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Managerial Economics · End Term · 31 Aug 2025 (Afternoon)

BSMS3206 · 43 questions · 45 marks · 90 min

Answer key Take as mock

Indian Institute of Technology Madras

BS Degree Programme · Examination & Study Paper

BSMS3206 · Managerial Economics

End Term · 31 Aug 2025 (Afternoon)

Official Paper

Examination Instructions & Guidelines

Solve on notebook/paper first before checking solutions.
MCQ: Exactly 1 option is correct. Negative marking applies.
NAT: Numerical response. No negative marking.
Scientific calculator allowed for all calculations.
Official answer key is sealed at the end of this sheet.

Read the passage below, then answer Q1–Q3
Suppose a profit-maximizing monopolist is producing 800 units of output and is charging a price of ₹40 per unit.
Based on the above data, answer the given subquestions.
Q1NAT2 Marks·Write the number
Key ↓
If the price elasticity of demand for the product is –2, find the marginal cost (in ₹) of the last unit produced ____________
Your answer:
Q2NAT2 Marks·Write the number
Key ↓
What is the firm’s percentage markup of price over marginal cost (as a % of the price)? ___________
Your answer:
Q3NAT2 Marks·Write the number
Key ↓
Suppose that the average cost of the last unit produced is ₹15 and the firm’s fixed cost is ₹2000. Find the firm’s profit (in ₹)___________
Your answer:
Read the passage below, then answer Q4–Q10
Based on the above data, answer the given subquestions.
Q4NAT1 Mark·Write the number
Key ↓
What is Latif’s profit (per car in $) if he does not offer a one-year warranty?______________
Your answer:
Q5NAT1 Mark·Write the number
Key ↓
What is Latif’s profit (per car in $) if he offers a one-year warranty?______________
Your answer:
Q6NAT1 Mark·Write the number
Key ↓
What is Hamid’s profit (per car in $) if Latif’s does not offer a one-year warranty? ___________
Your answer:
Q7NAT1 Mark·Write the number
Key ↓
What is Hamid’s profit (per car in $) if Latif’s offers a one-year warranty? _____________
Your answer:
Q8MCQ1 Mark·Choose one option
Key ↓
Will Latif’s match Hamid’s one-year warranty?
1. AYes
2. BNo
Q9MCQ1 Mark·Choose one option
Key ↓
Is it a good idea for Hamid’s to offer a one-year warranty?
1. AYes
2. BNo
Q10MCQ1 Mark·Choose one option
Key ↓
What if Hamid offers a two-year warranty? Will this generate a credible signal of quality?
1. AYes
2. BNo
Read the passage below, then answer Q11–Q18
Based on the above data, answer the given subquestions.
Q11NAT1 Mark·Write the number
Asked 2 times Key ↓
The equilibrium price of ball pens in the domestic market without any imports will be P*= _______
Your answer:
Q12NAT1 Mark·Write the number
Asked 2 times Key ↓
Consumer surplus in this case will be CS = ____________
Your answer:
Q13NAT1 Mark·Write the number
Asked 2 times Key ↓
Producer surplus in this case will be PS = ____________
Your answer:
Q14NAT1 Mark·Write the number
Asked 2 times Key ↓
In case of import without tariff, how many total units of ball pens will be imported _______________
Your answer:
Q15NAT1 Mark·Write the number
Asked 2 times Key ↓
In case of import without tariff, how many units of ball pens are being supplied by domestic firms ____________
Your answer:
Q16NAT1 Mark·Write the number
Asked 2 times Key ↓
With the tariff, how many units would be imported? ____________
Your answer:
Q17NAT1.5 Marks·Write the number
Asked 2 times Key ↓
How much would domestic producer surplus change compared to the case with imports without tariffs if the government introduces a ₹10 import duty per ball pen?____________
Your answer:
Q18NAT1.5 Marks·Write the number
Asked 2 times Key ↓
How much revenue would the domestic government collect from the imports of ball pens due to this import duty of ₹10? ____________
Your answer:
Read the passage below, then answer Q19–Q28
The market demand curve for pizzas is P=300-Q and the market supply curve is P=60+2Q. A tax of t=15 INR is imposed on one unit of pizza sold. Answer the given subquestions.
Q19MCQ0.5 Marks·Choose one option
Asked 3 times Key ↓
The equilibrium quantity and price before incidence of tax are
1. A
2. B
3. C
4. D
Q20MCQ0.5 Marks·Choose one option
Key ↓
Consumer surplus before incidence of tax is
1. AINR 4500
2. BINR 2700
3. CINR 3200
4. DINR 4200
Q21MCQ0.5 Marks·Choose one option
Key ↓
Producer surplus before incidence of tax is
1. AINR 6400
2. BINR 4600
3. CINR 3700
4. DINR 2700
Q22MCQ0.5 Marks·Choose one option
Asked 2 times Key ↓
The equilibrium quantity after the incidence of tax is
1. A
2. B
3. C
4. D
Q23MCQ0.5 Marks·Choose one option
Asked 2 times Key ↓
The new price that buyer pays after incidence of tax is
1. AP=220 INR
2. BP=190 INR
3. CP=180 INR
4. DP=225 INR
Q24MCQ0.5 Marks·Choose one option
Asked 2 times Key ↓
The net price received by the seller after incidence of tax
1. AP=220 INR
2. BP=225 INR
3. CP=190 INR
4. DP=210 INR
Q25MCQ0.5 Marks·Choose one option
Key ↓
The loss in consumer surplus due to incidence of tax is
1. A527.5 INR
2. B387.5 INR
3. C478.5 INR
4. D268.5 INR
Q26MCQ0.5 Marks·Choose one option
