Q.1. What are the differences between Monopoly and Monopolistic Competition.
Ans : The following are the main differences between monopoly and monopolistic competition :
(1) Nature of the Product : Product differentiation is a characteristic feature of monopolistic competition but it is not essential under monopoly.
(2) Number of Sellers : There is a single seller under monopoly but there are many sellers producing close substitutes under monopolistic competition.
(3) Entry of New Firms : In the long-run entry of new firms in the market is possible under monopolistic competition; but it is not possible under monopoly.
(4) Selling Costs : A monopolist has to incur cost of production alone, but a firm under monopolistic competition incurs selling costs in addition to production costs. However, while introducing new product in the market, a monopolist might have to incur some advertisement expenditure.
(5) Demand Curves : Both market situations have downward sloping revenue curves. But under monopolistic competition, average revenue and marginal revenue curves are more elastic. This is because of the availability of large number of close substitutes in monopolistic competition. Both in case of monopoly and monopolistic competition, firm’s demand curve slopes downward. But it is more elastic under monopolistic competition compared to monopoly.
(6) Difference Regarding Profit : Because of the freedom of entry of new firms, profits under monopolist competition are forced to be normal. But monopolist continues to enjoy above normal profits because of the barriers of entry of new firms.
Q.2. What is Theory of Factor Pricing ?
Ans : - Anatol Murad, “The theory of factor pricing deals with the price paid for factor services (land, labour, capital, entrepreneur) and received by the sellers of factor services. It deals with wage rates, interest rates, specific rent and profit. In short, theory of factor pricing studies how rent of land, wages of labourer, interest on capital and profit of entrepreneur are determined.” These factors are also know as Production Services, Resources or Inputs.
Two Important functions of the theory of factor pricing are as under :
(1) Allocation of Factors : The theory of factor pricing studies the allocation of factors across their different uses.
(2) Distribution of Value Added among the Owners of Factors or Production : The theory of factor pricing explains how value added is distributed among the owners of factors of production. It explains the determination of rent, interest, profit and wages.
Q.3. What is Full Employment ?
Ans : Ordinarily, the term full employment refers to the situation in which no one is unemployed. Demand for and supply of labour are equal. In macro economics, ‘full employment’ means a situation in which at a given level of real wage, demand for labour is equal to its available supply. Thus, the term full employment is used to signify a situation in which ordinarily all those people who are willing to work at the prevailing wage-rate, get work.
In the words of Lerner, “Full Employment is a situation in which all those who are able and want to work at the existing rate of wage get work without any undue difficulty.”
Practically, full employment means that number of vacancies is more than the unemployed persons. Even in full employment situation some kind of unemployment may exist. In modern dynamic economy, due to constant change in demand for and supply of labour, it is not possible that all those who want to work may get work all the time.
In the words of Spencer, “Full employment is a situation in which everyone who wants to work is working except for those who are frictionally and structurally unemployed.”
It is clear from the above defination that in situation of full employment also there can be some types of unemployment. As such, according to modern macro economic full employment does not mean lack of unemployment. It simply means a situation of equilibrium between vacant jobs and qualified job-seekers. But in this situation of equilibrium some sort of unemployment can exist. It is referred to as natural rate of unemployment arising from normal labour market frictions that exist when the labour market is in equilibrium”. It refers to frictional and structural unemployment.
In short, situation of full employment does not imply a situation of zero unemployment. It is a situation compatible with natural rate of unemployment. In the words of Ward, “Full employment is a level of employment e(150
Q.4. Discuss the fiscal measures that are recommended to correct the inflationary situation.
Ans : (1) Increase in Taxes : Tax rates should be enhanced progressivly to mop up additional purchasing power within the economy.
(2) Decrease in Government Expenditure : Government expenditure should be reduced on (i) health and education, (ii) public works programmes, (iii) maintenance of law and order, and defence of country, and (iv) the subsidies.
(3) Reduce Deficit Financing : Deficit financing should be increased, so that people are left with lesser purchasing power.
Thus , during periods of excess demand, the government should adopt the policy of Surplus-budget, enhancing its revenue and restricting its expenditure as much as possible.
Q.5. Why public sector is so important in India ?
Ans : Public sector has to play an important role in India. It is through the expansion of public sector that the state can assume commanding heights of the economy and give practical shape to its socio-economic policies designed at economic development with social justice. Public sector is important due to the following reasons:
Q.6. What did the Ninth Five Year Plan thought of the reliance in the country?
