Other MCQ Bank For ME

Multi Choices Questions for Managerial Economics
1-Demand is determined by
a. Price of the product
b. Relative prices of other goods
c. Tastes and habits
d. All of the above
(Ans: d)
2-When a firm’s average revenue is equal to its average cost, it gets ________.
a. Super profit
b. Normal profit
c. Sub normal profit
d. None of the above
(Ans: b)
3-Managerial economics generally refers to the integration of economic theory with business
a. Ethics
b. Management
c. Practice
d. All of the above
(Ans: c)
4-Given the price, if the cost of production increases because of higher price of raw materials, the
supply
a. Decreases
b. Increases
c. Remains same
d. Any of the above
(Ans: a)
5-The cost recorded in the books of accounts are considered as

a. Total cost
b. Marginal cost
c. Average cost
d. Explicit cost
(Ans: d)
6-A Joint Stock Company is managed by the Board of Directors elected by _____ .
a. Top management
b. Shareholders
c. Employees of company
(Ans: b)
7-Under ______, price is determined by the interaction of total demand and total supply in the
market.
a. Perfect competition
b. Monopoly
c. Imperfect competition
d. All of the above
(Ans: a)
8-Under perfect competition, price is determined by the interaction of total demand and ________.
a. Total supply
b. Total cost
c. Total utility
d. Total production
(Ans: a)
9-The out of pocket costs are ________.

a. Sunk costs
b. Marginal costs
c. Explicit costs
d. Social costs
(Ans: b)
10-The short run Average Cost curve is __ shaped

a. V
b. U
c. L
d. Any of the above
(Ans: b)
11-Distinction between private sector and public sector is determined on the basis of
a. Economic system
b. Motive
c. Principle of pricing
d. All of the above
(Ans: d)
12-Goods produced on small scale have

a. Relatively inelastic supply
b. Highly elastic supply
c. Perfectly elastic supply
(Ans: a)
13-Oligopoly is a type of ________ market. A ________ exists in the industry

a. Perfect, few firms
b. Imperfect, few firms
c. Perfect, many firms
d. Imperfect, many firms
(Ans: b)
14-The management of the _________ form of business organization is totalitarian in nature.

a. Cooperative
b. Partnership
c. Individual proprietorship
d. All of the above
(Ans: a)
15-The demand curve has a _____ slope.

a. Undefined
b. Zero c
c. Negative
d. Positive
(Ans:)
SENGAMALA THAYAAR EDUCATIONAL TRUST WOMEN’S
COLLEGE
SUNDARAKKOTTAI, MANNARGUDI.
(Accredited with ‘A’ Grade by NAAC)
PG & RESEARCH DEPARTMENT OF ECONOMICS
Subject name; PUBLIC FINANCES
Staff name; Dr. R.Malathi
Class : III B.A ECONOMICS
UNIT I; Public finance;
Meaning and scope- Uses and role of public finance in the economy- Public
finance and private finance- The principle of maximum social advantages.
PUBLIC ECONOMICS
MULTIPLE CHOICE QUESTIONS
1. Scope of public finance includes:
(a) Public revenue (b) Public debt (c) Public expenditure (d) All of these
2. Public Authorities Include:

(a) Central Government (b) State Government (c) Local Government (d) All of these
3. Which is the main point on the basis of which public finance can be separated from privatefinance?
(a) Price policy (b) Borrowings (c) Secrecy (d) Elasticity in income
4. The principle of Maximum Social Advantage have been suggested by

(a) Pigou (b) Dalton (c) Musgrave (d) Adam Smith
5. In the following which is the characterstic of a tax

(a) Compulsory (b) optional (c) forced (d) nationality
6. Which is the main objective of a tax:

(a) Increase in consumption (b) increase in production (c) Raising public revenue (d) reduction
in capital formation
7. Among the following canons of taxation which one has been given by Adam Smith:
(a) Canon of Uniformity (b) Canon of productivity (c) canon of diversity (d) canon of equity
8. The Indian tax system is:

(a) Proportional (b) Progressive (c) Regressive (d) Degressive
9. The burden of direct taxes is borne by :
28
(a) Rich person (b) poor person (c) on whom it is levied (d) none of these
10. Indirect taxes have an element of :

(a) Equitable (b) certainity (c) economical (d) encourage honesty
11. Direct taxes have the element of :

(a) Evasion (b) convenient (c) progressive (d) economy
12. In proportional tax system, the rates of tax remain:

(a) Constant (B) increasing (c) decreasing (d) zero
13. Expenditure Tax for India was recommended by:

(a) Kaldor (b) Colin Clarke (c) Adam Smith (d) Adolph Wagnor
14. Corporate Income tax is the tax levied on:

(a) Corporations (b) Municipalities (c) Co –operative societies (d) Companies
15. Which of the following is the major source of revenue in India:

(a) Direct tax (b) Capital Levy (c) Grants in aid (d) Indirect tax
16. Which of the following is not a Commodity Tax:

(a) Excise duty (b) Customs Duty (c) Coporation Tax (d) Octroi
17. A duty levied on goods when they entering a town

(a) Income tax (b) Octroi (c) Agricultural tax (d) Professional tax
18. Special Assessment means:

(a) A tax on special benefits (b) General tax on all people (c) A periodical tax (d) Gift tax
19. Non-exclusion principle is related to:

(a) Private goods (b) Public goods (c) Merit goods (d) Mixed goods
20. Education is an example of:

(a) Public good (b) Merit good (c) Social good (d) Club good
21. Public Goods are:

(a) Excludable (b) Non – excludable (c) Marketable (d) All of these
22. Who is the father of Public Finance:

(a) Dalton (b) Pigou (c) Smith (d) Musgrave
23. Incidence of tax means:

(a) Direct money burden (b) indirect money burden (c) actual tax burden (d) none of these
24. Which is the tax shifting;

(a) To bear the tax burden himself (b) to shift the tax burden on others 9c) to bear some part of
the tax himself and shift the rest on others (d) none of these
29
25. The equity principle of taxation was propounded by:
A) Adam Smith B) Dalton C) J.B. Say D) Marshall
26. “The government which taxes the least is the best”, is the belief of:
A) Mercantilists B) Physiocrates C) Modern D) Classical
27. According to Laffer, when the tax rate is 100 per cent , the tax revenue will be:
A) 100% B) 50% C) Zero D) 10%
28. Incidence of a tax refers to the--------------burden of tax:

A) Initial B) Ultimate C) Intermediate D) None
29. In the case of regressive tax, the rate of tax---------------------as income increases:
A) increases B)remains constant C) Decreases D) None
30. Advolorum duties are levied on:

A) Length B) Weight C) Utilities D) Value
31. Tax avoidance is:

A) Illegitimate B) Legitimate C) Punishable D) None
32. The VAT was first introduced in:

A) India B) Britain C) USA D) France
33. Customs duties are imposed on commodities as they cross:

A) State boundaries B) District boundaries C) National boundaries D) Muncipal boundaries
34. Contra-cyclical fiscal policy was popularized by:

A) Adam Smith B) Dalton C) J.B. Say D) Keynes
35. Deficit financing as a tool of fiscal policy was suggested by:

A) Keynes B) Dalton C) J.B. Say D) Marshall
36. Keynes popularized:

A) Monetary policy B) Fiscal Policy C) Income policy D) Price policy
37. A budget where there is excess of expenditure over revenue is called:

A) Surplus B) Deficit C) Balanced D) Zero-based
38. The balanced budget principle was advocated by:

A) Keynesians B) Mercantilists C) Classical school D) Neo-Classical school
39. Which one of the following is not a tax base?

A) Income B) wealth C) Utility D) Consumption
40. Equals treated equally in taxation leads to:

A) Vertical equity B) Real equity C) Horizontal equity D) None
30
41. Which one of the following is not a public utility?
A) Electricity B) Water supply C) Gas service D) Tourism
42. The largest component of revenue expenditure in India is:

A) Pension B) Interest payments C) Education D) Health
43. The Classical economists asserted that public expenditure is:

A) Unproductive B) Productive C) stagnant D) All of these
44. Wagner’s Law is related to:

A) Public revenue B) Public expenditure C) Public debt D) Budget
45. The largest component of revenue expenditure in India is:

A) Pension B) Interest payments C) Education D) Health
46. .Adolph Wagner was a-----------------Economist:

A) French B) German C) Indian D) American
47. Who is the exponent of Law of Increasing State Activities?

A) Dalton B) Pigou C) Smith D) Wagner
48. The Displacement effect hypothesis was formulated by: A) Peacock and Wiseman B) Pigou
C) Smith D) Musgrave
49. The financial year in India starts from:

A) 1st January B) 31st March C) 1st April D) 1st July
50. Salaries and pensions paid by governments are called:

A) Capital expenditure B) Development expenditure C) Revenue expenditure D)Plan
expenditure
PUBLIC ECONOMICS
MULTIPLE CHOICE QUESTIONS
Answer Key
1. (d) All of these 2. (d) All of these 3. © Secrecy 4. (b) Dalton 5. (a) Compulsory 6. (c) Raising
public revenue 7. (d) Canon of equity 8. (c) Regressive 9. (c) on whom it is levied 10. (a)
Equitable 11. (c) Progressive 12. (a) Constant 13. (a) Kaldor 14. (d) Companies 15. (d) Indirect
tax 16. (c) Corporation Tax 17. (b) Octroi 18. (a) A tax on special benefits 19. (b) Public goods
20. (b) Merit good 21. (b) Non – excludable 22. (a) Dalton 23. (b) indirect money burden 24. (b)
to shift the tax burden on others 25. (a) Adam Smith 26. D) Classical 27. C) Zero 28. B) Ultimate
29. C) Decreases 30. D) Value 31. B) Legitimate 32. D) France 33. C) National boundaries 34.
D) Keynes 35. (a) Keynes 36. B) Fiscal Policy 37. B) Deficit 38. C) Classical school 39. C)
Utility 40. C) Horizontal 41. D) Tourism 42. B) Interest payments 43. A) Unproductive 44. B)
Public expenditure 45. B) Interest payments 46. B) German 47. D) Wagner 48. A) Peacock and
Wiseman 49. C) 1st April 50. C) Revenue expenditure
31
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SIDDHARTH ACADEMY
CS-Foundation-BUSINESS ECONOMICS
Multiple Choice Questions
1. Which of the following is not considered production in Economics?

1 Tilling of soil by farmers
2 Singing a song before friends.
3 Construction of Canal by laborers
4 Painting a picture for sale
2. Which of the following is not a characteristic of labour?

a. Its inseparable from laborer
b. It is immobile & passive
c. It is human efforts.
d. It is rewarded with wages
3. When marginal product (MP) & average product (AP) both falls-
a. AP lies below MP
b. AP & MP intersect
c. MP Lies below AP
d. None of above
4. Total Product, Marginal Product & Average Product for 1st unit of labor are-
e. Identical
f. Different
g. Unable to be determined
h. None of above
5. The long run, as economists use the phrase, is characterized by:

i. At least one fixed factor of production.
j. The law of variable proportions
k. The law of Returns to scale
l. All inputs being fixed.
6. To economists, the common thing between the short run and the long is that:
m. In both, capital is fixed
n. In both, labor is variable
o. In both, production is absent
p. None of above
7. Which of the following is the best formula of the “production function”?

q. Q= F (L,L,K,E)
r. Q= F (L,E)
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SIDDHARTH ACADEMY
s. Q= F (L,L,K,E) T
t. None of above
8. The “law of Returns to scale” applies to:

u. The short run, but not the long run.
v. The long run, but not the short run.
w. Both the short run and the long run.
x. Neither the short run nor the long run.
9. Law of Variable proportions passes from-

y. 2 stages
z. 4 stages
aa. 1 stage
bb. 3 stages
10. Opportunity cost of an unemployed youth in past now getting job worth Rs.
7500/- per month is _________.
a. Nil
b. infinite
c. Rs. 7500
d. Negative
Use the following schedule to answer question 11-14.