Key ↓
The loss in producer surplus due to incidence of tax is
1. AINR 565
2. BINR 845
3. CINR 775
4. DINR 695
Q27MCQ0.5 Marks·Choose one option
Key ↓
The total tax revenue is
1. AINR 1255
2. BINR 1075
3. CINR 1535
4. DINR 1125
Q28MCQ0.5 Marks·Choose one option
Key ↓
Deadweight loss of tax is
1. AINR 48.5
2. BINR 37.5
3. CINR 89.5
4. DINR 68.5
Read the passage below, then answer Q29–Q30
Based on the above data, answer the given subquestions.
Q29NAT2 Marks·Write the number
Asked 2 times Key ↓
What should be the socially efficient number of hives that the beekeeper should maintain ____________
Your answer:
Q30NAT1 Mark·Write the number
Asked 2 times Key ↓
How many beehives will the beekeeper maintain if we ignore the apple orchard ____________
Your answer:
Read the passage below, then answer Q31–Q32
Imagine that you have been working after college and now face the decision of whether or not to get an MBA at a prestigious institution. The cost of getting the MBA is 10. (Again, you can decide on the denomination, but rest assured that this sum includes the income lost over the course of the two years you will be studying!) Your future value is your stream of income, which depends on the strength of the labor market for the next decade. If the labor market is strong then your income value from having an MBA is 32, while your income value from your current status is 12. If the labor market is average then your income value from having an MBA is 16, while your income value from your current status is 8. If the labor market is weak then your income value from having an MBA is 12, while your income value from your current status is 4. Further assume that the probability of a strong labor market is p, of an average labor market is 0.5 and of a weak labor market is 0.5− p.
Based on the above data, answer the given subquestions.
Q31MCQ2 Marks·Choose one option
Asked 2 times Key ↓
For which values of p will you decide not to get an MBA?
1. A
2. B
3. C
4. D
Q32NAT2 Marks·Write the number
Asked 2 times Key ↓
If P=0.4, what is the highest price the university can charge for you to be willing to go ahead and get an MBA? ____________
Your answer:
Read the passage below, then answer Q33–Q36
Based on the above data, answer the given subquestions.
Q33NAT1 Mark·Write the number
Asked 2 times Key ↓
What price would this monopolist will set? ____________
Your answer:
Q34NAT1 Mark·Write the number
Asked 2 times Key ↓
How many apartments will he offer for rent?____________
Your answer:
Q35NAT1 Mark·Write the number
Asked 2 times Key ↓
What price would he set if he had 40 apartments? ____________
Your answer:
Q36NAT1 Mark·Write the number
Asked 2 times Key ↓
How many would he rent if he had 40 apartments?____________
Your answer:
Q37MCQ1 Mark·Choose one option
Asked 2 times Key ↓
What is true about monopolistic competition
1. AFirms compete by selling differentiated products that are highly, but not perfectly, substitutable
2. BEntry and exit are free in the market
3. CNone
4. DBoth the firms compete by selling differentiated products that are highly, but not perfectly, substitutable and entry and exit are free in the market
Q38MCQ1 Mark·Choose one option
Key ↓
Choose the correct statement
1. AQuasi linear preferences are linear in one good
2. BU = min{ax, by} represents complements
3. CU = ax+by represents substitutes
4. DAll of these
Q39MCQ1 Mark·Choose one option
Asked 2 times Key ↓
Choose the correct alternative
1. AFirst-degree price discrimination is the practice of attempting to price each unit at the consumer’s reservation price
2. BOutcome in First-degree price discrimination is not Pareto efficient
3. CBoth the first-degree price discrimination is the practice of attempting to price each unit at the consumer’s reservation price and outcome in First-degree price discrimination is not Pareto efficient
4. DNone
Q40MCQ1 Mark·Choose one option
Key ↓
Adverse selection occurs when
1. Aa person takes more risks that are not known to the life insurance company because he has life insurance
2. Ba person buys life insurance because he has a risky lifestyle that is not known to the life insurance company
3. Ca person is a risk lover
4. Dpregnant women with health insurance make more doctor visits than uninsured pregnant women
Q41MCQ1 Mark·Choose one option
Asked 2 times Key ↓
Moral hazard occurs when contracts are written in such a way that
1. Athe interests of agent and principal converge
2. Bthe interests of agent and principal diverge
3. Cagents will wish to maximize the principal's utility
4. Dproduction and risk-bearing efficiency are achieved
Q42MCQ1 Mark·Choose one option
Asked 2 times Key ↓
If the income of the consumer increases and the one of the prices decreases at the same time, the consumer will not necessarily be at least as well-off.
1. ATRUE
2. BFALSE
Q43MCQ1 Mark·Choose one option
Asked 3 times Key ↓
A monopolist never produces in
1. AThe inelastic region of market demand curve
2. BThe elastic region of market demand curve
3. CThe whole demand curve
4. DNone of these

