Explore topic-wise InterviewSolutions in Current Affairs.

1. Mines had a limited reserve of the metals.

2. An alternative was found and coins were made using metals with lesser value.

3. These were used to buy and sell goods of lesser value.

4. It was used as the money of the poor people,
Hence the coins of low value were printed in large quantities.

18.04.2019

Chennai

From

Deepa

18, Meenakshi Nagar

Nerkundram

To 

The Branch Manager

HDFC Bank 

T. Nagar

Chennai-600 017

Respected Sir,

Sub: Request for Educational Loan

I am Deepa, a student of Architecture living in Chennai. I have completed my degree course with 85% marks. I have got an opportunity to pursue a Post Graduation course in Architecture at King’s College, London. As I belong to an economically weaker section, I need your help in funding my studies. I am applying for an educational loan at your esteemed bank. I herewith enclose the copies of my marksheet and admission letter. Could you please consider my request for the loan. I shall be obliged for the same.

Thank you,

Yours sincerely,

Deepa

Enclosures: 

1. B.Arch. marksheet 

2. Admission Letter for Post Graduation in Architecture

To 

The Branch Manager

HDFC Bank 

T. Nagar, Chennai – 600 017

(c) Employers.

The metals such as silver and gold gained importance gradually all over the world. So, these metals were used as standard value in the exchange of goods. This was called as natural money.

(b) Members.

The later Cholas allowed the traders to have their own army. Historical evidences state that during this period, small traders and producers gave credit to the Tamil traders to support their export needs.

1. Pepper, spices, pearls, gems, rubies and muslin clothes were exported from the eastern sea of TamilNadu.

2. Pepper and spices took a major share of the exports. Hence this route was called the spice route.

Money supply is divided into four;

M₁ = Currency held with the public + cash 

Reserves in commercial and Co-operative banks + cash reserves in the RBI.

M₂ = M₁ + Money saved in Post office and bank savings Accounts

M₃ = M₁ + Time Deposits in Commercial and cooperative banks

M₄ = M₃ + Post office savings Money .

Self Help Group is a voluntary organization formed to enhance the microcredit for the members in it. The members of the organization save their money by fixing an amount to be deposited weekly, the amount will be such that it is affordable for everyone. That deposited money can be advanced as a loan to any of the member in the group who is actually in need of it. The loan will be advanced by the consent of all the group members. There will be transparency in the working of the organization because all the group members will be from the same neighbourhood. Normally an SHG will have 15-20 members.

The barter system flourished wherever civilizations thrived. This system was active not only within a civilization, but also among civilizations. This was the initial form of international trade.

(ii) Both 1 and 2 are correct

Leather beads, shells, tobacco, salt, com and even slaves were the items used as barter during olden days.
 

Currency refers to all that thing which has general acceptability and can be exchanged for goods and services.

Exchange refers to changing of goods and services against any currency.

Cheque is a banking instrument in writing that contains an unconditional order addressed to a banker to pay on demand a certain sum of money only to or to the bearer of it.

Central bank of India is Reserve bank of India.

Saving refers to excess of income over consumption.

Name of Indian currency is Indian national Rupee.

India rupee is represented by ₹.

Paper notes of Rs 500 and Rs 1000 was demonetized in 2016 by Indian government.

Credit is needed for productive as well as non productive purposes.

Institutional credit in India is controlled by government of India or Reserve bank of India.

It refers to the total borrowing capacity bank provide to borrowers. It allows borrowers to buy goods or services on a fixed monthly payment for specified period.

Financial mediators refer to those institutions or firms which act as a bridge between depositors and creditors. These institutions pool the savings of depositors and gives credit for the purpose of production and consumption.

Barter system is a system in which goods and services are exchanged for some other goods or services. It was used when evolution of money didn’t take place. Still in certain remote areas barter system exists.

Money serves as a measure of value. In other words it serves as a unit of account. Unit of account means that the value of each good or services is measured in the monetary unit. With the help of money we can express each unit of goods or services in terms of money. For example: value of a chocolate is Rs 10.

Barter system had many drawbacks because of which it didn’t succeed. Most common are double coincidence of wants, lack of common unit of value, difficulty of future payments and difficulty of storage of value.

The barter system is the traditional form of transferring the goods and services for other goods and services. It is an old method of exchange. This system has been used for centuries and long before money was invented. People exchanged services and goods for other services and goods in return. Some of the major drawbacks of the system are:

• Double coincidence of wants: One of the most important drawbacks of the barter system was a double coincidence of wants in which the buyer and seller should agree to buy and sell each other's commodity in exchange. It is very difficult to find the buyer who is need of commodity which the seller wants to sell.
• Lack of proper valuation of goods: In a barter system there will not be an equal valuation of the goods. There will be no existence of costly good or cheaper goods. All the goods will be equal.
• Store of value: Barter system lacks the function of store of value because the sold commodities cannot be saved for future use whereas money can be easily saved as a deposit. The goods do not possess the quality to use for future requirements.

Two characteristics of the production possibility curve are :

1. The production possibility curve slopes downwards to the right.
2. It is concave to the origin.

Two assumptions of production possibility curve are:

1. Resources are fully and efficiently utilized.
2. Technique of production remains constant.

(a) Variable Cost

(a) Long-term average cost curve

It is a situation in which the price falls below Average Variable Cost and thus the firm is forced to stop production or shut down because the firm in this situation will not be able to recover its entire average cost.

The opportunity cost of any good is the next best alternative good that is sacrificed. That is to say, the opportunity cost of producing a good is not any other alternative good that could be produced with the same factors; it is only the most valuable other good which the same factors could produce. The factors which are used for the manufacture of a car may also be used for the production of an equipment for the army. Therefore, the opportunity cost of the production of a car is the output of the army equipment foregone or sacrificed, which could have been produced with the same amount of factors that have gone into the making of a car.

