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# Question Paper Solutions for Economics All India Set 1 2015-2016 CBSE (Arts) Class 12

#### Alternate Sets

Marks: 100
[1]1

What is the relation between Average Variable Cost and Average Total Cost, if Total Fixed Cost is zero?

Chapter: [1.03] Producer Behaviour and Supply
Concept: Relationship Between Average Variable Cost and Average Total Cost and Marginal Cost
[1]2

A firm is able to sell any quantity of a good at a given price. The firm's marginal revenue will be : (Choose the correct alternative):

(a) Greater than Average Revenue

(b) Less than Average Revenue

(c) Equal to Average Revenue

(d) Zero

Chapter: [1.03] Producer Behaviour and Supply
Concept: Total, Average and Marginal Revenue
[1]3

When does 'change in demand' take place?

Chapter: [1.02] Consumer Equilibrium and Demand
Concept: Change in Demand
[1]4

Differentiated products is a characteristic of: (Choose the correct alternative):

(a) Monopolistic competition only

(b) Oligopoly only

(c) Both monopolistic competition and oligopoly

(d) Monopoly

Chapter: [1.04] Forms of Market and Price Determination
Concept: Main Market Forms
[1]5

Demand curve of a firm is perfectly elastic under: (Choose the correct alternative)

(a) Perfect competition

(b) Monopoly

(c) Monopolistic competition

(d) Oligopoly

Chapter: [1.04] Forms of Market and Price Determination
Concept: Main Market Forms
[3]6

A consumer consumes only two goods X and Y. Marginal utilities of X and Y is 3 and 4 respectively. Prices of X and Y are Rs 4 per unit each. Is consumer in equilibrium? What will be further reaction of the consumer? Give reasons.

Chapter: [1.02] Consumer Equilibrium and Demand
Concept: Conditions of Consumer's Equilibrium Using Marginal Utility Analysis
[3]7

What will be the effect of 10 percent rise in price of a good on its demand if price elasticity of demand is (a) Zero, (b)-1, (c)-2.

Chapter: [1.02] Consumer Equilibrium and Demand
Concept: Elasticity of Demand
[3]8 | Attempt any ONE
[3]8.1

What is minimum price ceiling? Explain its implications.

Chapter: [1.04] Forms of Market and Price Determination
Concept: Price Ceiling
[3]8.2

If the prevailing market price is above the equilibrium price, explain its chain of effects.

Chapter: [1.04] Forms of Market and Price Determination
Concept: Equilibrium Price
[4]9

Define demand. Name the factors affecting market demand.

Chapter: [1.02] Consumer Equilibrium and Demand
Concept: Demand
[4]10 | Attempt any ONE
[4]10.1

Define fixed cost. Give an example.

Chapter: [1.03] Producer Behaviour and Supply
Concept: Cost - Fixed Cost

What is the behaviour of average fixed cost as output is increased? Why is it so?

Chapter: [1.03] Producer Behaviour and Supply
Concept: Cost - Average Fixed Cost
[4]10.2

Define marginal product.

Chapter: [1.03] Producer Behaviour and Supply
Concept: Marginal Product

State the behaviour of marginal product when only one input is increased and other inputs are hold constant.

Chapter: [1.03] Producer Behaviour and Supply
Concept: Marginal Product
[4]11

When price of a commodity falls from Rs 12 per unit to Rs 9 per unit, the producer supplies 75 percent less output. Calculate price elasticity of supply.

Chapter: [1.03] Producer Behaviour and Supply
Concept: Concept of Supply
[6]12

Why do central problems of an economy arise?

Chapter: [1.01] Introduction
Concept: Central Problems of an Economy

Explain the central problem for whom to produce.

Chapter: [1.01] Introduction
Concept: Central Problems of an Economy
[6]13

Explain the three properties of the indifference curves.

Chapter: [1.02] Consumer Equilibrium and Demand
Concept: Indifference Curve
[6]14

Examine the effect of (a) fall in the own price of good X and (b) rise in tax rate on good X, on the supply curve. Use diagrams.

Chapter: [1.03] Producer Behaviour and Supply
Concept: Supply Curve and Schedule
[6]15 | Attempt any ONE
[6]15.1
[3]15.1.1

Explain the implications of the following in a perfectly competitive market :

Large number of sellers

Chapter: [1.04] Forms of Market and Price Determination
Concept: Main Market Forms
[3]15.1.2

Explain the implications of the following in a perfectly competitive market :

Homogeneous products.

Chapter: [1.04] Forms of Market and Price Determination
Concept: Main Market Forms
[6]15.2
[3]15.2.1

Explain the implications of the following in an oligopoly market: Barriers to entry of new firms

Chapter: [1.04] Forms of Market and Price Determination
Concept: Main Market Forms
[3]15.2.2

Explain the implications of the following in an oligopoly market: A few or a few big sellers

Chapter: [1.04] Forms of Market and Price Determination
Concept: Main Market Forms
[1]16

Define flows.

