OSN ACADEMY. LUCKNOW

Transcription

1 OSN ACADEMY LUCKNOW

2 TEST PAPER The price of computer chips used in the manufacture of personal computers has fallen. This will lead to personal computers. a) a decrease in the quantity supplied of b) an increase in the supply of c) a decrease in the supply of d) an increase in the quantity supplied of 2. When excess demand occurs in an unregulated market, there is a tendency for: a) price to rise. b) quantity supplied to decrease. c) quantity demanded to increase. d) price to fall. 3. Market equilibrium exists when at the prevailing price. a) quantity demanded equals quantity supplied b) quantity supplied is greater than quantity demanded c) quantity demanded is less than quantity supplied d) quantity demanded is greater than quantity supplied 4. A movement along the demand curve to the left may be caused by: a) a rise in income. b) a decrease in supply. c) a rise in the price of inputs. d) a fall in the number of substitute goods. 5. The price elasticity of demand is the: a) ratio of the change in price to the change in quantity demanded. b) ratio of the percentage change in quantity demanded to the percentage change in price. c) ratio of the change in quantity demanded to the change in price. d) ratio of the percentage change in price to the percentage change in quantity demanded. 6. The price of apples falls by 5% and quantity demanded increases by 6%. This means that demand is: a) elastic. b) perfectly elastic. c) zero elastic. d) inelastic. 7. The price of burgers increases by 22% and the quantity of burgers demanded falls by 25%. This indicates that demand for burgers is: a) unitarily elastic. b) elastic. c) perfectly elastic. d) inelastic. 8. If the cross-price elasticity of demand between two goods is negative, then the two goods are: a) substitutes. b) unrelated goods. c) normal goods. d) complements. 9. If the quantity demanded of beef increases by 5% when the price of chicken increases by 20%, the cross-price elasticity of demand between beef and chicken is: a) -4. b) 4. c) d) When the market operates without interference, price increases will distribute what is available to those who are willing and able to pay the most. This process is known as: a) price rationing. b) quantity setting. c) price fixing. d) quantity adjustment. 2

3 11. Macroeconomics distinguishes between the real economy and the... a) monetary economy. b) virtual economy. c) normative economy. d) underground economy. 12. During business cycles the opposite of a trough is... a) an inflation b) a hyperinflation. c) a trend. d) a peak. 13. According to the analysis of the British economist John Maynard Keynes,... a) markets coordinate supply and demand so that a policy of laissez-faire would prevent recessions. b) economic fluctuations were the cumulative result of mistakes made by businesses and households in an uncertain world. c) government demand could be used to smooth fluctuations in aggregate output and income. d) supply creates its own demand through the circular flow of economic activity. 14. In order to influence spending on goods and services in the short-run, monetary policy is directed at directly influencing... a) unemployment rates. b) inflation rates. c) interest rates. d) economic growth rates. 15. "Inflation is generally procyclical" means... a) "higher rates of inflation tend to precede periods of high economic growth." b) "the rate of inflation tends to rise in periods of high economic growth and fall in periods of low economic growth". c) "prices on average rise in an economic expansion but fall after a business cycle peak." d) "more inflation results in less capacity utilization." 16. Constrained choice is relevant for households: a) making spending decisions but not labour-supply decisions. b) making labour-supply decisions but not spending decisions. c) making both spending and labour-supply decisions. d) considered to be 'poor', but not for those who are considered to be 'rich.' 17. Economists use the term utility to mean: a) any characteristic of a good or service which cannot be measured. b) the value of a product before it has been advertised. c) the contribution a good or service makes to social welfare. d) the satisfaction a consumer obtains from a good or service. 18. Economists use the term marginal utility to mean: a) total satisfaction gained when consuming a given number of units. b) the process of comparing marginal units of all goods which could be purchased. c) additional satisfaction gained by the consumption of one more unit of a good. d) additional satisfaction gained divided by additional cost of the last unit. 19. The law of diminishing marginal utility states that: a) total satisfaction will decrease as more units of the good are consumed. b) the satisfaction from each additional unit of a good consumed will decrease. c) total utility will become negative. d) both the first and third option. 3