Real cost connotes to those payments which are made to factors of production to compensate for the toil and efforts in rendering their services. Real cost is computed in terms of the pain and the discomfort involved for labour when it is engaged in production, and also the abstinence and sacrifice involoved in saving and capital accumulation.

According to Marshall, “The exertions of all the different kinds of labour that are directly or indirectly involved in making it, together with the abstinences sacrifices together will be called the real costs of production of the commodity.”

Production cost refer to the amount spent on the production of a commodity.

(c) In the short-term, at least one of the firm’s input levels is fixed.

(d) Opportunity cost

(d) Variable Cost

(a) Tilling of soil

Short Period Marginal Cost can be estimated either from Total Variable Cost or from Total Cost. Marginal cost is an additional cost. 

MC can be calculated by the following ways: 
MC = TC_n – TC_n-1
= (TFC_n + TVC_n) – (TFC_n-1 + TVC_n-1)
= TVCn – TVC_n-1
(TFC_n = TFC_n-1, because TFC is constant).

(d) Average Fixed Cost Curve

Accounting costs are only related to those costs which include cash payments by the firm’s entrepreneur.

(d) Real costs

In order to produce goods, a firm uses raw material and factors of production (land, labour, capital, etc.) called ‘Inputs’. The expenditure incurred on these inputs is called cost of production. The functional relationship between cost and output is called Cost Function. Cost of production depends on the prices of factors of production. Higher level of output implies higher total cost of production, in a situation of constant technology and constant factor-prices. 

Cost can be classified into the following categories:

(a) Social Cost- Social cost implies the cost which a society bears on account of production of a commodity. Social cost includes both private cost and external cost. It includes all those sacrifices and inconvenience that society has to bear in the process of production. For example, Mathura Oil Refinery discharges its waste into the Yamuna river causing water pollution causing danger to the beauty of Taj Mahal. Mills and factories located in a city cause air pollution by emitting smoke, etc.

(b) Monetary Cost- The amount spent in terms of money for the production of a commodity is called monetary cost. Suppose the cost of production of 500 T-Shirts is Rs. 2,00,000, then this amount will be called the monetary cost of producing 500 T- Shirts.

(c) Opportunity Cost- The concept of opportunity cost plays a very important role in modern economic analysis. Opportunity cost is the loss of income due to an opportunity foregone. Opportunity cost is also called as alternative or economic cost. It arises because of scarcity and alternative uses of resources. We know the resources that are available, at any point of time, to a firm or any business organisation, are limited and resources have alternative uses. Therefore, profit maximizing firms have to choose the best from the alternatives available to them. In fact, firms have to forego the gains expected from the second best alternative use of their resources. The foregone benefit is called opportunity cost of the gains from the chosen use of the resources.

(d) Real Cost – Real cost connotes to those payments which are made to the factors of production to compensate for the toil and efforts in rendering their services. According to Marshall, “The exertions of all the different kinds of labour that are directly or indirectly involved in making it, together with the abstinences or rather the waiting required, for saving the capital used in making it; all these sacrifices together will be called the real costs of production of the commodity.”

(e) Short-term Cost- Short-term is a period of time during which some factors are fixed and some are variable. Accordingly, Short period costs are divided into two components,viz.

(a) Fixed Cost – Fixed costs are the sum total of expenditures incurred by the producer on the purchase or hiring of fixed factors of production.
(b) Variable Cost – Variable costs are the expenditures incurred by the producer on the use of variable factors of production.

(f) Long term cost – The long term is defined as a period of time which is sufficient to bring about proper changes in the scale of output through an adjustment of the quantity of the various factors employed. The quantity of all the factors can be increased or decreased according to the requirement of production. Thus, in the long run, all factors are variable.

(g) LAC (Long-term Average Cost or Envelope Curve) – Long-term average cost refers to the minimum possible per unit cost of producing different quantities of output in the long period. According to the Mansfield, “The long-run average cost curve is that curve which shows the minimum cost per unit of producing each output level corresponding to different scales of productivity.”

(i) LMC (Long-term Marginal Cost) – Change in the total cost in the long – term, due to the production of one more or one less unit of commodity is called long-term marginal cost. In the words of Ferguson, “Long-term Marginal Cost is the addition to total cost attributable to an additional unit of output when all inputs are optionally adjusted.”

(h) Explicit Cost – It is the cost which falls under the actual or business costs entered in the books of account. Explicit costs are the costs in terms of money expenditure of the factors of production hired or purchased by an entrepreneur. It would include wages paid to labour hired by the entrepreneur, interest paid on capital or rent paid on land. These costs are also called accounting costs.

(ii) Implicit Cost- Implicit costs are the value of the factors of production put in by the entrepreneur himself. It includes the normal returns on money- Capital invested by the entrepreneur, wages or salary for his services in his own firm, inputed rent if he is using his own land or building.

Correct answer is (b) AFC

AC and MC curves are U-shaped.

It is the point, where Total Cost is equal to the Total Revenue.

In the words of Marshall, “The exertion of all different kinds of labour that are directly or indirectly involved in making it, together with the abstinences or rather the waiting required, for saving the capital used in making it; all these sacrifices together will be called the real costs of production of the commodity.”

Long-run average cost is the long-run total cost divided by the level of output. Long- run average cost curve depicts the least possible average cost for producing all possible levels of output. The short-run average cost curves are also called plant curves. In the long run, the firm has a choice in the employment of a plant, and it will employ that plant which yields minimum possible unit cost for producing a given output. Long-term average cost curve is in the shape of English letter ‘U’, because it is determined by return to scale. It is also called

the-envelope curve since it surrounds many short-term average cost curves LAC = \(\frac{TC}{Q}.\)