ASRB NET and ARS / SMS / STO recruitment · India · Agricultural Scientists Recruitment Board (ICAR)
Original practice questions written to the published syllabus · not past papersEconomic theory put to work for business decisions: demand, production, cost and pricing, with a short macro block. Named explicitly in agribusiness master's entrance syllabi.
In the exams: agricultural master's entrance examinations, agribusiness (heavy); agribusiness management PhD entrance and fellowship examinations (heavy); agricultural master's entrance examinations, agricultural economics (heavy)
How our questions for ASRB NET and ARS / SMS / STO recruitment spread across the units of Managerial (Applied Agribusiness) Economics. Difficulty: 0 easy, 32 medium, 31 hard.
| Pricing under different market structures | 11 | |
| Objective of the firm and mathematical tools | 9 | |
| Multi-period production | 7 | |
| Demand determinants, elasticity and forecasting | 5 | |
| Production function, least-cost combination and returns to scale | 5 | |
| Supply in the short and long run | 5 | |
| Price discrimination: first, second and third degree | 4 | |
| Demand for money | 4 | |
| Indifference curves and budget sets | 3 | |
| Joint-product pricing | 3 | |
| Introduction to behavioural economics | 2 | |
| Cost concepts and cost-output relationships | 2 | |
| Business cycles | 2 | |
| Inflation | 1 |
Choose an answer, then open the working. Each explanation says why the right answer is right and why the others are not.
A farmer can plant paddy, maize or pulses. Net returns (thousand per hectare) under good, normal and poor rainfall are: paddy 60, 40, 10; maize 45, 35, 25; pulses 30, 30, 28. Probabilities are unknown. Which crop does the maximin (Wald) rule choose?
A. Pulses
Maximin picks the crop whose worst outcome is best: worst returns are paddy 10, maize 25, pulses 28, so pulses. Paddy is the maximax choice (best outcome 60). Maize is the minimax-regret choice (its maximum regret is 15 against 18 for paddy and 30 for pulses). Unknown probabilities are exactly the situation these rules are for.
Further reading: Hardaker et al., Coping with Risk in Agriculture
Using the Hurwicz rule with a coefficient of optimism of 0.6, which option is chosen? Net returns (thousand per hectare) under good, normal and poor rainfall: paddy 60, 40, 10; maize 45, 35, 25; pulses 30, 30, 28.
B. Paddy (40)
Hurwicz value = 0.6 x best + 0.4 x worst. Paddy: 0.6 x 60 + 0.4 x 10 = 40; maize: 0.6 x 45 + 0.4 x 25 = 37; pulses: 0.6 x 30 + 0.4 x 28 = 29.2. The highest is Paddy. Averaging all three outcomes is the Laplace rule, not Hurwicz.
Further reading: Hardaker et al., Coping with Risk in Agriculture
Field experiments in Kenya found that offering farmers a small, time-limited discount on fertiliser right after harvest increased fertiliser use more than a similar discount offered later at planting time. This is most consistent with
D. present bias: farmers intend to buy later but spend the cash before planting
Duflo, Kremer and Robinson interpreted the result as present bias: with cash in hand at harvest, a commitment-style offer helps farmers act on their plans; later, the cash is gone. Time-consistent exponential discounting would not make timing of the offer matter this much, and the result says nothing about Giffen behaviour or yield response.
Further reading: Duflo, Kremer and Robinson, American Economic Review 2011
In decomposing a price change into substitution and income effects, the Slutsky approach differs from the Hicks approach in that Slutsky
C. keeps the original bundle just affordable, whereas Hicks keeps her on the original indifference curve
Hicks compensates to keep utility constant (the original indifference curve). Slutsky compensates to keep purchasing power constant (the original bundle just affordable), which is easier to observe with data. Both are ordinal and both measure an income effect for any good.
Further reading: Koutsoyiannis, Modern Microeconomics
A country's population grows at 1.2 percent a year and per capita income at 4 percent a year. The income elasticity of demand for dairy products is 0.5. With prices and tastes unchanged, demand for dairy products will grow at about
C. 3.2 percent a year
Demand growth = population growth + income elasticity x per capita income growth = 1.2 + 0.5 x 4 = 3.2 percent. 2.0 percent leaves out population growth; 5.2 percent assumes an income elasticity of one; 4.8 multiplies the two growth rates.
Further reading: FAO food demand projection method; Salvatore, Managerial Economics in a Global Economy
A dairy farmer is deciding when to replace an ageing cow. The standard rule is to keep the cow as long as
B. her expected net revenue for the next period exceeds the average annual net revenue (annuity equivalent) of the best replacement
Replacement compares the marginal return of keeping the current animal with the amortised return from a replacement over its whole productive life. Herd average yield and book value (an accounting figure) do not measure this opportunity cost.
Further reading: Kay, Edwards and Duffy, Farm Management
A cold-storage unit costs 250,000 today and yields net cash inflows of 80,000 at the end of each of the next four years, with no salvage value. At a discount rate of 12 percent, its NPV and the decision are
C. -7,012; reject
PV of inflows = 80,000 x annuity factor (12 percent, 4 years) 3.0373 = 242,988; NPV = -7,012, so reject. 70,000 ignores discounting (320,000 - 250,000). 3,589 uses 10 percent instead of 12.
Further reading: Gittinger, Economic Analysis of Agricultural Projects
A cold-chain firm has total contribution of 800,000 and operating profit of 200,000. If its sales volume rises by 10 percent with unchanged prices and unit costs, operating profit will rise by
A. 40 percent
Degree of operating leverage = contribution / operating profit = 800,000 / 200,000 = 4, so a 10 percent rise in volume raises operating profit by about 4 x 10 = 40 percent (contribution rises by 80,000 while fixed cost is unchanged: 80,000 / 200,000 = 40 percent). 25 percent inverts the ratio; 4 percent reads the leverage multiple as the percentage change.
Further reading: Brigham and Ehrhardt, Financial Management
A profit-maximising monopolist with positive marginal cost will never produce where demand is
C. price-inelastic
MR = P(1 - 1/|e|) is negative when |e| < 1, and since MR must equal a positive MC, the monopolist operates where |e| > 1. Unit elasticity (MR = 0) is chosen only if MC is zero. A monopolist always faces a downward-sloping demand curve.
Further reading: Koutsoyiannis, Modern Microeconomics
In the Cambridge cash-balance equation M = kPY, if nominal income PY is 5,000 and people wish to hold one-fifth of it as money, money demand is
D. 1,000
M = kPY = 0.2 x 5,000 = 1,000. k is the inverse of income velocity (here V = 5), so 25,000 wrongly multiplies by velocity. 200 divides by velocity again (1,000/5).
Further reading: Mankiw, Macroeconomics
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