Test

MM: 40 Time : 1hr 30 min

Q1. Value of a factor in its next best alternative use is (1)

a. social cost b. opportunity cost

c. marginal rate of substitution d. PPC

Q2. What is MU when TU is maximum? (1)

Q3. Give two examples of underutilization of resources.(1)

Q4. If a consumer has monotonic preferences, which bundle would be preferred by

him? (1)

a. (12,8) b. (12,12) c. (10,6) d.(8,12)

Q5. When the price of commodity X increases then the demand for commodity y
increases, how are they related? (1)

Q6. ‘’An economy always produces on, but not inside a PPC”, defend or refute. (3)

Q7. Why is PPC concave to the origin?

OR

Explain the central problem of “what to produce” with the help of an example. (3)

Q8. Explain the law of DMU with the help of an example. (3)

Q9. State with reasons, whether the following items will have elastic or inelastic
demand: (3)

a. liquor b. Butter for a poor man c. Mobile Phone

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Q10. Distinguish between a change in quantity demanded and a change in demand
of a commodity. (3)

Q11. The Government establishes a large number of institutes of science and

technology. How will it affect the PPC ? Explain.

OR

Calculate MOC and discuss the shape of PPC , make diagram: (4)

Production of Wheat 0 1 2 3
Production of Rice 12 7 3 0
Q12. If price of a good rises from ₹ 46 to ₹ 50 per unit, the demand decreases from
30 units to 15 units. Calculate the co-efficient of price elasticity of demand. (4)

Q13. Explain the effect of the following on the demand of a good. (6)

i. Change in the income of the consumer.

ii. Change in the price of the related goods.

Q14. a) A consumer consumes only two goods X and Y , both priced at ₹ 2 per unit.
If the consumer chooses a combination of the two goods with Marginal Rate of
Substitution equal to 2, is the consumer in equilibrium? Why or Why not? What
will a rational consumer do in this situation? Explain.

b) A consumer consumes only two goods X and Y , both priced at ₹ 5 and ₹ 4

respectively. If the consumer chooses a combination of the two goods with
Marginal utility of X equal to 4 and that of Y equal to 5, is the consumer in
equilibrium? Why or Why not? What will a rational consumer do in this situation?
Use utility analysis. (6)

AMIT ARORA

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