0807 Eco (CFA520) - Question Paper Economics(CFA520 July...

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1 Question Paper Economics (CFA520): July 2008 Answer all 76 questions. Marks are indicated against each question. Total Marks : 100 1. What will happen when price of a good remaining constant at a point and demand increases in a perfect competitive market? (a) The demand curve shifts to right (b) The demand curve shifts to left (c) There will be a downward movement along the demand curve (d) There will be an upward movement along the demand curve (e) The demand curve becomes horizontal. (1mark) <Answer > 2. For luxury goods the income elasticity is (a) Less than zero (b) Zero (c) Between zero and one (d) One (e) Greater than one. (1mark) <Answer > 3. Which of the following statements is not true ? (a) Cross price elasticity between perfect substitutes is infinity (b) There exists a difference between income elasticity and income sensitivity of demand (c) Goods with positive income elasticity are called as normal goods (d) Slope of the demand curve and elasticity of demand are same (e) When price elasticity is zero, then the quantity demanded is the same at all prices. (1mark) <Answer > 4. When the price elasticity of demand is equal to two, then the marginal revenue is (a) Negative (b) Twice the average revenue (c) Thrice the average revenue (d) Half of average revenue (e) Equal to average revenue. (1mark) <Answer > 5. Which of the following statements is/are true with respect to indifference curve? I. The slope of the indifference curve represents the marginal rate of substitution between two goods. II. Indifference curve in the case of perfect substitutes is a straight line with positive slope. III. Two indifference curves intersect each other in the case of perfectly complementary goods. IV. A higher level of indifference curve connotes higher level of output. (a) Only (I) above (b) Both (I) and (II) above (c) Both (II) and (III) above (d) Both (I) and (IV) above (e) (I), (II) and (IV) above. (1mark) <Answer > 6. Which of the following statements is false pertaining to utility? (a) Want satisfying power of a good is called as utility (b) There exists a difference between choice and preference (c) The concept of utility is developed to explain the basic principles of consumer choice and behaviour (d) A rational consumer is one who allocates his spending in such a way that the preferred combination gives him the maximum satisfaction (e) According to Ordinalist approach, the utility can be measured in subjective units. (1mark) <Answer >
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2 7. For a quantity of a good to be called as the ‘satiation quantity’, the marginal utility of the good must be (a) Equal to the total utility (b) Greater than the total utility (c) Negative (d) Equal to zero (e) Maximum. (1mark) <Answer > 8. The total product reaches maximum, when
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0807 Eco (CFA520) - Question Paper Economics(CFA520 July...

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