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0707 Eco (CFA520)1 - Question Paper Economics(CFA520 July...

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Question Paper Economics (CFA520) : July 2007 Answer all questions. Marks are indicated against each question. 1. At a local supermarket, the price of Simla apples varies every week. Mr. Mishra, who is a regular buyer of apples, spends exactly Rs.50 on apples every week, irrespective of the price. For Mr. Mishra, the price elasticity of demand for apples is (1 mark) (a) Perfectly elastic (b) Perfectly inelastic (c) Unit elastic (d) Relatively elastic (e) Relatively inelastic. < Answer > 2. Which of the following statements are false ? I. Elasticity of demand is graphically represented by the slope of the demand curve. II. Elasticity of demand increases, as one goes down along the demand curve. III. If the demand is inelastic, a decrease in price increases the total revenue of the firm. IV. Elasticity of demand is measured by dividing change in quantity demanded with the change in the price of the good. (1 mark) < Answer > 3. When the quantity supplied of a commodity exceeds the quantity demanded at a given price, the price (1 mark) < Answer > 4. The demand curve is usually (1 mark) < Answer > 5. If the demand equation is given as Q d = 100 – 4P and price is Rs.10, the point elasticity of demand is (2 marks) (a) –4.00 (b) –0.67 (c) –0.06 (d) –0.10 (e) –0.60. < Answer > 6. A product priced at Rs.900 has price elasticity of demand equal to 6. What is the marginal revenue? < Answer
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(2 marks) > 7. Which of the following is/are not true regarding consumer surplus? I. Consumer surplus is helpful to the government in fixing taxes. II. Consumer surplus helps the monopolists in fixing price of a commodity. III. In case of imported products which are cheaper than domestic products the consumer surplus is less. IV. A higher consumer surplus indicates that the economy is stable. (1 mark) < Answer > 8. Which of the following statements is not true ? (1 mark)
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