NIOS Solved Papers: Economics (318) - April' 2013

APRIL’ 2013
Time : 3 Hours ]
[ Maximum Marks : 100]
Note : (i) This Question Paper consists of two Sections, viz., ‘A’ and ‘B’.
(ii) All questions from Section ‘A’ are to be attempted.
(iii) Section ‘B’ has got more than one option. Candidates are required to attempt questions from one option only.
1. What is meant by marginal revenue? When sales increase by one more unit, total revenue increases from R 1,980 to R 2,500. Find marginal revenue.                          2
2. If a curve is upward rising from left to right, how are the two variables related? Give an example of an upward rising curve.                                      2
3. Classify the following as fixed cost or variable cost:                                                                   2
a)      Rent on factory building
b)      Expenditure incurred on raw material
c)       Property taxes
d)      Interest on borrowed capital
4. Define ‘stock’ and ‘flow’ concepts.                                                                                                     2
Ans.:- A stock is measured at one specific time, and represents a quantity existing at that point in time (say December 31, 2004), which may have accumulated in the past.
 A flow variable is measured over an interval of time. Therefore, a flow would be measured per unit of time (say a year).

5. What is value added? What is value added if a firm’s value of output is Rs. 20,000 and intermediate consumption is R 4,990?                                                                   2
Ans.:- Value added is the difference between the price of product or service and the cost of producing it.
                Value added = value of output – intermediate consumption
                Value added = 20,000 – 4,990
                                         = 15010

6. What is mid-point of a class interval and how is it calculated?                                                                                              2
Ans.:-The midpoint of each class interval is called the class midpoint and is sometimes referred to as the class mark. It is the value halfway across the class interval.
The midpoint of a class interval obtained by dividing the sum of the upper and lower limits by 2 for example if the class interval is 10-20 than the midpoint will be 30/2= 15

7. If total fixed cost is R 10,980 and production is zero, find total variable cost and total cost.                                      2
Ans.:- If production is zero than total variable cost and total cost remain same as Rs. 10,980.

8. What is net indirect tax? Find net indirect tax if indirect tax is R 50 crores and subsidy is equal to R 29 crores.               2
Ans.:- Indirect taxes are basically taxes that can be passed on to another entity or individual. It is usually imposed on a manufacturer or supplier who then passes on the tax to the consumer.
Net indirect tax = indirect tax – subsidy
                                = 50 – 29 (crores)
                                = 21 (crores)

9. Give the meaning of the terms ‘market supply’ and ‘market demand’ of a commodity.                                            2
Ans.:- Market Demand:- Demand refers to how much of that  product, item, commodity, or service consumers are willing and able to purchase at a particular price.
Market Supply:- Supply pertains to how much the producers of a product or service are willing to produce can provide to the market with limited amount of resources available.

10. Calculate net national product at factor cost: 5

Rs. (in crores)
1)            Net factor income from abroad 112
2)            Consumption of fixed capital 43
3)            Indirect tax 22
4)            Subsidies 18
5)            GDP at market prices 758

11. What is meant by ‘government budget’? Distinguish between ‘plan’ and ‘non-plan’ expenditures of government.     5
Ans.:- A government budget is an annual statement presenting the revenues and spending for a financial year that is often passed by the legislature, approved by the chief executive or president and presented by the Finance Minister to the nation. The budget is also known as the Annual Financial Statement of the country.
                Distinguish between plan and non-plan expenditures of government:-
Plan Expenditures
a)      components relate to items dealing with long-term socio-economic goals as determined by the ongoing plan process.
b)      They are usually routed through central ministries to state governments for achieving certain desired objectives.
c)       In some cases, the state governments also contribute their own funds to the schemes.
Non-Plan expenditure
a)      interest payments on the loans taken by government of India.
b)      Expenditure incurred on Defence services (EXCEPT Defence Equipment which is a capital expenditure)
c)       Pensions, social services such as healthcare, education, social security etc.

12. What is a production possibility curve? With the help of a production possibility curve, explain ‘growth of resources’. 5
Ans.:- a production-possibility frontier(PPF) or production possibility curve (PPC) is a curve which shows various combinations of the amounts of two goods which can be produced within the given resources and technology/ a graphical representation showing all the possible options of output for two products that can be produced using all factors of production, where the given resources are fully and efficiently utilized per unit time. A PPF illustrates several economic concepts, such as allocative efficiency, economies of scale, opportunity cost (or marginal rate of transformation), productive efficiency, and scarcity of resources (the fundamental economic problem that all societies face).
                Graphically bounding the production set for fixed input quantities, the PPF curve shows the maximum possible production level of one commodity for any given production level of the other , given the existing state of technology. By doing so, it defines productive efficiency in the context of that production set: a point on the frontier indicates efficient use of the available inputs (such as points B,D and C in the graph), a point beneath the curve (such as A) indicates inefficiency, and a point beyond the curve (such as X) indicates impossibility.

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