(i) The first, and perhaps most important, component of self-reliance is to ensure balance of payments sustainability and avoidance of excessive external debt. This requires a commitment to sound and prudent macro-economic policies, particularly in fiscal and monetary management matters.
(ii) Self-reliance demands that most of the investible resources should be generated domestically and recourse to external sources be resorted to the extent dictated by a sustainable proportion of external liabilities. The Ninth Plan will link the inflow of external resources to the level of domestic savings and the long-run ability to service external liabilities.
(iii) Self-sufficiency in food is a basic element in any strategy of self-reliance. In view of the fluctuations in agricultural production India will have to target for a higher growth rate of agriculture than dictated by the needs in order to prevent periodic large-scale imports and the vulnerability that it entails..
(iv) Natural resources are a patrimony of the nation. The Ninth Plan will lay stress on conservation and optimal utilisation of natural resources, including herbs and plants of medicinal value, keeping in view the international availability of such resources and the need to maintain a viable balance of payments position.
(v) A critical element of self-reliance is self-reliance in technology. While it is desirable to access the best and most appropriate technologies from wherever they are available, in the long-run it is necessary that domestic capacity is developed in respect all critical technologies needed by the country. This aspect has gained further importance in view of the emerging restrictions of "dual use". Ninth Plan will begin process of implementation of the technology statement called 'Vision 2020'.
Q.7. What are the powers and responsibilities of the Panchayat?
Ans : State Legislatures have the power to confer on the Panchayats such powers and authority as may be necessary to enable them to function as institutions of self-government [Acts. 243G-243H]. Their responsibilities may include: (i) preparing plans for economic development and justice, (ii) implementation of schemes for economic development and social justice, and (iii) in regard to matters listed in the Eleventh Schedule (inserted by the 73rd Amendment). The list contains 29 items, e.g., land improvement, minor irrigation, animal husbandry, fisheries, education, women and child development etc. The 11th Schedule thus distributes powers between the State Legislature and the Panchayat just as the 7th Schedule distributes powers between the Union and the State legislature.
A State may by law authorise a Panchayat to levy, collect and appropriate taxes, duties, tolls etc. and can also assign to a Panchayat various taxes, duties etc. collected by the State Government. Grants-in-aid may be given to the Panchayats from the Consolidated Fund of the State.
Q.8. What is the role of Finance Committe and Election Commission in regards to the Panchayats?
Ans : Finance Commission
Within one year from 25th April 1993, i.e. the date on which the Constitution 73rd Amendment came into force and afterwards every 5 years the State Government shall appoint a Finance Commission to review the financial position of the Panchayats and to make recommendations as to :
(i) The distribution between the State and the Panchayats of the net proceeds of taxes, duties, tolls and fees leviable by the State which may be divided between them and how allocation would be made among various levels of Panchayats;
(ii) What taxes, duties, tolls and fees may be assigned to the Panchayats;
(iii) Grant-in-aid to the Panchayats.
The report of the Commission together with a memorandum of action taken on it, shall be laid before the State Legislature. These provisions are modelled on Art. 280 which contains provisions regarding appointment of a Finance Commission for distribution of finances between the Union and the States.
State Election Commission
Article 243K is designed to ensure free and fair elections to the Panchayats.
Article 243K provides for the Constitution of a State Election Commission consisting of a State Election Commissioner to be appointed by the Governor. Powers of superintendence, direction and control of elections to the Panchayats, including preparation of electoral rolls for it shall vest in the State Election Commission. To ensure the independence of the Commission it is laid down that State Election Commissioner can be removed only in the same manner and on the same grounds as a Judge of a High Court. The State Legislatures have the power to legislate on all matters relating to elections to Panchayats.
As under Art. 329, courts shall have no jurisdiction to examine the validity of a law, relating to delimitation of constituencies or the allotments of seats, made under Art. 243K. An election to a Panchayat can be called in question only by an election petition which should be presented to such authority and in such manner as may be prescribed by or under any law made by the State Legislature.
Q.9. What are the composition, duration, qualification of members and powers of the Municipality?
Ans : Composition
The members of a municipality are generally elected by direct election. The legislature of a State may by law provide for representation in a municipality of : (i) Persons having special knowledge or experience in municipal administration; (ii) Members of Lok Sabha, State Assembly, Rajya Sabha and Legislative Council; and (iii) The Chairpersons of Committees constituted under C1. (5) of Art. 243 S. The Chairperson shall be elected in the manner provided by the Legislature.