4 20. By consumer surplus, economists mean: a) the difference between the maximum amount a person is willing to pay for a good and its market price. b) household saving Y-T-C. c) the area inside the budget line. d) the area between the average revenue and marginal revenue curves. 21. The equation for Anna's demand curve for CDs is Q = P. If the price of a CD is 18, consumer surplus will be: a) 198. b) 11. c) 242. d) The price of an ice cream cone is 1.50 and you buy three ice cream cones per week. If the price of an ice cream cone falls to 1.25 and you still buy three ice cream cones per week, which of the following is TRUE? a) The total utility of the fourth ice cream cone per week must be worth less than 1.25 to you. b) Both the total and marginal utility of the fourth ice cream cone per week must be worth less than 1.25 to you. c) The marginal utility of the fourth ice cream cone per week must be worth less than 1.25 to you. d) This violates the law of demand because as price falls quantity demanded must increase. 23. Economists have used the idea of diminishing marginal utility to explain why: a) demand curves slope downwards. b) demand curves become flatter at lower prices. c) demand curves are inelastic. d) both the first and second option. 24. A consumer will buy more units of a good if the value of the good's: a) total utility is less than price. b) total utility is greater than price. c) marginal utility is less than price. d) marginal utility is greater than price. 25. The diamond-water paradox can be explained by suggesting that the price of a product is determined by: a) consumer surplus. b) consumer incomes. c) marginal utility. d) diminishing marginal utility. ANSWERS B A A B B A B D D A A D C C B A D C B A D C D D C 4

5 TEST SERIES Assertion (A): An oligopolist faces demand curve which has a kink at the level of the prevailing price. Reason (R): The segment of the demand curve above the prevailing price level or kink is highly inelastic and the segment of the demand curve below the prevailing price level is elastic. Codes: (a) Both A and R are individually true and. R is the correct explanation of A (b) Both A and It are individually true but R is not the correct explanation of A (c) A is true but R is false (d) A is false but R is true 2. Consider the following statements relating to marginal rate of technical substitution (MRTS). 1. The MRTS in case of an isoquant measures the rate at which one input is substituted for the other. 2. The M of input X for input Y at a point on an isoquant is equal to the positive slope of the isoquant at that point. 3. The MRTS equals to the ratio of the marginal product of input V to the marginal product of input X. Which of the statements given above are correct? (a) 1 and 2 (b) 2 and 3 (c) 1 and 3 (d) 1, 2 and 3 3. When is an isoquant L shaped? (a) When the two factors are complementary (b) When the two factors are perfect substitutes (c) When the two factors are used in fixed proportions (d) When the two factors are imperfect substitutes 4. A firm s average total cost is Its 60, its average variable cost is Rs. 55 and its output is 50 units. What is its total fixed cost? (a) Less than Rs. 200 (b) Between Rs. 200 and Rs. 300 (c) More than Rs. 300 (d) Firm has no fixed cost 5. Under constant returns to scale, which one of the following is the nature of the long - run average cost curve? (a) Parallel to output axis (b) Upward rising (c) Downward sloping (d) Identical to short-run average cost curve 6. In the figure shown below, MN and QR are two straight line demand curves parallel to each other. Consider the following statements 1. The slope and elasticity of demand is same on the demand curves MN and QR, at the price P0 2. The slopes are same but elasticity of demand is more on demand curve MN than demand curve QR, at price 3. Elasticities of demand are same but slope of demand curve MN is less than that of QR at the price P Which of the statements given above is/are correct? (a) 1 only (b) 2 only (c) 1 and 3 (d) 2 and 3 5

