# IEcoS (Economic Services) Economics Paper-1: Questions 14 - 19 of 85

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## Question number: 14

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Appeared in Year: 2011

Essay Question▾

### 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 » Cross-Subsidy Free Pricing and Average Cost Pricing

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Appeared in Year: 2011

Essay Question▾

### 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

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Appeared in Year: 2011

Essay Question▾

### 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 chi-square 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

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Appeared in Year: 2011

Essay Question▾

### 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

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Appeared in Year: 2011

Essay Question▾

### 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

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Appeared in Year: 2011

Essay Question▾

### Describe in Detail

Define and distinguish between rent and quasi-rent. 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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