The IIT Madras BS Managerial Economics (Managerial Economics) End Term paper sat on 1 Sept 2024, in the May 2024 term: 36 questions for 45 marks in 180 minutes. Every question is below with its answer. Take it as a timed mock test to be marked, or read it through first.
What is true about monopolistic competition
Firms compete by selling differentiated products that are highly, but not perfectly, substitutable
Entry and exit are not free in the market
None of these
Both Firms compete by selling differentiated products that are highly, but not perfectly, substitutable & Entry and exit are not free in the market
Correct answer
Firms compete by selling differentiated products that are highly, but not perfectly, substitutable
A firm can always trade three units of labour for one unit of capital and still keep output constant. The production technology for this firm can most suitably represented by
Cobb-Douglas production function
Leontief production function
Linear production function
None of these
Correct answer
Linear production function
A common resource is
rival and nonexcludable
nonrival and excludable.
nonrival and nonexcludable
rival and excludable
Correct answer
rival and nonexcludable
Choose the correct alternative
First-degree price discrimination is the practice of attempting to price each unit at the consumer’s reservation price
Third-degree price discrimination is the practice of offering consumers a quantity discount
Second-degree price discrimination is the practice of charging different uniform prices to different consumer groups or segments in a market
All of these
Correct answer
First-degree price discrimination is the practice of attempting to price each unit at the consumer’s reservation price
A monopolist always produces in
The inelastic region of market demand curve
The elastic region of market demand curve
The whole demand curve
None of these
Correct answer
The elastic region of market demand curve
Adverse selection occurs when
a person takes more risks that are not known to the life insurance company because he has life insurance
a person buys life insurance because he has a risky lifestyle that is not known to the life insurance company
a person is a risk lover
pregnant women with health insurance make more doctor visits than uninsured pregnant women
Correct answer
a person buys life insurance because he has a risky lifestyle that is not known to the life insurance company
If bad drivers can usually avoid being ticketed by the police, then insurance companies will
use one's driving record as a signal
use one's driving record as a screening device
not be able to use one's driving record as a screening device
request driving records directly from the police and not from the individual applicant
Correct answer
not be able to use one's driving record as a screening device
What are the monopolist’s profit-maximizing price and quantity?
Profit maximizing price=2.5 and Profit maximizing quantity=4500
Profit maximizing price=8.5 and Profit maximizing quantity=2500
Profit maximizing price=4.5 and Profit maximizing quantity=8500
Profit maximizing price=5.5 and Profit maximizing quantity=2500
Correct answer
Profit maximizing price=8.5 and Profit maximizing quantity=2500
The resulting profit will be
4250
6250
5060
6850
Correct answer
6250
Calculate the firm’s degree of monopoly power using the Lerner index
0.349
0.249
0.294
0.394
Correct answer
0.294
Based on the above data, answer the given subquestions.
Nita’s risk preferences are
Risk averse
Risk loving
Risk neutral
Cannot be determined
Correct answer
Risk averse
Based on the above data, answer the given subquestions.
Should Nita take up the new job?
YES
NO
Correct answer
NO
Based on the above data, answer the given subquestions.
Correct answer: 198 (accepted within ±10)
If there is no tariff, what is the quantity demanded (in thousand litres)____________________
Correct answer: 2250
If the tariff is imposed, how much a consumer will pay for a litre of palm oil_________________
Correct answer: 150
What is the new quantity demanded now (in thousand litres)?____________________
Correct answer: 2200
What will be the lost consumer surplus due to the imposed tariff (in thousand INR)______________
Correct answer: 55625
Tax revenue for the government will be (in thousand INR)________________
Correct answer: 55000
Tariff results in
Net gain for the society
Net loss for the society
Neither loss nor gain
Cannot compute
Correct answer
Net loss for the society
Based on the above data, answer the given subquestions.
Calculate the output level of dry cleaning if it is produced under competitive conditions without regulation.
Q^(*)=___________________________
Correct answer: 45
Based on the above data, answer the given subquestions.
Calculate the price of dry cleaning if it is produced under competitive conditions without regulation.
