Entrance Examinations, February 2014 M.Phil. (Economics) Time: 2 Hours Max. Marks: 75
HALL TICKET NUMBER
INSTRUCTIONS
1.
Read these instructions carefully before answering.

2.
Enter your Hall Ticket Number on this page and also on the OMR answer sheet.

3.
Answers are to be marked on the OMR answer she_et following the instructions provided thereon.

4.
Handover the OMR answer sheet at the end ofthe examination.

5.
Use ofnon-programmable calculators is allowed.

6.
There are 75 questions in this paper. The Question Paper has two parts -PART-A and PART-B: the PART-A contains 25 questions and the PART-B contains 50 questions. Marks obtained in PART-A will determine the merit rank in case of a tie in the total number of marks obtained.

7.
Each correctanswer carries one mark.

8.
There is negative marking. Each wrong answer carries -0.33 marks.

9.
This question paper contains 15 pages excluding this cover page but including pages for rough work.


PART-A (There are 2S questions in this part)
1. Which ofthe following is TRUE?
An increase in the price of a Normal good would:

A. reduce the quantity demanded of it by a larger amount on the Hicksian Compensated Demand curve than on the Marshallian Demand curve.
B. Increase the quantity demanded of it by a larger amount on the Hicksian Compensated Demand curve than oli the Marshallian Demand curve.
C. Reduce the quantity demanded of it by a smaller amount on the Hicksian Compensated Demand curve than on the Marshallian Demand curve.
D. Reduce the quantity demanded of it by the same amount on the Hicksian Compensated Demand curve and on the Marshallian Demand curve.
2. Compensating Variation in income measures:
A. The income necessary to compensate a consumer for a price increase so as to leave him at the original level of indifference
B.Changesinthewelfareofanindividualforchanges
inpriceofa commodity

C.
Changes in the utility ofthe individual for changes in prices ofthe commodity

D.
all three ofthe above.


3. Which ofthe following is TRUE? An individual has the following Utility function: U =XtX2 and a fixed income. The Demand functions for this Individual for both the commodities would be
A. Linear and Downward sloping in their own price and income.
B. Functions oftheir own price and the price ofthe substitute good.
C. Rectangular Hyperbolas with respect to their own prices.
D. Would have an elasticity ofdemand greater than unity.
4. If the production function for a good Y is given by Xa where O. The price of input X is w. Ifthe market for Y is competitive, the condition that this would yield a meaningful solution for a rational producer is:
A.a> 1
B. 2
C.a 1
D. Y must be a normal good.
5. Unconditional or Absolute convergence refers to the hypothesis that:
A. Poor countries growth faster the farther away they are from their steady state equilibrium.
B. Rich countries growth faster than poor countries because they have higher savings rates
C. Poor countries grow faster than rich countries
D. Countries with higher levelsofreal percapitatendto have higher levelofsavings
6. According to Ricardian theory, the price ofagricultural produce rises over time because
A. Rent has to be paid on more fertile land as less fertile lands are brought into cultivation
B. Supply of food does not keep up with the demand for food
C. Landlords raise the price ofagricultural produce since they have a monopoly over land
D. The labour content in the production of agricultural products rises as less fertile lands are brought into cultivation



f-S 1

7. Primitive accumulation ofcapital is a process, where
A. Accumulation happens by dispossession of the peasants and petty producers from their means ofproduction and placing in the hands ofcapitalists by the State.
B. Accumulation occurs in primitive communities.
C. Capitalists increase their surplus value.
D. All ofthe above.
8. Neoclassical economists and Marxian economists agree on the following proposition:
A. Firms extract surplus value from workers.
B. Firms pay efficiency wages to extract greater effort from workers.
C. Firms are profit maximizing.
D. Band C above are true.
9. When independent variables are correlated which statistical technique is used?
A. Multiple regression
B. Logistic regression
C.Factor analysis