Units of labour Total Product Marginal
product
0 _____ _____
1 100 100
2 195 ?
3 ? 80
4 ? ?
11. What is the Avg. Product when 1 Unit of labour is employed?

a. 80
b. 100
c. 180
d. 200
12. What is the marginal product of the 2nd Unit of labour?

a. 95
b. 195
c. 295
d. 80
13. What is the Total product of the first three units of labour?
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SIDDHARTH ACADEMY
a. 295
b. 95
c. 195
d. 275
14. If Optimum level of output results at end of 4th unit of labor, TP & MP shall be-
a. 100 & 100 respectively
b. 195 & 0 respectively
c. 0 & 100 respectively
d. 275 & 0 respectively
15. Direction of TP, AP & MP in 3rd stage of Law of variable proportions shall be-
a. All the three Increasing
b. TP increasing, AP & MP falling
c. All the three falling
d. TP & AP increasing, MP falling
16. Uncommon thing between law of variable proportions & returns to scale is-
a. Increasing Returns
b. Decreasing Returns
c. Constant Returns
d. None of above
17. Economies of scale means increasing production with______ per unit

a. Increase in total cost
b. Decrease in average cost
c. Decrease in marginal cost
d. Decrease in total cost
18. Which one of the following is also known as Long run average cost curve?
a. Basket Curve
b. Wallet Curve
c. Envelope curve
d. None of above
19. Which of the following is an example of external diseconomies?

a. Lower salary of firm
b. Higher salary of firm
c. Tax exemption by Govt.
d. High Tax Govt. Policy
20. Internal economies of scale are noticed at-

a. Firm level independent of industry
b. Industry level independent of Firm
c. At both firm & industry level
d. nowhere
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SIDDHARTH ACADEMY
21. Which of the following is an example of internal diseconomies?

a. High salary of firm
b. High tax for industry
c. Low tax for industry
d. Labour – management disputes in firm
22. Which of the following is an example of External economies?

a. Low salary of firm
b. tax exemption for industry
c. High tax for industry
d. Labour – management disputes of firm
23. With which of the following is the concept of marginal cost closely related?
a. Variable cost.
b. Fixed cost.
c. Opportunity cost.
d. Economic cost.
24. Which of the following does not have non linear shape?
a. Total cost curve
b. Total Variable cost curve
c. Total fixed cost curve
d. None of above
Use the following data to answer question 25-29. (Total Cost in Rs)
Output 0 1 2 3 4 5 6
(Units)
Total Cost 300 350 410 465 515 600 700
(TC)
25. AFC of 6 units of output is:

a. Rs. 50
b. Rs. 80
c. Rs. 116.66
d. None of above
26. TFC of 2nd unit of output is:

a. None of below
b. Rs. 110
c. Rs. 410
d. Rs. 300
27. TVC of 3 units of output is-

a. 300
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SIDDHARTH ACADEMY
b. 410
c. 465
d. 165
28. AVC of 5 units of output is-

a. 50
b. 120
c. 60
d. None of above
29. ATC or AC of 4 units of output is-

a. 55.25
b. 128.75
c. 515
d. None of above
30. The rising part of the LAC curve is due to which of the following?
a. Economies of scale.
b. Diminishing returns.
c. The coordination problems in firm
d. Diseconomies of scale
31. A firm’s average total cost is Rs. 300 at 5 units output and Rs. 320 at 6 units of
output. The marginal cost of producing the 6th unit is:
a. Rs. 20
b. Rs. 120
c. Rs. 320
d. Rs. 420
32. A toy manufacturer incurs total cost of Rs, 1, 13,900 per annum at zero level of
output. If the selling price is Rs. 200 per unit and break even quantity is 680 units,
what is the average variable cost per unit for the firm in Rs.?
(a) 32.5 (b) 33

(c) 33.5 (d) 31.5
33. A publisher publishes a book on management. His fixed cost is Rs. 2, 00, 000. If
he sells the book at Rs.250 per unit and incurs a variable cost of Rs. 50 per unit, the
total variable cost at break even shall be______
(a) Rs. 30,000 (b) Rs. 50000

(c) Rs. 2, 50,000 (d) Rs. 2, 75,000
Use the following data taken from seller of Diamonds to answer question 34-39.
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SIDDHARTH ACADEMY
MR in Rs. 110 135 165 205 240 260

MC in Rs. 75 115 160 205 245 270
Q In Units 1 2 3 4 5 6
34. Equilibrium level of output is ______ units.

a. 5
b. 6
c. 4
d. None of above
35. Producer should continue to produce & sell at _____ units of output.
a. 6
b. 2
c. 5
d. None of above
36. Maximum total profit at equilibrium level of output in Rs=

a. 60
b. 65
c. 55
d. 35
37. Total cost at equilibrium level of output in Rs=

a. 615
b. 350
c. 245
d. 555
38. Average Revenue at equilibrium level of output in Rs=

a. 155.35
b. 155
c. 153.75
d. 154
39. If the seller sells 5th & 6th unit, his total profit will_____
a. None of below
b. Rise
c. Be maximum
d. Fall
If TC = 2Q2 + 55Q +150 & TR = 2Q2 + 40Q + 1050, then answer questions (40 to 43)
40. Break even TR & TC is___

a. Rs. 10650
b. Rs. 10560
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SIDDHARTH ACADEMY
c. Rs. 60
d. Rs. 10660
41. Break even AR & AC in Rs. is___

a. 175.25
b. 177.5
c. 176.75
d. None of above
42. Break even MC in Rs. Is____

a. 290
b. 395
c. 195
d. 295
43. Break even MR in Rs. is___

a. 180
b. 380
c. 250
d. 280
If TFC = Rs.750, TVC = 3Q2 + 50Q, & MR = 15Q + 5, answer questions (44-45)
44. Equilibrium level of output in units is ____.

a. 5
b. 6
c. 50
d. none of above
45. TC at equilibrium level of output in Rs is____

a. 275
b. 325
c. 225
d. none of above
46. Price discrimination implies that the monopolist maximizes profits:

(a) None of Below
(b) By implementing arbitrage
(c) By Charging single price
(d) By prohibiting Arbitrage
47. Slope of AR curve in the context of monopolistic competition is-

(a) Perfectly elastic
(b) Relatively elastic
(c) Unitary elastic
(d) Relatively inelastic
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SIDDHARTH ACADEMY
48. Market structure where goods have close substitutes is best described as-
(a) Perfectly competitive.
(b) Monopolistic.
(c) Monopolistically competitive.
(d) None of above
49. In perfect competition in the short run there will be __________ possibilities
(a) Normal profits.
(b) Supernormal profits.
(c) Loss
(d) All of above
50. If seller’s AR & AC functions are given as 115Q + 290 & 95Q + 305 respectively,
with Output of 19 units, seller is making_____
a. NP
b. SNP
c. Loss
d. None of above
51. __________ is the official minimum rate at which the Central Bank of a
country is prepared to rediscount approved bills held by banks.
a. CRR
b. SLR
c. Bank rate
d. Repo rate
52 . The 3rd Five Year Plan duration covered the period-
a. 1951-56
b. 1961-66
c. 1947-52
d. None of above
53. Literacy rate calculated considering total population into account is known
as-
a. Crude Literacy Rate, b. Total Literacy Rate c. Mean Literacy Rate, d. None
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SIDDHARTH ACADEMY
54. The National Population Policy (NPP) 2000 set long term objective of
achieving a stable population by-
a. 2045 b. 2020 c. 2030 d. 2025
55. Match the following-
a) Science of wealth 1) Marshall

b) Science of welfare 2) Samuelson
c) Science dealing with 3) Robbins
scarcity
d) Science of growth 4) Smith
a. (a-3, b-1, c-2, d-4) b. (a-4, b-3, c-1, d-4) c. (a-2. b-1, c-3, d-4)
d. (a-4, b-1, c-3, d-2)
56. Match the following
(a) “What is” 1) Micro-economics

(b) “What ought to be” 2) Macro-economics
(c) Aggregates 3) Positive economics
(d) Individual units 4) Normative economics
a. (a-4, b-1, c-2, d-3) b. (a-2, b-4, c-1, d-3) c. (a-3, b-4, c-3, d-1)
d. (a-3, b-4, c-1, d-2)
57. Corporation Bank & Air India are the examples of:
(a) Fixed capital (b) Artificial capital (c) private capital (d) public
capital.
58. The first industrial revolution laid the foundation of --
(a) Capitalist economy (b) Socialist economy (c) Mixed economy (d)
None of these
.59. Under a Command economy –
(a) State plays a major role (b) Market plays major role (c) Both a & b (d)
Neither a nor b
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SIDDHARTH ACADEMY
60. . When the price of a complementary of commodity X falls, the demand for X-
A. Falls B. Rises C. Remains unchanged D. Any of

the above
61. Which of the following is the method of measuring elasticity of demand when
change in price of a commodity is substantial?
A. Arc method B. Point method C. Percentage method D. None of these
62. IC analysis was given by
A. Allen & Smith B. Hicks & Marshall C. Allen & Hicks

D. Hicks & Pigou
63 FERA stands for -
A. Foreign Exchange Recommendation Act

B. Foreign Exchange Regulation Act
C. Finance and Export Regulation Association
D. Funds Export Revaluation Act
64. In order to encourage investment in the economy, the RBI may

a. Increase Bank Rate
b. Sell securities in the open market
c. Buy securities in the open market
d. None of above
65. If Repo Rate is 2 %, as per RBI policy, Reverse repo rate must be-
a. 1% b. 2% c. 10% d. 0.5%
66. Nearly _____percent of working population is engaged in the service sector.

a. 23 per cent
b. 45 per cent
c. 80 per cent
d. 50 per cent
67. 11th Plan had objective of reducing Infant Mortality rate to _____.
a. 30 b. 28 c. 35 d. 0
68. ACRP stands for –
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SIDDHARTH ACADEMY
a. Agro-Commodity Regional Planning

b. Agro-Climatic Rational Planning
c. Agro-Climatic Regional Planning
d. Allied-Climatic Regional Planning
69. As per 2011 Census, ____________ has got highest Gender Ratio.
a. Tamil Nadu
b. Goa
c. Sikkim
d. Pondicherry
70. A target for creating ________new jobs has been set for the Rural Employment
Generation programme under the Tenth Five Year plan.
a. 25 Lacs b. 30 Lacs c. 100 Lacs d. 1 Crore
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SIDDHARTH ACADEMY
MCQs
1) Which of the following statements is false?
a) Statistics is derived from the Latin word 'status' b) statistics is derived from
Italian word 'statista
c) statistics is derived from in French word 'statistik' d)none
2) Statistics is applied in
a)Economics b) Business Management c) Commerce & Industry d)All these
3) Data collected on religion from the census reports are
a)Primary data b)Secondary data c)Sample data d) a or b
4) The data collected on the height of group of students after recording their heights
with a measuring
tape are
a)Primary data b)Secondary data c) Discrete data d)continuous data
5) The primary data are collected by
a)Interview method b)Observation method c) Questionnaire method d) All these
6) The best method to collect the data in case of natural Calamity , is
a) Personal Interview b) Indirect Interview c) Questionnaire Method d)none
7) which method of data collection covers the widest area?
a) Telephone Interview b) Mailed Questionnaire c) Direct Interview d)All these
8) The amount of non responses is maximum in
a)mailed Questionnaire method b) Interview method c) Observation method d) All

these
9) The mode of presentation of data are
a) Textual, tabulation & diagrammatic b) Tabular, Internal

