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Managerial Economics · Market equilibrium, taxes & subsidies

BSMS3206 · 22 questions · 16 marks · 3 papers

Answer key

Indian Institute of Technology Madras

BS Degree Programme · Examination & Study Paper

BSMS3206 · Managerial Economics

Market equilibrium, taxes & subsidies

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.

End Term · 31 Aug 2025 (FN)End Term

Q1MCQ1 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

End Term · 31 Aug 2025 (AN)End Term

Read the passage below, then answer Q2–Q11
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.
Q2MCQ0.5 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
Q3MCQ0.5 Marks·Choose one option
Key ↓
Consumer surplus before incidence of tax is
1. AINR 4500
2. BINR 2700
3. CINR 3200
4. DINR 4200
Q4MCQ0.5 Marks·Choose one option
Key ↓
Producer surplus before incidence of tax is
1. AINR 6400
2. BINR 4600
3. CINR 3700
4. DINR 2700
Q5MCQ0.5 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
Q6MCQ0.5 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
Q7MCQ0.5 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
Q8MCQ0.5 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
Q9MCQ0.5 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
Q10MCQ0.5 Marks·Choose one option
Key ↓
The total tax revenue is
1. AINR 1255
2. BINR 1075
3. CINR 1535
4. DINR 1125
Q11MCQ0.5 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

Quiz 2 · 3 Aug 2025 (AN)Quiz 2

Read the passage below, then answer Q12–Q20
Based on the above data, answer the given subquestions.
Q12NAT1 Mark·Write the number
Asked 3 times Key ↓
Your answer:
Q13NAT1 Mark·Write the number
Asked 3 times Key ↓
Your answer:
Q14NAT1 Mark·Write the number
Asked 2 times Key ↓
New equilibrium quantity after the incidence of tax Q^t = __________________
Your answer:
Q15NAT1 Mark·Write the number
Asked 2 times Key ↓
Price that buyers pay now will be P^B= ________________
Your answer:
Q16NAT1 Mark·Write the number
Asked 2 times Key ↓
Price that seller receives per unit will be P^S= _______________
Your answer:
Q17NAT1 Mark·Write the number
Key ↓
Suppose, the government acts weird and removes the tax to provide a subsidy of ₹2 per unit to cigarette producers. New equilibrium quantity after the subsidy, Q^S = __________
Your answer:
Q18NAT1 Mark·Write the number
Key ↓
Suppose, the government acts weird and removes the tax to provide a subsidy of ₹2 per unit to cigarette producers. Price that buyers pay now will be P^B= ______________
Your answer:
Q19NAT1 Mark·Write the number
Key ↓
Suppose, the government acts weird and removes the tax to provide a subsidy of ₹2 per unit to cigarette producers. Price that seller receives per unit (including subsidy) will be P^S= _____________
Your answer:
Q20NAT1 Mark·Write the number
Key ↓
Suppose, the government acts weird and removes the tax to provide a subsidy of ₹2 per unit to cigarette producers. Total cost to the government will be (in rupees) ______________
Your answer:
Q21MCQ0.5 Marks·Choose one option
Asked 3 times Key ↓
The entire burden of a quantity tax falls on buyers when the price elasticity of supply is zero.
1. ATrue
2. BFalse
Q22MCQ0.5 Marks·Choose one option
Asked 3 times Key ↓
If demand is perfectly inelastic, consumers bear the full incidence of a per-unit tax.
1. ATrue
2. BFalse

Official Key

Master Answer Key & Explanations

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

Reveal Key

Q1B

Q2B

Q3C

Q4A

Q5C

Q6D

Q7D

Q8B

Q9C

Q10D

Q11B

Q127 or 7000

Q133

Q146 or 6000

Q154

Q162

Q178 or 8000

Q182

Q194

Q2016000

Q21B

Q22A

Detailed Answer Notes & Working

Q12Answer: 7 or 7000: Official answer key accepts 7 or 7000.
Q14Answer: 6 or 6000: Official answer key accepts 6 or 6000.
Q17Answer: 8 or 8000: Official answer key accepts 8 or 8000.

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