# 12th Economics Paper Solutions Set 2 : CBSE Abroad Previous Year 2014

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Q1 :

What is meant by collusive oligopoly?

Under collusive oligopoly, firms decide to collude together and behave as a single monopoly. They aim at maximising their collective profits rather than their individual profits.

Q2 :

Define production function.

The production function of a firm depicts the relationship between the inputs used in the production process and the final output produced.
Algebraically, the production function is represented as
Qx = f (L, K)

Q3 :

Define supply.

Supply refers to different quantities of a commodity offered for sale at different prices.

Q4 :

Large number of technical training institutions have been started by the government. State its economic value in the context of production possibilities frontier.

Q5 :

When is demand called perfectly inelastic?

Q6 :

How does change in per unit tax influence the supply of a good by a firm? Explain.

OR

How does subsidy influence the supply of a good by a firm? Explain.

Q7 :

Why is a production possibilities curve downward sloping? Explain.

Q8 :

Price elasticity of demand of a good is (−) 1. Calculate the percentage change in price that will raise the demand from 20 units to 30 units.

Q9 :

Explain the implication of large number of buyers in a perfectly competitive market.

Q10 :

Under what market condition does Average Revenue always equal Marginal Revenue? Explain.

Q11 :

State the different phases of change in total product according to the Law of Variable Proportions. Use diagram.

OR

Explain the law of Variable Proportions.

Q12 :

Assuming that a consumer consumes only two goods, explain the conditions of consumer's equilibrium with the help of Utility Analysis.

OR

A consumer consumes only two goods X and Y and is in equilibrium. Show that when price of good X falls, demand for good X rises. Use Utility Analysis.

Q13 :

Distinguish between demand by an individual consumer and market demand of a good. Also state the factors leading to fall in demand by an individual consumer.

Q14 :

What is meant by 'excess supply' of a good in a market? Explain its chain of effects on the market of that good. Use diagram.

Q15 :

State the conditions of consumer's equilibrium in the Indifference Curve Analysis and explain the rationale behind these conditions.

OR

Explain the three properties of the Indifference Curves.

Q16 :

From the following information about a firm, find the firm's equilibrium output in terms of marginal cost and marginal revenue. Give reasons. Also calculate profit at this output.

 Output (units) Total Revenue (Rs.) Total Cost (Rs.) 1 2 3 4 5 8 16 24 32 40 10 18 23 31 41

Q17 :

Define aggregate supply.

Q18 :

What is devaluation?

Q19 :

What is a central bank?

Q20 :

What is meant by 'excess demand' in macroeconomics?

Q21 :

What is 'primary deficit'?

Q22 :

Explain the 'standard of deferred payment' function of money.

OR

Explain the 'store of value' function of money.

Q23 :

How is balance of payment 'deficit' measured? Explain.

Q24 :

What is 'appreciation' of domestic currency? What is its likely effect on exports and how?

Q25 :

What are non-monetary exchanges? Give an example. Explain their impact on use of gross domestic product as an index of welfare of the people.

Q26 :

Giving reason, state whether the following is a revenue expenditure or a capital expenditure in a government budget:
(i) Expenditure on scholarships
(ii) Expenditure of building a bridge.

Q27 :

Government has started spending more on providing free services like education and health to the poor. Explain the economic value it reflects.

Q28 :

Explain the concept of money supply and its components.

OR

Explain the 'currency authority' function of central bank.

Q29 :

Calculate 'Marginal Propensity to Consume' from the following data about an economy which is in equilibrium:

 National income = 800 Autonomous consumption expenditure = 100 Investment expenditure = 100

Q30 :

Explain national income determination through the two alternative approaches. Use diagram.

OR

Outline the steps in deriving saving curve from the given consumption curve. Use diagram.

Q31 :

Calculate 'National Income' and 'Gross National Disposable Income' from the following:

 (Rs in Arab) (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) Net imports Net current transfers to abroad Net domestic fixed capital formation Government final consumption expenditure Private final consumption expenditure Consumption of fixed capital Net change in stocks Net factor income to abroad Net indirect tax 60 (−) 10 300 200 700 70 30 20 100