& External
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SIDDHARTH ACADEMY
c) Textual , tabular & internal d) Tabular, textual

& external
10) For tabulation 'Caption' is
a) The upper part of table b)The lower part of

table
c) The main part of table d)The upper part of table that describes column
& sub-column
11) 'stub' Of a table is
a) Left part of the table describing the Columns b) Right part of the table
describing the Column
c) Right part of table describing rows d) Left past of the table

describing the rows
12) The entire upper part of the table is known as
a) caption b) stub c) Box head d) Body
13) The unit of measurement in tabulation is shown in
a) Box head b) Body c) Caption d) stub
14) In tabulation source of data if any is shown in the
a) Footnote b) Body c) Stub d) Caption
15) Diagrammatic presentation is done by
a) Diagrams b)Charts c) Pictures d) All these
16) A frequency distribution
a) Arranges observation in ascending order b) Arranges in terms of groups
c) Relates to a measurable characteristic d) all these
17) Relative frequency for a Particular class
a) Lies between 0 & 1 b) Lies between O&1 , both

inclusive
c) Lies between -1 & 0 d) Lies between -1 & 1
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SIDDHARTH ACADEMY
18) median of a distribution can be obtained from
a) Frequency Polygon b) Histogram c) Less than type ogives d) None
19) The number of observations falling within a Class is called
a) density b) frequency c) both d)none
20) Consecutive rectangles in a Histogram have no space in between
a)True b)False c) both d)none
21) Graphically Mode Can be found using
a) Ogive b) Frequency polygon c) Histogram d)none
22) In Histogram , the classes are taken
a) Overlapping b) non-overlapping c) both d) none
23) How many basis of classification are there?
a)4 b) 3 c) 2 d) None
24) A table has ........ parts
a) 3 b) 5 c) 4 d) none
25) How many laws are there in Statistics ?
a) 2 b) 3 c) O d) none
26) Some believe that statistics originated from a German word ........
a)Statista b)statistik c) Status, d) none
27) Data Can be classified as
a) Private & Government b) Primary & Secondary c) 'Private & Public

d)none
28) Pie diagram is based on a
a) Circle b) Rectangle c) Triangle d) none
29) Cost of Sugar is as follows
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SIDDHARTH ACADEMY
Raw material 12
labour 20
direct Production 35
others 23
what is the difference between the central angles for largest & smallest components ?
a) 72 b) 48 c) 56 d) 92
30) ........ can not be obtained using graph
a) A.M. b) Median c) Mode d) none
15
SIDDHARTH ACADEMY
(MCQ’s)
Chapter VI- BASIC CHARACTERISTICS OF INDIAN ECONOMY-I
1. When India became Independent, it was a highly __________

a. backward economy
b. Progressive economy
c. None of above
2. We adopted ____________with an active role of the state.

a. Capitalism
b. Socialism
c. mixed economy
3. The Planning Commission was set up in ________

a. August 1947
b. March 1950
c. April 1991
d. January 1952
4. Major objective of Planning Commission is -

a. that the citizens shall not have the right to an adequate means of livelihood.
b. that the ownership and control of the material resources shall remain
unequal.
c. Avoiding the concentration of wealth and means in the hands of few.
d. None of above
5. The principal task of the Planning Commission is to formulate the

a. five-year plans.
b. Annual Plans
c. Budget
d. None of above
6. In the five year plan document, the amount of money, is broken down into-
a. public sector outlay and private sector plan outlay.
b. only public sector outlay
c. only private sector outlay
d. none of above
7. The public sector outlay is the most important part in the plan as-
a. the private sector has direct control over the investment during a plan
period
b. the Govt. has direct control over the investment during a plan period
c. the Govt. has no direct control over the investment during a plan period
16
SIDDHARTH ACADEMY
d. None of above
8. The first Prime Minister of India, Jawaharlal Nehru presented the first five-year plan
on –
a. December 8, 1951.
b. January 26, 1952
c. January 26, 1951
d. August 15, 1947
9. Target growth Rate & Actual growth Rate for 1st Five Year Plan was -
a. 3% & 3.6% respectively
b. 2.1% & 3% respectively
c. 3.6% & 2.1% respectively
d. 2.1% & 3.6% respectively
10. Target growth Rate & Actual growth Rate for 9th Five Year Plan was –
a. 5.35% & 6.5% respectively
b. 5.5% & 6.35% respectively
c. 6.5% & 5.35% respectively
d. None of above
11. The Tenth Five Year Plan duration covered the period-
a. 2002-07
b. 1997-2002
c. 2002-2012
d. None of above
12. The period 2007-12 represents-

a. 9th Five Year Plan
b. 11th Five Year Plan
c. 12th Five Year Plan
d. None of above
13. 11th Five Year Plan targeted increase in agricultural growth rate to ___%
a. 10%
b. 1%
c. 4.5%
d. 4%
14. In India, ____________represents 92% of the consumption of water

a. Irrigation
b. Industry
c. Household
d. All of above
15. In India, according to the Annual Report 2009-10 of the Ministry of Agriculture-
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SIDDHARTH ACADEMY
a. 240.3 million hectares is net sown area

b. 200 million hectares is net sown area
c. 140.3 million hectares is net sown area
d. 340.3 million hectares is net sown area
16. The 1st Five Year Plan duration covered the period-
a. 1951-56
b. 1947-52
c. 1956-61
d. None of above
17. Green Revolution started-

a. in the year 1947-48
b. in the year 1957-58
c. in the year 1977-78
d. in the year 1967-68
18. __________is a process where there is a sharp increase in the industrial share of
GDP
a. Industrialization
b. Commercialization
c. Modernization
d. None of above
19. System where British rulers collected the land taxes from farmers and assigned
responsibility to local zamindars in India is known as__________
a. Mahalwari system
b. Ryotwari system
c. Zamindari system
d. All of above
20. High Yielding Variety crops formed the basis for-

a. the Cultural Revolution.
b. the social Revolution.
c. Industrialisation
d. Green Revolution
21. The Industrial Policy Resolution, 1948, had following major feature.
a. State Monopoly in Arms and ammunition, Atomic Energy , Rail Transport
b. Private Monopoly in Arms and ammunition, Atomic Energy, Rail Transport
c. Foreign Direct Investment
d. Disinvestment
22. _________________laid down the economic reforms model.
18
SIDDHARTH ACADEMY
a. The Industrial Policy Resolution, 1948,

b. The Industrial Policy Resolution, 1991,
c. The Industrial Policy Resolution, 1956,
d. None of above
23. Disinvestment is a process of transferring the ownership of equity shares from-

a. Government to a private sector.
b. Private sector to Government
c. Central Government to World Bank
d. State governments to Central government
24. In year 1996-97, targeted & actual disinvestment in crores was-

a. Rs. 10000 & Rs. 580
b. Rs. 380 & rs. 10000
c. Rs. 5000 & Rs. 580
d. Rs. 5000 & Rs. 380
25. NTPC stands for-

a. National Telegraph Postal Corporation
b. Narmada Thermal Power Corporation
c. National Thermal Power Corporation
d. National Thermal Powder Corporation
26. BARC stands for-

a. Bhabha Atomic Research Centre
b. Bharat Atomic Research Centre
c. Bhabha Astrological Research Centre
d. Bhabha Atomic Recreational Centre
27. BHEL stands for-

a. Bharat Heavy Electronics Ltd
b. Bhabha Heavy Electrical Ltd
c. Bharat Heavy Electricals Ltd
d. Bombay Heavy Electricals Ltd
28. IPCL stands for-

a. International Petrochemicals Corporation Ltd.
b. Indian Premier Corporation Ltd.
c. Indian Police Corporation Ltd.
d. Indian Petrochemicals Corporation Ltd.
ADDITIONAL MCQS
19
SIDDHARTH ACADEMY
1. Generally an economy is considered under developed if

e. The standard of living of people & Productivity is low.
f. Agriculture is the main occupation of the people
g. The production techniques are backward.
h. All of the above.
2. Which of the following statement is correct?

a. Agriculture occupies 10 per cent population of India.
b. Nearly 5 per cent population of India is below the poverty line.
c. The production techniques in agriculture are backward.
d. None of the above.
3. Which of the statements is correct?

a. The tertiary sector contributes the maximum to the GDP.
b. India is basically a socialist economy.
c. The distribution of income and wealth is quite equitable.
4. _______is the apex bank for agriculture credit in India.

a. RBI
b. SIDBI
c. NABARD
d. ICICI
5. The share of agriculture in India’s national income has ______ over the years.
a. Remained constant.
b. Decreased.
c. Increased.
d. First decreased and then increased.
6. The green revolution is also known as

a. Wheat revolution.
b. Rice revolution.
c. Cultural Revolution.
d. Forest revolution.
7. The area under irrigation has ______ over the years in India.
a. Remained constant.
b. Decreased.
c. Increased.
d. First increased and then decreased.
8. Which of the following statements is correct?

a. Under zamindari system, farmers directly paid land revenue to the state.
20
SIDDHARTH ACADEMY
b. Income tax revenues from the agriculture sector are negligible.

c. Banks are providing loans to the agriculture sector at zero interest rate.
9. Abolition of intermediaries and tenancy reforms are both parts of

a. Industrial reforms in India.
b. External sector reforms in India.
c. Land reforms in India.
d. Banking reforms in India.
10. Agriculture sector faces the problem of

a. Slow and uneven growth.
b. Inadequate and incomplete land reforms.
c. Inadequate finance.
d. All of the above.
11. Which of the following has been specifically established to meet the requirements
of credit of the farmers and villagers?
a. ICICI bank.
b. Regional Rural Banks.
c. State Bank of India.
d. EXIM bank.
12. Which of the following statements is incorrect?

a. About 80 per cent of agricultural area has irrigation facilities.
b. About 60 per cent area is rain fed in India.
c. Productivity per worker in agriculture is much lower.
d. Cropping pattern is quite skewed in India.

