Macro Economics-1

            
1.  Discuss the nature and scope of Business Economics

 

2 .How does the study of Business Economics help a business manager indecision-making? Illustrate your answer with the real world examples.

3.  What is the Opportunity Cost? How can it be calculated? What are the precautions to be kept in view while using the Opportunity Cost?

4.  Draw individual and market demand schedules. Discuss the difficulties in preparing a market demand schedule.

5.  Write short notes on:

a)    Demand forecasting

b)    Consumer Surplus 

c)    Marginal Utility
d)    Gross price elasticity of demand

e)    Complementary goods

6.  Explain the law of Variable proportions. Which is the bet stage of production?

7.  Explain Least Cost Combination of the factors.

8.  Distinguish between Average and Marginal Cost and show by examples and diagrams that marginal cost is less than average cost if average cost is falling and marginal cost is more than average cost is rising.

Case Detail:  
Read the case study given below and answer the questions given at the end.          

                                                   Case Study       

                                     Two Wheeler Industries in India

The two wheeler category is steadily moving from a discretionary purchase to an essential purchase, especially among the burgeoning Indian middle-class households. Better quality and durability, higher fuel efficiency, new age styling, and features in conjunction with a slew of new product launches and greater finance availability have been the primary drivers of sales in the past years. India secures second-largest position in two wheeler production. Apart from the discussed facts, inadequacy and poor quality of public transport system in India have pushed the demand of two wheelers. In India, the two-wheeler industry is highly diversified in terms of presenting a versatile product line. Two-wheeler manufacturers produce different economic models for general public as well as some specific models to cater the different needs of high-income group. Two-wheelers contain scooters, mopeds, and motorcycles. Few years ago the market was dominated by scooter segment, but scenario changed in 1998-1999 when motorcycles took the edge and never looked back. Nowadays, Indian two-wheeler industry is dominated by the motorcycle segment. Hero Honda, Bajaj, TVS Motors, Kinetic Motors, and LML are some of the main players in the Indian two-wheeler industry.

Demand of two-wheelers is increasing day-by-day. In the year 1990-1991, the demand for the two-wheelers was 1.82 million units that grew to 3.83 million units in the year 2000-2001. The projected demand for the two-wheelers in the year 2014-2015 is estimated to reach 16 million units. This is no doubt a rosy picture for the growth of Indian two-wheeler industry. Table1 and Table2 present market segmentation and product variation of two-wheelers in India, respectively.

Table 1: Market segmentation for the two-wheeler industry in four regions of the country

    Market segmentation

Segment              Share (%)

North                       32

East                            9

West                        27   

South                      32      

Table 2: Product wise market share for the two-wheeler industry in India

     Product Variation

Type                           Share (%)

Motorcycles                  66

Scooters                        22      

Mopeds                         11

Q 1. Make a comprehensive analysis on two-wheeler demand in India.

Assignment C

1. Average product is defined as--    

Total cost divided by the total units of input    
Total output divided by the total units of input    
Total cost divided by total output    
Total output divided by total cost of input

2. To manufacture a PC, you require a keyboard and a monitor. If you measure keyboard on the X-axis and monitor on the Y-axis, the shape of the Isoquant will be--    

Convex to the origin    
Concave to the origin    
Downward sloping straight line    
Upward sloping straight line

3. When average product is highest? 

Total product is maximum    
Marginal product is maximum    
Marginal product is zero    
Marginal product is negative

4. The intersection of marginal product curve and average product curve characterizes the point of--    

Maximum profit    
Maximum total product    
Maximum average product    
Maximum marginal product

5. The average total cost will be minimum at a point where--    

Marginal cost and average fixed cost curves intersect    
Marginal cost and average variable cost curves intersect    
Marginal cost and average cost curves intersect    
Marginal cost is minimum

6. Which of the following curves is called envelope curve?    

Long run total cost curve    
Long run average total cost curve    
Long run marginal cost curve    
Long run average variable cost curve

7. Average fixed cost--    

Always declines as the output increases    
Is U-shaped, if there are increasing returns to scale    
Is U-shaped, if there are decreasing returns to scale    
Is intersected by marginal cost at its minimum point

8. Which of the following cost curves is also called planning curve?    

Long run total cost curve    
Long run average cost curve    
Long run marginal cost curve    
Total fixed cost curve

9. Economic profit is--    

Accounting profit + Implicit cost    
Accounting profit + Implicit cost+ Explicit cost    
Accounting profit - Implicit cost    
Accounting profit –Indirect costs    

10. The intersection of the marginal cost curve and the average cost curve characterizes the point of--    

Maximum profit    
Minimum average cost    
Minimum marginal cost    
Minimum opportunity cost

