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									             MASTER OF ARTS (ECONOMICS)
                       Term-End Examination
                                June, 2OOG

             MEC-001 : MICROECONOMIC

Time : 3 hours                                               Maximum Mqrks: 700

Nofe    .'   Attempt    questions t'rom each section qs directed.

                                SECTION A
       Answer two questions
                          from this section.                              2x20

l.     Supposean economyhas two consumers and B and two
       commodities1 and 2. The endowments the two agents

       arerespectively.= (*1, *l) and*" = (*1, *3)'
       The utility functions are Cobb-Douglas:
                                  ,   < ' d   r   . ' 1- a
                          uo : (*i) (.i)                     and

                          u" = (*l) ()(;)
                                  ,   , rb    ,   ttl-b

       w i t h0 < a , b < 1 .
       (a)                     demandfunctions.
             Solve the consumers
       (b)   Use the feasibility condition to solve for relative

MEC-001                                                                   P.T.O.
2 . What do you mean by social welfare function ? Explain
     different approachesadopted in its construction.Which of
     these would you prefer ? Why ?

3.   Discuss Baumol's static model of sales revenue
     maximisation.Why would you accept it as an alternativeto
     the traditional models ?

4 . What kind of moral hazard problem would you expect to
     be faced by insurance companies ? Why ? Suggest
     strategiesto be adopted by these companiesto taclde the
     problem of moral hazard. Give reasonsin support of your

                       SECTION B
     Answer tour questionsfrom this section.                    4x70

5 . Explain the two principles of justice formulatedby Rawls.

6.   What is meant by the Slutsky equation ? What are the
     signs of the terms in the Slutskyequation for x, if xt is a
     normal good ? What are the signsof the terms if xt is a
     Giffen good ?

7 . Suppose there are two goods which you consume. In the
     year-l you consume C, and in the !ear:2 Cr. The
     endowments the two yearsare ^t = 75 and m, : 720.
     If the interest rate r = 20o/oand your utility function is
                                    how much you plan to
     U(Cl, Cz) : C?t Cl'z , determine
     spend in each year and how much you would like to
     borrow or lend in the first vear.

8.   Suppose a price discriminating monopolist can separate
     the buyers into two groups. The demand curve for
     Group-1 is P. : 3= 1 -: 2
                 r                 - 0, r
                                            and that of Group-2is

     P2 : 10 -         ,rwhere   Q, and Q, indicategoods sold.
     Supposethe total costs are given by

         C(Q) : 3 + 2Q * |       q2with Q, + Qo : Q.

     Determine the profit maximising prices and outputs in
     each market.

MEC-001                                                         P.T.O.
9.   Define the conceptof Nash equilibrium.    Using the method
     of iterated elimination of strictly dominated strategies,find
     the Nash equilibriumof the following game :

                                           Plaver 2

                                 left      middle       right

                     up         ( 1 ,0 )    (r, 2)      (0, 1)
      Player 1
                    down        (0, 3)      (0, 1)      (2, 0)

lO. How do you determine the retums to scale when the
    production function is homogeneous? When MP' and
    MP^ can be shown to be functions of (K/L) if the
    productionfunction is q : p16, L) ? Show this result.

                           SECTION C
                                       section'                           2x70
        Answer tuto questionsfrom this

ll.     Define the followingterms :
        (i)         CES Production Function
        (ii)        Self-Selection
        (iiil        Cartel
        (iv) Stage garne
         (v)         Limit Price StrategY

 12. Answer as directed:
                                                      an inferior good' lf
         (i)         Supposethat you are producing
                                                          falls' what will
                     the income level of the economy
                                                      Explain the process
                     happen to your level of profit ?
                      to reach Your answer'
                                                         are considering to
          (iil        Your current wealth is 49 ' You
                                                            {air coin' If head
                      participatein a gambleof tossinga
                                                        you lose 13' If your
                      turns up, you get 15 otherwise
                                                           you participatein
                      utility function is U. = w0'5' would
                      the gamble ? ExPlain Your answer'

      13. Write short notes on :
              (i)      Coumot model of duoPolY
              (ir)     EnveloPeTheorem

                     Term-End Examination
                            June, 2006


Time :3 hours                                  Mqximum Morks : 700

Note :       Attempt questionst'rom each.sectionas directed'

                              SECTION A
         Long Answer Questions : Answerany two questions
         from this section in qbout 500 words each.

     '                                                          '   20
1.       Criticallyexaminethe Solow model of economicgrowth'

2.       What iS the puzzle in the consumptiondata highlighted by
         Kuznets ? How'does the permanent income hypothesis
         solve this puzzle ?                                      20

3.       What does the Phillips curve convey ? Why is the Phillips
         curve a'vertical straight line in the long-run ?          20

4.       In an open economy with perfect mobility of capital and
         flexible exchangerate, explain the role of monetary policy' 20

MEC-002                                                          P.T.O.
                           SECTION B
     Medium Answer Questions : Answer any three
     questionsfrom this section in about 250 words each.