D. Probit model
10. If the observations of 7 units are 108, 10006, 2 which of the central tendency
. measure is appropriate A.Mean B.Mode
C. Median
D. None ofthe above
11. Stratified sampling is used when
A. Population is homogenous
B. Population is scattered
C. Population is closed
D. Population is heterogeneous
12. Chi-square test is used to test
A. Independence ofattributes
B. Equality oftwo different means
C. Significance of mean from single population
D. Significance ofcorrelation coefficient
13.TheTotalDerivativeofz=(13x-18y)2wherey=x
6 is

A.
-26(13x

B.
26(13x 18y)
C.-I0



D.-10 (l3x 18y)
14. Let function/: S be continuous, Sand T be non-empty convex sets of real numbers. Then the function/has a fixed point, if,
A. T S is bounded.
B. S Tis compact.
C. T T is compact.
D. S S is compact.
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15. Rank ofthe following Matrix
62

1 5 4
4 -8 2
is
A.2
B.3
C.4
D.l
16. The set ofsimultaneous equations: 7x-3y-3z 7 2x+4y+z=0
2y-z=2
has

A. Infinite Solutions
B. Unique Non-Trivial solution
C. Only a trivial Solution
D. No solution
17. India's Current Account Deficit as a proportion of it GDP in 2012-13 has gone up to:
A. 1.8 percent
B. 2.8 percent
C. 3.8 percent
D. 4.8 percent
18. The objectives of Fiscal Responsibility and Budget Management Act 2004 are:
A. to introduce transparent fiscal management systems in the country
B. to introduce a more equitable and manageable distribution of the country's debts over the years
C. to aim for fiscal stability for India in the long run
D. All of the above
19. The total subsidies as share of India's GDP in 2012 is about
A. 2.03 percent
B. 5.5 percent
C. 10.2 percent
D. 20.2 percent
20. Given the supply ofmoney, ifthe government reduces the tax rate which ofthe following is true
A. Equilibrium income and interest rate will decrease
B. Equilibrium income and interest rate will increase
C. Equilibrium income will decrease and interest rate will increase
D. Equilibrium income will increase and interest rate will decrease
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21. "Limit Price" or "limit pricing" is a strategy
A. adopted by the Government to limit the entry of new frrms into the Market
B. adopted by new entrants to undercut the price of incumbents.
C. Adopted by the incumbents to prevent entry by making entry unprofitable to entrants.
D. Adopted by trading countries under the WTO agreements
22. The "Elasticity condition to improve the Trade Balance is:
A. A necessary condition
B. A sufficient condition
c.
Neither necessary nor sufficient condition

D.
Both a necessary and sufficient condition


23. Liquidity Trap occurs when the demand for money
A. Is perfectly interest elastic
B. Is perfectly interest inelastic
C. Leads to an increase in money supply resulting·in a fall in interest rates
D. Leads to an increase in money supply pushing interest rates upwards
24. Business cycles are
A. Short term patterns of increases and decreases in economic activity around a general trend
B. Irregular events, which rarely occur
C. Predictable economic expansions above the long term trend
D. Abrupt departures from the current economic trend
25. Consider a system in equilibrium in classical macroeconomic model. Let nominal money supply be increased by 50 per cent. Then new equilibrium is attained,
A. by restoring the nominal balances at the old level through a 50 percent increase in prices
B. as aggregate supply increases by 50 percent to meet increased aggregate demand
C. by restoring the real balances at the old level through a 50 percent increase in prices
D. as investment is stimulated by a fall in rate of interest
PART-B <There are 50 questions in this part)
26. A monopolist faces the demand curve X 10lp and has a constant marginal cost of 1. His profit maximizing level ofoutput
A. Is equal to ONE unit ofX
B. Is equal to X where, X<l
C. Does not exist
D. Is equal to Zero
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27. There are two firms A and B in the market having zero marginal costs of production. The
demand curve facing this industry is 100 -Y. Which ofthe following statements is TRUE?
A. The competitive output level ofthe industry is 150
B. The equilibrium level of Output in this Industry is 33.33 if they decide to share the Market equally
C. If firm A behaves as the leader and firm B is a follower then the output of firm B would be 10.
D. The cartel output level for the industry is 70.
28. If a monopoly is characterized by constant positive marginal costs of production and faces a linear demand curve, then it is true that the' Dead weight loss due to the monopoly pricing rule will equal to:
A. One halfthe value ofMonopoly profits
B. A quarter ofthe value ofthe monopoly profits
C. Equal to the value ofthe monopoly profits
D. Two-thirds the value ofthe monopoly profits
29. A Monopoly market structure is preferable over a competitive market structure only if:
A. The technology ofproduction is scale neutral.
B. Therearediseconomiesofscaleintheproductionoftheproduct.
C. There are strict economies ofscale in the production ofthe product.
D. Technology uses fixed proportions of inputs.
30. Which of the following statements is FALSE:
A. EconomiesofScaleisasufficientcondition forSub-additivityofCosts
B. Economiesofscaleisnot anecessarycondition fortheSub-additivityofCosts
C. EconomiesofscalenotnecessarybutsufficientfortheSubadditivityofcosts
D. Economies of scale are both a necessary and sufficient condition for the Subadditivity of costs.
31. Which of the following statements is TRUE?
A. A strong Natural monopoly is characterized by Strictly decreasing Average costs of production but can cover its costs by adopting Marginal cost pricing rule.
B. A firm is a Weak natural monopoly if it cannot cover its costs of production by adopting
the marginal cost pricing rule.
,C. A Natural monopoly by definition immune to entry by other firms.

