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PoE - Tutorial 3 - Set C - Solution

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62 views3 pages

PoE - Tutorial 3 - Set C - Solution

Uploaded by

chirag birla
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© © All Rights Reserved
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BIRLA INSTITUTE OF TECHNOLOGY & SCIENCE, PILANI

SECOND SEMESTER – 2016-17

COURSE NO.:ECON F211 Marks 15 (1*15), Weightage 5%


COURSE TITLE: Principles of Economics Date: 25thFebruary 2017
Tutorial Test - 3 (25 Minutes) Weight-age 5% (15 Marks)
ID. No: NAME: Tutorial Sec. No.
Read ALL instructions carefully.
 All questions are compulsory.
 For multiple choice questions, pick the most appropriate answer only.
 All questions carry 1 Mark. 0.25 Mark will be deducted for every INCORRECT answer.
 Write the answers in the Table given below . Ambiguous/Overwritten answers will NOT be
evaluated.
Write your answers in the table given below. Answers written elsewhere will NOT be evaluated.
1 True 5 False 9 ____ 13 A
2 True 6 C 10 B 14 C
3 False 7 D 11 C 15 B
4 False 8 D 12 B

I. State whether the statements are true or false.

1. It is possible to derive the demand curve of an inferior good from an individual's indifference curve and the budget
constraint. (True)

2. For a consumer consuming two goods, if one of the goods consumed is ‘bad’ (a commodity which gives a disutility), then
the indifference curves will have a positive slope. (True)

3. If a country is rich in unskilled labour, the producer is more likely to adopt a capital-intensive technique of production if
both labour-intensive and capital-intensive techniques of production are available. (False)

4. For a rational consumer, if the consumption bundle C is strictly less-preferred to consumption bundles B and A, we can
conclude that bundle A is strictly preferred to bundle B. (False)

5. In the short-run, the law of diminishing marginal returns will not operate if all factors of production are varied
simultaneously. (False)

II. Multiple choice questions:


6. For a linear short run production function, Q=2L the marginal product of labour is:
a) Always higher than average product of labour
b) Always lower than average product of labour
c) Equal to average product of labour
d) Initially higher and then lower than average product of labour

7. An inflow of unskilled immigrants of working age into the economy is likely to have the following impact on the isocost line
of a producer (with units of capital measured along the Y axis):
a) A parallel shift of the isocost line
b) No change in the isocost line
c) A reduction in the vertical intercept and increase in the horizontal intercept
d) No change in the vertical intercept, an increase in the horizontal intercept

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8. Total

Output

L1 L2 Labour

For the above short run production function, select the appropriate shape of the marginal product of labour curve:
a) It will be a horizontal line b) It will be a vertical line
c) It will be horizontal till L1and then it will fall to zero afterwards d) None of the above

9. For a general short-run production function which exhibits diminishing returns to labour over a certain range of output,
which of the following is true? (TPL refers to total product of labour).
a) TPL increases at a diminishing rate as MPL is increasing
b) TPL is maximum when MPL = APL
c) MPL = APL at the point where the TPL curve changes its curvature
d) TPL increases at an increasing rate as MPL falls

10. The relationship between accounting profit and economic profit, for a firm making positive economic profits, is:
a) Accounting profit and economic profit always differ in terms of the sign
b) Accounting profit is always greater than economic profit in terms of absolute value
c) Accounting profit and economic profit are always equal
d) Both (a) and (c)

11. Choose the most appropriate statement for a firm operating under a given cost constraint and the following conditions:
The marginal product of labour is equal to 4, marginal product of capital is equal to 8, and price per unit of labour is
Rs. 10 and price per unit of capital is Rs. 5:
a) The firm will be in equilibrium when the ratio of commodity prices equals the ratio of marginal utilities
b) The firm will be in equilibrium when the ratio of factor prices is greater than or equal to the ratio of marginal
products
c) The firm can reach equilibrium by substituting capital for labour in production
d) The firm can reach equilibrium by using only capital for production if capital and labour are perfect
complements
e) Cannot be determined from the information above.

12. A consumer has the utility function u ¿, x2 ) = 2 x 1+ x2 .Her income is y = Rs 100, the prices are p1= Rs 20 and p2 = Rs
30 for consumption goods x 1 and x 2 respectively. The amount of x1 in the utility maximizing bundle is:
a) 7
b) 5
c) 2
d) 0

13. If the marginal product of labour is twice that of the average product of labour for certain values of labour, then which of
the following is true?
a) Q/L2 is constant
b) Q/L is constant
c) Q2/L is constant
d) None of the above

14. If a firm is earning zero economic profits in any given period:


a) The opportunity cost of its factors of production are greater than the normal rate of return
b) The existing firms in the industry will definitely wish to exit the industry
c) The firm is likely to be making a profit in terms of its accounting profit
d) The loss in terms of accounting profit is equal to a below normal return on investment

15. The marginal rate of technical substitution for perfect complements is:
a) Equal to a constant in terms of absolute values
b) Either zero or infinity, nothing in between
c) Equal to zero
d) The concept of MRT should be used here not MRTS.

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