Monday, May 27, 2019

MCQ Walkthrough March 2019 9708/32 (India) (Q11 to Q20)

In this case, % of change in input > % of change in output. That means rising unit costs and therefore has to be decreasing returns to scale. The answer is (B)
Transfer earning is the minimum amount of profit that an enterprise/ entrepreneur must get. Otherwise, he/ she would be better-off by moving his/ her resources to another business venture. This would be equivalent to normal profit. The revenue generated must not only cover total cost (fixed cost and variable cost) but also opportunity cost of the next best business venture. (B) is the answer

Answer is (D). For the same level of income, one is being taxed more than before. That means, the income tax rates have become more progressive. This will reduce the incentive to work as one gets to keep lesser disposable income than before. However, income inequality would be narrowed as the gap between the high and low income is being reduced. Do take note that the lower income group of people are being given more benefits now (negative income tax = benefit/ subsidy)

Economic rent is the area to the left of supply of labour but below the equilibrium wage rate. The largest area would therefore be (C)

The answer is (A). The government is there to improve allocation of resources. However, sometimes, government interventions may do more harm than good. The existing problems become worse or new problems are created. This could be due to problems like regulatory capture, information failure and others

The answer is (D). There will be an expansion in the supply of labour and at the same time contraction in the demand for labour.  This results in rising unemployment especially among the low-skilled

Socially efficient level of output is Q2 where MSB = MSC. To achieve that, the government must move MPC to MSC. Therefore the amount of indirect tax which is given by the vertical distance is VX. Answer is (B)
Actual growth is achieved when a point below the PPC moves closer to the boundary (rise in AD). Potential growth is achieved when there is an outward shift of PPC (rise in LRAS). Answer is (B)
GDP at factor cost = C + I + G + (X - M) - indirect tax  + subsidy. The answer is therefore (A)

Answer is (A). Pension is a transfer payment. It involves payments and receipts of money that do not involve buying and selling. That means there isn't any good or service that is being produced out of it and therefore there are expenditure and income but there isn't any output.

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