a. Countries which are industrially well-developed generally have
higher per capita income than countries which are not.
b. India is a capital surplus economy.
c. Agriculture sector need not depend upon industrial sector for its growth.
14. Three steel plants in Bhilai, Rourkela and Durgapur were set up in the
a. First plan.
b. Second plan.
c. Third plan.
d. Fourth plan.
15. Which of the following has resulted in failure to achieve targets of industrial
Production?
a. Poor planning.
b. Power, finance and labour problems.
21
SIDDHARTH ACADEMY
c. Technical complications.
16. About _______ per cent of the sick units in India are small units.
a. 10 per cent
b. 5 per cent
c. 30 per cent
d. 98 per cent
17. The Tenth Plan aimed at achieving a growth rate of _______ in the industrial
sector.
a. 5 per cent
b. 8 per cent
c. 10 per cent
d. 6 per cent
18. Oil and Natural Gas Corporation Indian Oil Corporation, Steel Authority of
India, and Bharat Heavy Electricals are all examples of
a. Small scale units.
b. Private sector units.
c. Public sector units.
d. Sick units.
19. Over the planning period the share of industrial sector in the GDP of India
has_________.
a. Increased
b. Decreased
c. Remained constant
d. Remained above 50 per cent
20. The industrial sector depends on the agricultural sector because

a. The agriculture sector provides food and other products for the
consumption purposes of industrial sector.
b. The agriculture sector provides raw-materials for the development of
agro-based industries of the economy.
c. The agricultural sector provides market for the industrial products.
21. A sick industrial unit is one

a. Where most of the employees are sick.
b. Which is unable to perform its normal functions and production of
goods and services at a reasonable profit on a sustained basis
c. Which is unable to make profits more than 10 per cent of its capital
employed
d. Which borrows money from bank for its fixed assets
22
SIDDHARTH ACADEMY
22. The service sector in India now accounts for

a. More than 80 per cent of GDP.
b. More than 70 per cent of GDP.
c. More than 50 per cent of GDP.
d. More thane 90 per cent of GDP.
23. Nearly _____percent of working population is engaged in the service sector.

a. 23 per cent
b. 45 per cent
c. 80 per cent
d. 50 per cent
24. India has the ______ largest scientific and technical manpower in the world.
a. Fifth
b. Tenth
c. Eighth
d. Second
25. Small scale units exist in India because

a. They are labour intensive and India is a labour surplus economy.
b. They offer methods of ensuring more equitable distribution of income and
wealth.
c. They facilitate the creation of a winder entrepreneurial base.
23
SIDDHARTH ACADEMY
(MCQ’s)
CHAPTER VII- SELECT AREAS OF INDIAN ECONOMY
1. India accounts for ______percent of world surface area but it supports _____ percent
of the world population respectively.
a. 3.4 & 16.7 b. 4 & 20 c. 2.4 & 16.7 d. 16.7 &
2.4
2. As per latest information, current population of India in 2012 is-

a. 1.22 billion b. 0.80 billion c. 2 billion d. 2.12 billion
3. The National Population Policy (NPP) 2000 outlines the long term objective of
achieving a stable population by-
a. 2045 b. 2020 c. 2030 d. 2015
4. As population of a country increases the per head availability of natural resources-

a. declines b. increases c. remains fixed d. becomes zero
5. Where as in 1921 the per capita cultivated land was ____ acres, it reduced to ____
acres in 1995 respectively.
a. 1.11 & 1 b. 1 & .048 c. 1.11 & .048 d. 1 & 1.11
6. The ratio of unproductive population to productive population is known as-

a. Independency ratio b. mean ratio c. dependency ratio d.
nothing
7. As per census 2011 regarding population in India-

I. Density is _______per sq km.
a. 125 b. 250 c. 372 d. 382
II. Gender ratio is _______ females per 1000 males.

a. 800 b. 950 c. 940 d. 1100
III. Female literacy % is _______.

a. 60 b. 65.46 c. 46.65 d. 64.56
IV. The state of _______ is said to be the most populous state.

a. Bihar b. Sikkim c. UP d. Goa
V. The country is responsible for _______ %of the total population on earth.
a. 17.5 b. 15 c. 20 d. 100
24
SIDDHARTH ACADEMY
8. Literacy rate calculated by taking the total population into account is known as-
a. Crude Literacy Rate b. No Literacy Rate c. Mean Literacy Rate
9. Literacy rate calculated by considering population aged above 7 years is known as-
a. Crude Literacy Rate b. Effective Literacy Rate c. Adult Literacy Rate
10. As per National Population Policy, 2000 (NPP 2000), following targets are set-
I. Make school education up to age _____free and compulsory
a. 10 b. 15 c. 21 d. 14
II. Reduce infant mortality rate to below _____per 1000 live births.
a. 20 b. 30 c. 40 d. 35
III. Promote delayed marriage for girls, not earlier than age ____.
a. 15 b. 21 c. 18 d. 25
IV. Achieve ______per cent registration of births, deaths, marriage and

pregnancy
a. 100 b. 80 c. 0 d. 50
11. _______can is defined as a situation in which a section of the society is unable to

fulfill even its basic minimum requirement of life.
a. Malnutrition b. inequality c. Poverty d. Full employment
12. Poverty is mainly viewed in two ways-
a. absolute and relative b. half & full c. more & less d.
good & bad
13. In India, we are mostly concerned with-

a. Zero poverty b. Absolute Poverty c. Relative poverty
14. National Rural Employment Guarantee Act (NREGA) 2005was passed in-
a. December 2005 b. November 2005 c. May 2005 d.
September 2005
15. NFWP stands for-

a. Notional Food for Work Programme
b. National Food for Work Programme
c. National Fool for Work Programme
d. National Food for Worm Programme
16. Swarnajayanti Gram Swarozgar Yojana (SGSY) was launched in-

a. 1999. b. 1991 c. 2001 2011
17. A target for creating ______ lakh new rural jobs has been set under the Tenth Five
Year plan
25
SIDDHARTH ACADEMY
a. 20 b. 50 c. 25 100
18. Pradhan Mantri Gramodaya Yozana (PMGY) launched in year-

a. 2000 b. 2005 c. 2010 d. 2012
19. NSSO stands for-

a. The National Soil Survey Organization
b. The National Sample System Organization
c. The National Sample Survey Organization
d. The National Sample Service Organization
20. India currently faces coal shortage of _____ metric tonne.

a. 23.96 b. 25 c. 27.15 d. 0
21. The Telecom Regulatory Authority of India (TRAI) was established with effect
from_____
a. 20th Feb 1991 b. 20th Feb 2001 c. 20th Feb 1997 d. 20th February 2007
22. TDSAT stands for-

a. Transport Dispute Settlement and Appellate Tribunal
b. Telecommunications Dispute Settlement and Appellate Tribunal
c. Telecommunications Directorate Settlement and Appellate Tribunal
d. Telecommunications Dispute Solutions and Appellate Tribunal
23. The New Telecom Policy, 1999 became effective from__________

a. 1st April 2009 b. 1st April 1991 c. 1st April 1999. d. 1st April
2009
24. Nearly ______% of the population in India does not have access to essential
medicines.
a. 25 b. 51 c. 75 d. 67
25. ____________has the lowest Infant Mortality Rate (IMR).

a. Kerala b. UP c. Assam d. Goa
26. ____________has the highest Infant Mortality Rate (IMR).

a. Gujarat b. Karnataka c. Bihar d. UP
26
SIDDHARTH ACADEMY
ADDITIONAL MULTIPLE CHOICE QUESTIONS

1. What is India’s rank in world population?
a. First.
b. Second.
c. Third.
d. Fourth.
2. The annual additional to India’s population is almost equal to the total

population of
a. Bangladesh
b. Australia.
c. Japan
d. China
.
3. In which state is the sex ratio most favorable to women?
a. Andhra Pradesh
b. Uttar Pradesh.
c. Kerala.
d. Karnataka.
4. Which year is known as year of great divide for India’s population?

a. 1991.
b. 2001.
c. 1981.
d. 1921.
5. In which state/union territory is the literacy rate highest?

a. Delhi.
b. Chandigarh.
c. Karnataka.
d. Kerala.
6. India’s passing through __________ stage of demographic transition.

a. Fourth
b. Third
c. First
d. Second
7. In the theory of demographic transition in the last stage-

a. Birth rate rises, death rate rises
b. Birth rate rises, death rate falls.
c. Birth rate falls, death rate rises.
d. Birth rate falls, death rate falls.

a. India’s population is second largest in the world.
27
SIDDHARTH ACADEMY
b. India is still passing through first stage of demographic transition.

c. More people in a country always mean more economic trouble for the country.
9. India’s present population is

a. Between 50-60 crore.
b. Between 60-70 crore.
c. Between 70-80 crore.
d. Above 100 crore.
10. India accommodates nearly _______ per cent of world’s population.

a. 10.
b. 50.
c. 17.
d. 45.
11. Of late, birth rate in India has _______ and death rate has ________
a. Fallen, fallen
b. Risen, fallen.
c. Risen, risen
d. Fallen, risen.
12. Identify the incorrect statement

a. The problems of poverty and unemployment are inter-related.
b. The problem of poverty has been solved in India.
c. Growing population has also contributed to the problem of poverty in India.
13. SJSRY stands for
a. Swaran Jayanti Shahari Rozgar Yojana.
b. Shahari Jeewan Sudhar Rashtriya Yojana.
c. Sampoorna Jeewan Shahari Rozgar Yojana.
14. A situation of employment in which a person is apparently employed but his

contribution to the production is almost nil is called __________ unemployment.
a. Structural
b. Chronic
c. Disguised
d. Cyclical.
15. ____________ Unemployment may result when some workers are temporarily out
of work changing job.
a. Cyclical.
b. Voluntary.
c. Frictional
28
SIDDHARTH ACADEMY
d. Seasonal
16. According to ___________ measure, a person is said to be employed for the week
even if the employed only for a day during the week.
a. Usual status.
b. Current weekly status.
c. Current daily status.
d. Current yearly status.
17. Every ________ person in the world in an Indian.

a. Second
b. Third.
c. Sixth.
d. Tenth.
18. ______________ measure generally gives the lowest estimate of unemployment
especially for poor economy.
a. Usual status.
b. CWS.
c. CDS.
d. CMS.
19. Most of unemployment in India is __________

a. Voluntary
b. Structural
c. Frictional
d. Technical
20. The highest user of commercial energy is

a. Agriculture.
b. Transport
c. Household.
d. Industry.
21. In terms of generation of power ___________’s contribution is the maximum.

a. Hydel
b. Nuclear.
c. Thermal.
d. Others.
22. Of the major 12 ports, ___________ is the top traffic handler.

a. Paradip
b. Cochin.
c. Vishakhapatnam.
d. Mumbai.
23. Sahara Jet and Kingfisher are examples of

29
SIDDHARTH ACADEMY
a. Private schools.
b. Private airlines.
c. Private ships,
d. Private railways
24. Our postal network is _________ in the world

a. Among the largest networks
b. Fifth smallest.
c. Tenth largest.
d. Tenth smallest.
25. Who is regulatory authority for telecom in India?

