Sample Question Format

(For all courses having end semester Full Mark=50)

KIIT Deemed to be University

Online End Semester Examination(Autumn Semester-2020)

Subject Name & Code: Engineering Econonomics HS 2002

Applicable to Courses: B.Tech 5th Semester

Full Marks=50 Time:2 Hours

SECTION-A(Answer All Questions. Each question carries 2 Marks)

Time:30 Minutes (7×2=14

Marks)

Question Questi Question CO Answer Key

No on Mappin (For MCQ
Type g Questions
(MCQ) only)
Q.No:1 CO1 (c)
1.Suppose goods X and Y are
substitutes. Which of the following
is TRUE?

a) An increase in the price of X will

result in a decrease in the
equilibrium price of Y.
b) An decrease in the price of X will
result in an increase in the
equilibrium quantity of Y.
c) An increase in the price of X will
result in an increase in the
equilibrium quantity of Y.
d) More than one of the above is
true.

CO1 (b)
2.Which of the following statements
about inferior goods is/are FALSE?

I. Inferior goods are those that we

will never buy, no matter how cheap
they are.
II. Inferior goods are those that we
buy more of, if we become poorer.
 III. Inferior goods are those that we
buy more of, if we become richer.

a) I only
b) III only.
c) I and III only.
d) I, II, and III.

3.A good with a vertical demand CO1 (c)

curve has a demand with
a) infinite elasticity.
b) unit elasticity.
c) zero elasticity.
d) varying elasticity
4. To say that turnips are inferior CO1 (b)
goods means that the income
elasticity
a) is definitely greater than 1.
b) is negative.
c) is positive but could be greater
than or less then (or equal to) 1.
d) is definitely between 0 and 1.
Q.No:2 1. If a rightward shift of the supply CO2 (a)
curve leads to a 6 percent decrease
in the price and a 5 percent increase
in the quantity demanded, the price
elasticity of demand is
a) 0.83 b) 0.30 c) 0.60
d) 1.20
2. A 10 percent increase in the CO2 (a)
quantity of spinach demanded
results from a 20 percent decline in
its price. The price elasticity of
demand for spinach is
a) 0.5 b) 20.0 c) 2.0 d) 10.0.
3. A 20 percent increase in the CO2 (a)
quantity of pizza demanded results
from a 10 percent decline in its
price. The price elasticity of demand
for pizza is
a) 2.0 b) 10.0 c) 0.5 d) 20.0.
4.Suppose a rise in the price of CO2 (a)
peaches from $5.50 to $6.50 per
bushel decreases the quantity
demanded from 12,500 to 11,500
bushels. The price elasticity of
demand is(by mid-point method)
a) 0.5 b) 1000 c) 2.0 d) 1.0.
Q.No:3 1.Given an investment of Rs 10000 CO3 (d)
 for a period of one year, it is better
to invest in a scheme that pays:
a) 12% interest compounded
annually.
b) 12% interest compounded
monthly.
c) 12% interest compounded
weekly.

d) 12% interest rate weekly.

2.If the interest rate on a loan is 1% CO3 (c)
per month, the effective annual rate
of interest is:
a) 12%
b) 12.36%
c) 12.68%
d) 12.84%
3.The difference between effective CO3 (d)
annual rate of interest with monthly
and quarterly compounding when
nominal rate of interest is 10% is:
a) 0.10%
b) 0.14%
c) 0.21%
d) 0.09%
4. If $400 is invested for 5 years at CO3 (b)
6% per annum compounded weekly,
what is the mature amount?
a) 632.36
b) 539.31
c) 523.34
d) 554.23
Q.No:4 1. With respect to production, the CO2 (d)
short run is best defined as a time
period
a. lasting about six months.
b. lasting about two years.
c. in which all inputs are fixed.
d. in which at least one input is
fixed.

2. In the long run, all factors of CO2 (a)

production are
a. variable.
b. fixed.
c. materials.
d. rented.

3. If the average productivity of CO2 (a)

labor equals the marginal
 productivity of labor, then
a. the average productivity of labor
is at a maximum.
b. the marginal productivity of labor
is at a maximum.
c. Both A and B above.
d. Neither A nor B above.

4. Marginal costs is the change in CO2 (a)

total cost resulting from unit change
in……..
a. output
b. input
c. both(a) and (b)
d. None of these

Q.No:5 1. A firm will shut down in the short CO3 (d)

run if:
a. fixed costs exceed revenues.
b. total costs exceed revenues.
c. it is suffering a loss.
d. variable costs exceed revenues.

2. Which of the following is not a CO3 (c)

valid option for a perfectly
competitive firm?
a. Increasing its output.
b. Decreasing its output.
c. Increasing its price.
d. Increasing its resources.

3. A firm that is producing at the CO3 (b)

lowest possible average cost is
always:
a. Earning an economic profit.
b. Productively efficient.
c. Dominating the other firms in the
market.
d. Not producing enough output.

