List of top Microeconomics Questions

Consider the following statements:
Statement 1: The new classical policy ineffectiveness proposition asserts that, systematic monetary policy and fiscal policy actions that change aggregate demand will not affect output and employment even in short run.
Statement 2: According to Real Business Cycle (RBC) model, the aggregate economic variables are the outcomes of the decisions made by many individual agents acting to maximize their utility subject to production possibilities and resource constraints.

The inverse demand function for a monopolist is given by \( P = 100 - kQ \), where \( P \) is the unit price of the good, \( Q \) is the quantity and \( k \) is a constant. The cost function facing the monopolist is given as \( C(Q) = 50 + 2Q(1 + Q) \). If the profit maximizing output is 7, the maximum profit is ________________ (in integer).

For a closed economy with no government expenditure and taxes, the aggregate consumption function (\(C\)) is given by: \[ C = 100 + 0.75 \, Y_d \] where \( Y_d \) is the disposable income. If the total investment is 80, the equilibrium output is ____________ (in integer).

A Constant Elasticity of Substitution (CES) utility function is given as: \[ U_{{CES}}(z_1, z_2) = \frac{1}{\delta} \left( z_1^\delta + z_2^\delta \right) \] where \( z_1 \) and \( z_2 \) are two goods, and \( \delta \leq 1, \delta \neq 0 \). A Quasi-linear (QL) utility function is given as: \[ U_{{QL}}(z_1, z_2) = 2z_1 + \log z_2 \] where \( z_1 \) and \( z_2 \) are two goods. Which of the following statements is/are NOT CORRECT?
The demand function is given as \( \log Q = \log A + 0.5 \log P \), where \( Q \) is quantity, \( P \) is the unit price of the good and \( A \) is a positive real number. The own price elasticity of demand is:
In the context of a perfectly competitive market, identify the statement that is NOT CORRECT.
Which of the following statements is/are TRUE ?
Consider a Cobb-Douglas utility function given as U(H) = (24 - H)1-a (wH)a, where H is the number of hours spent working per day, and w is the wage rate per hour. If \(a=\frac{1}{2}\) then the corresponding labour supply (in hours) is _______( in integer).
Suppose XYZ Corp. is totally financed by equity; it is earning Rs. 2.50 per share; its capitalization rate is 20%. There are 10,000 shares outstanding, and the replacement cost of the firm's real assets is Rs. 1,25,000. XYZ Corp.'s value of Tobin's q is _______ (in integer).
An industry comprising only two firms produces a homogenous product where the market demand function is given by P = 200 โ€“ 2(q1 +q2) where q1 and q2 are the output levels of firm 1 and firm 2, respectively. The individual firm's cost functions are TC1 = 4q1 and TC2 = 4q2, where TC1 and TC2 are total costs of firm 1 and 2, respectively. If firm 2 is a Stackelberg Leader, and firm 1 is a Follower, then the profit of the Stackelberg Leader will be ________ (rounded off to two decimal places).
Consider an industry with six firms. An analyst collated the data for this industry as given below. The Herfindahl-Hirschman Index (HHI) for this industry will be ________ (in integer).
FirmMarket Share
F130%
F220%
F315%
F415%
F510%
F610%
Consider a two good economy where a denotes consumption of apricots and b denotes consumption of bananas. Anu's utility function is UAnu (a, b) = a + 2b, and Binu's utility function is UBinu (a, b) = min{a, 2b}. Anu initially has no apricots and 12 bananas. Binu initially has 12 apricots and no bananas. In the competitive equilibrium, which one of the following will be Anu's optimal consumption bundle ?