6 7. When the negative income effect is greater than substitution effect, it is the case of which one of the following? (a) Giffen goods (b) Inferior goods (c) Luxury goods (d) Normal goods 8. Which one of the following statements is correct? Consumption possibility frontier is same as (a) the indifference curve (c) the production possibility frontier (b) the budget line (d) the demand curve 9. Which one of the following statements is not correct? (a) Normal goods have a positive income elasticity of demand (b) Inferior goods have a negative income elasticity of demand (c) Necessity has an income elasticity of demand that is less than one (d) Luxury goods have an income elasticity of demand that is equal to one 10. A firm has certain initial equilibrium price, when demand function QD = 50 3P and supply function is P. If the firm s demand function is shifted to C = 68 3P, what is the initial equilibrium price and the new equilibrium price, respectively? (a) 5 and 6 (b) 5 and 8 (c) 6and 8 (d) 8 and Cournot model assumes which of the following? 1. There are two firms operating in the market. 2. The firms face a kinked demand curve. 3. Each firm acts on the assumption that their competitors will not react to her decision to change output. Select the correct answer by using the code given below (a) (b) 2 and 3 (c) l and 3 (d)1, 2 and Which one of the following statements is correct? The Sweezy mode of oligopoly assumes that price elasticity of demand (a) is higher for a price increase than for a price decrease (b) is lower for a price increase than for a price decrease (c) cannot change for a price increase or price decrease (d) cannot change for a price decrease 13. Which one of the following statements is correct? (a) Demand for factors of production is an independent demand (b) Demand for factors of production is a derived demand (c) Demand for factors of production is a reciprocal demand (d) Demand for factors of production is same as the demand for commodities 14. What is the principle which is applied to redress the imbalance between distribution and welfare, known as? (a) Principle of taxation (b) Compensation principle (c) Principle of effective demand (d) Principle of supply 15. The inconsistency of which one of the following criteria is labelled as Scitovsky Paradox? (a) Little Criterion (b) Pareto Criterion (c) Bergson Criterion (d) Kaldor Flicks Criterion 6

7 16. consider the following statements The distribution of two commodities between two individuals is Pareto optimal if 1. one individual cannot be made better off without making the other worse off. 2. the individuals are on their consumption contract curve. Which of the statements given above is/are correct? (a) 1 only (b) 2 only (c) Both 1 and 2 (d) Neither 1 nor What is maximizing the level of satisfaction with the given level of inputs and technology, called? (a) Technical efficiency (b) Allocative efficiency (c) Economics of scale (d) X- efficiency 18. Which one of the following statements is correct? An increase in money supply in Keynesian framework results in (a) a higher level of income and a higher rate of interest (b) a lower level of income and a lower rate of interest (c) a higher level of income and a lower rate of interest (d) a lower level of income and a higher rate of interest 19. Which one of the following statements is correct? A fall in the money supply results in the (a) rightward shift in the IS curve (b) rightward shift in the LM curve (c) leftward shift in both the LM curve and the IS curve (d) leftward shift in the LM curve only 20. Which one of the following statements is correct? The IS function indicates the (a) locus of the money market equilibrium (b) locus of the commodity market equilibrium (c) locus of the labour market equilibrium (d) locus of both money and labour market equilibrium 21. Which one of the following statements is correct? According to Keynes, fresh investment would be possible only if (a) the marginal efficiency of capital exceeds the rate of interest (b) the marginal efficiency of capital is less than the rate of interest (c) the marginal efficiency of capital is positive (d) the marginal efficiency of capital is negative 22. Which one of the following statements is correct? Autonomous investment is (a) functionally related to interest rate (b) functionally related to both income and interest rate (c) functionally related to income alone (d) independent of income and interest rate 23. Consider the following statements 1. The MPC is higher in a poor country and lower in a rich country. 2. Higher the MPC, higher will be the value of multiplier. 3. Lower the M lower will be the value of multiplier. Which of the statements given above are correct? (a) 1 and 2 (b) 1 and 3 (c) 2 and 3 (d) 1 2 and 3 7

8 24. Match List-I with List-II and select the correct answer by using the code given below the lists List I (Economist) List II (Concept) A. A. C. Pigou 1. Liquidity Preference B. J.M. Key 2. Real Balance Effect C. J.R. Hicks-A.H. Hansen 3. Ratchet Effect D. J.S. Duesenberry 4. IS-LM Analysis Code: A B C D A B C D (a) (c) (b) (d) In the diagram given above, which one of the following is indicated by the point A lying below the IS curve? (a) Excess demand in the commodity market (b) Excess supply in the money market (c) Excess supply in the commodity market (d) Equilibrium income and interest ANSWERS C C C C A B D B D B C A B B D C D C D B A D A A A 8