4. Perfect competition is an industry CO3 (d)

with
a. a few firms producing identical
goods.
b. many firms producing goods that
differ somewhat.
c. a few firms producing goods that
differ somewhat in quality.
d. many firms producing identical
goods.
Q.No:6 1. Given the Purchase value(P)=Rs CO2 (c)
20000 and salvage value(S)=Rs 500,
what is the Dt and Bt combination
for the 1st year by Straight Line
Method of Depreciation?
a) 3000, 11500
b) 3900 , 8300
c) 3900,16100
d) 3200 , 15200
2. Given the Purchase value(P)=Rs CO2 (a)
20000 and salvage value(S)=Rs 500,
what is the Dt and Bt combination
for the 2nd year by Straight Line
Method of Depreciation?
a) 3900, 12200
b) 3900 , 8300
c) 3900,16100
d) 3200 , 15200
3. Given the Purchase value(P)=Rs CO2 (b)
20000 and salvage value(S)=Rs 500,
what is the Dt and Bt combination
for the 3rd year by Straight Line
Method of Depreciation?
a) 3000, 8000
b) 3900 , 8300
c) 3500,8200
d) 3200 , 8100

4. Given the Purchase value(P)=Rs CO2 (c)

20000 and salvage value(S)=Rs 500,
what is the Dt and Bt combination
for the 4th year by Straight Line
Method of Depreciation?
a) 3800, 6500
b) 3900 , 8300
c) 3900,4400
d) 3200 , 4400
Q.No:7 1.Social costs are those costs CO3 (d)
a) not borne by the firms b) incurred
by the society c) health hazards d)
all of these
2. Above the equilibrium price CO3 (b)
a) S < D b) S > D c) S = D d) none
3. Under perfect competition, the CO3 (b)
demand curve is
a) Upward sloping b) horizontal c)
downward sloping d) vertical
4.When the decrease in the price of CO3 (c)
one good causes the demand for
 another good to decrease, the goods
are:
a. Normal
b. Inferior
c. Substitutes
d. Complements

SECTION-B(Answer Any Three Questions. Each Question carries

12 Marks)

Time: 1 Hour and 30 Minutes (3×12=36

Marks)

Que Question CO Mapping

stio (Each question
n should be from
No the same CO(s))
Q.N Q.No:8-1st question (4+4+4)
o:8 CO4, CO5 and
1. Answer the following questions referring to the supply and demand curve CO6
diagram below.

a. What is the equilibrium price here in the diagram?

b. At the price $8, what is the market situation(shortage or surplus)
and by how many units?

2. Mr. X takes a loan of Rs 50,000 from HDFC Bank. The rate of interest is
10% per annum. The first installment will be paid at the end of year 1.
Determine the amount of equal annual installments if Mr. X wishes to repay the
amount in five installments. What is the future worth of this amount?

3. Explain any two quantitative methods adopted by the central bank to control
inflation.
Q.No:8 -2nd question

1. The table below gives the demand schedule for snow peas. Answer the
questions that follows.

Price Quantity demanded

(dollars per (bushels)
bushel)
8 2000

7 4,000
6 6000
5 8000
4 10000
3 12000

a .What is the price elasticity of demand between $6.00 and $7.00 per bushel?
b. If the price of snow peas falls from $4.00 to $3.00 a bushel, what will be the
effect on total revenue? What does this show about its elasticity?

2. Compute the future value of following given cash flows assuming an interest
rate of 10% compounded annually.
Years 0 1 2 3 4 5 6 7 8 9 10

Cash - - 200 - 200 - 200 - 200 - 200

flows
in $

3. Explain the stage in the Short run production function in which the Total
product of the producer gets optimized with adequate diagram.

Q.No:8-3rd question

1. a) Demand and supply in a market are described by the equations:

Qd = 66-3P and Qs = -4+2P .
Find the equilibrium price and quantity.

b) What is the equilibrium P and Q if a per unit tax of t=5 per unit is
imposed?

2. You want to buy an ordinary annuity that will pay you 4000 a year for the
next 20 years. You expect annual interest rates will be 8% over that time
period. What should be the maximum price you would be willing to pay for
this scheme now? What is the total future worth of this scheme?
 3. Explain the concept of 'Margin of Safety' of a producer with adequate
diagram.
Q.N Q.No:9- 1st question (4+4+4)
o:9 CO4, CO5 and
CO6
1. Suppose the GDP at market price of a country in a particular year was Rs
1,100 crores. Net Factor Income from Abroad was Rs 100 crores. The value
of Indirect taxes – Subsidies was Rs 150 crores and National Income was
Rs 850 crores. Calculate the aggregate value of depreciation.

2. You now have $8,000 in a bank account in which you made one single
deposit at 10% per annum exactly 40 years ago. How much was your
investment. If would have generated this same value with annual deposit,
what should be your investment?

3. Explain how the banking system of an economy can facilitate stabilization of

the economy.

