CUET PG Economics Mock Test- 10 - CUET PG MCQ

• Assertion (A) is true: A lump-sum tax imposed on a monopolist cannot be shifted directly to consumers in the form of higher prices because the tax is not dependent on the quantity produced or sold; it's a fixed amount. Therefore, the monopolist cannot charge more per unit just because of the lump-sum tax, as this would not change with the level of output.
• Reason (R) is also true: A lump-sum tax becomes part of the monopolist's fixed costs and does not affect the marginal cost of production. Marginal cost is concerned with the cost of producing one additional unit, and since a lump-sum tax does not change with output, it doesn't affect the cost of producing an additional unit. Furthermore, since the reason R correctly explains why a lump-sum tax cannot be shifted to consumers by a monopolist (because it's a fixed cost and doesn't change the monopolist's marginal cost structure), the combination of these truths supports the assertion.

The characteristic roots, also known as eigenvalues, of a matrix are the values of λ for which the characteristic equation det(A - λl) = 0 holds true, where A is the matrix and I is the identity matrix of the same size. 
For the matrix , we have already found the characteristic equation:
det(|1 - λ, - 1|) = (1 - λ) (1 - λ) - (-1) (-1) = λ² - 2λ + 2 = 0
| -1 1 - λ| 
Factoring this equation, we get: (λ - 1)² = 0
This implies that the only eigenvalue is λ, = 1, and it's a repeated root (multiplicity 2).
Hence, the characteristic roots of the matrix are both 1. 

• A common resource is a non-excludable but rival good; that is, an item that people cannot be forcibly stopped from consuming yet whose consumption reduces the consumption of another person's
• Examples of common goods are coal and timber because they can only be possessed or consumed by a single user at one time but access is not restricted.

Integration: Since S'(y) defines the rate of change of S(y) with respect to y, integrating S'(y) with respect to y will give us the original function S(y). This is represented mathematically as:
S(y) = ∫ S'(y) dy
Integration of terms: Integrate each term of S'(y) separately using the power rule of integration:


Combine terms: Add the integrated terms to get the original function S(y):

Constant of integration: Integration introduces a constant of integration (c) that accounts for any possible constant value added during the integration process. Therefore, the final form of the original function is:

The correct chronological order of the former Governors of the Reserve Bank of India (RBI) based on their tenure:

1. C. D. Deshmukh (1943-1949) – First in the given order.
2. C. Rangarajan (1992-1997) – Comes after Deshmukh and before Jalan.
3. Bimal Jalan (1997-2003) – Comes after Rangarajan.
4. Y. V. Reddy (2003-2008) – Comes after Jalan.
5. D. Subbarao (2008-2013) – Last chronologically among the given options.

Here is list

• Correct. Monopolistic competition is a market structure where there are many firms, free entry and exit, and each firm produces slightly differentiated products.

• Incorrect. Oligopoly is a market structure characterized by a small number of large firms dominating the industry, and entry is often restricted due to barriers such as high initial costs.

• Correct. Cartels involve firms collaborating to control prices and output in order to maximize joint profits.

• Incorrect. Monopoly power arises when a single firm dominates the market and sets prices, regardless of whether they are above or below average cost.

• Incorrect. In a competitive market, there is usually free entry and exit, promoting a large number of firms.

Here's how we can find the optimal bundle:
Lagrangian Approach: We introduce a Lagrange multiplier ("λ") to convert the constrained optimization problem into an unconstrained one. The Lagrangian function is:
L(x, y, λ) = xy + λ(M - pₓx - pᵧy)
Partial Derivatives: We take partial derivatives of the Lagrangian function with respect to x, y, and λ and set them equal to
zero:
∂L / ∂x = y - λ × pₓ = 0
∂L / ∂y = x - λ × pᵧ = 0
∂L / ∂λ = M - pₓx - pᵧy = 0
Solving: Solving this system of equations, we find the optimal consumption levels:
x = M / (2 × pₓ)
y = M / (2 × pᵧ)
Therefore, the optimal bundle that maximizes the consumer's utility within the budget constraint is (M / 2pₓ , M / 2pᵧ ).

The Harrod-Domar Model

• The Harrod-Domar model focuses on the dual role of investment.
• On the one hand, new investment generates income (via the multiplier effect) and effective demand.
• On the other hand, new investment increases the productive capacity of the economy by expanding the stock of capital assets.

δY = S / r, where, δY is the growth rate of income, S is the saving rate, and r is the capital-output ratio.
Substituting the given values in the growth equation, we get:
3 = S / 6
S = 18