WBCS(Main)-2002 Economics Paper-I Question Paper

                                                WEST   BENGAL   CIVIL  SERVICE 

                                                           EXAMINATION - 2002

                                                               Economics Paper-I


Time Allowed-3 Hours                                                                                        Full Marks-100 


                               Answer any five questions, taking atleast tow from each group

                                                                       Group - A 


1.  (a)  Explain the difference between marginal cost and average cost.

    (b)  Is it true that the marginal cost would be the same when computed from variable cost as from total cost ?   Explain.

    (c)  What is meant by opportunity cost ?      5 + 7 + 8


2.  (a) How does a competitive firm decide on the amount it will supply ?  Draw diagram to explain your answer. 

    (b) Bring out the main characteristics of a perfectly competitive market.

    (c) Mention some of the sources of market imperfection.      10 + 5 + 5


3.  (a) If the consumer is consuming exactly two goods, and he is always spending all of his money, can both of them be inferior goods ?  Give your reasons.

    (b) Distinguish between the Hicks substitution effect and  the Slutsky substitution effect of a price change.     10+10


4.  It has been argued that firms almost never set prices by aquaring marginal revenue to marginal cost. They follow instead what is known as mark-up pricing principle.   Do you think that this principle has a strong rational basis  ?  Fully Explain.      20


5.  (a) Do you think a consumption tax tends to be more favourable to saving than an income tax ?  Give your reasons.

    (b) Which type of the above tax you advocate for developing countries and why ?     12 + 8


                                                                        Group - B


6.  (a) What is “crowding-out effect” ? 

     (b) The crowding-out effect suggests that expansionary policy will exert less impact on aggregate demand than the basic Keynesian model implies.  Discuss briefly.      6 + 14


7.  Assume that the people expect that inflation will increase. What effect would that produce on the long term rate of interest ?     20


8.  (a)  Define “high-powered money”.

     (b)  How does money affect the economy ?

     (c)  What are the “excess reserves” of a bank ?     4 + 2 + 4


9.  (a)  Why does LM curve slope upwards ?

     (b)  If a Central Bank were to set monetary policy to maintain a constant exchange rate.  what type of LM curve would be the central bank to achieve its objective ?  Explain.      8 + 12


10.  Write Short Notes on the following (Any two)

     (a) Technological dualism,

     (b) Sustainable development,

     (c) Paradox of thrift,

     (d) Stolper-Samuelson theorem.