Introductory Microeconomics — DU B.A (Prog.) Economics as Major Previous Year Question Papers

1. (a) Suppose that the production of Rice and Cars are indicated on x-axis and y-axis , how will the PPC change it: (i) Factor inputs become three times more efficient than before. (3) (ii) Scientists discover a new variety of seeds that yields three times more Rice. (3) (b) Explain the circular flow diagram for two two-sector model? (4) (c) What is 'invisible hand' in a market economy? (d) 'Trade can make everyone better off'. Explain with an example. (4) (a) What is market equilibrium? Explain the process and forces that moves a market toward its equilibrium position when there are excess demand and excess supply using diagram. (8) (b) What is market efficiency? Explain the consumer surplus, producer surplus and deadweight loss, using diagrams. (10) 3. (a) Differentiate between the price elasticity of demand and income elasticity of demand. Explain with example. (6) (b) Suppose the price of tea increases from 740 to 750 per kilogram, the quantity demanded falls from 200 kilograms to 160 kilograms. Calculate the price elasticity of demand using the midpoint (arc elasticity) method. (6) (c) Explain any two measures of elasticity with suitable example. (6) 4. (a) How Price ceiling and price floor affect the market outcomes? (6) (b) What determines how the burden of a tax is divided between buyers and sellers? Why? (6) (c) Identify and explain the four major arguments against trade restrictions. (6) 5. (3) Define private goods, club goods and common resources with examples? (6) (b) Explain the market failure in case of public good with an example? (6) (c) What is the free rider problem and why it arises in public goods. Explain with an example? (6) 6. (a) What is Indifference curve and what are its properties! (6) (b) Show conditions for consumer equilibrium through Indifference curve? (6) (c) Explain the backward bending supply curve with the help of diagram. (6) (a) What is market failure? Explain two major causes of market failure with suitable examples to illustrate each. (6) (b) What is Tragedy of commons? (6) (c) What do you mean by the negative externality. Explain the inefficiency arising from negative externality with the help of diagram. (6) 8. Write a short note on the following with examples: (a) Strategies and payoff in the context of strategic games. (6) (b) 'Tradable Pollution Permits could be a better solution than corrective taxes' (6) (c) 'The Coase Theorem' (6) ¿DUO ZADa 1NE (9)