9 TEST SERIES Which of the following would shift the demand curve for new textbooks to the right? a. A fall in the price of paper used in publishing texts. b. A fall in the price of equivalent used text books. c. An increase in the number of students attending college. d. A fall in the price of new text books. 2. Which of these measures the responsiveness of the quantity of one good demanded to an increase in the price of another good? a. Price elasticity. b. Income elasticity. c. Cross-price elasticity. d. Cross-substitution elasticity. 3. Assume that the current market price is below the market clearing level. We would expect: a. A surplus to accumulate. b. Downward pressure on the current market price. c. Upward pressure on the current market price. d. Lower production during the next time period. 4. The income elasticity of demand is the: a. Absolute change in quantity demanded resulting from a one-unit increase in income. b. Percent change in quantity demanded resulting from the absolute increase in income. c. Percent change in quantity demanded resulting from a one percent increase in income. d. Percent change in income resulting from a one percent increase in quantity demanded. 5. Which of the following statements about the diagram below is true? a. Demand is infinitely elastic. b. Demand is completely inelastic. c. Demand becomes more inelastic the lower the price. d. Demand becomes more elastic the lower the price. 6. In the long run, new firms can enter an industry and so the supply elasticity tends to be: a. More elastic than in the short-run. b. Less elastic than in the short-run. c. Perfectly elastic. d. Perfectly inelastic. 7. A curve that represents all combinations of market baskets that provide the same level of utility to a consumer is called: a. A budget line. b. An isoquant. c. An indifference curve. d. A demand curve. 8. The magnitude of the slope of an indifference curve is: a. Called the marginal rate of substitution. b. Equal to the ratio of the total utility of the goods. c. Always equal to the ratio of the prices of the goods. d. All of the above. 9

10 9. Which of the following is a positive statement? a. Intermediate microeconomics should be required of all economics majors in order to build a solid foundation in economic theory. b. The minimum wage should not be increased, because to do so would increase unemployment. c. Smoking should be restricted on all airline flights. d. None of the above. 10. A supply curve reveals: a. The quantity of output consumers are willing to purchase at each possible market price. b. The difference between quantity demanded and quantity supplied at each price. c. The maximum level of output an industry can produce, regardless of price. d. The quantity of output that producers are willing to produce and sell at each possible market price. 11. Which of the following would NOT constitute a pure public good? A. National defense. B. A new national holiday. C. Free health service. D. National environmental protection. 12. One of the characteristics of a public good, X, is that it is nonrival. It means: A. It is not possible to exclude anyone from using (or benefiting from) X. B. There is no substitute for X. C. One person s use of X does not affect another person s ability to use (or benefit from) X. D. None of the above. 13. Why might advertising exceed its socially optimal level? A. Because the marginal social costs of advertising are less than the marginal private costs. B. Because private firms do not or cannot incorporate marginal external costs when deciding how much to advertise. C. The marginal external benefit to advertising is not taken into account by firms. D. None of the above. 14. If MSB > MPB, what can the government do to align the market outcome with the social optimum: A. Impose a consumption tax. B. Impose a production tax. C. Provide a consumption subsidy. D. Provide a production subsidy 15. If the VMP for labour > the MRP for labour, and there is no government intervention, you can conclude that the underlying market structure is: A. a monopoly. B. perfect competition. C. not perfect competition. D. none of the above. 16. A backward bending labour supply curve (roughly similar in shape to an inverted C) obtains when the income effect of a wage rise (beyond a certain wage level) dominates the substitution effect. If it was also the case that the income effect of a wage reduction (below a certain wage level) dominated the substitution effect, what would the complete labour supply curve roughly look like in wagehours worked space? A. a 3. B. an inverted 3. C. an S. D. an inverted S. 10