There are two goods ๐‘‹ and ๐‘Œ and there are two consumers ๐ด and ๐ต in a pure exchange economy. ๐ด and ๐ต have Cobb-Douglas utility functions of the form $๐‘ˆ_๐ด = 2๐‘‹^{0.4} ๐‘Œ^{0.6}$ and $๐‘ˆ_๐ต = ๐‘‹^{0.3}๐‘Œ^{0.7}$, respectively. Initially, ๐ด is endowed with 50 units of good ๐‘‹ and 20 units of good ๐‘Œ. Similarly, ๐ต is endowed with 50 units of good ๐‘‹ and 20 units of good ๐‘Œ. If the unit price of good ๐‘Œ is normalised to 1, then the equilibrium unit price for good ๐‘‹ is _____. (rounded off to two decimal places).
An industry has 6 firms in Cournot competition. Each of the 6 firms has zero fixed costs, and a constant marginal cost equal to 20. The product is homogenous and the industry inverse demand function is given by ๐‘ƒ = 230 โˆ’ ๐‘„, where ๐‘ƒ is the market price and ๐‘„ is the industry output (sum of outputs of the 6 firms). The market price under Cournot-Nash equilibrium is equal to _____ (in integer).
A consumerโ€™s utility function is given by: $๐‘ข(๐‘ฅ_1, ๐‘ฅ_2) = (2๐‘ฅ_1 โˆ’ 1)0.25(๐‘ฅ_2 โˆ’ 4)0.75$ If the consumer has a budget of 73 and the unit prices of $๐‘ฅ_1$ and $๐‘ฅ_2$ are given by 2 and 1, respectively, then the value of ($๐‘ฅ_1 + ๐‘ฅ_2$) is ________ (rounded off to two decimal places).
Let an inverse demand function for a commodity be $๐‘ = e^{\frac{-x}{2}$, where ๐‘ฅ is the quantity and ๐‘ is the price. Then, at ๐‘ = 0.5, the consumer surplus is equal to _______ (rounded off to two decimal places).
The characteristics of pure public good is/are
Consider the following three utility functions:
$F = (4x_1 + 2x_2), G = min (4x_1, 2x_2)$ and $H = (\sqrt{x_1} + x_2)$ where, $x_1$ and $x_2$ are two goods available at unit prices $p_{x1}$ and $p_{x2}$ , respectively. Which of the following is/are CORRECT for the above utility functions?
Suppose high quality and low quality products are sold at the same price to the buyers. The buyers have less information to determine the quality of the product compared to the sellers at the time of purchase. Which of the following problems arises in this situation?
Consider a closed economy with consumption function $ C = 2 + 0.5๐‘Œ$, where ๐‘Œ is income. The government expenditure is 3 and investment function is $ I = 4 โˆ’ 0.5r $ , where r is interest rate. Then, the slope of the IS curve will be
Consider a production function of the form:
$ Y = ๐‘Ž log L + (1 โˆ’ ๐‘Ž) log K , ๐‘Ž โˆˆ (0, 1), ๐‘Ž โ‰  0.5 $
where, Y is output, L is labour, and K is capital. Then, the absolute value of elasticity of substitution is
Consider a 2-agent, 2-good exchange economy where agent ๐‘– has utility function ๐‘ข๐‘– (๐‘ฅ๐‘– , ๐‘ฆ๐‘– ) = max{๐‘ฅ๐‘– , ๐‘ฆ๐‘– }, ๐‘– = 1,2. The initial endowments of goods ๐‘‹ and ๐‘Œ that the agents have are (๐‘ฅฬ…ฬ…1ฬ…, ๐‘ฆฬ…ฬ…1ฬ…, ๐‘ฅฬ…ฬ…2ฬ…, ๐‘ฆฬ…ฬ…2ฬ…) = (25, 5, 5, 5). Then select the CORRECT choice below where the price vector (๐‘๐‘ฅ, ๐‘๐‘ฆ) specified is part of a competitive equilibrium.
For a firm operating in a perfectly competitive market which of the following statements is CORRECT?
A firm is operating in a perfectly competitive environment. A change in the market condition leads to an increase in the firmโ€™s profit by an amount K. Which of the following describes the change in the Producerโ€™s Surplus due to the above change in the market condition?
Two people, 1 and 2, are engaged in a joint project. Person ๐‘–โˆˆ{1,2} puts in effort ๐‘ฅ๐‘– (0โ‰ค ๐‘ฅ๐‘– โ‰ค 1), and incurs cost ๐ถ๐‘– (๐‘ฅ๐‘– ) = ๐‘ฅ๐‘– . The monetary outcome of the project is 4๐‘ฅ1๐‘ฅ2 which is split equally between them. Considering the situation as a strategic game, the set of all Nash Equilibria in pure strategies is