Mock Test-I (Business Economics ) 1.

The demand for most products varies directly with the change in consumer income. Such products are known as a. Normal goods b. Prestigious goods c. Complementary goods d. Inferior goods e. Substitute goods. (1 point) 2. The situation of market equilibrium occurs when a. emand for the goods is greater than supply of the goods b. !uantity demanded for the goods equals quantity supplied of the goods c. The price" sellers ask for the goods is less than the price consumers pay of those goods d. There e#ist a shortage of the supply of the goods e. emand for the goods is less than supply of the goods. (1 point) 3. $sse## esign Inc. produces very costly and attractive sports watches. Now Sofe# Inc. introduced a stylish sports watch in the market. The watches of $sse## esign Inc. and Sofe# Inc. are considered to be perfect substitutes. The cross elasticity of demand between these watches is a. Infinity b. Positive" less than infinity c. %ero d. &ess than 'ero e. (ne. (1 point) 4. )hich of the following does not cause a shift in the demand curve* a. Change in the price of the good. b. Change in the income of the buyers. c. Change in the personal preferences. d. Change in the price of the related goods. e. Change in the consumer patterns. (1 point) 5. The demand and supply functions of a commodity are estimated as !d + ,-- . P !s + /- 0 1P The equilibrium price and quantity of the good are a. 2s.3- and 4- units respectively b. 2s.4- and 3- units respectively c. 2s.5- and 5- units respectively d. 2s.1- and 6- units respectively e. 2s.6- and 1- units respectively. (1 point) 6. Current demand for apples in a city is ,"--- bo#es per week. In the city" price elasticity of demand for apples is .,./5 and income elasticity of demand is /.--. 7or the ne#t period" if per capita income is e#pected to increase by 68 and price of apples is e#pected to increase by ,-8" demand for apples is e#pected to be a. b. 965 bo#es per week ,"--- bo#es per week

c. d. e. 7.

,"/5- bo#es per week ,",4- bo#es per week ,"-,5 bo#es per week. (2 points)

The falling part of a total utility curve indicates a. b. c. d. e. Increasing marginal utility ecreasing marginal utility %ero marginal utility Negative marginal utility Indeterminate marginal utility. (1 point)

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The difference between the price an individual is willing to pay and the price he or she actually pays is a. b. c. d. e. Producer cost :onopolist profit $conomic profit Producer surplus Consumer surplus. (1 point)

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:arginal utilities of goods ; and < are 5-- utils and ,"--- utils respectively. The price of good < is 2s./--. If the consumer is in equilibrium" the price of good ; is a. b. c. d. e. 2s.32s.62s.92s.=2s.,--. (1 point)
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10.

If the average product of labor >;P&? is 1-& . & " the ma#imum possible total product >TP&? is a. b. c. d. e. /"--- units 4"--- units 3"--- units 9"--- units ,/"--- units. (2 points)

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;verage productivity of labor for a firm is 5- when labor employed is ,-- units. )hen labor employed is increased to ,-4 units" average productivity of labor declines to 49 units. ;t current input level the marginal productivity of labor is a. ., unit b. ./ units c. , unit

d. e. 12.

/ units 5 units.
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(1 point) Production function for a firm is ! + ,--& . -.,& . If ,- units of labor are used" average productivity of labor is a. =- units b. == units c. ,-- units d. /-- units e. //- units. (1 point) )hich of the following represents the :arginal 2ate of Technical Substitution >:2TS?* a. Slope of the isocost curve. b. Slope of the indifference curve. c. Slope of the isoquant curve. d. Slope of the budget line. e. Slope of the average cost curve. (1 point) :a#imum point on the average product curve is reached when a. :arginal product is 'ero b. :arginal product is ma#imum c. :arginal product is minimum d. :arginal product is negative e. :arginal product equals average product. (1 point) The point beyond which no rational firm would employ labor is a. )hen the average product of labor is equal to marginal product of labor b. )hen the marginal product of labor is ma#imum c. )hen the marginal product of labor is 'ero d. )hen the total product of labor is 'ero e. )hen the average product of labor is 'ero. (1 point) / If the total cost function is TC + /-- . 4! 0 3! and the output is 4 units" the marginal cost is a. 2s./4 b. 2s.1/ c. 2s.44 d. 2s.15 e. 2s.4,. (2 points) The cost schedule of a firm is given below@ (utput >units? , / 1 Total 7i#ed Cost >2s.? ,-,-,-Total Aariable Cost >2s.? 5,515-

4 ,-5 ,-The average fi#ed cost of producing 4th unit of output is a. b. c. d. e. 18. 2s.,-2s.52s./2s./5 2s.5--.

