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

BSMS3206 · 37 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 (Forenoon)

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–Q8
Based on the above data, answer the given subquestions.
Q1NAT1 Mark·Write the number
Asked 2 times Key ↓
Your answer:
Q2NAT1 Mark·Write the number
Asked 2 times Key ↓
Consumer surplus in this case will be CS = _____________
Your answer:
Q3NAT1 Mark·Write the number
Asked 2 times Key ↓
Producer surplus in this case will be PS = ______________
Your answer:
Q4NAT1 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:
Q5NAT1 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:
Q6NAT1 Mark·Write the number
Asked 2 times Key ↓
With the tariff, how many units would be imported? _____________
Your answer:
Q7NAT1.5 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:
Q8NAT1.5 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 Q9–Q10
A beekeeper lives adjacent to an apple orchard. The orchard owner benefits from the bees because each hive pollinates about one acre of apple trees. The orchard owner pays nothing for this service, however, because the bees come to the orchard without his having to do anything. Because there are not enough bees to pollinate the entire orchard, the orchard owner must complete the pollination by artificial means, at a cost of $10 per acre of trees.
Beekeeping has a marginal cost MC=10+5Q, where Q is the number of beehives. Each hive yields $50 worth of honey.
Based on the above data, answer the given subquestions.
Q9NAT2 Marks·Write the number
Asked 2 times Key ↓
What should be the socially efficient number of hives that the beekeeper should maintain ____________
Your answer:
Q10NAT1 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 Q11–Q12
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.
Q11MCQ2 Marks·Choose one option
Asked 2 times Key ↓
For which values of p will you decide to get an MBA?
1. A
2. B
3. C
4. D
Q12NAT2 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 Q13–Q16
Recall the example of apartments’ market discussed in the week 1. Suppose the demand curve faced by a monopolist apartment owner who has 60 apartments is D(p) = 100−2p.
Based on the above data, answer the given subquestions.
Q13NAT1 Mark·Write the number
Asked 2 times Key ↓
What price would this monopolist will set? ____________
Your answer:
Q14NAT1 Mark·Write the number
Asked 2 times Key ↓
How many apartments will he offer for rent? _____________
Your answer:
Q15NAT1 Mark·Write the number
Asked 2 times Key ↓
What price would he set if he had 40 apartments? _____________
Your answer:
Q16NAT1 Mark·Write the number
Asked 2 times Key ↓
How many would he rent if he had 40 apartments? ______________
Your answer:
Read the passage below, then answer Q17–Q25
A monopolist can produce at a constant average (and marginal) cost of AC = MC = $5. It faces a market demand curve given by Q = 53 – P.
Based on the above data, answer the given subquestions.
Q17NAT1 Mark·Write the number
Asked 2 times Key ↓
Your answer:
Q18NAT1 Mark·Write the number
Asked 2 times Key ↓
Your answer:
Q19NAT1 Mark·Write the number
Asked 2 times Key ↓
What will be the profit of this monopolist? Profit = _____________
Your answer:
Q20NAT1 Mark·Write the number
Key ↓
Suppose a second firm enters the market. Let Q_1 be the output of the first firm and Q_2 be the output of the second. Market demand is now given by Q_1 + Q_2 = 53 – P. Assuming that this second firm has the same costs as the first and the firms are competing as per the Cournot competition, find out the equilibrium quantity for both firms, equilibrium price and difference in profit of a firm compared to monopolist case.
Your answer:
Q21NAT1 Mark·Write the number
Key ↓
Suppose a second firm enters the market. Let Q_1 be the output of the first firm and Q_2 be the output of the second. Market demand is now given by Q_1 + Q_2 = 53 – P. Assuming that this second firm has the same costs as the first and the firms are competing as per the Cournot competition, find out the equilibrium quantity for both firms, equilibrium price and difference in profit of a firm compared to monopolist case.
Your answer:
Q22NAT1 Mark·Write the number
Key ↓
Suppose a second firm enters the market. Let Q_1 be the output of the first firm and Q_2 be the output of the second. Market demand is now given by Q_1 + Q_2 = 53 – P. Assuming that this second firm has the same costs as the first and the firms are competing as per the Cournot competition, find out the equilibrium quantity for both firms, equilibrium price and difference in profit of a firm compared to monopolist case.
Your answer:
Q23NAT2 Marks·Write the number
Key ↓
Suppose a second firm enters the market. Let Q_1 be the output of the first firm and Q_2 be the output of the second. Market demand is now given by Q_1 + Q_2 = 53 – P. Assuming that this second firm has the same costs as the first and the firms are competing as per the Cournot competition, find out the equilibrium quantity for both firms, equilibrium price and difference in profit of a firm compared to monopolist case. Now suppose that the two firms are competing in the Stackelberg manner where one of the firms makes its output decision before the other. Suppose Firm 1 is the Stackelberg leader (i.e., makes its output decisions before Firm 2). Calculate the equilibrium quantity for both the firms, equilibrium market price and difference in profit of both firms compared to Cournot case.
Your answer:
Q24NAT1 Mark·Write the number
Key ↓
Suppose a second firm enters the market. Let Q_1 be the output of the first firm and Q_2 be the output of the second. Market demand is now given by Q_1 + Q_2 = 53 – P. Assuming that this second firm has the same costs as the first and the firms are competing as per the Cournot competition, find out the equilibrium quantity for both firms, equilibrium price and difference in profit of a firm compared to monopolist case. Now suppose that the two firms are competing in the Stackelberg manner where one of the firms makes its output decision before the other. Suppose Firm 1 is the Stackelberg leader (i.e., makes its output decisions before Firm 2). Calculate the equilibrium quantity for both the firms, equilibrium market price and difference in profit of both firms compared to Cournot case.
