NTA UGC NET/JRF Exam, December-2022 Economics (Shift-II)

Total Questions: 100

31. Which of the following is not true in the case of externality?

Correct Answer: (c) It is based on higher order judgements of right and wrong.
Solution:

There are several ways differentiate between different type of externalities. One way is to consider whether the externalities. One way is to consider whether the externality is positive or negative.

These positive and negative externalities can be further divided into production and consumption externalities.

• An example of an externality is when a factory emits pollution into the air. The people who live near the factory may suffer from health problems as a result of the pollution.

This is an example of a negative externality, as the people who live near the factory did not choose to incur the cost of the pollution.

• It is based on higher order judgements of right and wrong is not true in the case of externality.

32. Compensating variation for a price decrease of a good can be interpreted as.

Correct Answer: (a) Willngness to pay
Solution:

For a price decrease of a good, compensating variation (CV) can be interpreted as the maximum amount consumer is willing to pay to have the price decrease happen :

• CV is a measure of how much money a consumer needs to reach their original utility level after a price change. It's a way to measure the impact of price change on a consumer's welfare.

• CV is calculated by measuring the difference in attaining the initial utility level at the initial and subsequent prices.

e.g. In the case of a price decrease, CV is the maximum amount a consumer is willing to pay to have the price decrease happen.

33. Which of the following is an example of depreciation of natural capital?

Correct Answer: (c) Pollution-control activities by the public sector such as municipal waste treatment
Solution:

Pollution-control activities by the public sector such as municipal waste treatment is an example of depreciation of natural capital.
Important points -
Depreciation of natural capital : This is the value of net losses to natural resources, such as minerals, fossil fuels, forests and similar sources of material and energy inputs into our economy.

34. Equivalent variation for a price increase of a good can be interpreted as.

Correct Answer: (a) Willingness to pay
Solution:

Equivalent variation is a measure of the change in wealth that would have the same effect on consumer welfare as a price change, while income remains unchanged.

It can be interpreted as the amount of money a consumer would accept in lieu of a price change.

Willingness to pay (WTP) is the maximum price at which a consumer will buy a product. WTP can vary from customer to customer for a number of reasons, including difference in age, gender, income, education, and location.

•The equivalent variation of a price increase is positive, while the equivalent variation of a price decrease is negative.

35. According to the specific factors model, which of the following is correct?

Correct Answer: (a) Trade benefits the factor specific to the export sector of each country but hurts the factor specific to the import-competing sectors with ambiguous effects on mobile factors.
Solution:

According to the specific factor model, trade factor mobility benefits the specific sector of each country but causes harm to the specific sector of the country by imports having ambiguous effect on mobile factors.

36. What does 'immiserising growth' argued?

Correct Answer: (a) Export-biased growth by poor nations would worsen their terms of trade so much that they would be worse off than if they had not grown at all.
Solution:

Immiserizing growth is a theoratical economic situation where a country's economic growth can make it worse off than it was before.

It occurs when the gains from economic growth are outweighed by losses due to a negative shift in trade terms.

Immiserising growth export-biased growth by poor nations would worsen their terms of trade so much that they would be worse off thean if they had no grown at all.

37. Which of the following postulates the Gravity Model correctly?

Correct Answer: (b) The larger and the closer the two countries are, the larger the volume of trade between them is expected to be.
Solution:

The gravity model of international trade predicts that the flow of goods between two locations is positively related to their size (or income levels) and negatively related to the distance between them, after controlling for factors that may affect trade.

38. If the nominal tariff rate (t) on consumers of the final commodity is 10 per cent, the ratio of the cost of the imported input to the price of the final commodity in the absence of tariffs (ai) is = 0.8, and the nominal tariff rate on the imported input (ti) = 0, then find the rate of effective protection.

Correct Answer: (c) 50%
Solution:

39. Which of the following are true for ridge lines?

A. They separate the relevant from the irrelevant portions of the isoquants.

B. Along the ridge lines, the slope of the isoquants is either zero or infinite.

C. The relevant segment of the isoquants encolsed pertains to the stage II of production for labour and capital.

D. Producers will never want to operate outside the region enclosed within the ridge lines.

E. The marginal product of both inputslabour and capital is positive but declines for the portion of the isoquants within the ridge lines.

Choose the correct answer from the options given below.

Correct Answer: (d) A, B, C, D and E only
Solution:

Ridge lines: (A) They seperate the relevant from the irrelevant portions of the isoquants.
(B) Along the ridge lines, the slope of the isoquants is either zero or infinite.
(C) The relevant segment of the isoquants enclosed pertains to stage II of production for labour and capital.
(D) Producers will never want to operate outside the region enclosed within the ridge lines.
(E) The Marginal product of both inputs-labour and capital is positive but declines for the portion of the isoquants within the ridge lines.

40. Which of the following are true about a fair game or fair bet?

A. The entry of a fair bet is zero.
B. The person who accepts fair bet is said to be risk lover.
C. Expected value of income from the bet is equal to same amount of income with certainty.
D. The person who refuses a fair bet is said to be risk neutral.
E. The person who refuses a fair bet is said to be risk neutral.
Choose the correct answer from the options given below.

Correct Answer: (d) C and E only
Solution:

The following that are true about a fair game or fair bet
(1) Expected value of income from the bet is equal to the same amount of income with certainty.
(2) The person who refers a fair bet is said to be risk averse.
Important points -
A game which is not biased toward any player. A game in which a given player can always win by playing correctly is therefore called an unfair game.