NEB Class 12 Management Economics (NEB Released Items) Question Paper 2081 (Set C) Nepal

Human development is the process of enlarging people's freedoms and opportunities so they can lead a long and healthy life, gain access to knowledge (literacy and education), and enjoy a decent standard of living.

Variable costs are those that vary with the level of output. Among the given headings, milk and sugar and tea are variable costs, while house rent is a fixed cost.

Therefore, the Total Variable Cost (TVC) = Rs. 14,000.

Nepal's foreign trade suffers from a huge deficit mainly due to:

1. High dependence on imports for essential goods such as fuel, machinery and consumer products, while having only limited exportable goods.
2. Low productivity and lack of product diversification, which reduce Nepal's competitiveness in the global market and weaken the export sector.

(i) Completed table

Total Revenue $TR = P \times Q$ and Marginal Revenue $MR = TR_n - TR_{n-1}$.

(ii) Curves

• The TR curve rises continuously from 20 up to 90 but at a decreasing rate (it is an inverted-U shape that, here over this range, is still increasing while flattening), plotted with units sold on the X-axis and TR on the Y-axis.
• The MR curve is downward sloping from left to right, falling steadily from 20 to 10 as units sold increase, plotted with units sold on the X-axis and MR on the Y-axis. MR falls faster than price because the firm must lower the price on all units to sell an extra unit (imperfect competition).

Step 1: Mean

Step 2: Deviations from mean $|X - \bar{X}|$

| $X$ | $X - \bar{X}$ | $|X - \bar{X}|$ | |---|---|---| | 20 | -21 | 21 | | 25 | -16 | 16 | | 30 | -11 | 11 | | 35 | -6 | 6 | | 40 | -1 | 1 | | 45 | 4 | 4 | | 50 | 9 | 9 | | 52 | 11 | 11 | | 53 | 12 | 12 | | 60 | 19 | 19 | | $\sum X = 410$ | | $\sum|X-\bar{X}| = 110$ |

Step 3: Mean deviation from mean

Step 4: Coefficient of mean deviation

Interpretation: On average, the wages deviate from the mean wage of 41 by about Rs. 11. The coefficient of mean deviation (0.27) is a relative, unit-free measure of dispersion that allows comparison of variability across different data sets; a value of 0.27 indicates a moderate degree of dispersion in the wage data.

Meaning of monopoly: Monopoly is a market structure in which a single seller produces and sells a unique product that has no close substitute, and there are strong barriers to the entry of new firms. Because there is no competition, the monopolist has sole control over the price and quantity of the product. To sell more, the monopolist must lower the price on all units, so the average revenue (AR) and marginal revenue (MR) curves both slope downward from left to right, with the MR curve lying below the AR curve.

Conditions for equilibrium (MR-MC approach): A profit-maximizing monopoly firm is in equilibrium when:

1. Marginal Revenue equals Marginal Cost, i.e. $MR = MC$.
2. The MC curve cuts the MR curve from below at the equilibrium point.

At equilibrium, the firm produces output $OQ$ and charges price $OP$. In the short run a monopolist need not always earn supernormal profit; depending on the position of the AC curve relative to the AR curve, three situations are possible.

1. Excess (supernormal) profit: When $AR > AC$ at equilibrium output, the firm earns supernormal profit. The firm is in equilibrium at point E where $MR = MC$ and MC cuts MR from below, producing $OQ$ at price $OP$. Since the AC curve lies below the AR curve, the shaded area (e.g. PUTS) represents total profit, with $AR(QU) > AC(QT)$.

2. Normal profit: When $AR = AC$ at equilibrium output, the firm earns only normal profit. At equilibrium point E, $MR = MC$ and MC cuts MR from below; the AC curve is just tangent to the AR curve at the equilibrium output, so there is no excess profit or loss.

3. Loss: When $AR < AC$ at equilibrium output, the firm bears a loss. At equilibrium point E, $MR = MC$ and MC cuts MR from below, producing $OQ$ at price $OP$, but because the AC curve lies above the AR curve, the shaded area (e.g. STUP) represents the total loss, with $AR(QU) < AC(QT)$. A monopolist may still continue in the short run while bearing a loss if it expects profit in the future.

(Three diagrams should be drawn — one each for excess profit, normal profit and loss — with output measured on the OX-axis and price, revenue and cost on the OY-axis, showing the AR, MR, AC and MC curves and the equilibrium point E.)