List of top Economics Questions on Microeconomics asked in IIT JAM EN

Consider the economy described by the following: \[ Y = C + I + G \quad \text{with} \quad Y = 5000, \, G = 1000, \, T = 1000, \quad \text{and} \quad C = 250 + 0.75(Y - T), \] where $ Y $, $ C $, $ I $, $ G $, and $ T $ are national income, private consumption spending, investment expenditure, government expenditure, and tax revenue respectively. In this economy, private saving is ............

Lerner Index ($ L $), a measure of market power, is defined as $ L = \frac{P - MC}{P} $, where $ P $ and $ MC $ are, respectively, price and marginal cost of a firm. If a profit maximizing firm faces the demand curve $ P^2 Q = 7 $, the value of $ L $ is ............ (rounded off to one decimal place).

Demand curve for a commodity in your consumption basket is given by $ P^2 Q^5 = 392.67 $. The absolute value of your own price elasticity of demand for this commodity is ........ (rounded off to one decimal place).

Price of milk of certain brand was Rs.28/litre and Rs.36/litre in the months of September and October of 2015, respectively. Assume equal amounts of money is spent on that brand of milk by a particular family in each of these months. The average monthly price of milk paid by this family during these months is ............ per litre (rounded off to one decimal place).

If average variable cost (AVC) curve is an upward sloping straight line through the origin, then the marginal cost curve will be ............

A firm has two manufacturing plants, 1 and 2 to produce the same product. The total costs of production are given by \[ TC_1 = 500 + 30Q_1 \quad \text{and} \quad TC_2 = 1500 + 20Q_2 \] in plants 1 and 2, respectively, where $Q_1$ and $Q_2$ are the respective quantities. The demand for the product is given by $Q^d = 150 - \dfrac{P}{3}$, where $P$ is the price per unit. The value of $Q_1$ that maximizes the profit of the firm is ___________. (in integer)

The supply and demand curves of a vaccine are \[ q = 14 + 5p \quad \text{and} \quad q = 329 - 5p, \] respectively, where $p$ is the price per unit of vaccine and $q$ is quantity of vaccine. The government decides that the maximum price of the vaccine would be Rs. 25 per unit. To avoid any shortage in supply at the ceiling price, the government also decides to subsidize the sellers so that the market clears. Subsidy is given on per unit basis. The total expenditure of the government in providing the subsidy is Rs. _________. (in integer)

Amar has an endowment of food $F_A = 2$ and water $W_A = 5$. Barun has an endowment of food $F_B = 8$ and water $W_B = 5$. Amar’s utility function is given by \[ U_A(f_A, w_A) = f_A^2 w_A; \] where $f_A$ and $w_A$ are his consumption of food and water, respectively. Barun’s utility function is given by \[ U_B(f_B, w_B) = \min\{f_B, w_B\}; \] where $f_B$ and $w_B$ are his consumption of food and water, respectively. They exchange food and water at prices $p_f$ and $p_w$, respectively, to maximize their utilities. In the competitive equilibrium, $\dfrac{p_f}{p_w}$ equals __________. (in integer)

The utility function of a consumer from consumption of $x_1$ and $x_2$ is given by \[ u(x_1, x_2) = x_1 + 2\sqrt{x_2}. \] At the current prices and income, the consumer’s optimal consumption bundle is given by $(x_1 = 10, x_2 = 10)$. The consumer’s optimal choice of $x_2$, if his income increases by 50% but prices remain unchanged, is __________. (in integer)

A consumer always spends 50% of his monthly income on food. Introduction of value added tax on food items has led to a 20% increase in food prices while his monthly income remained unchanged. The consumer’s price elasticity of demand for food is __________. (in integer)

There are two firms in an oligopolistic industry competing in prices and selling a homogeneous product. Total cost of production for firm $i$ is \[ C_i(q_i) = 10q_i, \quad i = 1, 2; \] where $q_i$ is the quantity produced by firm $i$. Suppose firm $i$ sets price $p_i$ and firm $j$ sets price $p_j$. The market demand faced by firm $i$ is given by \[ q_i(p_i, p_j) = \begin{cases} 100 - p_i, & \text{if } p_i < p_j, \\ 0, & \text{if } p_i > p_j, \\ \dfrac{100 - p_i}{2}, & \text{if } p_i = p_j, \end{cases} \] for all $i, j = 1,2$ and $i \neq j$. Price can only take integer values in this market. Nash equilibrium/equilibria is/are given by

There are two sellers, $H$ and $L$, in a second-hand goods market where product quality varies. The sellers know the quality of their own product but the buyers cannot distinguish the product quality without further information. Sellers’ valuation of their own product is based on the quality. $H$ is willing to sell his product with quality $Q_H$ at a price $P_H$ per unit and $L$ is willing to sell the product with quality $Q_L$ at a price $P_L$ per unit such that \[ Q_H>Q_L \quad \text{and} \quad P_H>P_L. \] This market will suffer from

A monopolist is facing a downward sloping linear market demand. His variable cost of production is zero. The profit maximizing price will

An amateur singer has just recorded his first music album with a recording company. The demand for his album is given by $Q = 40000 - 800P$, where $Q$ is the number of albums sold and $P$ is the price of each album. Furthermore, per unit cost of producing each album is given by Rs. 8. A profit maximizing recording company has offered the following contract options to the singer
(i) 20% of the revenue from the sales of the album;
(ii) Rs. 2 per album sold;
(iii) A fixed fee of Rs. 32,000
Which of the following is/are correct?

There are only two firms in an industry producing a homogeneous product and having identical production technology. The cost function of firm $i$ is \[ C_i(q_i) = q_i^2, \quad \text{for } i = 1,2; \] where $q_i$ is the quantity produced by firm $i$. The market demand for the product is $p = 100 - q$, where $p$ is the unit price and $q = q_1 + q_2$ is the aggregate quantity. Assuming the firms are price takers, the competitive equilibrium solution of $p$ and $q$ in this market is

A monopoly canteen serves packed meals to two groups of consumers, group $X$ and group $Y$. The demand for packed meals for $X$ and $Y$ are given by, \[ Q_X = 200 - 4P \quad \text{and} \quad Q_Y = 300 - P, \] where $P$ is the uniform price per unit. The unit cost of producing each meal is Rs. 50. The value of $P$ (in Rs.) that maximizes the canteen’s profit is

The utility from wealth $(w)$ for an individual is given by $u(w) = \sqrt{w$. The individual owns a risky asset that is equally likely to yield either Rs. 400 or Rs. 900. The risk premium of the asset (in Rs.) is}