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# ECONOMICS (PAPER-I) (PMS Past Paper 2015) PUNJAB PUBLIC SERVICE COMMISSION
COMBINED COMPETITIVE EXAMINATION FOR RECRUITMENT TO THE
POSTS OF PROVINCIAL MANAGEMENT SERVICE, ETC. – 2015

### SUBJECT: ECONOMICS (PAPER-I)

TIME ALLOWED: THREE HOURS MAXIMUM MARKS: 100

Note: Write answer in English or Urdu. Use of calculator is allowed

SECTION I

Q.1. Price effect is composed of income effect and substitution effect. Discuss this statement in the light of Hicksian and Slutsky approaches.
Q.2. Explain the concept of three stages of production with the help of a diagram. How three stages of production can be used for production decisions?
Q.3. What are the conditions for least cost combination of inputs? Show the maximization of output with the help of isocost and isoquants at a given total cost.
Q.4. What are the characteristics of perfect competition? Under perfect competition average revenge (AR) equals average cost (AC) in the long run equilibrium. Yet why do firms produce under such a condition?
Q.5. What are the conditions necessary for price discrimination to be possible and worthwhile? Show how a profit maximizing discriminating monopolist allocate his output between two markets and charge different prices?
Q.6. Explain and illustrate graphically Sweezy’s kinked demand curve theory of rigidity in oligopoly. Are prices in oligopoly really sticky? What are the weaknesses of this model?
Q.7. Write a note on the following:
(i) Marginal rate of substitution (MRS) (ii) Returns to scale
(iii) Dumping (iv) Monopsony

SECTION II

Q.8. (a) Differentiate the following:
(i) Exponential and Logarithmic functions
(ii) Necessary and Sufficient conditions
(iii) Partial Market Equilibrium and General Market Equilibrium
(b) State all possible conditions for relative maxima and minima used in unconstrained optimization of a multivariate function.
Q.9. (a) What do you understand by extreme values?
(b) Optimize the objective function subject to the following constraint
Z = 8×2 + 6y2 – 2xy – 40x – 420y + 180
Subject to
X + Y = 5
(i) Use Lagrangian Multiplier Method for finding the values of , and
(ii) Use bordered Hessian determinants for 2nd order condition.
Q.10. (a) What do you understand by derivative? Bring out the difference between slope and elasticity.
(b) Given Q = 400 – 8P + 0.05Y
Where P = 15 and Y = 12000
Find
(i) Price elasticity of demand
(ii) Income elasticity of demand