List of top Microeconomics Questions

Which of the following statements is NOT correct under the IS-LM (Fixed Price) model?

Consider a pure exchange economy with two goods x and y. Ravi and Suraj are two individuals with utility functions $U_R = \beta log(xy)$ and $U_s = (x/y)^{\alpha},$ respectively. The endowments are $x_R$ and $y_R$ for Ravi and $x_s$ and $y_s$ for Suraj such that $x_R$+$x_s$ = A and $y_R + y_s= B$. Then their contract curve is

Let a monopolist demand curve be given by $Q = P^e$, where Q is output, P is price, e is the price elasticity of demand (e <-1), and Marginal Cost = Average Cost = $\alpha$. If $P^c$ and PM represent the price under perfect competition and monopoly, respectively, then which of the following is/are NOT correct?
($CS_M$ and $CS_C$ represent the consumer surplus under monopoly and perfect competition, respectively.)

Assume that the cost function for the i^th firm in an industry is given by
C_i = 0.25\(q^2_i\) + 2q_i + 5, i = 1, 2, ..., 150,
where C_i and q_i are cost and output for the i^th firm, respectively.
Let the aggregate inverse demand function be P = 10-0.01Q, where P is the unit price and Q is the aggregate output.
Assuming perfect competition, the equilibrium quantity is _____ (in integer).

Given the following information related to product and money markets,
\(\text{Product Market}\\C = 300 +0.8(Y – T)\\T = 200 +0.2(Y)\\I_0 = 300; G_o = 400\)           \(\text{Money Market}\\\frac{M_0}P=0.4Y-200i\\M_0=900; P = 1 (Fixed)\)
where Y Income, C = Consumption, T = Tax, I₀ = Autonomous Investment, G₀ = Autonomous Government Expenditure, M₀ = Nominal Money Demand, P = Price, and i = Interest Rate.
The equilibrium level of interest rate (in %) is ______ (round off to 2 decimal places)

When the supply curve S_x is backward bending and the demand curve Dx is downward sloping as shown in the figure, there are two equilibria M and N, respectively. Which of the following statements is CORRECT?

A long-run cost function for a product exhibits economies of scale if

The short-run production function of a firm is $Q = 200 + 0.2L^2 -0.0004L^3$. If wage rate equals Rs. 140 and the number of labours (L) is 100, then the Marginal Cost and the Average Variable Cost, respectively, are

The demand function (\(Q^D_x\)) and supply function \((Q^S_x)\) are given as:
\(Q^D_x=f(P_x,I)\ and\ Q^S_x=g(P_x,A)\) where I (Income) and A (Advertisement expenses) are the exogenous factors affecting quantity demanded and supplied, respectively. Further, \(\frac{\partial f}{\partial P_x}\lt0,\frac{\partial g}{\partial P_x}\gt0\) but \(\frac{\partial f}{\partial I}\) and \(\frac{\partial g}{\partial A}\) may have any sign. Considering that there exists an equilibrium \((Q_x^D=Q_x^S=Q)\), which of the following is/are CORRECT?

Monthly per capita consumption expenditure (MPCE) of 10 households in a region is given below.

Households	H1	H2	H3	H4	H5	H6	H7	H8	H9	H10
MPCE(in Rs.)	2800	3000	1200	3500	1400	2500	4000	1000	900	1300

Assuming the poverty cutoff (Z) of MPCE to be Rs. 2000, the squared poverty gap ratio is _______(round off to 3 decimal places)

The Total Variable Cost (TVC) for a firm is given by TVC = $x^3-bx^2$. The Total Fixed Cost is 848. The value of b for which the Marginal Cost is minimum at x = 16 is________ (in integer).

In a market, two firms F₁ and F₂ are producing homogenous products. The inverse demand function is given by p=120-0.5(q₁+q₂), where p is the unit price of the product, and q₁ and q₂ are the outputs from F₁ and F₂, respectively. Suppose the cost functions of F₁ and F₂ are C₁ = 20q₁ and C₂ = 10 +0.5q₂², respectively. Then the total profit earned by both the firms assuming a competitive situation is (in integer).