### Section - I

1. Attempt any five parts of the following questios. Answers to each part should be of approximatel 50 words.

Marks: 7 × 5 = 35

#### (a) Define consumer's surplus. Derive an expression for it using integral calculus.

(Comment for solution.)

#### (b) Why is short-run average cost curve U-shaped? Show that marginal cost curve intersects the average cost curve at latter's minimum point.

(Comment for solution.)

#### (c) Compare long-run equilibrium of the firm under perfect competition with that under monopolistic competition using suitable diagram.

(Comment for solution.)

#### (d) What is a social welfare function? State the underlying assumption in its formulation.

(Comment for solution.)

#### (e) State and explain the assumptions of two variable linear regression model.

Answer to this question is available in Q. No. General Economics - I Previous Year Paper Solution 2013. Assumption of regression and OLS are same because regression is generally done using OLS method.

#### (f) What is log-normal distribution? Where is it used in economic analysis?

(Comment for solution.)

### Section - II

Attempt any seven of the following questions. Each answer is to be in about 150 words.

Marks: 15 × 7 = 105

#### 2. Derive consumer's expenditure function by minimizing total expenditure; $$y = {p_1}{x_1} + {p_2}{x_2}$$ subject to utility constraint $$\bar u = {q_1}{q_2}$$.

Solution (Only for IES Google Classroom Members)

#### 3. Draw consumer's indifference curve from revealed Preference Theory.

(Comment for solution.)

#### 4. Separate income effect from substitution effect of a price change for a Giffen type good. Use suitable diagram.

(Comment for solution.)

#### 5. What is elasticity of factor substitution? Give various forms of production function based on this concept.

(Comment for solution.)

#### 6. "Asymmetric or incomplete information leads to market failure." Examine lemons' problem in the above context with the help of pricing of used cars.

(Comment for solution.)

#### 7. What is Hicks-Kaldor criterion of compensation? What are its weaknesses? Give Scitovsky's suggestion for improvement.

(Comment for solution.)

#### 8. Distinguish between positive and negative externalities and explain with examples. Why does government provide some goods which are not public goods?

(Comment for solution.)

#### 9. What are type I and type II errors? Why is probability of type I error fixed in a hypothesis testing problem?

(Comment for solution.)

Solution video:

### Section - III

Attempt any two of the following questios, in about 500 each.

Marks: 30 × 2 = 60

#### 11. What is Peak-load Pricing? How is it different from third degree price discrimination? Give diagrams to illustrate your answer.

(Comment for solution.)

#### 12. Define production function. The production function for a product is given by Q = 100KL. If price of capital (K) is $120 per day and that of labour (L) is$ 30 per day, what is the minimum cost of producing 400 units of output?

(Comment for solution.)

#### 13.

(Comment for solution.)

1. I substituted the value of $${q_1}$$ into the utility constraint. It already contains the utility constraint so it is like to appear on both size. It is acceptable process in mathematics which we call substitution method.