11 17. A firm is considering the project of buying an ice-cream producing machine costing Rs.1,000,000 that will serve for 10 years and then have a scrap value of Rs. 110,000 at the end of 10 years. If the present value of the net ice-cream sales revenues that the machine will generate is Rs.900,000, then, assuming a 10% annual discount rate: A. the firm should not buy the machine because the NPV associated with the overall project is negative. B. the firm should be indifferent between buying and not buying because the NPV of the overall project is zero. C. The firm should buy the machine because the NPV of the overall project is positive. D. None of the above. 18. If the quarterly rent from a house is Rs.5,000, the annual interest rate is fixed at 5%, and housing market conditions are stable, what would you expect the market price of the house to be? A. Rs.100,000 B. Rs.200,000 C. Rs.400,000 D. Rs.800, There are many differences between labour and land as factors of production, for e.g.: A. Labour cannot be purchased like land, it can only be rented. B. There is no obvious reason why landowners will reduce the supply of land when the rental price of land goes up. C. The decision to hire labour does not directly depend on the interest rate. D. All of the above. 20. Information products are unique in that the marginal cost of the product is virtually zero. A. producing B. distributing C. accessing D. all of the above 21. A study of how increases in the minimum wage rate will affect the national unemployment rate is an example of A. descriptive economics. B. normative economics. C. macroeconomics. D. microeconomics. 22. Aggregate supply is the total amount A. of goods and services produced in an economy. B. produced by the government. C. of products produced by a given industry. D. of labour supplied by all households. 23. The total demand for goods and services in an economy is known as A. aggregate demand. B. national demand. C. gross national product. D. economywide demand. 24. Deflation is A. an increase in the overall level of economic activity. B. an increase in the overall price level. C. a decrease in the overall level of economic activity. D. a decrease in the overall price level. 11

12 25. A recession is A. a period of declining prices. B. a period during which aggregate output declines. C. a period of declining unemployment. D. a period of falling trade volumes. ANSWERS C C C C B A C A D D C C B A&C C D A C D B C A A D B 12

13 TEST SERIES represents all combinations of market baskets that provide the same level of utility to a consumer: a) A budget line. b) An isoquant. c) An indifference curve. d) A demand curve. 2. Which of the following are examples of perfectly competitive markets: a) Wheat b) Gold c) The stock market d) All of the given options 3. An increase in income, holding prices constant, can be represented as: a) A change in the slope of the budget line. b) A parallel outward shift in the budget line. c) An outward shift in the budget line with its slope becoming flatter. d) A parallel inward shift in the budget line. 4. Moving down along a demand curve for apples: a) Consumer well-being decreases. b) The marginal utility of apples decreases. c) The marginal utility of apples increases. d) None of the given options. 5. Denise is shopping for lobsters and éclairs. When she faces budget line b1, she chooses market basket A over market basket B. When she faces budget line b2, she chooses basket B over basket C. Which assumption of consumer theory helps us determine Denise s preference ordering over basket A and basket C? a) Completeness b) More is better than less c) Transitivity d) Convexity 6. The endpoints (horizontal and vertical intercepts) of the budget line: a) Measure its slope. b) Measure the rate at which one good can be substituted for another. c) Measure the rate at which a consumer is willing to trade one good for another. d) Represent the quantity of each good that could be purchased if all of the budget were allocated to that good. 7. Which of the following will result in a decrease in a consumer's purchasing power? a) A decrease in the consumer's income. b) An increase in the price of the good on the vertical axis. c) An increase in the price of the good on the horizontal axis. d) All of the given options. 8. Land is best described as: a) Produced factors of production b) "Organizational" resources c) Physical and mental abilities of people d) "Naturally" occurring resources 9. As more and more firms have acquired fax machines, the fax machine has become a standard means of business communication. The increase in demand for fax machines for business communication: a) Its an example of the snob effect. b) Proves that the fax machine is a normal good. c) Is an example of the bandwagon effect. d) Is an example of a positive network externality. 13

