Question1. Explain and analyse the typical relationship between labour productivity and size of capital which characterize the short run production function of the firm.
Question2. Would additional capital equipment necessarily lead to lower costs in long run? Describe.
Question3. Use indifference curves to discrimination between income and substitution effects. Hence, using the above techniques describe why the demand curve slope downwards.
Question4. What are the major criteria for designing the tax system?
Question5. What do you understand by the term externalities? A dyeing unit of a textile firm discharges effluents in lagoon, polluting water, adversely affecting a nearby hotel resort, fishermen and community at large. Explain graphically why this problem results in the departure from a perfectly competitive market.
Question6. What conclusions can be drawn regarding market allocations?