1. ECONOMICS FOR ENTREPRENEURS by : DR. T.K. JAIN AFTERSCHO ☺ OL centre for social entrepreneurship sivakamu veterinary hospital road bikaner 334001 rajasthan, india FOR – PGPSE / CSE PARTICIPANTS mobile : 91+9414430763

2. My words.... Here I present a few basic questions on economics. I wish that more people should become entrepreneurs. An ordinary Indian entrepreneur wishes to remain an honest entrepreneur and contribute to the development of nation but we have to strengthen those institutions which truly promote entrepreneurship, not just degree granting institutions. Let us work together to promote knowledge, wisdom, social development and education. We believe in free education for all, free support for all, entrepreneurship opportunities and training for all. Let us work together for these goals. ... I alone cant do much, I need support of perosns like you .......... ...

3. First economics thought ... Classical economics is regarded as the first modern school of economic thought. Its major developers include Adam Smith, Jean-Baptiste Say, David Ricardo, Thomas Malthus and John Stuart Mill. (although Mahavir and Kautilya have given Indian ideas of economics long back).

4. What is theory of value given by classical economics ? Natural prices, according to Petty, Smith, and Ricardo, capture systematic and persistent forces operating at a point in time. Market prices always tend toward natural prices in a process that Smith described as somewhat similar to gravitational attraction.

5. What is monetary theory given by classical economics ? banks can and should control the supply of money. According to their theories, inflation is caused by banks issuing an excessive supply of money. According to proponents of the theory of endogenous money, the supply of money automatically adjusts to the demand, and banks can only control the terms (e.g., the rate of interest) on which loans are made.

6. Who wrote The General Theory of Employment, Interest and Money? John Maynard Keynes

7. Who wrote An Inquiry into the Nature and Causes of The Wealth of Nations? Adam Smith (1776)

8. What is Information asymmetry ? when one competitor has the advantage of more or better information.

9. What is Oligopsony? small number of buyers.

10. What is marginal revenue (MR)? It is the extra revenue that an additional unit of product will bring. It is the additional income from selling one more unit of a good; sometimes equal to price

11. If demand curve is Q=2000+100P, what is inverse demand curve (or price function)? P(Q) = 20 – q / 100

12. If demand curve is Q=2000+100P, what is total revenue curve ? TR(Q) = 20Q – q^2 / 100

13. If demand curve is Q=2000+100P, what is its marginal revenue curve ? MR(Q) = 20 – q / 50

14. What is indifference curve ? an indifference curve is a graph showing different bundles of goods, each measured as to quantity, between which a consumer is indifferent. That is, at each point on the curve, the consumer has no preference for one bundle over another. In other words, they are all equally preferred

15. What is indifference curve of perfect substitute goods?

16. What is indifference curve of perfect complementary goods?

17. What do indifference Curves exhibit ? diminishing marginal rates of substitution

18. What is indifference map? A graph of indifference curves for an individual consumer associated with different utility levels is called an indifference map.

19. Can different people have same indifference map? No An indifference curve describes a set of personal preferences and so can vary from person to person

20. Who started talks about neoclassical economics ? Indirectly : William Stanley Jevons's Theory of Political Economy (1871), Carl Menger's Principles of Economics (1871), and Leon Walras's Elements of Pure Economics (1874 – 1877). These three economists have been said to have begun “the Marginal Revolution”

21. What was the main criticism of neoclassical economics ? The assumption that individuals act rationally

22. What is economics as per Marshall? 1. Economics is a study of mankind; 2. Human life has several aspects—social, religious, economic and political—but economics is concerned only with the economic aspect of life; 3. Promotion of welfare is the ultimate goal, but the term welfare is used in a narrow sense to meet material welfare only.

