JNU doubts

[SoniaKapoor]

q1 In case of which of the following goods, will Marginal Revenue be greater than Average Revenue?
A) Normal good
B) Inferior good
C) Necessities
D) None of the above


q2 Money is created when
A) loans are repaid
B) the net worth of the banking system is increased
C) banks exchange some of the state and local bonds in their portfolio for federal
government bonds
D) banks make additional loans

q3 To produce 2 TVs’, India must forego 10 stoves where as to produce 3 TVs’ Sri Lanka must forego 27 stoves. If the prevailing world price of TVs’ in terms of stoves is
A) 4, then both Sri Lanka and India should produce TVs’
B) 6, then Sri Lanka should produce stoves and India should produce TVs’
C) 8, then Sri Lanka should produce TVs’ and India should produce stoves
D) 10, then both Sri Lanka and India should produce stoves

[Ashima]

Q1 d
Q2 b
Q3 b

Am I correct?

[SoniaKapoor]

i'm getting
q1 d
q2 d

wt about q3....how did u approach it?

[kangkan]

Hi...i guess u r..MR >AR(which is just p) only in case of giffen goods i tink..

[kangkan]

see,india has comparative advantage in production of TV's compared to srilanka..hence, it will ever make sense for them to make tv's..importing from india will be cheaper.hence b will be correct

[Ashima]

Sonia: Just use the concept of opportunity cost and see which country has a comparative advantage in which good.

[SoniaKapoor]

OKK...and how is the price 6???

[Ashima]

Price is been given just to elude. Had there be more than one option with India producing TV and SL producing stoves, we would considered the price. :)

[Ashima]

Also, how q2 is d?

[The Villain]

1 is d..cannnot ve in any case
2 d...as banks create money by creating deposits ...and since deposits are part of money supply so by creating deposits banks create money also
q3 b ...conpare opp costs

[Ashima]

Yes q2 is d. I misinterpreted the question. Banks make money by loaning out their funds.