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(1 point) ; firm will shut down its operations in the shortBrun if a. It incur losses b. 7i#ed costs e#ceed its revenue c. ;verage variable costs e#ceed its average revenue d. Total revenue falls short of total cost e. Total fi#ed cost e#ceeds its total variable costs. (1 point) :r. Sachin can earn money from various activities. Cis hourly earnings from cricket is 2s.5"---" acting 2s.1-"---" coaching 2s.,-"--- and ceremonies 2s.,5"---. The opportunity cost of an hour of coaching for Sachin is a. 2s.5"--b. 2s.,-"--c. 2s.,5"--d. 2s.1-"--e. 2s.4-"---. (1 point) Increasing marginal costs with increase of output implies a. ecreasing average returns b. ecreasing average fi#ed costs c. ecreasing average variable costs d. ecreasing total costs e. ecreasing average costs. (1 point) &i#an Imaging is a :umbai based image digiti'ation company" speciali'ing in digiti'ing visual collections. It has developed a proDectBbased model incorporating best practices into the digiti'ation workflow. The vertical distance between total variable cost and total cost of &i#an Imaging is equal to a. :arginal cost b. ;verage variable cost c. Total fi#ed cost d. ;verage fi#ed cost e. ;verage total cost. (1 point) 22. The total revenue and total cost functions of Nike Shoe Company are T2 + 4--! B ! " TC + 3-- 0 6-! 0 !/ )hat is the profit ma#imi'ing output for the firm*

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,-- units. ,,- units. ,4- units. ,9- units. /-- units.

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(2 points) :r. ;kash" the manager of EThe 7ast Trak Corp.F " a shoe manufacturing company develops do'ens of dramatically different methods of making shoes" which decreases the 7ast Trak Corp. s variable costs of producing shoes. The 7ast Trak Corp. faces the following average variable cost function@ ;AC + 1-- . ,-! 0 -.5!/ 7i#ed costs are 2s.,5-. )hat is the minimum possible average variable cost* a. 2s.//5. b. 2s./5-. c. 2s./65. d. 2s.1--. e. 2s.1/5. (2 points) In perfect competition" the long run equilibrium price is equal to i. :arginal 2evenue. ii. ;verage Cost. iii. :arginal Cost. iv. ;verage 2evenue. a. <oth >i? and >iii? of the above b. (nly >i?" >ii? and >iii? of the above c. (nly >i?" >iii? and >iv? of the above d. (nly >ii?" >iii? and >iv? of the above e. ;ll >i?" >ii?" >iii? and >iv? of the above. (1 point) The hori'ontal demand curve for a firm is one of the characteristic features of a. (ligopoly b. :onopoly c. :onopolistic competition d. Perfect competition e. uopoly. (1 point) In the long run" which of the following is t ue of a firm in a perfectly competitive industry* a. It operates at its minimum average cost b. The price is more than the average fi#ed cost c. The marginal cost is greater than marginal revenue d. The fi#ed cost is lower than the total variable cost e. The price is equal to minimum of average variable cost. (1 point) Neelam Pvt. &td. is operating in a perfectly competitive industry. If the firm doubles its output during the year" then

a. b. c. d. e. 28.

Price of the product falls more than proportionately Price of the product falls less than proportionately Price of the product falls proportionately Price of the product remains same Price of the product rises. (1 point)

)hich of the following conditions are necessary in the shortBrun equilibrium in monopolistic competition* a. b. c. d. e. :arginal cost + :arginal revenue Price + ;verage total cost Price + :arginal revenue Price + :arginal cost Price + ;verage fi#ed cost. (1 point)

30.

:edia Soft" a multimedia firm enters a monopolistically competitive market. The demand and cost function faced by :edia Soft are given as P + ,-"--- . /-! TC + 1"--"--- 0 /",=6! . /-!/ 0 !1 The shortBrun equilibrium output of the firm is a. b. c. d. e. ,, units 5, units 3, units 6, units 9, units.