D. A firm is a weak natural monopoly if the costs are sub-additive but not necessarily experiencing decreasing average costs of production.
32. In Schumpeter's theory of Economic development" the main source of finance for innovations comes from:
A. Profits from past economic activity
B. Past savings
C. Bank loans
D. Borrowings from abroad
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33. Ifat the aggregate level, the savings rate is equal to the competitive rate ofprofits then
A. This results in a steady state equilibrium with full employment
B. Maximizes Output
C. Maximizes consumption
D. Maximizes Consumption per capita
34. Which ofthe following statements is TRUE? Public Choice theory is
A. described as "the use ofeconomic tools to deal with traditional problems of political
science"..Itscontent includes the studyofpolitical behavior.

B. is the subset ofpositive.political theory that models voters, politicians, and bureaucrats
as mainly self-interested individuals.

C. is a sub-area ofmicroeconomics.
D. All ofthe above are true.
35.The author ofthe book "The Scope and Method ofPolitical Economy" is:
A. John Stewart Mill
B. John Neville Keynes
C. E.A.G. Robinson
O. Henry Sidgwick
36. What kind ofsampling is used in NSS data collection?
A. Simple random sampling
B. Stratified random sampling
C. Multistage sampling
All ofthe above
37. In a frequency distribution the last cumulative frequenoy is 500. Q3 must lie in:
A. 275th item
B. 375th item
C. 475th item
D. 175th item
38. As a remedy to multicollinearity problem, doing which of the followings may lead to specification bias?
A. Transforming the existing variables into new variables
B. Adding new data to the sample
C. Dropping one ofthe collinear variables
D. First differencing the successive values ofthe variables
39. An estimated econometric relation based on OLS is given as: Yt 0.04 Xlt 1.2 X2t -2.03 X3t 0.14 X4t
(0.11) (1.41) (3.15) (0.02)
Number of observations 541; Standard errors are in parenthesis. Which ofthe variables has statistically significant influence at level?
A. XI
B. X2
C. X3
D. M
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,40.TheHessianDeterminantofthefunction: z=2xl xy 4y2+ xz Zl 2 is given by
482 411 411 114
A. 1 8 0 B. 1 8 8 C. 1 8 0 D. 1 8 0
102 102 102 120