Your answer:
Q25NAT1 Mark·Write the number
Key ↓
Suppose a second firm enters the market. Let Q_1 be the output of the first firm and Q_2 be the output of the second. Market demand is now given by Q_1 + Q_2 = 53 – P. Assuming that this second firm has the same costs as the first and the firms are competing as per the Cournot competition, find out the equilibrium quantity for both firms, equilibrium price and difference in profit of a firm compared to monopolist case. Now suppose that the two firms are competing in the Stackelberg manner where one of the firms makes its output decision before the other. Suppose Firm 1 is the Stackelberg leader (i.e., makes its output decisions before Firm 2). Calculate the equilibrium quantity for both the firms, equilibrium market price and difference in profit of both firms compared to Cournot case.
Your answer:
Read the passage below, then answer Q26–Q28
In a market for old cars, there are 200 used cars for sale; half of these cars are good and half of them are lemons (the bad ones). Owners of lemons are willing to sell them for $500. Owners of good used cars are willing to sell them for prices above $1,100 but will keep them if the price is lower than $1,100. There are many potential buyers who are willing to pay $600 for a lemon and $1,700 for a good car. Buyers can’t tell good cars from bad, but original owners know. Based on the above data, answer the given subquestions.
Q26NAT1 Mark·Write the number
Key ↓
The expected valuation of a car for a potential buyer will be (in $) ______________
Your answer:
Q27MCQ2 Marks·Choose one option
Key ↓
In equilibrium, what kind of cars will be sold
1. AAll the good quality cars
2. BAll the bad quality cars (Lemons)
3. CAll 200 cars
4. DCannot answer
Q28NAT2 Marks·Write the number
Key ↓
What will be the equilibrium price at which the buyers will buy the cars (in $)? _____________
Your answer:
Read the passage below, then answer Q29–Q30
There are 50 low-risk people in a town and 50 high-risk people. A low-risk person has an average of $500 in medical expenses each year and is willing to pay $800 for medical insurance (this person is risk averse). A high-risk person has an average of $1,200 in medical expenses each year and is willing to pay $1,500 for medical insurance. Insurance companies are unable to differentiate who is high-risk and who is low risk.
Based on the above data, answer the given subquestions.
Q29MCQ1.5 Marks·Choose one option
Key ↓
If the insurance provider offered medical insurance at a price of $1,000
1. AEveryone will enroll for the insurance irrespective of the type
2. BThe provider will lose money
3. CBoth Everyone will enroll for the insurance irrespective of the type & The provider will lose money
4. DNone of these
Q30MCQ1.5 Marks·Choose one option
Key ↓
If the insurance company offered medical insurance at a price of $1,300
1. Alow-risk people would not be insured
2. BTotal surplus will be $10000 if the price is $1300
3. CBoth low-risk people would not be insured & Total surplus will be $10000 if the price is $1300
4. DNone of these
Q31MCQ1 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 necessarily be at least as well-off.
1. ATrue
2. BFalse
Q32MCQ1 Mark·Choose one option
Asked 2 times Key ↓
Which of the following is true about monopolistic competition?
1. AFirms compete by selling differentiated products that are highly, but not perfectly substitutable
2. BThere is free entry and exit from the market
3. CBoth Firms compete by selling differentiated products that are highly, but not perfectly substitutable & There is free entry and exit from the market
4. DNone of these
Q33MCQ1 Mark·Choose one option
Asked 3 times Key ↓
A monopolist always 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
Q34MCQ1 Mark·Choose one option
Key ↓
Public goods are provided by the government because
1. APrivate firms do not take into account the impact of external costs.
2. BGovernments are more efficient than private firms at producing public goods.
3. CPeople value national defence very highly.
4. DPrivate firms will make an economic profit.
5. Efree-rider problems result in underproduction by private markets.
Q35MCQ1 Mark·Choose one option
Key ↓
Which goods represent network goods?
1. APepsi, toilet paper, headphones
2. Bcalculator, oven, couch
3. CTwitter, Microsoft Excel, Facebook
4. Dfireworks, lighthouse, swimming pool
Q36MCQ1 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
Q37MCQ1 Mark·Choose one option
Asked 3 times Key ↓
Suppose the supply curve for pencils is vertical and government imposes a tax in this market.
1. ADeadweight loss of tax in this market will be finite
2. BSuppliers are paying full amount of tax
3. CBoth Deadweight loss of tax in this market will be finite & Suppliers are paying full amount of tax
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

Q150

Q21250 or 1250000

Q31250 or 1250000

Q460 or 60000

Q520 or 20000

Q640 or 40000

Q7250000 or 250

Q8400 or 400000

Q910

Q108

Q11B

Q122.8

Q1325

Q1450

Q1530

Q1640

Q1729

Q1824

Q19576

Q2032

Q2121

Q22320

Q2336

Q2417

Q2580

Q261150

Q27C

Q281150

Q29B

Q30C

Q31A

Q32C

Q33B

Q34E

Q35C

Q36B

Q37B

Detailed Answer Notes & Working

Q2Answer: 1250 or 1250000: Official answer key accepts 1250 or 1250000.
Q3Answer: 1250 or 1250000: Official answer key accepts 1250 or 1250000.
Q4Answer: 60 or 60000: Official answer key accepts 60 or 60000.
Q5Answer: 20 or 20000: Official answer key accepts 20 or 20000.
Q6Answer: 40 or 40000: Official answer key accepts 40 or 40000.
Q7Answer: 250000 or 250: Official answer key accepts 250000 or 250.
Q8Answer: 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.