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# Board Paper of Class 12-Science 2016 Economics (SET 2) - Solutions

General Instructions:

(i) All questions in both sections are compulsory. However, there is internal choice in some questions.

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

(iii) Question No.1-5 and 16-20 are very short answer questions carrying 1 mark each. They are required to be answered in one sentence.

(iv) Question No.6-8 and 21-23 are short answer questions carrying 3 marks each. Answers to them should not normally exceed 60 words each.

(v) Question No.9-11 and 24-26 are also short answer questions carrying 4 marks each. Answers to them should not normally exceed 70 words each.

(vi) Question No.12-15 and 27-30 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 limit be adhered to as far as possible.

• Question 1
Demand curve of a firm is perfectly elastic under :

(Choose the correct alternative)

(a) Perfect competition

(b) Monopoly

(c) Monopolistic competition

(d) Oligopoly VIEW SOLUTION

• Question 2
Differentiated products is a characteristic of :

(Choose the correct alternative) :

(a) Monopolistic competition only

(b) Oligopoly only

(c) Both monopolistic competition and oligopoly

(d) Monopoly VIEW SOLUTION

• Question 3
A firm is able to sell any quantity of a good at a given price. The firm's marginal revenue will be :

(Choose the correct alternative) :

(a) Greater than Average Revenue

(b) Less than Average Revenue

(c) Equal to Average Revenue

(d) Zero VIEW SOLUTION

• Question 4
When does "change in quantity demanded" take place? VIEW SOLUTION

• Question 5
What happens to the difference between Average Total Cost and Average Variable Cost as production is increased? VIEW SOLUTION

• Question 6
What is minimum price ceiling? Explain its implications.

OR

If the prevailing market price is above the equilibrium price, explain its chain of effects. VIEW SOLUTION

• Question 7
A consumer consumes only two goods X and Y. Marginal utilities of X and Y are 4 and 3 respectively. Price of X and price of Y is Rs 3 per unit. Is consumer in equilibrium? What will be further reaction of the consumer? Give reasons. VIEW SOLUTION

• Question 8
What will be the effect of 10 percent rise in price of a good on its demand if price elasticity of demand is (a) Zero, (b) –1, (c) –2. VIEW SOLUTION

• Question 9
When price of a good rises from Rs 10 to Rs 12 per unit, the producer supplies 10 percent more. Calculate price elasticity of supply. VIEW SOLUTION

• Question 10
Define utility. Explain the Law of Diminishing Marginal Utility. VIEW SOLUTION

• Question 11
Define fixed cost. Give an example. Explain with reason the behaviour of Average Fixed Cost as output is increased.

OR

Define marginal product. State the behaviour of marginal product when only one input is increased and other inputs are hold constant. VIEW SOLUTION

• Question 12
Explain the implications of the following in a perfectly competitive market :

(a) Large number of sellers

(b) Homogeneous products.

OR

Explain the implications of the following in an oligopoly market :

(a) Barriers to entry of new firms

(b) A few or a few big sellers VIEW SOLUTION

• Question 13
Examine the effect of (a) fall in the own price of good X and (b) rise in tax rate on good X, on the supply curve. Use diagrams. VIEW SOLUTION

• Question 14
Explain three properties of indifference curves. VIEW SOLUTION

• Question 15
Why do central problems of an economy arise? Explain the central problem of "for whom to produce"? VIEW SOLUTION

• Question 16
Foreign exchange transactions which are independent of other transactions in the Balance of Payments Account are called :

(Choose the correct alternative)

(a) Current transactions

(b) Capital transactions

(c) Autonomous transactions

(d) Accommodating transactions VIEW SOLUTION

• Question 17
Primary deficit equals :

(Choose the correct alternative)

(a) Borrowings

(b) Interest payments

(c) Borrowings less interest payments

(d) Borrowings and interest payments both VIEW SOLUTION

• Question 18
National income is the sum of factor incomes accruing to :

(Choose the correct alternative)

(a) Nationals

(b) Economic territory

(c) Residents

(d) Both residents and non-residents VIEW SOLUTION

• Question 21
An economy is in equilibrium. Find investment expenditure :
 National income = 1200 Autonomous consumption expenditure = 150 Marginal Propensity to consume = 0.8
VIEW SOLUTION

• Question 22
If nominal income is Rs 500 and price index is 125, calculate real income. VIEW SOLUTION

• Question 23
What is aggregate demand? State its components.

OR

Explain how controlling money supply is helpful in reducing excess demand. VIEW SOLUTION

• Question 24
Explain the role of Cash Reserve Ratio in controlling credit creation. VIEW SOLUTION

• Question 25
Sale of petrol and diesel cars is rising particularly in big cities. Analyse its impact on gross domestic product and welfare. VIEW SOLUTION

• Question 26
Explain the 'medium of exchange' function of money. How has it solved the related problem created by barter?

OR

Explain the 'standard of deferred payment' function of money. How has it solved the related problem created by barter? VIEW SOLUTION

• Question 27
Calculate Net National Product at Market Price and Private income.
 (Rs crores) (i) Net current transfers to abroad 10 (ii) Private final consumption expenditure 500 (iii) Current transfers from government 30 (iv) Net factor income to abroad 20 (v) Net exports (–) 20 (vi ) Net indirect tax 120 (vii) National debt interest 70 (viii) Net domestic capital formation 80 (ix) Income accruing to government 60 (x) Government final consumption expenditure 100
VIEW SOLUTION

• Question 28

(a) In which sub-account and on which side of the Balance of Payments Account such lending is recorded? Give reasons.

(b) Explain the impact of the leading on market exchange rate. VIEW SOLUTION

• Question 29
Given saving curve, derive consumption curve and state the steps in doing so. Use diagram. VIEW SOLUTION

• Question 30
What is the difference between revenue expenditure and capital expenditure? Explain how taxes and government expenditure can be used to influence.

Or

What is the difference between direct tax and indirect tax? Explain the role of government budget in influencing allocation of resources. VIEW SOLUTION
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