X3J2 <IX
41.
J
A. 2/5 Xl/S
B.2/5
C. 2/5 XS12
D. 5/2 X2/S c
42. The function z=x 2eY-eX -elY
A. Has only one extreme value and this is a miminum value ofthe function.
B. Has no extreme values
C. Has a unique extreme value which is a maximum
D. Has many local maxima
43. Which of the following statements is incorrect?
A. the transpose ofa transposed matrix is equal to the original matrix.
B. the transpose ofthe sum ofmatrices is equal to the sum oftransposed matrices.
C. the transpose of the sum of matrices is not equal to the sum of transposed matrices in reverse order
D. the transpose of the product of two matrices is equal to the product of the transposes of the matrices in reverse order.
44. The set of points that satisfy the equation Y mX, where 0 and Y and X belong to the set ofReal numbers, constitutes
A. A compact set
B. A closed set
C. An open set
D. A bounded set
45. The 73rd 74th Amendments to Constitution of India done in 1993 Pertains to:
A. Centre-State Finances
B. Creationofthree-tierstructure oflocalgovernmentbodies
C. Partial Liberalization
D. Banking Sector Reforms 46. The Commission for Agricultural Costs and Prices sets Minimum Support Prices taking the following criteria into consideration:

A. Inter-crop price parity
B. Inter-sector price parity
C. Cost ofcultivation
D.All ofthem

47. Under targeted public distribution system, NSS survey in 2005 found that 40 percent of the rural poor and 27 percent of urban poor were denied BPL ration cards. This is due to:
A. Inclusion errors
B. Exclusion errors
C. Both inclusion and exclusion errors
D. Enumeration Errors
48. In the monetary policy, the following is considered to be an intermediate target:
A. Interest rate
B. Exchange rate
C. CRR
D. SLR
49. The disparity tax was propounded by
A. Raja Challaiah
B. Gautam Mathur
C. Richard Musgrave
D. Y.V.Reddy
50. In the union budget, profits from public sector undertakings are taken under .
A. Capital receipts
B. Revenue receipts
C. Planned expenditure
D. Non-Plan Expenditures
51. Tax elasticity is the growth oftax revenue due to
A. Growth in the tax rate alone
B. Growth in the tax base alone
C. Growth in the tax base as well as tax rate
D. Growth in indirect taxes
52. Arbitrage entails outcomes where,
A. there is a possibility of sure gain with no possibility of loss.
B. expected gain is strictly positive.
C. probability of gain is very large whereas probability of loss is quite low.
D. value ofpossible gain is higherthan value ofpossible loss.
53. In the secondary market for securities, accrued interest
A. is quoted in the bond price in the financial press.
B. must be paid by the buyer ofthe bond and remitted to the seller ofthe bond.
C. must be paid to the broker for the inconvenience of selling bonds between maturity dates.
D. A. andB.
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54.Theopportunitycost
ofholdingmoney isthe A. Real rate of interest

B.
Inflation rate

C.
Expected inflation rate

D.
Nominal rate of interest


55. The assertion that one cannot consistently achieve returns in excess of average market returns on a risk-adjusted basis, given the information available at the time the investment is made is a logical conclusion of
A. The invisible hand hypothesis ofAdam Smith
B. The assumptions on economic agents by behavioral finance theorists
C. The assumption that agents have rational expectations
D. The assumption that agents work under imperfect information.
56. Market Failure refers to the fact that,
A. Markets do not exist for certain products
B. The Market does not allocate the resources optimally
C. The Market discriminates between different consumers
D. The Market does not function due to regulation by the government
57. Consider two firms which are identical except for their financial structures. The first (Firm is unlevered: that is, it is financed by equity only. The other (Finn is levered: it is financed partly by equity, and partly by debt. Which ofthe following statements is true?
A. The Capital asset pricing Model states that the value of the first firm would be more than the value ofthe second firm
B. The Value of the two firms is the same according to the Capital-Structure irrelevance principle.
C. Value of a firm is unaffected by how it is financed according to the Modigliani­Miller theorem
D. Both Band C are true statements
58.Whichofthefollowing isNOTconsideredtobeaBarrier to.entryoffirms inanindustry?
A. Absolute Costs advantages of incumbent firms
B. Economies of Scale
C. Limit pricing
D. Advertising
59. The pay offmatrix for a game is:
The game has:
A. No Nash Equilibrium
B. Only one Nash Equilibrium
C. Two Nash Equilibria
D. Three Nash Equilibria