23. What was contribution of Marshall to economics ? Alfred Marshall (born 26 July 1842 in Bermondsey, London, England, died 13 July 1924 in Cambridge, England) was an English economist and one of the most influential economists of his time, being one of the founders of neoclassical economics . His book, Principles of Economics (1890), brings the ideas of supply and demand, of marginal utility and of the costs of production

24. Name some books written by Marshall? The Pure Theory of Foreign Trade: The Pure Theory of Domestic Values. In 1879 he published The Economics of Industry with his wife Mary Paley Marshall.

25. How did Marshall change economics ? he extended economics away from its classical focus on the market economy and popularized it as a study of human behavior

26. What was marginalist revolution in economics (given by Marshall)? consumers attempt to adjust consumption until marginal utility equals the price The price elasticity of demand was presented by Marshall as an extension of these ideas. Economic welfare, divided into producer surplus and consumer surplus, was contributed by Marshall, and the two are sometimes described eponymously as 'Marshallian surplus.' He used this idea of surplus to analyze the effect of taxes and price shifts on market welfare. Marshall also identified quasi-rents.

27. What is Marshall's industrial district ? Industries are clustered in a small geographical area with high degrees of vertical and horizontal specialisation and a very heavy reliance on market mechanism for exchange. Firms tend to be small and to focus on a single function in the production chain

28. What was the most significant contribution of Marshall? Marshall explained price by the intersection of supply and demand curves. The introduction of different market "periods" was an important innovation of Marshall's (four periods : market, short, long and very long period)

29. What is neo-classical economics ? economics focusing on the determination of prices, outputs, and income distributions in markets through supply and demand

30. Who introduced the term neo-classical economics? The term was originally introduced by Thorstein Veblen in 1900, in his Preconceptions of Economic Science , to distinguish marginalists like Alfred Marshall from those in the Austrian School

31. What are the assumptions of neo-classical economics ? 1. People have rational preferences among outcomes that can be identified and associated with a value. 2. Individuals maximize utility and firms maximize profits. 3. People act independently on the basis of full and relevant information.

32. Who wrote The Wealth of Nations, publishing in 1776? Adam Smith (1723-1790)

33. Who said : "real price of every thing ... is the toil and trouble of acquiring it" Adam Smith

34. What is "the effective birth of economics as a separate discipline” The book by Adam Smith – The Wealth of Nations

35. Name the scholars from classical era , who favoured Adam Smith's ideas? J.B. Say and Walker and others

36. What is the objective of political eonomics ? To increase the wealth of the country

37. What is The Chicago School of economics known for? The Chicago School of economics is best known for its free market advocacy and monetarist

38. What are the ideas of Chicago school of Economics ? market economies are inherently stable if left to themselves and depressions result only from government intervention Friedman, argued that the Great Depression was result of a contraction of the money supply, controlled by the Federal Reserve, and not by the lack of investment as Keynes had argued

39. Trace the origin of contemporary macroeconomics? It derives from John Maynard Keynes, in particular his book The General Theory of Employment, Interest and Money (1936), which ushered in contemporary macroeconomics as a distinct field

40. Which economics studies supply and demand analysis. Market structures, such as perfect competition and monopoly etc? Micro economics

41. Name the scholars of neo-classical economics ? 'neoclassical economics' or 'marginalism' formed from about 1870 to 1910. The term 'economics' was popularized by neoclassical economist Alfred Marshall

42. Who is father of marxian economics ? Marxist (later, Marxian) economics descends from classical economics. It derives from the work of Karl Marx. The first volume of Marx's major work, Das Kapital, was published in German in 1867. In it, Marx focused on the labour theory of value and what he considered to be the exploitation of labour by capital

43. Who criticised the tendency to save ? Malthus, who questioned the automatic tendency of a market economy to produce full employment. He blamed unemployment upon the economy's tendency to limit its spending by saving too much , a theme that lay forgotten until John Maynard Keynes revived it in the 1930s.

44. Was J.S. Mill completely in favour of classical economics ? No John Stuart Mill said : The market might be efficient in allocating resources but not in distributing income, so it is necessary for society to intervene.