a. SEBI
b. TRAI
c. MTNL
d. BSNL
26. Over the years, the incidence of malaria (cases in million) has ___________
a. Reduced
b. Increased
c. Remained the same
d. Doubled.
27. Over the years, the number of polio cases has

a. Increased
b. Reduced
c. Remained the same
d. Doubled.
28. NLM stands for
a. National Leprosy Mission.
b. National Logistic Mission.
c. National Literacy Mission
d. National Law Mission.
29. IIM stands for

a. Indian Institute of Marketing
b. Indian Institute of Manpower
c. Indian Institute of Management
d. International Institute of Management.
30
MANAGERIAL ECONOMICS
BBA(SEM III) Multiple choice questions
1. Automatic fiscal stabilizers

a. Keep the federal budget balanced
b. Keep the federal high employment budget balanced
c. Help to reduce the severity of recessions and inflationary boom periods
d. Increases structural deficits over the business cycle
e. Both C & D
2. The higher the marginal income tax rate, the
a. Higher the MPC out of disposable income
b. Lower the MPC out of disposable income
c. Highest the autonomous expenditure multiplier
d. lower the autonomous expenditure multiplier
e. none of the above
3. Suppose that the MPC out of disposable income was 0.8 and the marginal tax rate was
0.25 for a given economy. In this case, the value of the tax multiplier in the simple
Keynesian model would be
a. 1
b. -2.
c. 2.5
d. 2
e. None of the above
4. Suppose that the MPC out of disposable income was 0.8 and the tax function for a given
economy was T= -30+0.25Y. an increase in the intercept of the tax function of 10
units(from -30 to -20 would cause equilibrium income in the simple Keynesian model to
fall by
a. -20 units
b. 10 units
c. 20 units
d. 40 units
5. If the tax function is given by T= -20+0.1 Y the average tax rate would
a. Be 0.1
b. Fall as income falls
c. Vary negatively with income
d. Be -20 _0.1
6. The role of the progressive tax system as an autonomous fiscal stabilizer requires that the
budget
a. Should require actual deficits be equal to zero on average
b. Should go into a surplus at appropriate points in the business cycle.
c. Cannot have a structural deficit component
d. Both a & b
7. If the tax function is T= t0+t1y where t1 equals 1/3,and if the marginal propensity to
consume out of disposable income is 3/4 , then the change in GDP oer unit change into t0
(∆Y/∆ t0) will be
a. -1
b. +1
c. -1.5
d. -2
e. +1.5
8. In the simple Keynesian model, if the tax function is given by T=0.15Y and the
consumption function is C= 50 + 0.7 YD then a 10-unit ncrease in government spending
would increase equilibrium income by
a. 10 units
b. 11.2 units
c. 22.4 units
d. 30 units
e. None of these
9. According to partisan party model,
a. The primary emphasis of the liberal party is on full employment and income
distribution.
b. The liberal party stresses price stability as their most important goat.
c. Employment stability is most important to the conservative party.
d. Only two parties exit.
e. Both a and d
10. Advocates of the public-choice view argue that voting behaviour is influenced by the
a. Rate of inflation prior to an election.
b. Level of economic activity.
c. “Favourite son syndrome.
d. Campaign issues
11. According to the partisan theory,
a. Politicians are viewed as working only for their own welfare.
b. There are two parties with flexible goals
c. Moderates and liberals often switch political goals
d. Macroeconomic policy is not a key focus of most politicians
e. None of these
12. Keynesians believe in
a. Active management of structural deficits an minimal cyclical deficits
b. Running structural budget deficits to simulate output
c. Running large surpluses during expansions
d. Active management of cyclical deficits and minimal structural deficits
13. Which of the following statements is(are) correct?
a. Even the earliest political business cycle and partisan models assume that
expectations were rational
b. The partisan model of fiscal policy cannot be modified to be consistent with
rational expectations
c. The myopic, or short-sighted behaviour of voters is inconsistent with rational
expectations
d. The earliest political business cycle models assumed that expectations were
always rational, whereas the partisan model assumed that expectations were
sometimes irrational.
14. When automatic fiscal stabilizers are in place, a shock that causes a fall in the kevel of
economic activity automatically
a. Results in a decline in the federal budget deficit that lessens the fall in income
b. Results in a rise in the federal deficit that lessens the fall in income
c. Requires the federal government to balance the budget
d. Will lead to a permanent increase in the budget deficit
15. According to the Keynesian model, the optimal fiscal policy is to
a. Increase cyclical but not structural deficits during a recession
b. Reduce cyclical and structural deficits during a recession
c. Increase structural deficits during a recession
d. Maintain a balanced budget in case of national emergency
16. Which of the following are the most frequently utilized tools of fiscal policy in the
United States?
a. Indirect business taxes
b. Corporate income taxes
c. Inheritance taxes
d. Personal income taxes
17. Assume that the actual deficit is $150 billion with the economy well below potential
output and that the level of economic activity rose to its potential level while tax revenues
increased by $50 billion and transfer payments fell by $20 billion. Then, what is the
structural deficit?
a. $180 billion
b. $120 billion
c. $220 billion
d. $80 billion
18. The structural deficit is
a. Directly attributable to the long-run behaviour of the economy
b. Not directly attributable to the cyclical behaviour of the economy
c. The result of permanent decisions policymakers have made about tax rates, the
level of government spending, and benefit levels for transfer programs.
d. Both b and c
19. According to the Keynesians,
a. An easy-fiscal tight-monetary policy reduces the trade deficit, such as what
occurred during the 1980s
b. An easy-fiscal tight-monetary policy mix affects the composition of output by
encouraging imports of foreign goods and discouraging U.S. exports, as was
experienced during the 1980s
c. There was not a link between the rising government budgetary deficit and the
rising trade deficit during the mid-1980s
d. Budget deficits and trade deficits should not be a source of concern
20. During the recession of 2001,
a. There were a number of proposals for tax increases or spending cuts to stir the
economy, but the failed due to worries about their effects on the already large
deficit
b. A series of tax cuts were passed, though the only occurred in late 2001
c. All the proposed tax and spending cuts were approved in order to motivate the
economy and reduce the large deficit
d. The cyclical deficit increased but the structural deficit remained unchanged
21. Advocates of the public-choice view argue that elected officials
a. Will always respond to inflation with expansionary policies but will respond to
unemployment with restrictive policies
b. Will actively respond to inflation with restrictive policies but are reluctant to
respond to unemployment with expansionary policies
c. Will always respond to both inflation and unemployment with expansionary
policies
22. Which of the following statements are(is) correct?
a. Expansionary monetary policy and expansionary fiscal that leads to budget
deficits create low interest rates
b. High interest rates in the first half of the 1980s resulted from falls in the budget
deficit under the Reagan administration
c. The best monetary-fiscal policy mix to keep interest rates low would be to raise
taxes and raise the money supply
d. The answer depends upon the school of thought used to evaluate the effects of
deficit policies
23. Assuming a simultaneous deduction in income taxes and transfer payments of $50
billion, then aggregate disposable income will
a. be higher than before
b. be lower than before
c. remain constant
d. none of the above
24. From the net tax function: T=t0+t1Y,where t0<0 and t1>0, it follows that, as income rises
a. average taxes falls and the surplus declines
b. average taxes rises and the deficit increases
c. average taxes falls and the deficit declines
d. average taxes and the deficit do not change
25. The structural deficit is the deficit that
a. Is composed by of non discretionary spending by the federal government
b. Results from the economy being below is natural rate of output
c. Exists when output is at its natural rate of output
d. Results from temporary tax cuts
26. Which of the following hypotheses about voter behaviour have been advanced in public-
choice literature?
a. Voters are myopic
b. Unemployment is more likely to result in vote loss than is higher inflation
c. Deficit bias of the budget process
d. Both a and c
e. All of the above
27. In the IS-LM model, an easy monetary in conjunction with a tight fiscal policy
a. Increases exports and decreases imports
b. Decreases exports and increases imports
c. Encourages foreign capital inflows to the U.S.
d. Both b and c
28. The cyclical deficit is that portion of the deficit
a. That results form the economy being below the natural rate of output
b. That would exist even if the economy were at its natural rate of output
c. Is a function of the level of automatic stabilizers
d. Both a & c
29. Automatic stabilizers drive changes in
a. The total deficit
b. The cyclical deficit
c. The structural deficit
d. Monetary policy
30. According to the concept of rational expectations
a. Budget deficits are irrelevant to output in the short-run
b. Higher deficits should increase output in the short run if they are expected
c. Lower deficits can be used to stabilize output during expansions
d. None of these
31. The book ‘Asian Drama’ was written by
a. A.C Pigou
b. D. Ricardo
c. Gunnar Myrdal
d. Lionel Robbins
32. The Historical school was based on
a. Deductive method
b. Inductive method
c. Both of above
d. None of these
33. Physiocrats give utmost importance to
a. Services
b. Industry
c. Agriculture
d. None of these
34. Feudalistic economy is dominated by
a. Entrepreneur
b. Worker
c. Landlord
d. None of these
35. Adam Smith advocated
a. Laissez Faire
b. Division of Labour
c. Both of these
d. None of these
36. A fall in the price of a commodity leads to
a. A shift in demand
b. A fall in demand
c. A rise in the consumer’s real income
d. A fall in the consumer’s real income
37. An exceptional demand curve is one that slopes
a. Upward to the left
b. Downward to the right
c. Horizontally
d. Upward to the right
38. Which one is not an exception to the Law of Demand?
a. Normal good
b. Articles of Distinction
c. Ignorance
d. Inferior good
39. Demand for a commodity is elastic when it has:
a. Only one use
b. Uses which can not be postponed
c. Many uses
d. Uses very essential for the consumer
40. When the demand curve is a rectangular hyperbola, it represents:
a. Perfectly elastic demand
b. Unitary elastic demand
c. Perfectly inelastic demand
d. Relatively elastic demand
41. The horizontal demand curve for a commodity shows that its demand is:
a. Perfectly elastic
b. Highly elastic
c. Perfectly inelastic
d. Moderately elastic
42. When an individual’s income falls(while everything else remains the same), his demand
for an inferior good:
a. Increases
b. Decrease
c. Remains unchanged
d. We cannot say without additional information
43. A fall in the price of a commodity whose demand curve is a rectangular hyperbola causes
total expenditure on the commodity to:
a. Increases
b. Decrease
c. Remains unchanged
d. Any of the above
44. The utility may be defined as:
a. The desire for a commodity
b. The usefulness of a commodity
c. The necessity of a commodity
d. The power of a commodity to satisfy wants
45. The utility of a commodity is:
a. Its expected social value
b. The extent of its practical use
c. Its relative scarcity
d. The degree of its fashion
46. Marginal utility curve of a given consumer is also his:
a. Indifference curve
b. Total utility curve
c. Demand curve
d. Supply curve
47. The relationship between demand for a commodity and price, ceteris paribus, is:
a. Negative
b. Positive
c. Non-negative
d. Non-positive
48. A demand curve which takes the form of horizontal line parallel to quantity axis
illustrates elasticity which is:
a. Zero
b. Infinite
c. Greater than one
d. Less than one
49. Consider a demand curve which takes the form of a straight line cutting both axes.
Elasticity at the mid-point of the line would be:
a. Zero
b. One infinite
c. infinite
d. Can not be calculated
50. The elasticity of demand for a product will be higher:
a. The more available are substitutes for that product
b. The more its buyers demand loyalty
c. The more the product is considered a necessity by its buyers
d. All of the above
51. A consumers demand curve can be obtained from:
a. ICC
b. Engel curve
c. Lorence curve
d. PCC
52. In case of Giffen goods, demand curve will slope:
a. Vertical
b. Horizontal
c. Upward
d. Downward
53. Cross elasticity of demand between tea and sugar is:
a. Positive
b. Zero
c. Infinity
d. Negative
54. If the percentage increase in quantity of a commodity demanded is its price, the
coefficient of price elasticity of demand is:
a. Greater than 1
b. Equal to 1
c. Less than 1
d. Zero
55. If the quantity of a commodity demanded remains unchanged as its price changes, the
coefficient of price elasticity of demand is
a. Greater than 1
b. Equal to 1
c. Less than 1
d. Zero
56. Unitary elasticity of demand is:
