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# Board Paper of Class 12-Commerce 2018 Economics (SET 1) - Solutions

General Instructions:

(i) All questions in both sections are compulsory.

(ii) Marks for questions are indicated against each question.

(iii) Question No.1-4 and 13-16 are very short answer questions carrying 1 mark each. They are required to be answered in one sentence each.

(iv) Question No.5-6 and 17-18 are short answer questions carrying 3 marks each. Answers to them should not normally exceed 60 words each.

(v) Question No.7-9 and 19-21 are also short answer questions carrying 4 marks each. Answers to them should not normally exceed 70 words each.

(vi) Question No.10-12 and 22-24 are long answer questions carrying 6 marks each. Answers to them should not normally exceed 100 words each.

(vii) Answers should be brief and to the point and the above word limits should be adhered to as far as possible.

• Question 2
At what level of production is total cost equal to total fixed cost? VIEW SOLUTION

• Question 3
Which of the following does not cause shift of supply curve of a good?
(Choose the correct alternative)
(a) Price of input
(b) Price of the good
(c) Goods and services tax
(d) Subsidy VIEW SOLUTION

• Question 4
Which of the following measures of price elasticity shows elastic supply?
(Choose the correct alternative)
(a) 0
(b) 0.5
(c) 1.0
(d) 1.5 VIEW SOLUTION

• Question 5
Explain the central problem of "What is produced and in what quantities.".

OR

In what circumstances may the production possibility frontier shift away from the origin? Explain. VIEW SOLUTION

• Question 6
A consumer buys 200 units of a good at a price of Rs 20 per unit. Price elasticity of deamnd is (–) 2. At what price will he be willing to purchase 300 units? Calculate. VIEW SOLUTION

• Question 7
Write a budget line equation of a consumer if the two goods purchased by the consumer, Good X and Good Y are priced at Rs 10 and Rs 5 respectively and the consumer's income is Rs 100.

OR

Define marginal rate of substitution. Explain its behaviour along an indifference curve. VIEW SOLUTION

• Question 8
Explain the conditions of producer's equilibrium under perfect competition. VIEW SOLUTION

• Question 9
Explain the implications of "freedom of entry and exit of firms" under perfect competition. VIEW SOLUTION

• Question 10
A consumer consumes only two goods X and Y. Explain the conditions of consumer's equilibrium using Utility Analysis. VIEW SOLUTION

• Question 11
Draw Average Variable Cost (AVC), Average Total Cost (ATC) and Marginal Cost (MC) curves in a single diagram. State the relation between MC curve and AVC and ATC curves. VIEW SOLUTION

• Question 12
Define price floor. Explain the implications of price floor.

OR

Market of a good is in equilibrium. If the demand for the good 'decreases'. Explain the chain of effects of this change. VIEW SOLUTION

• Question 13
Give one example of negative externalities. VIEW SOLUTION

• Question 14
Credit creation by commercial banks is determined by (Choose the correct alternative)
(a) Cash Reserve Ratio (CRR)
(b) Statutory Liquidity Ratio (SLR)
(c) Initial Deposits
(d) All the above VIEW SOLUTION

• Question 15
State the two components of M1 measure of Money Supply. VIEW SOLUTION

• Question 17
Distinguish between stock and flow variables with suitable examples.

OR

What are capital goods? How are they different from consumption goods? VIEW SOLUTION

• Question 18
Define investment multiplier. How is it related to marginal propensity to consume? VIEW SOLUTION

• Question 19
What is monetary policy? State any three instruments of monetary policy. VIEW SOLUTION

• Question 20

Define full employment in an economy. Discuss the situation when aggregate demand is more than aggregate supply at full employment income level.

OR

What are two alternative ways of determining equilibrium level of income? How are these related?

VIEW SOLUTION

• Question 21
What is ex-Ante consumption? Distinguish between autonomous consumption and induced consumption. VIEW SOLUTION

• Question 22
What is government budget? Explain its major components.

OR

Explain (a) allocation of resources and (b) economic stability as objectives of government budget. VIEW SOLUTION

• Question 23
Discuss briefly the meanings of :
(i) Fixed Exchange Rate
(ii) Flexible Exchange Rate
(iii) Managed Floating Exchange Rate VIEW SOLUTION

• Question 24
Calculate (a) Operating Surplus, and (b) Domestic Income :
 (Rs in crores) (i) Compensation of employees 2,000 (ii) Rent and interest 800 (iii) Indirect taxes 120 (iv) Corporation tax 460 (v) Consumption of fixed capital 100 (vi) Subsidies 20 (vii) Dividend 940 (viii) Undistributed profits 300 (ix) Net factor income to abroad 150 (x) Mixed income 200
VIEW SOLUTION
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