45. What was the main idea of classical economics ? Classical economics focused on the tendency of markets to move to long-run equilibrium.

46. Did Adam Smith favour competition? Yes In his famous invisible-hand analogy, Smith argued for the notion that competitive markets tended to advance broader social interests, although driven by narrower self-interest

47. Who lamented at the increasing population? Thomas Robert Malthus, who used the idea of diminishing returns to explain low living standards. Human population, he argued, tended to increase geometrically, outstripping the production of food, which increased arithmetically.

48. What was the period of classical economics ? Adam Smith, whose ideas were called political economy and later classical economics. It included such notables as Thomas Malthus, David Ricardo, and John Stuart Mill writing from about 1770 to 1870.

49. How was Ricardo different from Adam Smith ? While Adam Smith emphasized the production of income, David Ricardo focused on the distribution of income among landowners, workers, and capitalists. Ricardo saw an inherent conflict between landowners on the one hand and labor and capital on the other. He posited that the growth of population and capital, pressing against a fixed supply of land, pushes up rents and holds down wages and profits.

50. What is the other name of neoclassical economics ? Neoclassical economics is also referred as orthodox economics

51. What is the idea of LTV as per Smith ? LTV= labour theory of value Adam Smith held that in a primitive society, the amount of labor put into producing a good determined its exchange value, with exchange value meaning in this case the amount of labor a good can purchase. However, according to Smith, in a more advanced society the market price is no longer proportional to labor cost since the value of the good now includes compensation for the owner of the means of production:

52. What is the difference between LTV and STV ? STV= subjective theory of value The labor theory as an explanation for value contrasts with the subjective theory of value, which says that value of a good is not determined by how much labor was put into it but by its usefulness in satisfying a want and its scarcity

54. Which of these are examples of internal economies of scale ? 1. better use of inputs 2. managerial competencies 3. better information availability 4. technical competencies 5. better resource utilisation answer : all except point no. 3.

55. Which of these are examples of external economies of scale ? 1. better R& D 2. Benefits of concentration 3. Better productivity 4. benefits of specialisation 5. advertising 6. marketing answer : 1,2,4

56. Which of these are diseconomies of scale ? 1. limit of entrepreneurship 2. reduced cost of advertising 3. managerial autonomy 4. inefficiency 5. bureaucracy answer : all except point no. 2.

58. What is the maximum number of sellers in perfect market ? No upper limit (infinite)

59. What is the maximum number of buyers in perfect market Infinite (no limit)

60. What is the condition of equilibrium of a firm ? MR = MC (this is the point of equilibrium)

61. What is profit of a firm in a graph ? TR – TC or volume multiplied to (AR – AC)

62. How many firms are there is duopoly ? Only two sellers

63. What is the loss to the consumers in monopolistic competition ? There is lot of advertising selling and publicity expenses in monopolistic competition, the consumer has to pay for it ultimately, They get a smaller supply compared with what the economy can produce by effectively utilising its productive capacity. The average cost of production is more than the minimum average cost of optimum level of output and the consumers have to bear it in the form of higher prices. They also pay for the selling expenses incurred by the sellers. for a given quality of product they pay a higher price, and for a given price they get an inferior product’.

64. What is the market condition, where each firm has a unique market condition still it can be in equilibrium ? Under monopolistic competition it is possible to see that even when each individual firm produces under conditions of increasing returns, not only the firm under consideration but the entire group of firms can be in equilibrium.

65. Where does LMC curve cuts the LAC ? It cuts at its bottom LMC = long term marginal cost LAC = long term average cost

66. What are the choices available to a firm in monopolistic competition? It can decide about : product quality, product differentiation, and selling costs.

