts and anlyse their impact on the market demand behaviour
(i) Veblen effect
(ii) bandwagon effect

4. How would an isoquant lines be if all the inputs are perfect substitutes and perfect
complementary of each other

5. A firm’s owner has been complaining to the controller about the rising labour costs and costs
of the materials. But the controller notes that the average costs have not increased during the
past one year. Is it possible? Explain your answer with proper support

6. Write the limitations of cost plus pricing

7. Is bundling similar to price discrimination? Which one of these require more information about
consumer preferences?

Section – C

Answer any four questions . Each question carries 5 marks. Total Marks - 20

1. Given the data below showing the demand and supply of X in a given market
Price of X per ton (Rs) 1 2 3 4.5
Quantity Demanded of X 25 16 12 10.9
Quantity Supplied of X 3 5 12 14.3
a) What would be equilibrium price of X
b) What would be the increase in price if demand increased by 4 tons
c) Calculate price elasticity of demand at any point on the demand curve

2. Fill in the blanks in the following table

Variable TFC TVC TC MC AFC AVC ATC
factor
1 100 50
2 30
3 40
4 270
5 70

3. A monopolist has demand curve given by P = 405 – 4 Q and total cost given by TC =
40 + 5 Q + Q2

a) What are profit maximising price and quantity and total profits?
b) what would be the profit maximising price and quantity if the firm made its output
decisions under perfectly competitive market

4. What factors determine the market structure? How does the market structure affect the
pricing decision of a firm

5. Which of the following statements are true? Justify your answer

a) Under perfect competition, all firms always earn normal profit

b) The slope of AR is the twice the slope of MR.
c) A monopoly firm always earn supernormal profit
d) Firms under monopolistic competition earn only normal profit in the long run