a. Zero
b. Equal to one
c. Greater than 1
d. Less than 1
57. The real business cycle theory is most closely related to
a. Keynesian theory
b. Monetarist theory
c. The classical theory
d. The new Keynesian theory
58. In the real business cycle model, business cycles are
a. Efficient and do not represent lost output
b. Driven by technology shocks
c. Occur when markets clear
d. All of the above
59. Real business cycle proponents argue that
a. Recessions are caused by movements of output away from the natural rate of
output
b. Prices and wages are sticky
c. Macroeconomics should be based on the same assumptions as microeconomics
d. Monetary policy is important in determining recessions
60. Which of the following statements are correct? In (the)
a. Keynesian model, unemployment is voluntary.
b. Real business cycle model, all unemployment is voluntary
c. New classical models, there is voluntary unemployment
d. Both b&c
61. The real business cycle theory
a. Argues for active stabilization policy.
b. Argues for interventionist policies in response to recessions
c. Is in favor of a constant money growth rate rule for the money stock
d. Is an offshoot of Monetarist theory
62. A usual assumption in real business cycle models is that the economy is populated by a
group of identical individuals and the behavior of the group can then be explained in
terms of the behavior of one individual, called a-------------
a. Maximizing agent
b. Representative agent
c. Republican agent
d. Informative agent
e. Democratic agent
63. The aggregate production function for real business cycle models is shown as
a. Yt=F(Kt,Nt)
b. Yt= Zt F(Kt - Nt)
c. Yt= Zt F(Kt,Nt)
d. Yt=Zt / (Kt,Nt)
64. New Keynesian economics differs from real business cycle economics in that
a. Markets are perfectly competitive in new Keynesian models
b. Business cycles are fluctuations in the natural rate of unemployment in new
Keynesian models
c. Wages and prices are perfectly flexible
d. Agents maximize utility in the new Keynesian model
e. None of these
65. In real business cycle models and new classical models
a. Monetary factors are responsible for fluctuations in output and employment
b. Changes in unemployment are involuntary
c. Markets always clear
d. Prices and wages are perfectly flexible
66. Which of the following statements are correct? According to real business cycle theory,
a. The desirable monetary policy would appear to be one that results in a slow
steady growth in the money supply and, thus stable prices.
b. There is some role for activist monetary stabilization policy of a Keynesian type
c. Changes in aggregate demand cannot impact output
d. Both a and b
e. Both a and c
67. Which of the following shocks have been emphasized most often with respect to real
business cycle story?
a. Shocks to technology
b. Variations in environmental conditions
c. Changes in the real(relative) prices of imported raw materials
d. Changes in tax rates
68. In the new Keynesian models,
a. Imperfect competition comes is the result of optimizing behavior by individuals
b. Perfect competition is assumed with respect to the product market
c. A natural monopoly is presumed for the product market
d. Both a and c
69. Which of the following cannot be used to justify efficiency wages
a. Sticky price(menu cost) models
b. Turnover costs
c. Worker shirking
d. Worker morale
70. In any efficiency wage model it must be true that
a. The marginal benefit of increased efficiency is equal to the marginal cost of
higher wages
b. Nominal wages are inflexible
c. Disequilibrium in the labor market exists
d. All of the above
71. With respect to efficiency wage models the efficiency of workers depends
a. Positively on the money wage they are paid
b. Positively on the real wage paid
c. Inversely on the age of the workers
d. Positively on the unemployment rate
72. New Keynesian would agree with all of the following except
a. Stabilization policy can reduce the severity of business cycles
b. Wages and prices are sticky
c. Markets are perfectly competitive
d. Market equilibrium is often suboptimal
73. New Keynesian economists
a. Believe that the deviations of output below potential output during recessions are
socially costly
b. Presume that much unemployment is involuntary
c. Attempt to improve the microeconomic foundations of the traditional Keynesian
models not challenge their major premises
d. Both a and c
e. All of the above
74. In real business cycle models, business cycles are caused by ------------------,while in new
Keynesian model business cycles are caused by-------------------
a. Aggregate demand ; Aggregate demand
b. Aggregate demand ; Aggregate supply
c. Aggregate supply; Aggregate demand
d. Fiscal policy ; monetary policy
75. Which of the following models view changes in real supply-side factors as determinants
of short-run fluctuations in output and employment?
a. New classical models
b. Political business cycle models
c. Keynesian models
d. Real business cycle models
76. An example of negative productivity shocks that could cause recessions is
a. A hurricane which destroys capital
b. A decrease in the price of oil
c. Reductions in defense spending
d. All of the above
e. Both a and b
77. The real business cycle theory and the new classical theory agree that
a. Business cycles are driven by changes in Aggregate demand
b. Expectations are formed rationally
c. Imperfect information plays a big role in business cycles
78. Advocates of real business cycle theories argue that all of the following could cause a
recession except
a. A fall in consumer expectations
b. Natural disasters
c. Higher taxation
d. Increase in the price of oil
79. Real business cycle and new Keynesian models disagree upon
a. Whether people form their expectations rationally
b. Whether changes in unemployment are voluntary or involuntary
c. Whether individuals engage in optimizing behavior at all times
d. Whether changes in the money supply affect output in the long-run
80. In the real business cycle theory during a period when output is falling
a. Workers are voluntary giving up their jobs
b. The quantity supplied of labor is falling
c. All of the above
81. According to the real business cycle theory business cycles
a. Can be eliminated with appropriate monetary and fiscal policy
b. Are natural and efficient reactions to changes in productivity
c. Do not occur
d. Occur infrequently
82. According to real business cycle theory an increase in taxes
a. Would significantly reduce labor supply, increase employment, and decrease
output
b. A decline in employment but not in output
c. Would significantly reduce labor supply, decrease employment, and decrease
output
d. No change in output and employment
83. Many economists who accept the real business cycle explanations of economic
fluctuations
a. Believe that the Sharpe rise in the relative price of imported oil was the central
cause of the deep recession in the United States in the mid-1970s
b. Believe that the restrictive Federal reserve Monetary policy was the central cause
of the deep recession in the United States in the mid-1970s
c. Believe that the Sharpe rise in the relative price of imported oil was not the main
cause of the deep recession in the United States in the mid-1970s
d. Both a and c
84. Which of the following statements are correct
a. Real business cycle theorists remain convinced that the business cycle can be
explained as an equilibrium phenomenon
b. According to real business cycle theorists fluctuations in output come as
optimizing agents respond to real shocks that affect production possibilities
c. Real business cycle theorists consider policies to prevent fluctuations in output
unnecessary
d. Both a and b
e. All of the above
85. Which of the following statements are correct? In the insider/outsider model there is
a. Unemployment due to the real wage being set above the market clearing level
b. Cyclical unemployment in response to changes in aggregate demand
c. Structural unemployment in response to hysteresis
d. Both a and b
e. All of the above
86. New Keynesian theories of efficiency wages imply
a. Voluntary unemployment
b. Real wage rigidity
c. Changes in unemployment represent changes in the natural rate of unemployment
87. The first Nobel prize winner for Economics was
a. Hicks
b. Myrdal
c. Samuelson
d. Turbergen
88. Which of the following is the least liquid asset?
a. Machines
b. Money
c. Shares
d. Bonds
89. The five year plan in India are launched after the approval of
a. The President and Prime Minister
b. The Rajya Sabha
c. The National Development Council (NDC)
d. The Lok Sabha
90. Harrod-Domar model was formed the basis of which plan
a. First plan
b. Third plan
c. Second plan
91. Deductive method
a. Moves from general to particular
b. Moves from particular to general
c. Is based on hypothesis
d. Both a and b
92. The equity of Reserve Bank of India in National Housing Bank is:
a. 49%
b. 51%
c. 71%
d. 100%
93. When average product is falling, it is
a. Less than the marginal product
b. Not measurable in this case
c. Greater than the marginal product
d. Equal to the marginal product
94. Dualism in development economics refers to
a. Dual price policy
b. Co-existence of technical and non-technical sectors
c. Co-existence of modern and traditional sectors
d. Co-existence of institutional and non- institutional agencies
95. The economist who said that international trade was based upon the concept of absolute
advantage was:
a. David Ricardo
b. Adam Smith
c. J.S.Mill
d. Bertil Ohlin
96. If external debt of country rises faster than its interest obligations, it is a case of:
a. Dept trap
b. Liquidity trap
c. Poverty trap
d. Export led growth
97. Who gave the first scientific treatment of general equilibrium analysis
a. Leon Walras
b. J.B Say
c. Edward Chamberlain
d. K.E Boulding
98. Protectionism in the international trade stands for:
a. Semi-restricted Trade
b. Free trade policy
c. Restricted Trade policy
d. All of the above
99. Determination of price through interaction of demand and supply was introduced by:
a. Keynes
b. Marshall
c. Pigou
d. Walras
100. Joint profits are maximized in the model cartel, which is model of:
a. Duopsony
b. Duopoly
c. Oligopoly
d. Oligopony
101. Which of the following is a better measure of economic development?
a. National income
b. Rural consumption
c. Size of exports
d. Employment
102. Indian exports were increased during 2001-2002 and it went upto the level of:
a. 39.8 billion dollars
b. 28.2 billion dollars
c. 44.0 billion dollars
d. 45.6 billion dollars
103. The imposition of an import tariff by a nation will increase the nation’s welfare:
a. Never
b. Often
c. Sometimes
d. Always
104. 13th Finance Commission has been constituted under the chairmanship of:
a. C. Rangarajan
b. Vijay L Kelkar
c. Deepak Parekh
d. Indira Bhargara
105. Monopsony is a form of market organization in which there is a:
a. Single buyer of an input
b. Single seller of an output
c. Single buyer of an output
d. Single seller of an input
106. The rational entrepreneur will expand his output and select input combinations
which lies on his:
a. Isoquant line
b. Ridge line
c. Isoquant line
d. Expansion path
107. Factor intensity as it is used in economics, is primarily s:
a. Relative concept
b. Absolute concept
c. Abstract concept
d. Empirical concept
108. The proportionality between the velocity of price movement and the inflationary
gap is:
a. Indirect and irregular
b. Direct and linear
c. Irregular and direct
d. Indirect and non-linear
109. The interrelation between innovations and investment opportunity was first
pointed out by:
a. Schumpeter
b. Samuelson
c. T. R. Hicks
d. Torgenson
110. Direct control refers to:
a. Trade and exchange controls
b. Interference with the operation of the market forces
c. Price and wage controls
d. All of these
111. A situation where the firm is not in a position to recover its variable costs at the
prevailing prices is known as:
a. Point of inflation
b. Equilibrium point
c. Optimum point
d. None of these
112. Which of the following is a problem connected with general equilibrium analysis?
a. Uniqueness problem
b. Existence problem
c. stability problem
d. all of the above
113. Who has suggested the utilization of “disguised unemployment” as a source of
savings potential in underdeveloped countries?
a. W.A Lewis
b. Ragnar Nurkse
c. Gunnar Myrdal
d. K.K Kurihara
114. The income consumption curve generally?
a. Slopes upwards to the right
b. Slopes downwards to the right
c. Slopes upwards to the left
d. Slopes downwards to the left
e. Represents a horizontal line
115. The fundamental cause for the collapse of the Bretton woods system was:
a. The liquidity problem
b. The adjustment problem
c. The confidence problem
116. The traffic which maximizes a country’s economic welfare is called
a. Discriminatory traffic
b. Protective traffic
c. Optimum traffic
d. Non-Discriminatory traffic
Answers
1.c 2.d 3.b 4.c 5.b 6.b 7.c 8.b 9.e 10.b 11.a
12.e 13.c 14.b 15.a 16.d 17.d 18.d 19.b 20.b 21.d 22.d
23.c 24.c 25.c 26.e 27.d 28.d 29.b 30.a 31.c 32.b 33.c
34.c 35.c 36.c 37.d 38.a 39.c 40.b 41.a 42.b 43.c 44.d
45.c 46.c 47.a 48.d 49.b 50.a 51.d 52.c 53.d 54.c 55.d
56.b 57.C 58.D 59.C 60.D 61.E 62.B 63.C 64.E 65.D 66.E
67.A 68.A 69.A 70.D 71.B 72.C 73.E 74.C 75.D 76.A 77.B
78.A 79.B 80.D 81.B 82.C 83.A 84.E 85.E 86.B 87.D 88.A
89.C 90.A 91.A 92.D 93.C 94.C 95.B 96.A 97.A 98.C 99.D
100.C 101.A 102.C 103.C 104.B 105.A 106.D 107.A 108.B 109.D 110.D
111.D 112.D 113.B 114.C 115.C 116.D
Chapter-1
MANAGERIAL ECONOMICS