67. What is PSU? Public sector undertaking

68. What are the methods of privatisation? 1. Disinvestment (here Govt. Sells out PSUs to private sector companies) 2. IPO – here govt. Invites public to subscribe to PSU's shares 3. Management – employee buyout: here government employees are given an opportunity to buy stake in the govt. Company 4. Strategic Sale : - here the govt. Sells its strategic stake in PSUs to private sector companies. 5. sale to foreigners/ foreign company (example= maruti)

69. When will the total utility be highest ? When marginal utility will be zero. (answer )

70. What are giffin goods? Inferior goods (consumers buy them because they cant afford normal goods).

71. What are components of modern theory of demand ? 1. income effect 2. substitution effect (traditional theory incorporate law of diminishing marginal utility, addition of new consumers and other such concepts)

72. Is per capita income a study of microeconomics (because in micro economics we study an individual unit)? No it is a macro economics subject

73. Do we have exact science and law in economics ? No because it is about human behaviour

74. Is economics neutral between ends ? It should be but it is not

75. What is difference between value and price ? Value is based on satisfaction / utility to the consumer price is based on cost of the seller and so seller fixes up price as per the cost.

76. What is CETERIS PARIBUS ? It means = other things remaining the same

77. What is deductive reasoning ? Deductive reasoning works from the more general to the more specific. Sometimes this is informally called a "top-down" approach. We might begin with thinking up a theory about our topic of interest. We then narrow that down into more specific hypotheses that we can test. We narrow down even further when we collect observations to address the hypotheses

78. What is inductive reasoning ? nductive reasoning works the other way, moving from specific observations to broader generalizations and theories. Informally, we sometimes call this a "bottom up" approach (please note that it's "bottom up" and not "bottoms up" which is the kind of thing the bartender says to customers when he's trying to close for the night!). In inductive reasoning, we begin with specific observations and measures, begin to detect patterns and regularities, formulate some tentative hypotheses that we can explore, and finally end up developing some general conclusions or theories.

79. What is difference between deductive method and inductive method ? Deductive method of study is widely used in classical economics, but industive method is widely used in modern economics deductive moves from general to particular, but inductive moves from particular to general.

80. What are key assumptions in socialist economics ? 1. State ownership 2. central decision making 3. social welfare is important 4. there should be econoic equality among people 5. rule by proletariat and not by bourgeoises.

81. What is people plan ? This was prepared by M.N. Roy, it was a plan which presented how our country could progress (prepared before independence of India)

82. What is under employment ? When a person is doing work far below his standard / capability, it is called under employment

83. What type of unemployment is found in developing countries ? Structural unemployment : because people have traditional skills, but there are no vacancies for that. There are vacancies for new jobs, for which there are not people

84. What is disguised unemployment ? When far more number of persons are employed when actually the work can be done by only a few persons, it is called disguised unemployment

85. Which department completed 150 years in 2002? Indian Railway It has now over 63000 km of network in our country

86. What is IWT ? Inland water transport : it is estimated that India has 15000km of IWT possibilities

87. What is teledensity in India ? with 621 million telephone(landline and mobile) subscribers and 584 million mobile phone connections as of March 2010 India has teledensity of over 50% and it is the second largest in the world (about to overtake number One – China) Indian Mobile subscriber base grew 10 fold in just 4 years(from 7.56 million subscribers in Dec 2001 to 75.94 million subscribers in Dec 2005) and then over the next 4 years it grew 7 fold (from 75.94 million subscribers in Dec 2005 to 525.94 million subscribers in SDec 2009). In the first quarter of 2010 there have been a record breaking 59.18 million mobile subscriber additions

88. 90 per cent of India's trade by volume (70 per cent in terms of value) is moved by..... (fill in the blank)? Sea

89. What is India's rank in shipping in developing countries ? India has the largest merchant shipping fleet among the developing countries and ranks 20th amongst the countries with the largest cargo carrying fleet with 8.83 million GT as on 01.06.2008 and the average of the fleet being 18 years

90. How many vessels does India has ? 872 vessels (282 overseas vessels with 7.89 million Gt and 13.55 million DWT and 590 coastal vessels with 0.5 million GT and 0.99 million DWT).

