JNU MA Economics Past Year Paper- 2011 Doubts

[Darth Vader]

I had a few basic Logic problems, particularly Questions 90-93.
https://docs.google.com/file/d/0B6IWcTxlhduOcUN2blRkSEZWbDA/edit

Also tiny problems regarding Q42, 47 and 49.

Could really use a headway into how to go ab out doing any of these questions. Peace!

[duck]

Hi.. :)

Please refer the following document for 90-93.
http://economicsentrance.weebly.com/uploads/1/1/0/5/1105777/jnu_forum.pdf

[duck]

42) Its easy to disprove this statement. Please refer some logic book.

47) Plot MC and AC curve.

[Ayushya Kaul]

The link is broken :/

Any logic book you would recommend? I have no idea how to go about this otherwise!

[duck]

oh.. Refer Solutions (JNU section) on Lessons page.

[Ayushya Kaul]

How is it none of the above? Shouldn't be the AC of the the 4th unit ,vis-a-vis the 3rd unit, depend on the position of the MC curve?
e.g If MC curve is above AC curve, Ac of 4th unit> AC of the 3rd unit.

[Ayushya Kaul]

Any idea about q49?

[duck]

Its because we're given that MC is rising. Now, when MC is rising, AC can fall or increase.
Plot AC and MC curve for a better understaning.

[Ankit Agrawal]

This is a question of 'intertemporal choice'.
I've made it unnecessarily long. But it is for those who know nothing about it.

All you need to do in such questions is to calculate the 'Present Value'(PV) of the amounts.

Skip this paragraph if you already know what Present value is.
What is Present value?
Present value is today's worth of a future cash inflow/outflow. Example: You can either take Rs. 105 from me after a year or Rs. 100 now. What will you choose? Well, you'll think in this way. "I can take Rs. 100 now and invest it for a year somewhere. I will get a return on the investment. Now, if i get:
(a) 2% p.a.- I'll receive 102 after a year. However I am getting Rs. 105 after a year from Ankit. Hence, I'll take 105 after a year.
(b) 5% p.a.- I'll receive 105 after a year. I am also getting 105 from Ankit. I'll be indifferent.
(c) 10% p.a.- I'll receive 110 after a year. Ankit is giving me only 105. So I'll take 100 now and invest it.

How to calculate the PV

It is extremely simple.

PV= Amount that you will receive after a year/(1+rate of interest)

Considering this question:

Option 1: You'll receive 112 after a year. Interest=12%

PV=112/(1+12%)
   =112/(1+0.12)
   =112/(1.12)
   =100
This means that you are effectively receiving Rs. 100 now

Option 2:
Now here you have a different time period. All you need to do is to simply change the Rate of interest. It is 12% for 12 months. So it will be 9% for 9 months.

PV= {55/(1.09)} + {56/(1.12)}
   = 50.46 + 50
   = 100.46

This means that you are effectively receiving 100.46 now, if you choose option 2.

So you will choose option 2 over option 1.

Hence answer is (b).

I just saw that the answer on 'Answer key' page is (d). I don't know why.

[Ayushya Kaul]

I answered (b) too. Have no idea why the answer is (d) :/

[Ayushya Kaul]

Anybody who can tell why the answer is (d)?

Duck?

[sakshi]

i think bcoz we cant assume 9% interest 4 9 months...
correct me if i m wrong

[taanya]

i think the answer would be d because it has not been mentioned whether the person wants to optimize in terms of obtaining maximum returns!!

[Ayushya Kaul]

Hmm, doesn't seem satisfactory. Anyone else?

[duck]

Hi Ayushya.. :)
Its not mentioned in the question whether its compunded anually or instantaneously.
So, taking 3/4*12% for 9 months is not correct.
Hence, no claim can be made from the given information.