IEcoS (Economic Services) Economics Paper1: Questions 14  19 of 85
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Question number: 14
» Theory of Production » Equilibrium of the Firm and Industry
Appeared in Year: 2011
Describe in Detail
If and are the demand and supply functions respectively, calculate the equilibrium price and the quantity. Hence calculate both consumers and producer’s surplus under equilibrium.
Explanation

The equilibrium is established at the point where demand is equal to supply. Thus, equating the demand and supply equations given, we get:

Putting this in any one of the equations give wi
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Question number: 15
» Theory of Value » Pricing under Different Market Structures » CrossSubsidy Free Pricing and Average Cost Pricing
Appeared in Year: 2011
Describe in Detail
Suppose that a monopolist faces a demand curve with price elasticity less than one. Should the monopolist adopt the policy of price increase in order to increase revenue? Comment Briefly.
Explanation
Marginal Revenue is given as: where e is the price elasticity.
Relation between Ma
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Question number: 16
» Quantitative Methods in Economics » Statistical and Econometric Methods » Correlation and Regression
Appeared in Year: 2011
Describe in Detail
Explain the terms as follows and their importance in the context of inference analysisDegrees of freedom, Level of significance, and Power of the test.
Explanation
Degrees of Freedom:
 The degree of freedom is a statistical calculation representing how many values involved in a calculation have the freedom to vary. This freedom ensures the validity of various statistical test like chisquare test, t test etc. which are used to compare observed data with data obtained according to a specific hypothesis. The
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Question number: 17
» Quantitative Methods in Economics » Statistical and Econometric Methods » Measures of Central Tendency and Dispersions
Appeared in Year: 2011
Describe in Detail
How does Lorenz curve explain income inequality? Explain with one suitable example. Define Gini coefficient with the help of Lorenz curve and show that Gini
Explanation
 Lorenz Curve is plotted in a way that it can serve as a visual indicator of income inequality. On the X axis, the cumulative percentage of income recipients is given and on the y axis, measured percentages of total income of the nation received by each percentage of population is marked. The point marked 10 on the horizontal axis shows the lowest
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Question number: 18
» Theory of Value » Pricing under Different Market Structures » Peak Load Pricing
Appeared in Year: 2011
Describe in Detail
What is meant by excess capacity? Why is it bad? Are there any benefits of excess capacity associated with monopolistic competition?
Explanation
When a firm can increase its output and reduce its cost per unit of output but continues to produce a smaller quantity at a higher price, it has an excess capacity. This means that a firm under monopolistic competition or imperfect competition in long run equilibrium produces an output that is less than the ideal output or socially optimum level.
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Question number: 19
» Theory of Value » Pricing under Different Market Structures » Peak Load Pricing
Appeared in Year: 2011
Describe in Detail
Define and distinguish between rent and quasirent. What do you mean by ‘transfer earnings? Elucidate the statement that no economic rent is earned when the supply of a factor is perfectly elastic.
Explanation

Transfer Earnings means the amount of money which any particular unit of a factor could earn in its next best alternative. They are the earnings in the next best occupation. Economic rent is the payment of a unit of a factor of production in excess of its transfer earnings. It is called so because a payment below this will cause the factor of p
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