The IIT Madras BS Managerial Economics (Managerial Economics) Quiz 2 paper sat on 3 Aug 2025, in the May 2025 term: 31 questions for 25 marks in 120 minutes. Every question is below with its answer. Take it as a timed mock test to be marked, or read it through first.
Based on the above data, answer the given subquestions.
Suppose that both Air India and Indigo charge a price of $300 each for a round-trip ticket between Kolkata and Delhi. What is the price elasticity of demand for Indigo flights between Kolkata and Delhi? (please ignore the sign)
Correct answer: 3 (accepted within ±0.1)
Based on the above data, answer the given subquestions.
What is the market-level price elasticity of demand for air travel between Kolkata and Delhi when both airlines charge a price of $300? (please ignore the sign)
Correct answer: 0.03 (accepted within ±0.001)
Based on the above data, answer the given subquestions.
How many nurses will the hospital hire as a monopsonist
100
120
140
160
Correct answer
100
Based on the above data, answer the given subquestions.
What wage will it pay to a nurse
12500
13000
14000
16000
Correct answer
13000
Consider the following game matrix where only the payoff of player 1 is given.
Based on the above data, answer the given subquestions.
M weakly dominates T
True
False
Correct answer
True
Consider the following game matrix where only the payoff of player 1 is given.
Based on the above data, answer the given subquestions.
M weakly dominates B
True
False
Correct answer
False
A monopolist can produce at a constant average (and marginal) cost of AC = MC = $5. It faces a market demand curve given by Q = 53 – P.
Based on the above data, answer the given subquestions.
Calculate the profit-maximizing price (in $) for this monopolist.
Correct answer: 29
A monopolist can produce at a constant average (and marginal) cost of AC = MC = $5. It faces a market demand curve given by Q = 53 – P.
Based on the above data, answer the given subquestions.
Calculate the profit-maximizing quantity for this monopolist.
Correct answer: 24
A monopolist can produce at a constant average (and marginal) cost of AC = MC = $5. It faces a market demand curve given by Q = 53 – P.
Based on the above data, answer the given subquestions.
What will be the profit of this monopolist?
Profit= ___________________
Correct answer: 576
Suppose that a competitive firm’s marginal cost of producing output q is given by MC(q)=6+4q. Assume that the market price of the firm’s product is ₹18.
Based on the above data, answer the given subquestions.
What level of output (q) the firm will produce?
2
3
4
5
Correct answer
3
Suppose that a competitive firm’s marginal cost of producing output q is given by MC(q)=6+4q. Assume that the market price of the firm’s product is ₹18.
Based on the above data, answer the given subquestions.
Producer surplus of the firm is
17
18
19
20
Correct answer
18
Suppose that a competitive firm’s marginal cost of producing output q is given by MC(q)=6+4q. Assume that the market price of the firm’s product is ₹18.
Based on the above data, answer the given subquestions.
Suppose the average variable cost of the firm is given by AVC(q)=3+q and firm’s fixed costs are known to be ₹3, the firm be earning
Positive economic profit
Negative economic profit
Zero economic profit
Cannot say
Correct answer
Positive economic profit
Based on the above data, answer the given subquestions.
Correct answer: 7 or 7000
Based on the above data, answer the given subquestions.
Correct answer: 3
Based on the above data, answer the given subquestions.
New equilibrium quantity after the incidence of tax Q^(t) = __________________
Correct answer: 6 or 6000
Based on the above data, answer the given subquestions.
Price that buyers pay now will be P^(B)= ________________
Correct answer: 4
Based on the above data, answer the given subquestions.
Price that seller receives per unit will be P^(S)= _______________
Correct answer: 2
Based on the above data, answer the given subquestions.
Suppose, the government acts weird and removes the tax to provide a subsidy of ₹2 per unit to cigarette producers.
New equilibrium quantity after the subsidy, Q^(S) = __________
Correct answer: 8 or 8000
Based on the above data, answer the given subquestions.
Suppose, the government acts weird and removes the tax to provide a subsidy of ₹2 per unit to cigarette producers.
Price that buyers pay now will be P^(B)= ______________
Correct answer: 2
Based on the above data, answer the given subquestions.
Suppose, the government acts weird and removes the tax to provide a subsidy of ₹2 per unit to cigarette producers.
Price that seller receives per unit (including subsidy) will be P^(S)= _____________
Correct answer: 4
Based on the above data, answer the given subquestions.
Suppose, the government acts weird and removes the tax to provide a subsidy of ₹2 per unit to cigarette producers.
Total cost to the government will be (in rupees) ______________
Correct answer: 16000
In quasi-linear utility functions, the marginal utility of income remains constant
True
False
Correct answer
True
A monotonic transformation can alter the shape of indifference curves
True
False
Correct answer
False
Marginal utility is unaffected by monotonic transformations
True
False
Correct answer
False
The entire burden of a quantity tax falls on buyers when the price elasticity of supply is zero.
True
False
Correct answer
False
If demand is perfectly inelastic, consumers bear the full incidence of a per-unit tax.
True
False
Correct answer
True
For a profit-maximizing monopolist, price exceeds marginal revenue at the equilibrium quantity.
True
False
Correct answer
True
When a monopolist practices perfect price discrimination, it eliminates only some portion of the deadweight loss.
True
False
Correct answer
False
A natural monopoly has a long-run marginal cost that exceeds long-run average cost.
True
False
Correct answer
False
Peak load pricing is a form of price discrimination.
True
False
Correct answer
True
A monopolist will never operate in the elastic portion of the demand curve.
True
False
Correct answer
False