91. How many ports does India have ? India has 7,517 km long coastline studded with 13 major ports and 200 non-major port

92. Which are the training institutions relating to shipping etc. ? * Training Ship 'Chanakya'; which conducts (i) Three years B.Sc. degree course in Nautical Sciences under the University of Mumbai, (ii) Pre-Sea training course for Deck Cadets. * Marine Engineering and Research Institute (MERI), Kolkata; which conducts four-year degree course in Marine Engineering under Jadavpur University. * Marine Engineering & Research Institute (MERI), Mumbai; conducts (i) one-year Training Marine Engineering course for graduate Mechanical Engineers and (ii) Three-year B.Sc. degree course in Martime Sciences (polyvalent degree) under the University of Mumbai. * LBS College of Advance Maritime Studies & Research, Mumbai, conducts almost 46 post-sea training courses for serving Marine Officers.

93. What is NREGA? National Rural Employment Guarantee Act 2006

94. What are the features of NREGA? time bound employment guarantee and wage payment within 15 days, incentive-disincentive structure to the State Governments for providing employment as 90 per cent of the cost for employment provided is borne by the Centre or payment of unemployment allowance at their own cost and emphasis on labour intensive works prohibiting the use of contractors and machinery. The Act also mandates 33 percent participation for women.

95. When did NREGA start ? February 2, 2006 In Phase one it was introduced in 200 of the most backward districts of the country. It was implemented in an additional 130 districts in Phase two 2007-2008. As per the initial target, NREGA was to be expanded countrywide in five years. However, in order to bring the whole nation under its safety net and keeping in view the demand, the Scheme was extended to the remaining 274 rural districts of India from April 1, 2008 in Phase III.

97. If banking system has reserves of Rs. 500 crores and reserve requirements are 20%, what is demand deposit that the banking system can support ?? 500 * 100/20 = 2500 crore answer

98. If banking system has reserves of Rs. 500 crores and reserve requirements are 20%, If reserve requirement is increased to 25%, how much can the system take as additional deposits / how much will its capacity reduce in terms of deposits ? 500 * 100/25 = 2000 earlier the deposit was 2500, but now it is 2000 so the system has to pay deposits of 500 crore thus its capacity reduces by 500 cr.

99. What is fixed fiduciary system ? Suppose the government asks RBI to issue upto 5000 crore without any gold / security to back up. This is called fixed fiduciary system if RBI issues more than 5000 crore, it will have to deposit gold for that.

100. What is Proportional reserve system:? According to this system proportion of note issue is backed by metallic reserve and rest of the amount is backed by Govt. securities and bonds. In other words central bank issue notes 25% to 40% of which is backed by gold and rest of 60% to 75% is backed by Govt. securities. The proportional percentage is different from countries to countries.

101. What is percentage deposit system? Under this system the central bank is allowed to hold part of the legal percentage of the reserve in foreign exchange, including currency, foreign bills and deposits in foreign banks. The foreign country should be such where gold standards prevail. (not relevant today as no country follows gold standard today)

102. What are the different systems of notes issue by government ? 1. fixed fiduciary system: here there is a fixed amount upto which currency can be issued 2. proportional system – here currency is issued inproportion to the deposits with the government 3. minimum reserve system – here there are some minimum reserve requiremens. 4. simple deposit system / percentage deposit system

103. What is REPO rate? REPO = repurchase rate it is the rate at which the RBI will repurchase the securities issued by it to banks and financial institutions.

104. What is production theory ? Production theory: quantity of output may change (i) when some factors of production are kept constant (fixed), and others are varied(The law of variable proportions ); or (ii) when all factors of production are varied (law of returns to scale)

105. Which production theory is applicable in short term ? The law of variable proportions

106. Which production theory is applicable in long term ? The law of returns to scale

107. What are the 3 phases of law of variable proportion? phase of increasing returns, phase of constant returns, and phase of diminishing returns.