F-s1

60. An economy with L commodities (including factors of production) has well defined demand and supply functions for all positive prices. Suppose at price p P2, ... all. firms earn positive profits. Ifprices change from p to kp, where k is a real number, k 1. Then,
A. aggregate demand for each commodity goes down.
B. aggregate supply for each commodity goes up.
C. aggregate excess demand for each commodity goes up.
D. aggregate profit for each firm goes up.
Q.61. Given that the individual preferences be complete orderings over a given set of social states, which of the following collective choice rules provides complete binary relation over the social states?
A. Pareto ranking rule.
B. Kaldor compensation criteria.
C. method ofmajority decision.
D. all ofthe above.
62. Which trade theory holds that nations should produce those goods for which it has the greatest relative advantage?
A. The theory ofabsolute advantage.
B. The factor endowment theory
C. The theory ofrelative advantage.
D. None ofthe above
63. The recent fall in the value ofthe rupee against US dollars is on account ot:
A. decline in foreign exchange reserves.
B. increase in current account deficit.
C. decline in exports.
D. decline in imports.
64. In country it takes 50 labour hours to produce per unit of cloth and 100 labour hours to produce per unit of grain. In country it takes 200 labour hours to produce per unit of cloth and 200 labour hours to produce per unit of grain. At what price would X be willing to trade with
A. More than halfa unit ofgrain per unit ofcloth.
B. Morethanaquarterunit ofclothperunit ofgrain.
C. Morethanaquarterunit ofgrainperunit ofcloth.
D. Morethanhalfaunit ofclothperunit ofgrain
65. The argument that in countries with a large surplus workforce in agriculture, in order to take advantage of network effects, a concentrated planned investment in industrialization must be undertaken was first propounded by:
A. A.a.Hirschman
B. Ragner Nurkse
C. Rosenstein Rodan
D. W.W. Rostow
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66. The World bank's modified human development index has included which of the following in its construction?
A. Poverty
B. Inequality
C. Health
D. Education
67. One ofthe problems ofRural C.redit is seen as:
A. Lack of information on formal credit institutions by rural households
B. Rationing ofcredit by formal credit institutions
C. ReluctanceofformalinstitutionstolendmoneyduetoproblemsofMoralHazard
D.Fear ofretaliation from Money lenders

68. Ifthe Lorenzcurve foracountry is astraight lineof45°, thevalue ofthe Gini Coefficient
A. Is equal to 1
B. Is equal to 0
C. Is equal to 0.5
D. Cannot be calculated
69.The supply curve ofrupees to the currency market will be upward sloping if
A. The demand for Indian Exports is price elastic
B. The demand for Indian Exports is price inelastic
C. The demand for Imports into India is price elastic
D. The demand for Imports into India is price inelastic
70. Assuming that money demand is completely interest insensitive, the
A. LM schedule will be horizontal.
B. LM schedule will be vertical.
C. IS schedule is vertical.
D. IS schedule is horizontal.
71. Traditional Keynesians tend to favor
A. monetary policy over fiscal policy because ofthe effectiveness ofcentral
B. monetary policy over fiscal policy because it reduces interest rates..
C. fiscal policy over monetary policy because it doesn't impact interest rates.
D. fiscal policy over monetary policy because ofthe liquidity trap.
72. In the IS-LM model for a closed economy, the rate ofinterest in determined in the,
A. capital market
B. money market
C. goods market
D. stock market
73. The classical model differs from the Keynesian model in that
A. monetary policy does not impact output in the Keynesian model.
B. the classical model focuses on the long-run and the Keynesian model focuses on the short-run.
C. fiscal policy is more powerful in the classical model than in the Keynesian model.
D. the classical model believes monetary policy is a powerful impact on output and fiscal policy is not.
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F -51

74. The idea ofmistaken expectations leading to an upward sloping aggregate supply curve was given by
A. JMKeynes
B. RLucas
c.
GMankiw

D.
M Friedman


75.LetXandYbetwostatesofsocietysuchthatXisScitovskysuperiorto Y.Then,
A. X is Kaldor superior to Y and Xis Hicks superior to Y.
B. X is Kaldor superior to Y but X is not Hicks superior to Y.
C. X is Kaldor not superior to Y but X is Hicks superior to Y.
D. X is neither Kaldor superior to Y nor is X Hicks superior to Y.

SPACE FOR ROUGH WORK
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