5.   Aggregatesupplycurveis positively   slopedin the short run
     but verticalin the long run. Explain.                      12

6.   How does the efficiencywage theory justify the existence
     of higher than market-clearing wage rate ?
                                  real                        12

7.   On what grounds does Lucas criticisemacroeconometric
     models?                                              n

8.   Supply curve of foreign currency is upward sloping.
     Explain.                                            72

9.   Explain the reasons behind the rigidity in prices on the
     basisof new Keynesian theories.                          12

lO. What determinesthe value of investment
                                         multiplier in the
    Keynesianmodel ? Explainwith an example.               12

                        SECTION C
    Short Answer Quesfions : Answer any three
    questionsfrom this sectionin sbout 700 words eqch.

I l. Distinguish between the concepts of        friitional
     unemployment and structuralunemployment.

12. Distinguishbetweenthe conceptsof adaptiveexpectations
    and rational expectations.                            I

13. Explainthe conceptof liquiditytrap.                      I

14. Bring out the significance of the search theory of

15. Write a short note on the insider-outsider
                                             model of

16. Write a short note on the new classicalbusinesscvcle

MEC-OO2                                                 3.000
                       Term-End Examination
                            June, 2006

             MEC-003: OUANTITATIVE
T i m e, 3 h o u r s                                       Marks: 100

Note :       Answer tuso questionst'rom Section A, four from
             SectionB qnd two lrom Section C'

                              SECTION A
       Answer any tuio questionst'rom this section'             2x20

l.    (i)    Explain the meaning of necessaryand sufficient
             conditionsencountered optimisationproblems'

      (ii)   A monopoly firm producestwo productsand faces
             the demandfunctions,
             If its total cost function is given as
              find the profit maximising necessaryand sufficient
              conditionsand get the equilibriumoutput, profit and

 MEC-OO3                                                        P.T.O.
 2.    (i)    Write a differentialequationof first order and list the
              stepsyou will passthrough for obtainingits solution.
       (ii)   If the productionfunction is given as q = A Lo Kl-o,
              where A is a positiveconstantand 0 < d < 1, follow
              the logic of Solow's growth model to solve for K
              using differentialequation.You know that a constant
              fraction s of output is saved with 0 < s < 1.
              Moreover, you also know that the saving is used to
              augmentthe capitalstock.

3.    (i)     What is an input coefficientmatrix ?
      (ii)    You are given the followingtechnologymatrix. Find
              the equilibriumprices if the wage rate is Rs. 10 per
                          Steel      Coal     Final Demand
                Steel      0.4       0.1             50
                Coal       0'7       0.6           100
               Labour       5         2

4.    (i)     Discussthe assumptions
                                   made in formulatinga linear
      (ii)    Using Simplex method, solvethe problem :
              Maximisen = 5x, + 2x, + 5xa

                   lt't oor '2ll lf ," '=f 1o8
                                           ' l
              subjec     l        *                   |
                        L ' , ' 1 1 , L," l
                       SECTION B
     Answer any tour questionsfrom this section.                   4x10

5.   You are given a Cobb-Douglas production function,
     q = A 1ct141-o with A, a > 0 and q, L and K are level of
     output, labour and capital respectively. Prove that it is
     homogeneous degree1 and explainits meaning.

6.   Find the extreme value(s) the equationq : Pz -
                             of                                6 and
     determine whether they are maxima or minima.

7.   Let the consumer'sdemand function be p = 20 -               q,.
                         surplusfor p = 3.
     Derive the consumer's

8.   Find the time path represented the equation
             /      a\t
     y' , = 2 1 - ; l + 9 .
             \      c)

9.   Use Cramer's rule to solve the following national income
     model :
                 Y = C + l + G        a n dC = a + b Y

                             betweenheightand weight for a
1O. The correlationcoefficient
    group of 20 Indian adult males was found to be 0'203.
     Test if there is any correlation between these traits in the
     population. You are given the table valuesof
     t o . o z s1 8 : 2 . 1 0 1 u n d t o . o o s ,   2.878.

MEC-OO3                                                           P.T.O.
                              SECTION C
     Answer any two questionsfrom this s,ection.                 2x70

11. Define the followingterms :
     (i)    Type II error
     (ii)   Monotone function
     (iii) Inversefunction
     (iv) L'Hospital's rule
     (v)    Homogeneousfunction

12. Answer the followingas directed:
     (i)    Use Lagrange multiplier method to find the
            stationary value of z, if z : x - 3y - xy subject to
            x + Y : [ '
     (ii)   Find the limit of the function
                  Y=         w n e nx - ) u '

f 3. (i)    From the function 0(x) = =,           find the Taylor's
            serieswith n : 4 and xo = -      2.
     (ii)   Find the inner product of the following pair of
            vectors :
            (2, 3, 4) and (4, 5, 5).