For one or more wards comprised within the territorial area of a municipality having a population of 3 lakhs or more it would be obligatory to constitute Ward Committees. The State Legislature shall make provision with respect to its composition, territorial area and the manner in which the seats in a ward committee shall be filled. It is open for the State Legislature to constitute Committees in addition to the wards committees.
Reservations of seats are to be made in favour of the Scheduled Castes and Scheduled Tribes in every Municipality. Out of the total number of seats to be filled by direct elections at least 1/3rd would be reserved for women. This includes the quota for women belonging to Scheduled Castes and Tribes.
All reservations in favour of Scheduled Castes and Tribes shall come to an end with the expiry of the period specified in Art. 334. It has been left to the State Legislature to prescribe by law the manner of reservation of the offices of the Chairpersons of Municipalities. It is permissible for a State Legislature to make provisions for reservation of seats or offices of Chairpersons in favour of backward classes.
Every Municipality shall continue for 5 years from the date of its first meeting. But it may be dissolved earlier according to law. Elections to constitute a Municipality shall be completed before the expiry of the period of 5 years. If the Municipality has been superseded before the expiry of its term the elections must be completed within 6 months of its dissolution A municipality constituted after its dissolution shall continue only for the remainder of the term. But if the remainder of the period is less than 6 months it shall not be necessary to hold elections. It has been provided that no amendment of the law in force shall cause dissolution of a Municipality before the expiry of the 5 years term.
Article 243V lays down that all persons who are qualified to be chosen to the State Legislature shall be qualified for being a member of a Municipality. The difference is that persons who have attained the age of 21 years (for State Legislature the person must have attained the age of 25 years) will be eligible to be a member.
Powers and Responsibilities
Legislatures of States have been conferred the power [Art. 243W] to confer on the Municipalities all such powers and authority as may be necessary to enable them to function as institutions of self government. They may be given the responsibility of : (i) preparation of plans for economic development and social justice, (ii) implementation of schemes as may be entrusted to them and (iii) in regard to matters listed in the 12th Schedule. This Schedule contains 18 items, e.g. Urban Planning, Regulation of Land Use, Roads and Bridges, Water Supply, Public Health, Fire Services, Urban Forestry, Slums, etc.
A State Legislature may by law authorise a Municipality to levy, collect and appropriate taxes, duties tolls etc. It can also assign to a Municipality various taxes, duties etc. collected by the State Government. Grants-in-aid may be given to the Municipalities, from the Consolidated Fund of the State.
Q.10. What is the role of Finance Commission and State Election Commission in regard to Municipality?
Ans : Finance Commission
The Finance Commission appointed under Art. 243-I (see Panchayat Finance Commission) shall also review the financial position of the Municipalities and make recommendations as to:
(i) The distribution between the State and the Municipalities of the net proceeds of taxes, duties, tolls and fees leviable by the State which may be divided between them and allocation of shares amongst different levels of Municipalities;
(ii) The taxes, duties, tolls and fees that may be assigned to the Municipalities;
(iii) Grants-in-aid to the Municipalities;
(iv) The measures needed to improve the financial position of the Municipalities; and
(v) Any other matter that may be referred to it by the Governor.
Under Art. 280 the Commission will make recommendations in regard to the measures needed to augment the Consolidated Fund of a State to supplement the resources of the Municipalities in the State on the basis of the recommendations made by the State Finance Commission.
State Election Commission
The State Election Commission appointed under Art. 243K shall have the power of superintendence, direction and control of : (i) the preparation of electoral rolls for, and (ii) the conduct of all elections to the Municipalities. State Legislatures have been vested with necessary power to regulate by law all matters relating to elections to municipalities.
The courts shall have no jurisdiction to examine the validity of law, relating to delimitation of constituencies or the allotment of seats made under Art. 243ZA. An election to a Municipality can be called in question only by an election petition which should be presented to such authority and in such manner as may be prescribed by or under any law made by the State Legislature.
Apart from giving constitutional recognition to Municipalities the 74th Amendment lays down that in every State two committees shall be constituted.
(i) At the district level a District Planning Committee [Art. 243ZD].
(ii) In every metropolitan area a Metropolitan Planning Committee [Art. 243ZB].
The composition of the committees and the manner in which the seats are to be filled are to be provided by a law to be made by the State Legislature. But it has been laid down that:
(i) In case of the District Planning Committee at least 4/5th of the members shall be elected by the elected members of the district level, Panchayat and of the Municipalities in the district from amongst themselves. Their proportion would be in accordance with the ratio of urban and rural population of the district.
