Section – I

1 Citrus Speculation and Forecasting, Inc, has been hired by a private consortium of orange growers to predict what will happen to the price and output of oranges under the conditions below. What are your predictions? For each part, sketch a graph showing the appropriate demand and supply analysis.

a) A major freeze destroys a large number of the orange trees in Florida. b) The American Medical Association announces that drinking orange juice can reduce the risk of heart attack. (Marks 10)

2) During a year of operation, a firm collects Rs. 2,00,000 in revenue and spends Rs. 90,000 on raw materials, labor expense, utilities, and rent. The owners of the firm have provided Rs. 4,00,000 of their own money to the firm instead of investing the money and earning a 10 percent annual rate of return. a) The explicit costs of the firm are $ __________. The implicit costs are $ __________. Total economic cost is $ __________. b) The firm earns economic profit of $ __________. c) The firm’s accounting profit is $ ______________. (Marks 5)

Section – II (2 marks each)

1) Which of the following is/are the outcomes of sinking of a vessel transporting crude oil to a country that is completely dependent on imports for oil? a) A fall in the quantity supplied of crude oil in the country. b) A rise in the prices of crude oil. c) Shifting of supply curve towards right. d) Both (a) and (b) above. e) All of (a), (b) and (c) above.

2) Which of the following is a movement along the supply schedule? a) A fall in the output of rice because of a rise in the prices of pesticides and fertilizers. b) An increase in supply of air travel because of the liberalization of the aviation