Q.No:9-2nd question
1. Suppose the market demand for milk is Qd=40−4P, where Qd is millions of
gallons demanded and P is the price per gallon. Suppose the market supply for
milk is Qs= −40/3+20/3P
a. What is the equilibrium price?
b. Suppose a tax of $1 per gallon of milk is imposed in this market. What is the
new price paid by consumers?
2. You borrow $80,000 to be repaid in equal yearly installments for 15 years at
9% per annum. What is your instalment amount? What is the future worth of
this amount?
3. Given the purchase value of an asset as $20000 with a salvage value of $800
at the end of the 5th year, find the Depreciation(Dt) and the book value(Bt) at
the end of the various years by Declining Balance method at a constant
percentage of depreciation of 10%.

Q.No:9-3rd question
1. Suppose the demand and supply equations of a commodity X in a perfectly
competitive market are given by :
Qd = 1700 – 2P
Qs = 1300 + 3P
Calculate the value of equilibrium price and equilibrium quantity of the
commodity X.
2. . What is the total value of the following set of cash flows today at 8.5% rate
of interest per annum ?
Year 0 1 2 3 4
 Cash - 1000 200 400 600 800
flows(in $)

3. Explain the concept of 'Cost Push Inflation' with adequate diagram.

Q.N Q.No:10-1st question (4+4+4)

o:10 CO4, CO5 and
1. . If the Purchase value of an asset is $10000 with a salvage value of $400 at CO6
the end of the 6th year, compute the Depreciation(Dt) and Book value(Bt) for
the various years by Sum of the Years Digit method.

2. a) Complete the following schedule.

b) Where is the Profit maximum for this producer. Explain.

Output Price Total TFC TVC TC AC MC

per Revenue
unit
0 100 100
1 90 130
2 80 158
3 70 183
4 60 208
5 50 253
6 40 308
7 30 368
8 20 468

3. Explain the 'Break Even point' of a producer with diagram.

Q.No:10-2nd question

1. Consider the supply and demand curve diagram below.

a. What is the equilibrium price and quantity?

 b. If the price of this good is $6, then what is the market
situation(shortage/surplus) and by how much units?

2. From the following information about a firm, find the firms equilibrium
output of the firm in terms of Marginal Cost(MC) and Marginal Revenue(MR).
Show the MC and MR curves with diagrams.
Output Total revenue(Rs) Total cost(Rs)
(units)

1 7 8
2 14 15
3 21 21
4 28 28
5 35 36

3. Explain where should a perfectly competitive firm 'shut down', with

adequate diagram.

Q.No:10-3rd question

Q1. Producer A has a fixed cost of $40000 per year and a variable cost of $60
per unit. Producer B has a variable cost per unit of $10. If the total costs of the
two producer break even at a production rate of 2000 units per year, what is the
fixed cost of machine B?

Q2. If a person invests Rs 50000 at the end of the first year and thereafter
increases his investment by Rs 5000 each year, what is the maturity amount he
will receive at the end of the 15th year at 8% rate of interest?

Q3. Compare and contrast the features of a 'Perfectly competitive'

and a 'Monopoly' market(explain minimum 4 points)
Q.N Q.No:11 1st question (4+4+4)
o: Q1. The fixed costs at Company X are $1 million annually. The main product CO4, CO5 and
11 has revenue of $8.90 per unit and $4.50 variable cost. (a) Determine the break- CO6
even quantity per year, and (b) Annual profit if 250000 units are sold.

Q2. Explain the concept of 'Demand Pull inflation' with diagram.

Q3. The following table shows the total revenue and total cost schedules of a
competitive firm. Calculate
(a)the profit at each output level and
(b) determine the market price of the goods.

Quantity sold 0 1 2 3 4 5 6 7
in units
TR(in Rs) 0 5 10 15 20 25 30 35
 TC(in Rs) 5 7 10 12 15 23 33 40

Profit(Rs) ? ? ? ? ? ? ? ?

Price per unit ? ? ? ? ? ? ? ?

(in Rs)

Q.No:11 2nd question (4+4+4)

CO4, CO5 and
Q1. A Monopolist has the cost function TC= 200Y +15Y2 and faces the CO6
demand function given by p=1200 -10Y (where Y =output and p=price per
unit) , find

(a) the profit maximizing output and price?

(b) What is its maximal profit?

Q2. Explain the role of government in stabilizing the economy of any country.

Q3. Given the initial cost on a project is $ 20000 with Returns of $12000 each
year for two years of its operation before winding up, find the Internal Rate of
return by Trial and Error method.

Q.No:11 3rd question (4+4+4)

Q1. Given the following details, find the Net presents value of the project and CO4, CO5 and
suggest if it can be considered on NPV criteria at 10% per annum. CO6
Initial Return (in Return (in Return (in Return Salvage
cost($) $)Year 1 $)Year 2 $)Year 3 (in $) Year value($)
4
3000 1000 1200 800 800 20

Q2. Write short notes on:

a) Concept of Short run and long run production function with example.
b) Shapes of average fixed cost, average variable cost and average cost with
diagrams.
Q3. Find the future worth of the following cash flows over the years at 8% per
annum.
Year 0 1 2 3
Cash flows -100000 60000 10000 60000

Paper Setter: Dr. S Palit

Moderator: Dr. Sukanta Chandra Swain