108. What are assumptions of law of variable proportion? It claims that the extent to which a firm can utilise its inputs does not depend upon their absolute quantities. Instead, this depends upon the proportion in which they are combined. productive efficiency of inputs varies with the proportion in which they are combined, it follows that there will be one combination in which it will be the highest attainable. The combination with highest possible productive efficiency of inputs is termed ‘ideal’ or ‘optimum’ combination. Technology is also assumed to be stable

109. What is the phase when average output is the highest in law of variable proportion. 2 nd phase

110. total output increases throughout this phase, marginal output first increases, reaches its highest value and then starts declining till it is equal to the average output. Name this phase ? 1 st phase in law of variable proportion

111. During this phase, average product of the variable factor keeps declining together with marginal output. Eventually, marginal output may even fall to zero and become negative. Name this phase 3 rd phase of law of variable proportion

112. Which assumption of law of variable proportion is unrealistic ? The assumption regarding the homogeneous units of variable input (specially labour) is not logical. Every unit of labour or worker is different from each other. Secondly, the assumption of constant input prices and technique of productions also seems unrealistic in the present dynamic world.

113. What is the classical stand regarding law returns to scale? The classical economists subscribed to the theory that productive efficiency of inputs depends upon the proportion in which they are combined.

114. What is modern perspective on law of returns to scale ? In modern view, productive efficiency of inputs is affected by both their proportion and their absolute quantitie (scholars like Professor Chamberlin)

115. What is short run? ‘ short run’ does not represent a fixed time period. It is a functional concept and represents that time interval over which the firm is not able to alter every input.In the short term, we have fixed and variable both type of expenses. In the long term every input is variable, therefore there is no fixed cost in the long term.

116. What is literal meaning of economy of scale ? economies of scale denotes ‘saving’ in cost of production with an increase in the scale of output

117. What is difference between internal and external factors in economies of scale ? Internal ones are those which occur due to what we term endogenous (or internal) causes. For example, if we are thinking of a firm, then internal economies and diseconomies arise on account of some actions of the firm itself. Example : marketing, advertising etc. In contrast, external economies and diseconomies result from some exogenous or external causes, The firm has no control on these. Examples : govt. policy

118. What is ‘bilateral monopoly’ If a single buyer is confronted with a single seller,

119. What is monopsony? When we have a single buyer

120. What is necessary condition for a firm ? There is a single unit of entrepreneurship. The restriction of having only one unit of input applies only to entrepreneurship. A firm can have any number of units of other inputs.

121. What is industry ? An industry is a set of firms which are conceptually closely associated in the sense of having some "common" type(s) of activities. It is a set of firms which are producing a certain type of a manufactured good or providing a certain type of service.

122. What is conventional assumption about firm ? a firm always tries to maximise its profit and takes decisions such that this objective is satisfied to the maximum extent possible. These days, however, several economists have expressed doubts about this assumption. They have suggested that a firm may try to aim at some objective other than profit maximisation

123. What are fundamental assumptions of perfect market ? No Transportation cost Free entry and free exit large number of buyers and sellers honomogenous product prices determined purely by demand and supply no single buyer / seller can influence price perfect information perfect mobility of factors of production Economic Rationality

124. What are characteristics of day to day market period ? This time period is also referred to as Day-to-Day Period or simply Market Period. It is that interval of time within which the firm is not able to alter its supply by replenishing it through additional production. It can only sell what it has in stock. Thus the total supply of the firm is limited by stock held by it. Given the existing stock, of course, it has the choice to sell its entire stock, a part of it, or nothing at all. It bases its decision upon the demand conditions and other relevant factors. Normally, it has a "reserve" price below which it is not ready to sell even a single unit of its produc

125. What are the conditions for equilibrium of a firm in short term in perfect market ? two conditions should be satisfied : MR must equal MC and cut it from below; and AR must equal or exceed AVC MR = marginal revenue MC = marginal cost, AR = average revenue AVC = average variable cost

126. How do cost curve behave in long run in comparison to short term? Long term is defined as that period in which the firm has the opportunity of varying all its inputs. There are no fixed costs and therefore, average fixed cost curve vanishes. The average cost (AC) curve denotes average total cost (ATC) curve. In the long run, the firm can decide to go in for any of the alternative plants of different scales.

