BIRLA INSTITUTE OF TECHNOLOGY & SCIENCE, PILANI

SECOND SEMESTER 2018-2019

Tutorial Test 1 (SOLUTION)
A
Course No. : ECON F211 Max. Marks : 24
Course Title : Principles of Economics Duration : 30 mints
Date : 19/01/2019 Weightage : 6%
Q1. Based on your elementary understanding of the scope of economics indicate whether the following areas fall
under Microeconomics or Macroeconomics. Use letters MI for microeconomics and MA for macroeconomics to
indicate your answer in the table given below. (Note: Overwritten/ambiguous answers will NOT be evaluated).
[6Marks]
A B C D E F
MA MI MA MA MI MI 1 mark
each
A) Long term economic growth and poverty alleviation.
B) Wage rate bargaining power of labor union in the steel industries.
C) Differences in inflation rates between South-Asian countries.
D) The Effect of Exchange Rates on competitiveness of Indian economy.
E) Auction of 5G spectrum to telecom companies.
F) The marriage market in India and cooperative behavior of spouses.

Q2.Refer to the statements given below and indicate whether the statement is a Positive statement or a Normative
statement Use letters P for positive or N for normative to indicate your answer in the table given below. (Note:
Overwritten/ambiguous answers will NOT be evaluated). [6 Marks]
A B C D E F
1 mark
N P P P N P
each
A) Higher salaried individuals should pay higher taxes to the government.
B) During economic recession unemployment rates tend to rise.
C) Inflation tends to be high when unemployment is low.
D) Asking companies to cut down environmental pollution will cost jobs.
E) Senior citizens deserve higher pension when inflation in the economy is high.
F) In the upcoming Union Budget 2019 the Indian government is likely to reduce income tax burden for the
salaried class.

Q3. Two individuals Max and Pat are manufacturers and both make Cots and Tables on a daily basis. If Max
devotes all of his time in making cots he can make 20 cots in a day whereas Pat can make only 15 cots if his entire
time goes in making cots. On the other hand Max and Pat can make 15 and 6 tables respectively in a day after
devoting all of their resources in making tables. You are required to: [8 + 4 Marks]
A) Fill the opportunity cost table given below. Note: Overwritten/ambiguous answers will NOT be evaluated.

Opportunity Cost
1 cot 1 Table
Max ¾ or 0.75T 4/3 or 1.33C
Pat 2 marks each
2/5 or 0.4T 5 / 2 or 2.5C
B) Clearly state which Individual has a comparative advantage in producing which commodity.
Solution: MAX has comparative advantage in making TABLES and PAT has
comparative advantage in making COTS. [4 marks]
 BIRLA INSTITUTE OF TECHNOLOGY & SCIENCE, PILANI
SECOND SEMESTER 2018-2019
Tutorial Test 1(SOLUTION) B
Course No. : ECON F211 Max. Marks : 24
Course Title : Principles of Economics Duration : 30 mints
Date : 19/01/2019 Weightage : 6%
Q1. Based on your elementary understanding of the scope of economics indicate whether the following areas fall
under Microeconomics or Macroeconomics. Use letters MI for microeconomics and MA for macroeconomics to
indicate your answer in the table given below. (Note: Overwritten/ambiguous answers will NOT be evaluated).
[6Marks]
A B C D E F
1 mark
MI MA MI MI MA MA each
A) Bankruptcy filing by Indian IT companies since the year 2008.
B) Impact of inflation on the annual import and export in the Indian economy.
C) Fluctuations in automobile sales of Indian auto companies in past three years.
D) The widening gap between research grant required by academic institutions and funds provided by
government agencies.
E) The foreign exchange rate gap between Indian Rupee and Chinese Yuan.
F) Causal relationship between inlation and unemployment rate.

Q2.Refer to the statements given below and indicate whether the statement is a Positive statement or a Normative
statement. Use letters P for positive or N for normative to indicate your answer in the table given below. (Note:
Overwritten/ambiguous answers will NOT be evaluated). [6Marks
A B C D E F
1 mark
P N N N P P each
A) High tax rates cause demotivation among the working class.
B) The government should impose strict pollution guidelines even if it causes discomfort to common people.
C) The Indian government should reduce the income tax in the forthcoming annual budget because the tax rate
is too high for an average Indian.
D) It is right on the part of the Rerserve Bank of India to interfere in the foreign exchange market for
controlling fall in the value of Indian Rupee.
E) The government has decided to have a uniform Goods and Services Tax rate across all goods and services
produced.
F) An increase in the interest rates in an economy will cause a fall in capital investments by companies.

Q3. Two individuals Max and Pat are manufacturers and both make Tables and Cots on a daily basis. If Max
devotes all of his time in making tables he can make 20 tables in a day whereas Pat can make only 15 tables if his
entire time goes in making tables. On the other hand Max and Pat can make 15 and 6 cots respectively in a day after
devoting all of their resources in making cots. You are required to: [8 + 4 Marks]
A) Fill the opportunity cost table given below. Note: Overwritten/ambiguous answers will NOT be evaluated.
Opportunity Cost
1 cot 1 Table
Max 4/3 or 1.33T ¾ or 0.75C
Pat 2 marks each
5 / 2 or 2.5 T 2/5 or 0.4C
B) Clearly state which Individual has a comparative advantage in producing which commodity.
Solution: MAX has comparative advantage in making COTS and PAT has
comparative advantage in making TABLES.
4 marks