Chapter: [2.01] National Income and Related Aggregates
Concept: Basic Concepts - Stocks and Flows
[1]17

National income is the sum of factor incomes accruing to : (Choose the correct alternative)

(a) Nationals

(b) Economic territory

(c) Residents

(d) Both residents and non-residents

Chapter: [2.01] National Income and Related Aggregates
Concept: Concept of National Income
[1]18

What are revenue receipts in a government budget?

Chapter: [2.04] Government Budget and the Economy
Concept: Classification of Receipts
[1]19

Primary deficit equals : (Choose the correct alternative)

(a) Borrowings

(b) Interest payments

(c) Borrowings less interest payments

(d) Borrowings and interest payments both

Chapter: [2.04] Government Budget and the Economy
Concept: Deficit Budget - Primary Deficit
[1]20

Foreign exchange transactions which are independent of other transactions in the Balance of Payments Account are called : (Choose the correct alternative)

(a) Current transactions

(b) Capital transactions

(c) Autonomous transactions

(d) Accommodating transactions

Chapter: [2.05] Balance of Payments
Concept: Concept of Balance of Payments Account
[3]21

Assuming real income to be Rs 200 crore and price index to be 135, calculate nominal income.

Chapter: [2.01] National Income and Related Aggregates
Concept: Real and Nominal GDP
[3]22 | Attempt any ONE
[3]22.1

What is aggregate demand?

Chapter: [2.03] Determination of Income and Employment
Concept: Concept of Aggregate Demand and Aggregate Supply

State components of Aggregate demand ?

Chapter: [2.03] Determination of Income and Employment
Concept: Concept of Aggregate Demand and Aggregate Supply
[3]22.2

Explain how controlling money supply is helpful in reducing excess demand.

Chapter: [2.02] Money and Banking
Concept: Cash Reserve Ratio (CRR)
[3]23

An economy is in equilibrium. Calculate Marginal Propensity to Consume :

National income = 1000

Autonomous consumption expenditure = 200

Investment expenditure = 100

Chapter: [2.03] Determination of Income and Employment
Concept: Consumption Function and Propensity to Save
[4]24

Sale of petrol and diesel cars is rising particularly in big cities. Analyse its impact on gross domestic product and welfare.

Chapter: [2.01] National Income and Related Aggregates
Concept: GDP and Welfare
[4]25 | Attempt any ONE
[4]25.1

Explain the 'medium of exchange' function of money. How has it solved the related problem created by barter?

Chapter: [2.02] Money and Banking
Concept: Function of Money - Primary Function
[4]25.2

Explain the 'standard of deferred payment' function of money. How has it solved the related problem created by barter?

Chapter: [2.02] Money and Banking
Concept: Standard of Deferred Payment
[4]26

Explain how 'Repo Rate' can be helpful in controlling credit creation.

Chapter: [2.02] Money and Banking
Concept: Repo Rate and Reverse Repo Rate
[6]27 | Attempt any ONE
[6]27.1

Distinguish between revenue expenditure and capital expenditure in Government budget. Give an example of each.

Chapter: [2.04] Government Budget and the Economy
Concept: Classification of Expenditure

Explain how taxes and government expenditure can be used to influence revenue expenditure and capital expenditure?

Chapter: [2.04] Government Budget and the Economy
Concept: Classification of Expenditure
[6]27.2

What is the difference between direct tax and indirect tax?

Chapter: [2.04] Government Budget and the Economy
Concept: Direct and Indirect Tax

Explain the role of government budget in influencing allocation of resources.

Chapter: [2.04] Government Budget and the Economy
Concept: Government Budget - Allocation of Resources
[6]28

Given saving curve, derive consumption curve and state the steps in doing so. Use diagram.

Chapter: [1.03] Producer Behaviour and Supply
Concept: Supply Curve and Schedule
[6]29

(a) In which sub-account and on which side of the Balance of Payments Account such lending is recorded? Give reasons.

(b) Explain the impact of the lending on market exchange rate.

Chapter: [2.05] Balance of Payments
Concept: Concept of Balance of Payments Account
[6]30

Find Gross National Product at Market Price and Private Income:

 Rs. in crore 1 Private final consumption expenditure 800 2 Net Current transaction to abroad 20 3 Net factor income to abroad (-)10 4 Government final consumption expenditure 300 5 Net indirect tax 150 6 Net domestic capital formation 200 7 Current transfer to government 40 8 Depreciation 100 9 Net imports 30 10 Income accruing to government 90 11 National debt interest 50
Chapter: [2.01] National Income and Related Aggregates
Concept: Aggregates Related to National Income - Gross National Product (GNP)
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