14 10. An individual consumes only two goods, X and Y. Which of the following expressions represents the utility maximizing market basket? a) MRSxy is at a maximum. b) Px/Py = money income. c) MRSxy = money income. d) MRSxy = Px/Py. 11. When the price of wood (which is an input in the production of furniture) falls, the consumer surplus associated with the consumption of furniture: a) Increases. B) Decreases. c) Does not change. d) Insufficient information for judgement 12. What does it mean when the CPI is higher this year than last? a) The rate of inflation has increased. b) There has been inflation since last year. c) Real prices have increased. d) Real prices have decreased. 13. Suppose that the prices of good A and good B were to suddenly double. If good A is plotted along the horizontal axis: a) The budget line will become steeper. b) The budget line will become flatter. c) The slope of the budget line will not change. d) The slope of the budget line will change, but in an indeterminate way. 14. The change in the quantity demanded of a good resulting from a change in relative price with the level of satisfaction held constant is called the effect. a) Giffen b) Real price c) Income d) Substitution 15. The price elasticity of demand is a negative number this means: a) Demand is price elastic. b) Demand is price inelastic. c) The demand curve is downward sloping. d) An increase in income will reduce the quantity demanded. 16. If the cross elasticity of demand is -2: a) The products are substitutes and demand is cross price elastic. b) The products are substitutes and demand is cross price inelastic. c) The products are complements and demand is cross price elastic. d) The products are complements and demand is cross price inelastic. 17. The magnitude of the slope of an indifference curve is: a) Called the marginal rate of substitution. b) Equal to the ratio of the total utility of the goods. c) Always equal to the ratio of the prices of the goods. d) All of the given options. 18. Indifference curves that are convex to the origin reflect: Select correct option: a) An increasing marginal rate of substitution. b) A decreasing marginal rate of substitution. c) A constant marginal rate of substitution. d) A marginal rate of substitution that first decreases, then increases. 14

15 19. The theory of consumer behavior is based on certain assumptions. It includes at least the assumption(s) that preferences are: Select correct option: a) Complete. b) Transitive. c) Intransitive. d) Complete and transitive. 20. The price of good A goes up. As a result the demand for good B shifts to the left. From this we can infer that: Select correct option: a) Good A is used to produce good B. b) Good B is used to produce good A. c) Goods A and B are substitutes. d) Goods A and B are complements. 21. Which of the following is true concerning the income effect of a decrease in price? Select correct option: a) It will lead to an increase in consumption only for a normal good. b) It always will lead to an increase in consumption. c) It will lead to an increase in consumption only for an inferior good. d) It will lead to an increase in consumption only for a Giffen good. 22. Jane is trying to decide which courses to take next semester. She has narrowed down her choice to two courses Microeconomics and Macroeconomics. Now she is having trouble. She just cannot decide which of the two courses to take. It s not that she is indifferent between the two courses, she just cannot decide. An economist would say that this is an example of preferences that: a) Are not transitive. b) Are incomplete. c) Violate the assumption that more is preferred to less. d) All of the given options. 23. Denise is shopping for lobsters and éclairs. When she faces budget line b1, she chooses market basket A over market basket B. When she faces budget line b2, she chooses basket B over basket C. Which assumption of consumer theory helps us determine Denise s preference ordering over basket A and basket C? Select correct option: a) Completeness b) More is better than less c) Transitivity d) Convexity 24. Which of the following will result in a decrease in a consumer's purchasing power? Select correct option: a) A decrease in the consumer's income. b) An increase in the price of the good on the vertical axis. c) An increase in the price of the good on the horizontal axis. d) All of the given options. 25. Consider two goods X and Y available for consumption. Assume that the price of X changes while the price of Y remains fixed. For these two goods, the priceconsumption curve illustrates the: Select correct option: a) Relationship between the price of X and consumption of Y. b) Utility-maximizing combinations of X and Y for each price of X. c) Relationship between the price of Y and the consumption of X. d) Utility-maximizing combinations of X and Y for each quantity of X. 15

