Economics for Managers Winter 2017 Exam

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Questions and Answers

Can price stability and employment opportunities be achieved simultaneously?

No, there is often a trade-off between price stability and employment opportunities in the short run and long run.

What are the profit-maximizing output and price for the monopolist?

To be determined based on the demand curve and marginal cost.

What would be the equilibrium price and quantity in a competitive industry?

To be determined based on the demand curve and marginal cost.

What is the social gain if the monopolist were forced to produce at the competitive equilibrium?

To be determined based on the demand curve. Signup and view all the answers

What is the arc cross-price elasticity of demand for India Sports' deluxe bag?

To be calculated based on changes in quantity sold and price changes. Signup and view all the answers

What is the arc price elasticity of demand for India Sports' deluxe bag following a price reduction to Rs. 130?

To be calculated based on quantity changes. Signup and view all the answers

What price reduction is necessary for India Sports to regain 10,000 units sold?

To be calculated based on the elasticity previously determined. Signup and view all the answers

What is the circular flow of income model?

It illustrates the movement of money between producers and consumers in an economy. Signup and view all the answers

What is the production possibility curve (PPC)?

It shows the maximum feasible amounts of two goods that can be produced with available resources. Signup and view all the answers

How is the Consumer Price Index (CPI) calculated?

It measures the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. Signup and view all the answers

What are the differences between WPI and CPI?

WPI measures wholesale prices while CPI measures retail prices. Signup and view all the answers

What is the GDP deflator?

It is a measure of the level of prices of all new, domestically produced, final goods and services in an economy. Signup and view all the answers

What is Purchasing Power Parity?

It is an economic theory that compares different countries' currencies through a market 'basket of goods' approach. Signup and view all the answers

What is the difference between Real Exchange Rate and Nominal Exchange Rate?

The nominal exchange rate is the rate that allows you to exchange one currency for another, while the real exchange rate considers inflation. Signup and view all the answers

What are the various ways of measuring national income?

The main methods are the production method, income method, and expenditure method. Signup and view all the answers

What are the difficulties associated with measuring national income?

Difficulties include data collection issues, informal economy activities, and measuring value-added accurately. Signup and view all the answers

What is the difference between Real GDP and Nominal GDP?

Real GDP is adjusted for inflation, while Nominal GDP is not. Signup and view all the answers

What is Prisoner's Dilemma?

It is a situation in game theory where two individuals acting in their own self-interests do not produce the optimal outcome. Signup and view all the answers

What is consumer surplus?

It is the difference between what consumers are willing to pay for a good or service versus what they actually pay. Signup and view all the answers

What is producer surplus?

It is the difference between what producers are willing to accept for a good versus what they actually receive. Signup and view all the answers

What is the trade-off between equity and efficiency?

Increasing equity often comes at the cost of efficiency. Signup and view all the answers

What is the shut-down point?

It is the level of output at which a firm earns just enough revenue to cover its variable costs. Signup and view all the answers

How does monetary policy work in stabilizing an economy during a recession?

It typically involves lowering interest rates to encourage borrowing and spending. Signup and view all the answers

Study Notes

Exam Information

Subject: Economics for Managers (EFM)
Semester: 1
Examination: Winter 2017
Date: 30/Dec/2017
Total Marks: 70
Time: 10:30 AM – 1:30 PM

Question 1 (a)

Macroeconomic objectives of a country include price stability and employment opportunities.
Achieving both simultaneously may involve trade-offs, especially in the short run.

Question 1 (b)

Monopoly Demand Curve: A table showing price and quantity demanded for a monopolist.
Profit Maximizing Output/Price: The specific quantity and price that maximize profit given the conditions.
Competitive Equilibrium: The output and price where supply equals demand in a competitive market.
Social Gain: The increase in society's welfare resulting from moving from a monopoly to a competitive market.

Question 2 (a)

India Sports: A retailer of sports goods.
Decline in Sales: Sales of the Rs 140 deluxe bag declined from 10,000 to 4,800 units.
Competitor's Price Reduction: A competitor offered a Rs 52 discount on a similar bag.
Cross-Price Elasticity of Demand: Calculated using the formula relating changes in demand with respect to a change in the price of another product, for India Sports' Deluxe Bag.
Arc Cross-Price Elasticity Calculus: Used to determine the degree of relationship between two products in terms of price changes using the given formula.
Price Elasticity of Demand: A measure of how responsive quantity demanded is to a price change from the given data.

Question 2 (b)

Circular Flow of Income: Explains how money moves through an economy, including income and expenditure.
Income equals expenditure: A fundamental principle of economics stating that income generated in the economy equals the expenditure.

Question 3 (a)

CPI Calculation: Details on how the Consumer Price Index (CPI) is calculated.
Differences between WPI and CPI: Explaining the distinctions between Wholesale Price Index (WPI) and Consumer Price Index (CPI).
GDP Deflator: Description of how to calculate the GDP Deflator.

Question 3 (b)

Purchasing Power Parity (PPP): Explanation of PPP.
Real Exchange Rate: Definition of real exchange rate.
Nominal Exchange Rate: Description of nominal exchange rate.

Question 3 (General)

Ways of Measuring National Income: Various methods used to determine national income.
Equivalence of Measurement Methods and explanations: The relationship between various methods used to determine national income.

Question 4 (a)

Prisoner's Dilemma: Description of the Prisoner’s Dilemma game theory situation.
Oligopoly Firms: Explaining why oligopoly firms often find themselves in a prisoner’s dilemma situation .

Question 4 (b)

Consumer Surplus and Producer Surplus Explanation of each.
Costs Associated with Monopoly: Discussion of costs associated with a monopoly.

Question 4 (General)

Equity and Efficiency: Exploring the relationship between equity and efficiency.
Trade-off between Equity and Efficiency: Explanation of the potential trade-off.

Question 5 (a)

Fiscal Policy Multiplier: Description of how the multiplier works in a fiscal policy
Money Multiplier: Explanation of how this works in a monetary policy.

Question 5 (b)

Growth and its Elements: Factors supporting economic growth.

Question 5 (General)

Average Cost, Marginal Cost Curves: Average and marginal cost curves and explanations for their shapes for a typical firm.
Monetary Policy and Recession: Explanation of how monetary policy works to stabilize an economy during recessionary periods.

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Description

Test your understanding of key macroeconomic objectives, monopoly pricing strategies, and competitive equilibria with this quiz. It covers essential concepts relevant to Economics for Managers from the Winter 2017 semester. Assess your knowledge and readiness for the examination!