JNU 2009 Doubts

[Arushi :))]

1.
Suppose only a single firm has the technology to produce a commodity for which the demand curve is perfectly elastic. Total variable cost of the firm increases more than proportionally with firm output.
Which of the following conditions must necessarily be true for the firm at the equilibrium?
a) Average revenue = Marginal cost
b) Average revenue > Marginal cost
c) Average revenue > Average cost
d) Average revenue > Marginal revenue
e) None of the above

2.
An investment is worth-making, if overtime the lifetime of the project
a) cash inflows are positive
b) net cash inflows ( inflows minus outflows ) are positive
c) cash inflows discounted by an appropriate rate of interest are positive
d) net cash inflows (inflows minus outflows) discounted by an appropriate rate of interest are positive
e) None of the above

3.
In a closed economy in which the GDP is growing at 7% per annum and the population at 2% per annum,
the income elasticity of demand for food is 0.4 . If the food prices are determined by demand and supply , at what rate must food supply must increase , if the price of food is to remain constant?

[The Villain]

Q1d
Q2 c

[Ashima]

Ron: Shouldn't 2nd be d? We will take the concept of NAV, which says inflows minus outflows? We studied this in MFM!

[Shefali]

i thnk quest 2 is c only.net cas flows are not taken into acount

[Ashima]

To see whether an investment will be profitable or not, we use the NAV formula. NAV is assets - liabilities (net cash inflows). If NAV> 1, we make the investment, else not! So as per me, should be d!

[Granpa Simpson]

A project is accepted in its NPV>0, NPV=(PV of cash inflows - initial cash outflow)....so accordingly cash inflows have to be discounted to get the present value...so I guess d will be the answer...!!!!

[Shefali]

Maybe..i still think its c

[Granpa Simpson]

for Q3, {ΔC/C}/{ΔY/Y}=0.4, Now if GDP growth rate= income growth rate = ΔY/Y= 7%, so ΔC/C= 2.8%, this ΔC/C is the increase in consumption as income is changing…also there is a component in which demand is increasing because of growth in population i.e 2%...so tota increase in demand = 2%+ 2.8%= 4.8%....in order to keep the price constant the supply curve has to shift by the same amount as the shift in demand curve..so change in supply is 4.8%...are there any options to this..??plz do check wid the solution provided by others..!!!!

[E A Ibrahim]

I think we need not take into account the population growth rate in the increase in demand for food. It is included in the increase in demand component. See Question 60 of JNU SSS question paper 2013. If population growth is to be accounted for, the answer would have been 4.5 %, which is not there. But, the answer 2.5% is there.

[Granpa Simpson]

If that is the case then it will be 2.8%..isnt it so..??

[Shefali]

What is the answer?

[ViV]

May be this link can help in solving 2nd question...

http://en.wikipedia.org/wiki/Net_present_value

Arushi could you post the answer key of JNU 2009.(Q1-Q25)
I shall be highly grateful to you.
Thanks

[Arushi :))]

@Viv
Yeah sure :)
1. a-the proportion of income spent on food declines
2. a- 72 %
3. b- any amount of output
4. d- non-working age-group population to working age group population
5. b- two flow variables
6. b- relative inequality
7. a- a pure number
8. e- none of the above
9. b- unemployment increased, and output and prices decreased
10. a- 1/6
11. b- transfers
12. b- excise duty
13. b- between 15 and 25 %
14. e- none of the above
15. d- there are no net factor incomes from abroad
16. d- the money multiplier
17. b- payments to technical consultants abroad
18. d- lnX is a linear function of lnY
19.
20. e- none of the above
21.
22. a-the rate of increase in aggregate demand
23. d-devaluation
24. c- charge a price of 1250 per unit
25. c- decreasing returns to scale
Please confirm.

[ViV]

Arushi please explain 24th..
I am uploading the paper
2009.pdf
All the answers are matching except the followings...
1(b)
3(c)
5(c)
8(c)
11(e)
17(c)
19(d)
20(b)
21(d)
Hey! People please try these questions I have written above because we are getting different answers..

[Arushi :))]

1.
Engel's law says that proportion of income spent on food declines, although the expenditure may increase.
M= 1000, proportion on food = say 40% , then 400 is spent on food
M= 2000, proportion on food = 30% , then 600 is spent on food.
So its not necessary that expenditure on food declines.
The proportion declines.
3.
Okay, i agree with you. c is okay
5.
theta= K/Y
Y is a flow variable and amount of capital used to produce that particular Y would also be measured over a particular time period only.
That's why i chose b.
8.
Its e because it rules out the preferences like concave and perfect complements & in these cases , MRS isn't equal to price ratio.
11.
Imports , savings and taxes are the only leakages .
Transfers are not.
17.
additions to inventory stocks of intermediate / final goods are counted as investments.
It doesn't matter whether the good is final/ intermediate.
20.
If we make the normal distribution curve,
then P73= 63
=> area to the left of P73=0.73
And area to the right is 0.27 . This implies that 270 students got 63 or more marks.
And option b says 'at least 270 students'.
So i guess its e

[Ashima]

Arushi: 5th is d! Stock/ Flow

Y I s a flow variable.

K is stock: Capital stock is accumulated by past investments.

So investment is flow, Y is flow, but K is stock!

[ViV]

Thanks Arushi & Ashima.
One more request please tell me how you did 24th ques..

[anishagulati]

HII
Can you please explain q19 and 24?

[Anjali]

Arushi how did you do 24 ?

[Anjali]

And why c for 3 viv ? Here price cannot exceed 12 , since it PC.