(ii) In case of Metropolitan Planning Committee at least 2/3rd of the members of the committee shall be elected by the Members of the Municipalities and Chairpersons of the Panchayats in the Metropolitan area from amongst themselves. The proportion of seats to be shared by them would be based on the ratio of the population of the Municipalities and of the Panchayats in the area.
The State Legislature would by law make provision with respect to : (i) the functions relating to district planning that may be assigned to the district committees, and (ii) the manner in which the Chairperson of a district committee may be chosen. The Committee shall prepare and forward the development plan to the State Government. In regard to the Metropolitan Planning Committee which is to prepare a development plant for the whole Metropolitan area the State Legislature may by law make provision for:
(i) the representation of the Central and State governments and of such organisations and institutions as may be deemed necessary,
(ii) the functions relating to planning and coordination for the Metropolitan area,
(iii) the manner in which the Chairpersons of such committees shall be chosen.
The development plan shall be forwarded to the State Government.
Q.11. Discuss the need of a Supreme Court in a federal constitution?
Q.12. What is the importance of an independent judiciary in a democracy? How has the independence of the Supreme Court Judges been ensured by the constitution?
(i) According to Article 125, the salaries of the Judges are fixed and cannot be varied to their disadvantage during their term (except during a Financial Emergency). These salaries are, furthermore, charged on the Consolidated Fund of India and hence not votable.
(ii) Security of service is assured to the judges; though the appointing authority is the President, the process of removing the judges from office is difficult, and they can be removed only on grounds of proved misbehaviour and incapacity.
(iii) The conduct of a judge of the Supreme Court is not to be discussed in Parliament, except upon a motion for an address to the President for the removal of the judge.
(iv) The jurisdiction of the Court cannot be curtailed by Parliament.
(v) After retirement, a judge of the Supreme Court shall not plead or act in any court or before any authority within the territory of India.
(vi) The Court has the right to punish any person for its contempt.
(vii) The Court is free to recruit its staff and determine their service conditions without any interference from any other authority.
Q.13. What is meant by the Writ jurisdication of the Supreme Court? How does it differ from original jurisdication?
Q.14. Discuss the discretionary powers of the State Governor. Is there any check on his discretionary powers?
(a) the selection of a Chief Minister.
(b) dismissal of a ministry.
(c) dissolution of a State Assembly.
(d) advising the President for the proclamation of an emergency, etc.
Q.15. What are the privileges and immunities enjoyed by the Governor of a State?
Q.16. What do you mean by bicameral and unicameral states?
Ans : Art. 168 states that the legislature of each State shall consists of the Governor and the state legislature. The legislature in some states consists of two Houses—the Legislative Assembly and the Legislative Council —while in the rest there is only one House—the Legislative Assembly. In 1992 only five states, namely, Bihar, Maharashtra, Karnataka, Uttar pradesh and Jammu Kashmir, had bicameral legislatures. But this position may keep changing since the Constitution provides for the abolition of the second chamber (that is, the Legislative Council) in a State where it exists as well as for the creation of such a chamber in a State where there is none at present, by a simple procedure which does not involve an amendment of the Constitution.The procedure prescribed is a resolution of the Legislative Assembly of the state concerned passed by a special majority (that is, a majority of the total membership of the Assembly not being less than two-thirds of the members actually present and voting), followed by an Act of Parliament [Art. 169].
Q.17. “The favourable conditions for high productivity of sugarcane are found in southern India while bulk of it is produced in the northern plains of India”. Why?
Ans. Sugarcane is a crop of tropical region. The Southern India has favourable conditions for the cultivation of sugarcane. High temperatures, a long frost-free growing season and only a little dry period has resulted in high productivity in this region. Yield per hectare of sugarcane is more than 80 quintals in Tamil Nadu, Maharashtra, Karnataka and Andhra Pradesh. But it is as low as 40 quintals per hectare in Northern India.
q But the bulk of sugarcane is produced in northern plains of India. About 60% of total production is obtained from U.P. and Bihar. These regions are climatically less suitable due to frost in winter, long dry season and low sucrose content. Sugarcane is widely grown in Northern India due to fertile soils, irrigation facilities and marketing facilities of sugarcane. Due to less fertile soils, the Southern parts have less area under cultivation of sugarcane.