Podcast
Questions and Answers
Suppose the government imposes a binding price ceiling on a good. Which of the following scenarios is the MOST likely outcome?
Suppose the government imposes a binding price ceiling on a good. Which of the following scenarios is the MOST likely outcome?
- A shortage of the good, as the quantity demanded exceeds the quantity supplied at the lower price. (correct)
- The supply curve will shift to the left, increasing the equilibrium price.
- The market will remain in equilibrium as the price ceiling has no effect.
- A surplus of the good, as producers are willing to supply more at the lower price.
Which of the following is NOT a characteristic of indifference curves?
Which of the following is NOT a characteristic of indifference curves?
- They become steeper as you move to the right. (correct)
- They cannot intersect.
- They are convex to the origin.
- They are downward sloping.
A firm is producing at a level where its marginal cost (MC) is greater than its marginal revenue (MR). To maximize profits, the firm should:
A firm is producing at a level where its marginal cost (MC) is greater than its marginal revenue (MR). To maximize profits, the firm should:
- Decrease production. (correct)
- Maintain the current level of production.
- Increase production.
- Increase the price of its product.
In a perfectly competitive market, what is the shape of the demand curve faced by an individual firm?
In a perfectly competitive market, what is the shape of the demand curve faced by an individual firm?
Which of the following distinguishes monopolistic competition from perfect competition?
Which of the following distinguishes monopolistic competition from perfect competition?
Which of the following is an example of a positive externality?
Which of the following is an example of a positive externality?
According to the Ricardian theory of rent, land rent is determined by:
According to the Ricardian theory of rent, land rent is determined by:
A country has a comparative advantage in producing a good if it can produce that good:
A country has a comparative advantage in producing a good if it can produce that good:
If the marginal propensity to consume (MPC) is 0.8, what is the value of the Keynesian multiplier?
If the marginal propensity to consume (MPC) is 0.8, what is the value of the Keynesian multiplier?
Which of the following is likely to cause a shift in the IS curve to the right?
Which of the following is likely to cause a shift in the IS curve to the right?
Flashcards
Opportunity Cost
Opportunity Cost
The value of the next best alternative forgone as a result of making a decision.
Production Possibility Frontier
Production Possibility Frontier
A curve depicting all maximum output possibilities for two or more goods given a set of inputs (resources, labor, etc.).
Market Demand
Market Demand
The amount of a good or service that consumers are willing and able to purchase at various prices during a specified period.
Price Elasticity of Demand
Price Elasticity of Demand
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Utility
Utility
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Budget Constraint
Budget Constraint
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Isoquant
Isoquant
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Perfect Competition
Perfect Competition
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Monopoly
Monopoly
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Price Discrimination
Price Discrimination
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Study Notes
- The syllabus is divided into fifteen units, each carrying a weightage of four marks.
- Paper setters are requested to set four Multiple Choice Questions from each unit, aligning with the provided references.
Introduction to Microeconomics
- Microeconomics deals with problems of scarcity and choice, considering scarcity, choice, and opportunity cost.
- The production possibility frontier illustrates the trade-offs in production.
- Microeconomics studies economic systems, demand and supply, determinants, and shifts in demand and supply curves, leading to market equilibrium.
- Applications of demand and supply include consumer surplus and producer surplus.
- Elasticity of demand is measured by price, income, and cross-elasticity, along with determinants of price elasticity.
Consumer Theory
- Consumer theory focuses on the concept of utility and diminishing marginal utility.
- It examines consumer choice using indifference curves and their properties.
- The budget constraint affects consumer equilibrium and the derivation of the demand curve.
Production and Costs
- Production functions are studied for their properties, including the law of variable proportions and returns to scale.
- Isoquant and iso-cost lines determine the cost-minimizing equilibrium condition for a single-product firm.
- Costs are analyzed in the short run and long run, along with revenue concepts and profit maximization.
- The concept of minimizing loses, economies and diseconomies of scale are important to production and costs.
Market Structure
- Assumptions about the theory of a firm include perfect competition, demand, and revenue.
- Market structure also includes the equilibrium of the firm in the short run and long run.
- The long-run industry supply curve can be increasing, decreasing, or constant cost.
Imperfect Competition
- Imperfect competition includes monopoly characteristics and price/output decisions.
- Imperfect competition also includes the concept of a supply curve under monopoly.
- A comparison of perfect competition and monopoly is made, with an analysis of types and costs of monopoly.
- Price discrimination in monopoly is examined.
- Monopolistic competition includes short-run and long-run price/output determinations.
- Oligopoly models, such as Cournot, Chamberlin, and Kinked demand curve, are important to the study of imperfect competition.
Consumer and Producer Theory
- Externalities, marginal costs pricing, internalizing externalities, moral hazard, and social choice are studied.
- Market adjustment to changes in demand, efficiency of perfect competition, sources of market failure, public goods and imperfect information are also looked at.
Income Distribution and Factor Pricing
- Income distribution is studied, including marginal productivity theory.
- Modern wage theory, Ricardian rent theory, profit-innovation theory, and Keynesian interest theory are studied.
International Trade
- Studies theories of absolute and comparative advantage and terms of trade
- Explores sources of comparative advantage, trade barriers, and free trade/protectionism.
Introduction to Macroeconomics
- Introduces macroeconomic concepts, overviews issues, and details GDP and national income.
- Macroeconomics also studies measurement of national income.
Determination of GDP
- Macroeconomics studies actual and potential GDP, aggregate expenditure, consumption, investment, and equilibrium GDP.
- It looks at MPS, APS, MPC, APC, autonomous expenditure, and the concept of multiplier.
National Income Determination in an Open Economy
- National income determination studies fiscal policy, changes in government spending and taxes, net exports and equilibrium.
Money in a Modern Economy
- Looks at monetary aggregates, demand, quantity theory, liquidity preference, money supply/credit, and monetary policy.
IS-LM Analysis
- Involves derivations of the IS and LM functions, IS-LM and aggregate demand, and shifts in the AD curve.
GDP and Price Level in Short Run and Long Run
- Studies AD, aggregate supply, multiplier with AD curve and changes in price levels, focusing on short and long run.
Inflation, Unemployment and BoP
- Concepts and determinants of inflation, relationship between inflation and unemployment.
- Explores the Phillips curve, BoP, the foreign exchange market, and exchange rate determination.
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