MEC-003                                                          3.000
                       Term-End Examination
                            June, 2006

                  :         OF
                 AND DEVELOPMENT

T i m e: 3 h o u r s                        Maximum Marks : 100'

Note z       Attempt questionslrom each section as instructed'

                              SECTION A
                        (Long Answer Questions)

       Answer ony two queslionsfrom this section'         2x20=40

1.    What do you understandby economic growth ? How does
      it differ from economic development ? What is the
      importance of economic growth ?

 2.    Describe the structure of the Solow model of economic
       growth. Compare the Solow model with the
       Harrod-Domar model.

 MEC-OO4                                                     P.T.O.
3.   Describe the structure of Kaldor's model of economic
     groMh. Compare Kaldor's model of growth with Joan
     Robinson'smodel of growth.

4.   Explain the concept of market failure. Discuss its main

                               SECTION B

                  (Medium-length Answer Questions)

         Answer any three questionst'rom this section.       3x72:36

    5.         the role of norms in economicdevelopment.

    6.   Describe the benefits of inter-linked tranqactionsin rural
         areas of developingnations.

    7.   Explain Marx's theory of declining rate of profit in a

    8.                                   model of economic
         Describethe basicGrossman-Helpman

    9.   Describe                                       and
                 A.K. Sen'sapproachto choiceof techniques
         examine this model.

    MEC-004                                                      P.T.O.
                            SECTION C
                    (Short Answer Questions)

      Answer any three questionst'rom this section.          3x8:

1O. What are the factors that affect total factor productivity ?

ll.   Explain Hicks's classification technicalchange.

12. Distinguish between nominal and eflective tariff rate.
    Expfain the concept oI elfectiverate of protection.

1 3 . Explain the concept of shadow prices.

14. Distinguish betuteenthe Head-Count Ratio and the
      Index of pou?:rtymeasure.

MEC-004                           4
                       Term-End Examination
                           June, 2OO6


T i m e: 3 h o u r s                         Moximum Morks: 700

Note :       Answer the questionsas per insfructions giuen lor
             esch section.

                             SECTION A
                                                  in about
       Attempt any two questionsfrom this section
       600 words each.

                                                       What is
 1 . Explain the variousdimensionsof poverty in India'
                                                           in this
       the role of different poverty alleviationprogrammes
       context ? Also suggest measures to make
       programmesmore effective.

                                                           as the
 2 . Do you still consider the agriculturalsector in India
                                                         on the
       backbone of the economy ? Also comment
                                                         has not
       statement : "Declining share of agriculturein GDP
       been accompaniedby commensuratedecline in
        in agriculhrre."

3 . Evaluate the growth of economic infrastructure in India.
     Has it been adequateto meet the growth requirementsof
     the economy ? Give reasonsin support of your answer.

4.   "The fiscal position of both Centre and States has been
     under stress." Explain. Suggestmeasures improve this

                              t'rom this section about
     Attempt any four questions                 in
     250 words each.                               4x10=40

5.   "Economic policy in India is purely a political process.

6.   Do you agree that India's economic performanceduring
     1950 - 2000 has been lessthan satisfactory    both on the
     basisof capitalisticindex of growth rates or the
     indices of eradicationof poverty and reduction of income
     inequalities Give reasonsin supportof your answer.

7.   "The shift from the direct instruments monetary policy
     to indirect instrumentshas been made possiblethrough a
     seriesof carefullycraftedreforms." Elaborate.

8.   Explain the consequences a fall in public investmentin

9.   Do you think India has moved into more competitive
     industrial environment in the post-reform period ? Give

lO. "Economic growth bringsabout changes the structureof
    foreign trade." Examinethis statementin the light of the
    growth.experience the Indian economyin recentyears'

MEC-OO5                                                        P.T.O.
                           SECTION C
    Answer o,II the questionsfrom this section.       2x10=20

11. Write short notes on any tuto of the following (each in
    about 50 words) :                                  2xS=10
    (i)    Value Added Tax in India (VAT)
    (ii)   The need for regulationof MNCs in India
    (iii) India and WTO
    (iv) Market Capitalisation

12. Explain the djstinction between any two of the following
    (eachin about 50 words):                             2xS=10
    (i)    De-materialisation Demutualisation
    (ii)   Membership based organisations (MBOs) and
    (iii) Fiscaldeficit and Primary deficit
    (iv) Portfolio investment
                            and Foreign Direct Investment

MEC-OOs                                                 3,000

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