16 ANSWERS C A B B C D D D D D A C A D C C A B D D A D C D B 16

17 TEST SERIES-5 1. Money market has to provide facility for adjusting liquidity to a) banks b) business corporations c) non-banking financial institutions d) All of these 2. Gilt edged securities refer to a) Government Securities b) Securities issued by municipal corporations c) Securities issued by first class companies d) None of these 3. E.P.S. in share market stands for a) Earning Per Share b) Electronic Payment System c) Employee Pension Scroll d) Equated Payment System 4. Which of the following is not an organized sector in India? a) Nationalized Bank b) Regional Rural Banks c) Cooperative Banks d) Chits and Money lenders 5. C.R.A. in banking parlance stands for a) Credit Rating Association b) Credit Rating Agency c) Credit Risk Assessment d) None of these 6. The period for Call Money is a) 10 to 15 Days b) 1 to 14 Days c) 15 to 30 Days d) One month 7. Which of the following statement regarding S.E.B.I. is not correct? a) It regulates the business in stock markets and other securities markets. b) It was set up in 1988 and given statutory recognition in c) It fixes prices of I.P.O.s (Initial Public Offer) in the stock market. d) It regulates substantial acquisition of shares and takeover of companies. 8. Certificates of deposits are issued by: a) Scheduled commercial banks b) Regional rural banks c) Local area banks d) All of these 9. Which of the following is not a part of organised sector of the Indian money market? a) Commercial banks b) Foreign banks c) Chit funds d) Mutual funds 10. Industrial Securities Market is a market for shares and debentures of - a) The existing firms b) New corporate firms c) Both (a) and (b) d) None of these 11. Which of the following is a part of the organized sector or Indian money market? a) Indigenous bankers b) Loan companies c) Call money market d) Over the Counter Exchange of India 12. Which of the following is not the main player of Indian money market? a) Government b) RBI c) Commercial banks d) Over the Counter Exchange of India 13. Which of the following are the main participants in the call money market? a) Commercial banks b) Co-operative banks c) Primary dealers d) All of these 14. Which of the following does not form the part of treasury bills issued by the government of India today? a) 14-day treasury bills b) 91-day treasury bills c) 182-day treasury bills d) 364-day treasury bills 17

18 15. Which of the following is not the feature of commercial bills? a) Short term b) Trade bills c) Issued by RBI d) High degree of liquidity 16. Which of the following money market instrument is issued by commercial banks? a) CPs b) Commercial bills c) CDs d) Treasury bills 17. Which of the following measures absorb liquidity from the financial system? a) Repo b) Reverse repo c) MSF d) Buying of securities under OMO 18. Which of the following is the latest measure introduced by RBI to influence liquidity in the financial system? a) Repo b) Reverse Repo c) MSF d) LAF 19. Money market in India suffers from a) Insufficient funds b) Excess regulation by the government c) Insufficient demand for money d) None of these 20. Indian money market is a) Fully integrated b) suffering from dichotomy c) Well organized and fully developed d) None of these 21. RBI introduced reverse repos in a) 1992 b) 1996 c) 2002 d) None of these 22. The minimum lack in period for MMMF is a) 30 days b) 45 days c) 15 days d) None of these 23. The Clearing Corporation of India Limited (CCIL) deals with a) Government securities b) CDs c) CPs d) None of these 24. Capital market is a market for a) Short term funds b) Long term funds c) Medium term funds d) Medium and long term funds 25. Which of the following is not an important segment of capital market? a) Gilt edged market b) Corporate debt market c) Equity market d) RBI ANSWERS D C A C C B C A C C C D D A C C B C A B B C A D D 18

19 TEST PAPER In the kinked demand curve model, if one firm reduces its price a) Other firms will also reduce their price b) Other firms will compete on a non-price basis c) Other firms will raise their price d) All of the above 2. Monopolistic competition differs from perfect competition primarily because a) In perfect competition firms can differentiate their products b) In monopolistic competition firms can differentiate their products c) In monopolistic competition there are relatively few firms d) In perfect competition there are no barriers to entry 3. An individual consumes only two goods X and Y, Which of the following expressions represents the utility maximizing market basket? a) MRSxy is at a maximum b) Px/Py = Money income c) MRSxy =Money income d) MRSxy =Px/Py 4. Compared to the case of perfect competition, a monopolist is more likely to a) Charge a higher price b) Produce a lower quantity to the product c) Make a greater amount o economic profit d) All of the above 5. Which of the following is necessary for a natural monopoly? a) Economies of scale b) A high proportion of the total cost is the cost capital goods c) The market is very small d) All of the above 6. Which of the following best defines price discrimination? a) Charging different prices on the basis of race b) Charging different prices for goods with different costs of production c) Charging different prices based on cost of service differences d) Selling a certain product of given quality and cost per unit a different prices to different buyers 7. Which of the following refers to perfect competition? 1. There are restriction on buyers and sellers. 2. There are no restrictions on movement of goods. 3. There are no restrictions on factors of production. Select the correct answer using the codes given bellow (a) 1 and 2 (b) 2 and 3 (c) 1 and 3 (d) Only 1 8. Assertion (A) AC and AVC are always equal for any level of output. Reason (R) AVC is the vertical summation of AC and AFC. Codes a) Both A and R are true and R is the correct explanation of A b) Both A and R are true, but R is not the correct explanation of A c) A is true, but R is false d) A is False, but R is true 9. Which of the following is a characteristic of pure monopoly? (a) One seller of the product (b) Low barriers to entry (c) Close substitute product (d) perfect information 19

