NATIONAL INSTITUTE OF TECHNOLOGY, ROURKELA

END SEMESTER EXAMINATION, 2021

SESSION: 2020-21 (Autumn)
Programme: B.Tech

Subject code: HS1340 Subject Name: Principles of Economics

Dept. Code: HS

No. of pages: 02 Full Marks: 50 Duration: 2 hours

Figures at the right-hand margin indicate marks.

All parts of a question should be answered at one place.

Marks

Section A
Answer the following questions (any five) 6x5=30
1. What is consumer’s equilibrium? Discuss consumer’s equilibrium with the help
of indifference curve approach.
2. Define Price elasticity of demand and distinguish its various types. How would
you measure it?
3. Consider the following cost schedules:
Quantity Variable Cost Total Cost
0 0 30
1 10 40
2 25 55
3 45 75
4 70 100
5 100 130
6 135 165
a. Calculate average variable cost, average total cost, and marginal cost for each
quantity.
b. Graph all three curves.
c. What is the relationship between the marginal-cost curve and the average-
total-cost curve?
4. What is production function? Explain the three stages of production function with
only one variable input.
5. Explain the different approaches to measuring national income of a country.
Discuss the limitations of each of these approaches as a measure of social
welfare.
6. Explain firm’s equilibrium under perfect competition. Is that true in the long run
no super-normal profits are earned by a perfectly competitive firm?
7. Distinguish between demand pull and cost push inflation. How are they often
intertwined? Discuss the main factors that cause demand pull inflation.

PTO
 Section B
Answer the following questions (any eight)
2.5x8=20
1. Explain and illustrate indifference curve and isoquant curve.
2. When price of a good is 12 per unit, the consumer buys 24 units of that good. When
price rises to 114 per unit, the consumer buys 20 units. Calculate Price Elasticity of
Demand.
3. Distinguish between marginal utility and total utility.
4. Suppose that a consumer has Rs. 90 to be divided between two goods x and y and
the unit price of y is fixed at Rs. 0.20. What will be his demand equation for x if his
utility function is: U=logqx+2logqy.
5. Explain negative and positive externalities with examples.
6. A monopolist has the cost function TC(q) = 200q + 15q2 and faces the demand
function given by p = 1200 +10q. What output maximizes its profit? What is the
profit-maximizing price? What is its maximal profit?
7. Explain second degree price discrimination with an example.
8. Explain the trade-off between equity and efficiency.
9. Explain the circular flow of income in an economy.
10. What is the difference between real and nominal GDP?
11. What is currency depreciation? How does it affect import and exports of the domestic
country?

PTO