List of top Microeconomics Questions on Microeconomics asked in GATE XH-C1

An individual is endowed with income of ₹ 142 and has the utility function $U(x_1,x_2)=x_2(x_1+1)$, where $x_1\ge 0,\; x_2\ge 0$. The unit price of $x_1$ is ₹ 2 and the unit price of $x_2$ is ₹ 3. The utility maximizing bundle is

A monopolist faces $Q=\dfrac{100}{(P-1)}$ with $P>1$. Average variable cost is $AVC=\dfrac{4}{\sqrt{Q}}$ and fixed cost is $10$. Find the profit–maximizing price (integer).

A firm in perfect competition has $TC(Q)=a+b(Q)$, where $a$ is fixed cost and $b(Q)$ is variable cost. What happens if the fixed cost increases?

The demand and supply functions for a commodity are $D(p)=10-2p$ and $S(p)=-2+p$, respectively (}p in USD\textbf{). If the government sets a price ceiling of USD 3 per unit, then the increase in consumer surplus (USD) is _______ (round off to two decimal places).

A duopoly faces inverse demand $p=120-Q$ (Rs.), with total output $Q=q_A+q_B$. Firm A’s constant marginal cost is Rs.\ 20, which is exactly half of Firm B’s constant marginal cost. There are no fixed costs. If a Cournot–Nash equilibrium exists, $Q$ is _____(in integer).

Consider the short-run cost function $C(q)=10q^{3}-80q^{2}+300q+50$. At the minimum average variable cost (AVC), the value of marginal cost (MC) is ____________ (in integer).

Suppose the own price elasticity of demand and income elasticity of demand are $e_p$ and $e_I$, respectively. Identify the correct statement(s).

In a competitive market for dry-cleaning, the inverse market demand function is given by: \[ P = 100 - Q \] where $ P $ denotes price and $ Q $ denotes quantity. The (private) marginal cost (MC) of production for all the dry-cleaning firms together is given by: \[ MC = 20 + 2Q \] The market pollution generated by the dry-cleaning processes of all firms creates external damages given by the marginal external cost (MEC): \[ MEC = 2Q. \] The socially efficient output of dry-cleaning is _________ (in integer).

Tom and Jerry both arrive at a petrol pump. Without worrying about price, Tom says, “I want 10 liters of petrol.” Also, without worrying about price, Jerry says, “I want petrol worth 1000 rupees.” The own price elasticities of demand for Tom (denoted by $ \varepsilon_T $) and Jerry (denoted by $ \varepsilon_J $) are:

Which of the following variables are pushed upwards by ‘Seigniorage’?

Suppose Raju enters the job market at age 25 and earns annual income of Rs. 6000. He retires at age 65 and his life expectancy is 75 years. He does not own any assets. Assume that Raju consumes annual income uniformly over his lifetime. What will be his average propensity to consume during employment years?

Suppose the estimated consumption equation of an economy is: \[ C = 40 + \beta Y_d \] where $Y_d$ is the personal disposable income, $\beta$ is the marginal propensity to consume (MPC). Government expenditure $G$ is given as 90. Total tax ($T_x$) received is $\delta Y$, where $Y$ is aggregate output or real income and $\delta$ is tax to real income proportionality factor. Autonomous investment $I_A$ is given as 80. What are the tax revenue and budget surplus of the government when $\beta = 0.75$ and $\delta = 0.20$? All units are measured in constant rupees.

Suppose a firm has the following production function:
\[ f(x_1, x_2, x_3, x_4) = \min{x_1, x_2} + \min{x_3, x_4} \] The per unit cost of input $ x_i $ is given by $ w_i $, where $ i = 1, 2, 3, 4 $. Suppose that $ w_1 = 1, w_2 = 5, w_3 = 3, $ and $ w_4 = 6 $. If the firm is minimizing cost, which of the following input choices by the firm can be observed?

Suppose that a firm has a technology represented by the following production function: \[ Y(K, L) = K^x L^y \] where $ K $ denotes capital, $ L $ denotes labour, $ Y $ denotes the maximum output that is possible to produce using capital $ K $ and labour $ L $. $ x $ and $ y $ are two positive real numbers. It is also known that the production function satisfies constant returns to scale. Then which of the following is true?

Two farmers, Rohit and Harish, graze their animals on a common land. They can choose to use this common resource ‘lightly’ or ‘heavily’ and the resulting strategic interaction may be described as a simultaneous-move game. The payoff matrix is given below:

The minimum value of the discount rate (where the discount rate is less than one) under infinite repetition of the game where the threat strategy (“Graze lightly if the opponent also grazes lightly, whereas, if the opponent reneges then always graze heavily in all the future periods”), is a Sub-game Perfect Nash Equilibrium (SPNE) and, both the farmers graze their animals lightly is _________ (round off to one decimal place).

Consider an intersection of roads without any traffic light. Two cars A and B approach an intersection and they want to proceed as indicated by respective arrows in the following diagram. If both proceed without stopping and there is an accident, then A would have a payoff of -100 and B would have a payoff of -500 (since B is responsible for the accident). If one stops, and the other proceeds then the payoff is: -5 and 10, respectively. If both of them stop, then it takes a little longer to reach their respective destinations, they have a payoff of -5 each. Find the Pure Strategy Nash Equilibrium (PSNE) of the players (Car drivers).

Walras’ Law implies that if there are $ N $ markets in the economy, then one only needs to find equilibrium prices in