1 Which of the following is a characteristic of a perfectly competitive market?
a. Firms are price setters.
b. There are few sellers in the market.
c. Firms can exit and enter the market freely.
d. All of these
2 If a perfectly competitive firm currently produces where price is greater than marginal
cost it
a. will increase its profits by producing more.
b. will increase its profits by producing less.
c. is making positive economic profits.
d. is making negative economic profits.
3 When a perfectly competitive firm makes a decision to shut down, it is most likely that
a. Price is below the minimum of average variable cost.
b. Fixed costs exceed variable costs.
c. Average fixed costs are rising.
d. Marginal cost is above average variable cost.
4 In the long run, a profit-maximizing firm will choose to exit a market when
a. Fixed costs exceed sunk costs.
b. Average fixed cost is rising.
c. Revenue from production is less than total costs.
d. marginal cost exceeds marginal revenue at the current level of production.
5 When firms have an incentive to exit a competitive market, their exit will
a. Drive down market prices.
b. Drive down profits of existing firms in the market.
c. Decrease the quantity of goods supplied in the market.
d. All of the above are correct.
6 In a perfectly competitive market, the process of entry or exit ends when

a. Firms are operating with excess capacity.
b. Firms are making zero economic profit.
c. Firms experience decreasing marginal revenue.
d. Price is equal to marginal cost.
7 Equilibrium quantities in markets characterized by oligopoly is

a. Lower than in monopoly markets and higher than in perfectly competitive
markets.
b. Lower than in monopoly markets and lower than in perfectly competitive
markets.
c. Higher than in monopoly markets and higher than in perfectly competitive
markets.
d. Higher than in monopoly markets and lower than in perfectly competitive
markets.
8 In economics the central problem is:
a. Allocation.
b. Consumption.
c. Scarcity.
d. Money.
e. Production.
9 Indicate below what is NOT a factor of production.

a. Land.
b. A bank loan.
c. Labor.
d. Capital.
10 Macroeconomics deals with:

a. The behavior of firms.
b. Economic aggregates.
c. The activities of individual units.
d. The behavior of the electronics industry.
11 Microeconomics is not concerned with the behavior of:

a. Aggregate demand.
b. Consumers.
c. Industries.
d. Firms.
12 The study of inflation is part of:

a. Normative economics.
b. Macroeconomics.
c. Microeconomics.
d. Descriptive economics.
13 Aggregate supplies is the total amount:

a. Produced by the government.
b. Of products produced by a given industry.
c. Of labor supplied by all households.
d. Of goods and services produced in an economy.
14 The total demand for goods and services in an economy is known as:
a. National demand.
b. Economy-wide demand.
c. Gross national product.
d. Aggregate demand.
15 If marginal benefit is greater than marginal cost, a rational choice involves:
a. More of the activity.
b. Less of the activity.
c. No more of the activity.
d. More or less, depending on the benefits of other activities.
16 A student chooses to study because the marginal benefit is greater than the ________
cost.
a. average
b. total
c. marginal
d. expected
17 Periods of less than full employment correspond to:
a. Points outside the production possibility curve.

b. Points inside the production possibility curve.
c. Points on the production possibility curve.
d. Either points inside or outside the production possibility curve.
18 The circular flow of goods and incomes shows the relationship between:
a. Income and money.
b. Wages and salaries.
c. Goods and services.
d. Firms and households.
19 In a free market system, the amount of goods and services that any one household
gets depends upon its:
a. Income.
b. Wage and interest income.
c. Wealth.
d. Income and wealth.
20 In a planned or command economy, all the economic decisions are taken by the:
a. Consumers.
b. Workers.
c. Government.
d. Voters.
Answers for Multiple Choice Questions

1 (c) 2 (a) 3 (a) 4 (c) 5 (c)
6 (b) 7 (d) 8 (c) 9 (b) 10 (b)
11(a) 12(b) 13(d) 14(d) 15(a)
16(c) 17(b) 18(d) 19(d) 20(c)
Chapter-2
PRINCIPLES OF MANAGERIAL ECONOMICS
1 The word that comes from the Greek word for “one who manages a household is
a. Market.
b. Consumer.
c. Producer.
d. Economy.
2 Economics deals primarily with the concept of
a. Scarcity.
b. Poverty.
c. Change.
d. Power.
3 Which of the following is NOT included in the decisions that every society must make?
a. what goods will be produced
b. who will produce goods
c. what determines consumer preferences
d. who will consume the goods
4 In a market economy, characterized by Capitalism, there is full interference by the State in

the economic activities of consumers and producers.
(a)True (b) False
5 In a market system of economy, there is no harmony between individual interests and

interests of the community.
(a)True (b) False
6 Efficiency is the relation between returns and cost.
(a)True (b) False
7 The subject matter of macro –economic includes the theory of income and employment at an
individual level.
(a)True (b) False
8 Rational decision results in…………for the employees.

a. Division of work.
b. Centralization.
c. Discipline.
d. Motivation
9 A Theory Y approach is more suitable where a job offers:
a. a high degree of intrinsic satisfaction.

b. The ability to exercise initiative.
c. An element of problem solving.
10 Breech identifies four main elements of management. They are planning, control, co-
ordination and:
a. The division of work.
b. Centralization.
c. Discipline.
d. Motivation.
11 Many well-known business economists participate in public debates.

(a)True (b) False
12 Marginal Utility is the utility derived from the additional unit of a commodity consumed.
(a)True (b) False
13 Compared to the static model, the fishing effort in a dynamic model is likely to be
a. Larger.
b. Smaller.
c. Similar.
d. Larger or smaller.
14 Land, labor, and money are the three categories of economic resources.
(a)True (b) False
15 Which of the following is not an interest rate derivative used for interest rate management?
Interest rate guarantee
a. Floor
b. Swap
c. Cap
d. All of the above are interest rate derivatives
16 An agreement which guarantees an investor a minimum return on a principal amount is

called a:
a. Cap
b. Executive stock option
c. Stock option
d. Floor
17 Which of the factors listed below is not a reason for decision making in organizations
being a complex process?
a. Modern information systems enable people to evaluate a range of possible

outcomes
b. Factors in the current context of the organization affect the decision
c. Several stakeholders will have an interest in the decision
d. People have to make decisions in a historical context
18 The overall process of decision making in, for example, staff selection includes which
of these stages?
a. Deciding which candidate to appoint
b. Identifying the need for a new member of staff
c. Agreeing the job specification
d. All of the above
19 A manager who is helping a customer return some shoes they purchased last week is
dealing with what type of decision?
a. Uncertainty
b. Non-programmed decision
c. Bounded rationality
d. Programmed decision
20 Decision making situations can be categorized along a scale which ranges from:
a. Uncertainty to certainty to risk
b. Certainty to uncertainty to risk
c. Certainty to risk to uncertainty
d. Certainty to risk to uncertainty to ambiguity
Answers for Multiple Choice Questions

1 (d) 2 (a) 3 (c) 4 (b) 5 (b)
6 (a) 7 (b) 8 (d) 9 (d) 10 (d)
11(a) 12(a) 13(a) 14(b) 15(d)
16(d) 17(a) 18(d) 19(d) 20(d)
Chapter-3
CONCEPT OF DEMAND
1 The quantity demanded of Pepsi has decreased. The best explanation for this is that:
a. The price of Pepsi increased.

b. Pepsi consumers had an increase in income.
c. Pepsi's advertising is not as effective as in the past.
d. The price of Coca Cola has increased.
2 Demand curves are derived while holding constant:
a. Income, tastes, and the price of other goods.
b. Tastes and the price of other goods.
c. Income and tastes.
d. Income, tastes, and the price of the good.
3 When the decrease in the price of one good causes the demand for another good to
decrease, the goods are:
a. Normal
b. Inferior
c. Substitutes
d. Complements
4 Suppose the demand for good Z goes up when the price of good Y goes down. We can
say that goods Z and Y are:
a. Substitutes.
b. Complements.
c. Unrelated goods.
d. Perfect substitutes.
5 If the demand for coffee decreases as income decreases, coffee is:

a. An inferior good.
b. A normal good.
c. A complementary good.
d. A substitute good.
6 Which of the following will NOT cause a shift in the demand curve for compact discs?
a. A change in the price of pre-recorded cassette tapes.
b. A change in income.
c. A change in the price of compact discs.
d. A change in wealth.
7 When excess demand occurs in an unregulated market, there is a tendency for:

a. Quantity supplied to decrease.
b. Quantity demanded to increase.
c. Price to rise.
d. Price to fall.
8 Market equilibrium exists when _____________ at the prevailing price.
a. quantity demanded is less than quantity supplied

b. quantity supplied is greater than quantity demanded
c. quantity demanded equals quantity supplied
d. quantity demanded is greater than quantity supplied
9 A movement along the demand curve to the left may be caused by:
a. A decrease in supply.
b. A rise in the price of inputs.
c. A fall in the number of substitute goods.
d. A rise in income.
10 The quantity demanded of a product rises whenever

(a) The product’s price falls.
(b) Incomes increase.
(c) Population increases.
(d) The prices of substitute goods rise.
(e) Consumer tastes and preferences change.
11 The equilibrium quantity must fall when

(a) There is a decrease in demand.
(b) There is a decrease in supply.
(c) There is an increase in price.
(d) There is an increase in demand and supply.
(e) There is a decrease in demand and supply
12 The demand curve will shift to the left for most consumer goods when
(a) Incomes decrease.
(b) The prices of substitutes fall.
(c) The prices of complements increase
(d) All of the above.
13 Producer goods, also called intermediate goods, in economics, goods manufactured

and used in further manufacturing, processing, or resale.
(a)True (b) False
14 Consumer goods are alternately called final goods, and the second term makes more
sense in understanding the concept.
(a)True (b) False
15 GDP stands for
a. Gross Domestic Product
b. Gross Deistic Product
c. Gross dynamic product
d. All of these
16 GNP stands for
a. Gross national product
b. Gross natural product
c. Both (a)and (b)
d. None of these
17 When the demand for a product is tied to the purchase of some parent product, its
demand is called induced or derived.
(a)True (b) False
18 An industry is the aggregate of firms

(a)True (b) False
19 The 'law of demand' implies that:

a. As prices fall, quantity demanded increases.
b. As prices rise, quantity demanded increases.
c. As prices fall, demand increases.
d. As prices rise, demand decreases.
20 When the market operates without interference, price increases will distribute what is
available to those who are willing and able to pay the most. This process is known as:
a. Price rationing.
b. Price fixing.
c. Quantity adjustment.
d. Quantity setting
Answers for Self Assessment Questions

1 (a) 2 (d) 3 (c) 4 (b) 5 (b)
6 (c) 7 (c) 8 (c) 9 (a) 10 (a)
11(d) 12(d) 13(a) 14(a) 15(a)
16(a) 17(a) 18(a) 19(a) 20(a)
Chapter-4
DETERMINATION OF DEMAND
1 The demand for a product or a service depends on a host of factors.