P^(*)=_________________________
Correct answer: 55
Based on the above data, answer the given subquestions.
Determine the socially efficient output of dry cleaning.
Qs=_______________________
Correct answer: 30
Based on the above data, answer the given subquestions.
Determine the socially efficient price of dry cleaning.
Ps=___________________
Correct answer: 70
Based on the above data, answer the given subquestions.
Determine the tax that would result in a competitive market producing the socially efficient output.
t=______________
Correct answer: 1
Based on the above data, answer the given subquestions.
Calculate the output of dry cleaning if it is produced under monopoly conditions without regulation.
Qm=_____________________
Correct answer: 30
Based on the above data, answer the given subquestions.
Calculate the price of dry cleaning if it is produced under monopoly conditions without regulation. Pm=_________________
Correct answer: 70
Based on the above data, answer the given subquestions.
What is the profit maximizing price that BA will charge?
200
300
400
500
Correct answer
300
Based on the above data, answer the given subquestions.
How many passengers will be on each flight in equilibrium?
200
300
400
500
Correct answer
200
Based on the above data, answer the given subquestions.
What is BA’s profit for each flight?
10000
20000
30000
25000
Correct answer
10000
Based on the above data, answer the given subquestions.
Now, suppose BA realizes that the fixed costs per flight are in fact 41000 instead of 30000. It also finds out that two different types of passengers fly to Chennai. Type A consists of business people with a demand of QA = 260 - 0.4P and type B consists of students with a demand of QB= 240 - 0.6P. BA decides to charge these two types different prices.
The market demand curve will have a kink at
Correct answer
Based on the above data, answer the given subquestions.
Now, suppose BA realizes that the fixed costs per flight are in fact 41000 instead of 30000. It also finds out that two different types of passengers fly to Chennai. Type A consists of business people with a demand of QA = 260 - 0.4P and type B consists of students with a demand of QB= 240 - 0.6P. BA decides to charge these two types different prices.
Correct answer: 250 (accepted within ±3)
Based on the above data, answer the given subquestions.
Now, suppose BA realizes that the fixed costs per flight are in fact 41000 instead of 30000. It also finds out that two different types of passengers fly to Chennai. Type A consists of business people with a demand of QA = 260 - 0.4P and type B consists of students with a demand of QB= 240 - 0.6P. BA decides to charge these two types different prices.
Correct answer: 375 (accepted within ±4)
Based on the above data, answer the given subquestions.
Now, suppose BA realizes that the fixed costs per flight are in fact 41000 instead of 30000. It also finds out that two different types of passengers fly to Chennai. Type A consists of business people with a demand of QA = 260 - 0.4P and type B consists of students with a demand of QB= 240 - 0.6P. BA decides to charge these two types different prices.
Profit maximizing quantity for group A will be QA = _______________
Correct answer: 110 (accepted within ±1)
Based on the above data, answer the given subquestions.
Now, suppose BA realizes that the fixed costs per flight are in fact 41000 instead of 30000. It also finds out that two different types of passengers fly to Chennai. Type A consists of business people with a demand of QA = 260 - 0.4P and type B consists of students with a demand of QB= 240 - 0.6P. BA decides to charge these two types different prices.
Profit maximizing quantity for group B will be QB = _______________
Correct answer: 90 (accepted within ±1)
Based on the above data, answer the given subquestions.
Now, suppose BA realizes that the fixed costs per flight are in fact 41000 instead of 30000. It also finds out that two different types of passengers fly to Chennai. Type A consists of business people with a demand of QA = 260 - 0.4P and type B consists of students with a demand of QB= 240 - 0.6P. BA decides to charge these two types different prices.
Correct answer: 2750 (accepted within ±28)
Based on the above data, answer the given subquestions.
Now, suppose BA realizes that the fixed costs per flight are in fact 41000 instead of 30000. It also finds out that two different types of passengers fly to Chennai. Type A consists of business people with a demand of QA = 260 - 0.4P and type B consists of students with a demand of QB= 240 - 0.6P. BA decides to charge these two types different prices.
Correct answer: 21875 (accepted within ±219)