20 10. Match the following List I List II A. Average total coat 1. Variable cost/quantity of output B. Average fixed cost 2. Total cost/ Quantity of output C. Average variable cost 3. Fixed cost/ Quantity of output D. Marginal cost 4. The increase in total cost that arises from extra unit of production A B C D A B C D (a) (b) (c) (d) Match the following List I List II A. Kinked demand curve 1. Prof Samuelson B. Duopoly model 2. Paul M Sweezy C. Managerial theory of firm 3. Cournot D. Social welfare function 4. Williamson A B C D A B C D (a) (b) (c) (d) Match the following List I List II A. Implicit cost 1. Insurance premiums of property B. fixed cost 2. Average fixed cost C. Falls as long as output rises 3. Depreciation charges on company s own equipment 4. Tax paid to a local municipality A B C A B C (a) (b) (c) (d) Match the following List I List II A. Short period 1. Law of diminishing returns B. Interest on owned money capital 2. Implicit cost of production C. Rectangular hyperbola 3. Average fixed cost curve D. Price 4. Production Function 5. Average variable cost curve Codes A B C D A B C D (a) (b) (c) (d) If demand increases in a market this will usually lead to a) A higher equilibrium price and output b) A lower equilibrium price and higher output c) A lower equilibrium price and output d) A higher equilibrium price and lower output 15. A shift in supply will have a bigger effect on price than output, if demand is (a) Incomes elastic (b) income inelastic (c) Price elastic (d) price inelastic 16. If the price was fixed below the equilibrium price there would be (a) excess supply (b) excess demand (c) equilibrium (d) downward pressure on price 20

21 17. The Price mechanism cannot (a) act as a signal (c) act as a rationing device 18. Firms in perfect completion face a (a) perfectly elastic demand curve (c) perfectly elastic supply curve (b) act as an incentive (d) shift the demand curve (b) perfectly inelastic demand curve (d) perfectly inelastic supply curve 19. In the short period, monopolist firm s equilibrium is at (a) break-even point (b) AR>AC (c) AR< AC (d) All of these 20. Price discrimination is profitable and possible, if the two markets have (a) equal elasticity of demand (b) different elasticity of demand (c) inelastic demand (d) highly elastic demand 21. Law of increasing and constant returns are temporary phases of (a) law of variable proportion (b) law of diminishing return (c) law of proportionality (d) law of diminishing utility 22. Match the following List I List II A. Imperfect competition 1. Chamberlin B. Monopolistic competition 2. Bain C. Limit Price 3. hall and Hitch D. Average cost pricing 4. Mrs Robinson Codes A B C D A B C D (a) (b) (c) (d) Assuming a downward sloping demand curve and upward sloping curve, a higher equilibrium price may be caused by (a) a fall in demand (b) an increase in supply (c) Improvements in production technology (d) an increase in demand 24. In perfect competition a) The price equal the marginal revenue b) The price equals the average variable cost c) The fixed cost equals the variable cot d) The price equals the total costs 25. A profit maximizing firm in perfect competition produces where a) Total revenue is maximize b) Marginal revenue equals zero c) Marginal revenue equals marginal cost d) Marginal revenue equal average cost ANSWERS a d d d d d c b a c a c a a d b d a d b a a d a c 21