11. Which of the following costs remain constant as the output increases?    

Marginal cost and average fixed cost curves intersect    
Marginal cost and average variable cost curves intersect    
Average fixed cost    
Total variable cost

12. Increasing marginal costs with increase of output implies--    

Decreasing average returns    
Decreasing average fixed costs    
Decreasing average variable costs    
Decreasing total costs

13. Which of the following cost curves is not ‘U’ shaped?    

Long run average cost curve    
Long run marginal cost curve    
Short run average cost curve    
Long run average variable cost curve

14. What would be the shape of the total cost curve when a manufacturing unit is experiencing economies of scale?    

Upward sloping    
Rectangular hyperbola    
Is U-shaped    
Inverted U-shaped

15. In perfect competition, a firm maximizing its profit will set its output at that level where--    
Average variable cost = price    
Marginal cost= price    
Fixed cost= price    
Average fixed cost= price

16. It is advisable for a firm operating under perfect competition to shut down in the short run when the price of the product falls below the--    

Total cost    
Fixed cost    
Average variable cost    
Semi-fixed cost

17. Which of the following is not a feature of perfect competition?    

Large number of sellers and buyers    
No one is large enough to influence the market price    
Homogenous product    
A horizontal demand curve

18. In the long run, a perfectly competitive firm earns only normal profits because of --    

Product homogeneity in the industry    
Larger number of sellers and buyers in the industry    
Free entry and exit of firms in the industry    
Both (a) and (b) above

19. The doctrine of invisible-hand applies to economies in which all the markets are--    

Demand specific    
Supply specific    
Imperfectly competitive    
Perfectly competitive

20. The horizontal demand curve for a firm is one of the characteristic features of-    

Oligopoly    
Monopoly    
Monopolistic competition    
Perfect competition

21. A perfectly competitive firm can increase its sales revenue by--    

Reducing the price    
Increasing the price    
Increasing the production    
Increasing the expenditure on advertising

22.
If a perfectly competitive industry is an increasing cost industry, the demand curve faced by a firm will be--    

Upward sloping    
Downward sloping    
A horizontal straight line    
A vertical straight line    

23.A perfectly competitive firm earns abnormal profits when its--    

Average cost curve lies above its demand curve    
Average revenue curve is tangent to average cost curve    
Demand curve lies above the average cost curve    
Marginal revenue curve lies above the average cost curve

24. Which of the following is not a source of market imperfection?    

Technology    
Size of the firm    
Product of the differentiation    
Availability of resources

25. Which of the following is not a barrier to entry?    

High costs of production    
Government regulations    
Production differentiation    
Tax sops to new firms

26. The maximum profit condition for a monopoly firm is--    

Total cost should be minimum    
Total revenue should be maximum    
Marginal revenue = Marginal cost    
Quantity should be maximum

27. Market inefficiencies can come from--    

Externalities    
Monopolies    
Imperfect information    
All of the above

28. A monopolist who faces a negatively sloped demand curve operates in the region where the elasticity of demand is--    

Less than one    
Equal to one    
Greater than one    
Zero

29. An entrepreneur in order to maximize the profits, without affecting the price, should produce an output where--    

Average cost is minimum    
Average variable cost is minimum    
Average fixed cost is minimum    
Marginal cost is equal to the average variable cost

30. Macroeconomics is concerned with--    

The level of output of goods and services    
The general level of prices    
The growth of real output    
None of the above.

31. Real GNP increases--    

When there is an increase in the price level    
When there is an increase in the output of goods and services    
When there is an increase in the price level and/or the output of goods and services
None of the above

32. Personal income includes all of the following except--    

Transfer payments    
Undistributed corporate profits    
Personal income taxes    
Personal savings

33. NDP does not include--    

Payments made for income taxes    
Depreciation allowances    
Undistributed profits    
The value added from intermediate goods

34. National income is--    

NDP at market prices    
NNP at market prices    
NDP at factor cost    
GNP at market prices

35. The difference between personal disposable income and personal income is--    

Residential investment    
Indirect taxes    
Subsidies    
Personal taxes    

36.The net factor income earned within the domestic territory of a country must be equal to --    

Net Domestic Product at factor cost    
Net Domestic Product at market price    
Net National product at factor cost    
Personal income

37.The ratio of the change in equilibrium output to the change in autonomous spending that causes change in output is called--    

Marginal propensity to consume    
Marginal propensity to save    
Average propensity to save    
Average propensity to consume

38.When planned saving is greater than planned investment--    

Output should increase    
Output should decrease    
Output should not change    
Average propensity to consume

39.An autonomous increase in investment--    

Does not affect the IS curve    
Shifts the LM curve to the left    
Output should not change    
None of the above

40. What happens to the demand for coffee, when the price of tea increases?    

Increases    
becomes zero    
decreases    
remains same