Official Key

Master Answer Key & Explanations

Official answer keys from IIT Madras BS past papers. Click any question to review.

Reveal Key

Q120

Q250

Q320000

Q42000

Q52500

Q61500

Q70

Q8A

Q9B

Q10A

Q1150

Q121250 or 1250000

Q131250 or 1250000

Q1460 or 60000

Q1520 or 20000

Q1640 or 40000

Q17250000 or 250

Q18400 or 400000

Q19B

Q20C

Q21A

Q22C

Q23D

Q24D

Q25B

Q26C

Q27D

Q28B

Q296

Q304

Q31D

Q322.8

Q3325

Q3450

Q3530

Q3640

Q37D

Q38D

Q39A

Q40B

Q41B

Q42B

Q43A

Detailed Answer Notes & Working

Q12Answer: 1250 or 1250000: Official answer key accepts 1250 or 1250000.
Q13Answer: 1250 or 1250000: Official answer key accepts 1250 or 1250000.
Q14Answer: 60 or 60000: Official answer key accepts 60 or 60000.
Q15Answer: 20 or 20000: Official answer key accepts 20 or 20000.
Q16Answer: 40 or 40000: Official answer key accepts 40 or 40000.
Q17Answer: 250000 or 250: Official answer key accepts 250000 or 250.
Q18Answer: 400 or 400000: Official answer key accepts 400 or 400000.

Questions and answer keys are reproduced from the official IIT Madras BS papers. BTechi is not affiliated with IIT Madras.