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

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?

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.)

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).

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)

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).

In a competitive market for dry-cleaning, the inverse market demand function is given by: \[ P = 100 - Q \] where \( P \) denotes price and \( Q \) denotes quantity. The (private) marginal cost (MC) of production for all the dry-cleaning firms together is given by: \[ MC = 20 + 2Q \] The market pollution generated by the dry-cleaning processes of all firms creates external damages given by the marginal external cost (MEC): \[ MEC = 2Q. \] The socially efficient output of dry-cleaning is _________ (in integer).

Tom and Jerry both arrive at a petrol pump. Without worrying about price, Tom says, “I want 10 liters of petrol.” Also, without worrying about price, Jerry says, “I want petrol worth 1000 rupees.” The own price elasticities of demand for Tom (denoted by \( \varepsilon_T \)) and Jerry (denoted by \( \varepsilon_J \)) are:

Which of the following variables are pushed upwards by ‘Seigniorage’?

Suppose Raju enters the job market at age 25 and earns annual income of Rs. 6000. He retires at age 65 and his life expectancy is 75 years. He does not own any assets. Assume that Raju consumes annual income uniformly over his lifetime. What will be his average propensity to consume during employment years?

Suppose the estimated consumption equation of an economy is: \[ C = 40 + \beta Y_d \] where \(Y_d\) is the personal disposable income, \(\beta\) is the marginal propensity to consume (MPC). Government expenditure \(G\) is given as 90. Total tax (\(T_x\)) received is \(\delta Y\), where \(Y\) is aggregate output or real income and \(\delta\) is tax to real income proportionality factor. Autonomous investment \(I_A\) is given as 80. What are the tax revenue and budget surplus of the government when \(\beta = 0.75\) and \(\delta = 0.20\)? All units are measured in constant rupees.

Suppose a firm has the following production function:
\[ f(x_1, x_2, x_3, x_4) = \min{x_1, x_2} + \min{x_3, x_4} \] The per unit cost of input \( x_i \) is given by \( w_i \), where \( i = 1, 2, 3, 4 \). Suppose that \( w_1 = 1, w_2 = 5, w_3 = 3, \) and \( w_4 = 6 \). If the firm is minimizing cost, which of the following input choices by the firm can be observed?

Suppose that a firm has a technology represented by the following production function: \[ Y(K, L) = K^x L^y \] where \( K \) denotes capital, \( L \) denotes labour, \( Y \) denotes the maximum output that is possible to produce using capital \( K \) and labour \( L \). \( x \) and \( y \) are two positive real numbers. It is also known that the production function satisfies constant returns to scale. Then which of the following is true?