127. What are conditions for equilibrium of a firm in long term in perfect market ? MC curve must intersect MR curve from below. AR ≥ AC, so that the firm does not incur a loss and close down. (in the long term, AR=AC, as no firm can earn superior profit in long term and no firm whichh is incurring losses, will stay in the long term. )

128. What is difference in the shape of demand curve for a firm and industry in perfect market ? FIRM = A firm has a perfectly elastic demand curve, so its shape is a straight horizontal line. Industry : - demand curve for the industry is always drawn with a negative slope

129. What will be shape of supply curve of an industry in the long term in increasing return? Negative (falling)

130. What will be shape of supply curve of an industry in the long term in decreasing return? Increasing (positive) (supply of quantity will increase only on increase in price)

131. What will be shape of supply curve of an industry in the long term in constant return? Constant

132. What is price discrimination of first degree ? The monopolist may charge a separate price for each unit sold by him.

133. What is price discrimination of second degree ? The monopolist may sell his output in ‘batches’ or ‘lots’, charging a separate price for each batch or lot.

134. What is price discrimination of third degree ? The monopolist may split up the market for his product on the basis of the buyers, He may divide buyers into two or more categories and charge from each category a different price.

135. What is the basic rule for price discrimination ? The basic rule according to W.J. Baumol is that marginal revenue in all the markets should be similar. (discrimination is used when different markets have different elasticities and it is continued till these elasticities reach same point)

136. what is monopolistic competition It is defined as that market structure in which each seller produces a ‘differentiated product’.

137. What are essential features of monopolistic competition ? Product differentiation a large number of sellers perfect knowledge of market all firms have identical cost and demand conditions. (however, there are different selling expenses)

138. ONIDA, videocon, LG, samsung Are all examples of which market ? Monopolistic competition

139. What choices are available to firms in monopolistic competition? Each firm operating under monopolistic competition is thus able to make a choice between alternative combinations of product quality, product differentiation, and selling costs.

140. Why do firms operate at below their capacity in monopolistic competition? negatively sloping demand curves, U-shaped long term average cost curve, free exit and entry of firms, and competition among firms.

141. What is the benefit to the consumers in monopolistic competition? The benefit is in the form of the ‘variety’ of products.

142. What is the loss to the consumers in monopolistic competition? They get a smaller supply compared with what the economy can produce by effectively utilising its productive capacity. The average cost of production is more than the minimum average cost of optimum level of output and the consumers have to bear it in the form of higher prices. They also pay for the selling expenses incurred by the sellers. ‘ for a given quality of product they pay a higher price, and for a given price they get an inferior product’.

143. Why is monopolistic competition so popular ? it is much closer to reality than several other models of market structure. It incorporates the facts of product differentiation and selling costs. Secondly, it can be easily used for the analysis of duopoly and oligopoly.

144. can the the entire group of firms be in equilibrium in monopolistic competition? Yes

145. What are the major hurdles in analysis of monopolistic competition ? What is a group ? Here we assume that there are a number of companies in a group selling differentiated products. Related with the concept of a group of firms, we face the difficulty of defining the meaning of a ‘ close substitute’ .

146. What factors have been ignored by monopolistic competition theory? the demand by final consumers is influenced by the retail dealers because the consumers themselves are not fully aware of the technical qualities of the product.

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150. 2^(2x-1) = 1/(8^(x-3)), what is x? Options : 3,2,0,-2 put x = 2 and you get the answer

151. 3^(4x-2) = 729, what is x? Options : 1,1.5,2,2.5, try to put the value x=2, you get the answer

152. 32^1/3 = 2^x, what is x? Options : 5,3,3/5,5/3 answer :

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