(a)True (b) False
2 Demand curves may also be shifted by changes in expectations.

(a)True (b) False
3 Quantity demand is a specific quantity that buyers are willing and able to buy at a
specific demand price.
(a)True (b) False
4 If the price of a complement increases, all else equal,

a. Quantity demanded will increase.
b. Quantity supplied will increase.
c. Demand will increase.
d. Demand will decrease.
5 Which of the following would lead to an INCREASE in the demand for golf balls?
a. An decrease in the price of golf balls.
b. An increase in the price of golf clubs.
c. A decrease in the cost of producing golf balls.
d. An increase in average household income when golf balls are a normal good.
6 If input prices increase, all else equal,

a. Quantity supplied will decrease.
b. Supply will increase.
c. Supply will decrease.
d. Demand will decrease.
7 Which of the following would decrease the supply of wheat?

a. A decrease in the price of pesticides.
b. An increase in the demand for wheat.
c. A rise in the price of wheat.
d. An increase in the price of corn.
8 When Sonoma Vineyards increases the price of its Chardonnay from $15 per bottle to
$20 per bottle, the result is a decrease in…
a. The quantity of this wine demanded.
b. The quantity of this wine supplied.
c. The demand for this wine.
d. The supply of this wine.
9 Which of the following will cause a change in quantity supplied?

a. Technological change.
b. A change in input prices.
c. A change in the market price of the good.
d. A change in the number of firms in the market.
10 In which of the following cases will the effect on equilibrium output be indeterminate
(i.e., depend on the magnitudes of the shifts in supply and demand)?
a. Demand decreases and supply decreases.
b. Demand remains constant and supply increases.
c. Demand decreases and supply increases.
d. Demand increases and supply increases.
11 An increase in the number of firms selling pizza will cause, ceteris paribus,
(a) an increase in supply.
(b) an increase in demand.
(c) a decrease in quantity demanded.
(d) a decrease in the quantity supplied.
12 A change in demand is a change in the ENTIRE demand relation.

(a)True (b) False
13 The demand for a given product will rise if:

a. Incomes rise for a normal good or fall for an inferior good
b. The price of a complement falls
c. The price of a substitute rises
d. All of these
14 Two explanations for the law of demand are

(a) Price and quantity effects.
(b) Substitution and income effects.
(c) Opportunity cost and substitution effects.
(d) Substitutes and inferior goods.
(e) None of the above.
15 An increase in demand, ceteris paribus, will usually cause

(a) A decrease in quantity demanded.
(b) an increase in quantity supplied.
(c) an increase in supply.
(d) a higher quantity and a lower price.
16. The quantity demanded of a product rises whenever

(a) the product’s price falls.
(b) incomes increase.
(c) population increases.
(d) the prices of substitute goods rise
17 The demand curve is downward-sloping because at a higher price for a good (ceteris
paribus)
(a) people buy fewer substitutes.
(b) people buy more complements.
(c) people search for substitutes.
(d) income rises.
(e) substitutes become complements.
18 The supply curve is upward-sloping because at higher prices for a good

(a) consumers search out more substitutes.
(b) consumer income increases.
(c) demand is lower.
(d) None of the above.
19 If the factors held constant along a supply or demand curve change,

(a) the equilibrium may change.
(b) the demand and supply equilibrium may be disrupted.
(c) the supply or demand curve may shift.
(d) All of the above.
20 If the price of crackers goes up when the price of cheese goes down, crackers and
cheese are
(a) inferior goods.
(b) substitutes.
(c) both substitutes and complements.
(d) complements

1 (a) 2 (a) 3 (a) 4 (d) 5 (d)
6 (c) 7 (d) 8 (a) 9 (c) 10 (c)
11(a) 12(a) 13(d) 14(b) 15(b)
16(a) 17(c) 18(d) 19(a) 20(d)
Chapter-5
PRICE ELASTICITY OF DEMAND
1 If the price elasticity of demand for a good is .75, the demand for the good can be
described as:
a. normal
b. elastic
c. inferior
d. inelastic.
2. When the price of a product is increased 10 percent, the quantity demanded decreases
15 percent. In this range of prices, demand for this product is:
a. elastic
b. inelastic
c. cross-elastic.
d. unitary elastic.
3. If the price elasticity of demand for a product is equal to 0.5, then a 10 percent decrease
in price will:
a. increase quantity demanded by 5 percent.
b. increase quantity demanded by 0.5 percent.
c. decrease quantity demanded by 5 percent.
d. decrease quantity demanded by 0.5 percent.
4 If an increase in the supply of a product results in a decrease in the price, but no change
in the actual quantity of the product exchanged, then:
a. the price elasticity of supply is zero.
b. the price elasticity of supply is infinite.
c. the price elasticity of demand is unitary.
d. the price elasticity of demand is zero.
5. If 100 units of product K are sold at a unit price of $10 and 75 units of product K are
sold at a unit price of $15, one can conclude that in this price range:
a. demand for product K is elastic.
b. demand for product K is inelastic.
c. demand for product K has shifted to the right.
d. consumers are sensitive to price changes of product K.
6 Total revenue falls as the price of a good increases if price ela sticity of demand is:
a. elastic.
b. inelastic
c. unitary elastic
d. perfectly elastic.
7 The demand for Cheerios cereal is more price-elastic than the demand for cereals as a
whole. This is best explained by the fact that:
a. Cheerios are a luxury.
b. cereals are a necessity.
c. there are more substitutes for Cheerios than for cereals as a whole.
d. consumption of cereals as a whole is greater than consumption of Cheerios.
8 What is the most likely effect of the development of television, videocassette players,
and rental movies on the movie theater industry?
a. decreased costs of producing movies
b. increased demand for movie theater tickets
c. movie theater tickets become an inferior good
d. increased price elasticity of demand for movie theater tickets
9 The price elasticity of demand will increase with the length of the period to which the
demand curve pertains because:
a. consumers' incomes will increase.
b. the demand curve will shift outward.
c. all prices will increase over time.
d. consumers will be better able to find substitutes.
10. A state government wants to increase the taxes on cigarettes to increase tax revenue.
(a)True (b) False
11 This tax would only be effective in raising new tax revenues if the price elasticity of
demand is:
a. unity
b. elastic
c. inelastic
d. perfectly elastic.
12. Sony is considering a 10 percent price reduction on its color television sets. If the
demand for sets in this price range is inelastic:
A) revenues from color sets will remain constant.
B) revenues derived from color sets will decrease.
C) revenues derived from color sets will increase.
D) the number of television sets sold will decrease
13 Elasticity of demand for a commodity with respect to change in its price.

(a)True (b) False
14 An elasticity alternative in which infinitesimally small changes in price cause infinitely
large changes in quantity.
(a)True (b) False
15 Three factors that affect the numerical value of the price elasticity of demand are the
a. availability of substitutes
b. time period of analysis
c. proportion of budget
d. All of these
16 The price elasticity of demand is one of four common elasticity’s used in the analysis
of the market.
(a)True (b) False
17 Cross elasticity of demand is:

a. negative for complementary goods
b. unitary for inferior goods.
c. negative for substitute goods
d. positive for inferior goods.
18. A positive cross elasticity of demand coefficient indicates that:
a. a product is an inferior good.
b. a product is a normal good.
c. two products are substitute goods.
d. two products are complementary goods.
19 A market without legal prices is in equilibrium when:

a. quantity demanded equals price.
b. the demand curve remains constant.
c. quantity demanded equals quantity supplied.
d. quantity demanded is greater than quantity supplied.
20 A relatively small change, say 1% on an INR 100,000 house, can make a BIG difference
in the buyer’s decision to buy.
(a)True (b) False
1 (d) 2 (a) 3 (a) 4 (d) 5 (a)
6 (a) 7 (c) 8 (d) 9 (d) 10 (a)
11(d) 12(c) 13(a) 14(a) 15(d)
16(a) 17(a) 18(c) 19(c) 20(a)
Chapter-6
TYPES OF ELASTICITIES OF DEMAND
1 If it is observed that, in a particular market, price has risen and quantity exchanged has
increased, it is likely that:
a. supply has increased.
b. supply has decreased.
c. demand has increased.
d. demand has decreased.
2 The quantity of a good demanded rises from 1000 to 1500 units when the price falls
from $1.50 to $1.00 per unit. The price elasticity of demand for this product is
approximately:
a. 1.0
b. 16
c. 2.5
d. 4.0
3 If the elasticity of demand for a commodity is estimated to be 1.5, then a decrease in
price from $2.10 to $1.90 would be expected to increase daily sales by:
a. 50%
b. 1.5%
c. 5%
d. 15%
4 A long-run demand curve, as compared to a short-run demand curve for the same
commodity, is generally:
a. more elastic
b. less elastic
c. of the same elasticity
d. none of the above.
5 The price elasticity of demand is 5.0 if a 10 percent increase in the price results in a
a. 2%decrease in quantity demanded.
b. 5%decrease in quantity demanded.
c. 10% decrease in quantity demanded
d. 50% decrease in quantity demanded.
6 Demand for a good will likely be more elastic,

a. The higher the level of income.
b. The larger the proportion of monthly income spent on it.
c. The fewer the good substitutes available.
d. The higher the price of complementary goods.
7 Demand will be more elastic,
a. The higher the income.
b. The lower the price.
c. The shorter the passage of time after a permanent price increase.
d. The more substitutes available for the good.
8 The price elasticity of demand measures the sensitivity of demand to price changes.
(a)True (b) False
9 If a good has no close substitutes and is regarded as a necessity by many consumers,

then demand for the good will be quite elastic.
(a)True (b) False
10 Cross elasticity of demand is the ratio of the percentage change in demand for a good
to the percentage change in price for another.
(a)True (b) False
11 A 50 percent increase in price that results in a 90 percent decrease in the quantity

demanded indicates that demand is elastic in this price range.
(a)True (b)False
12 Demands for most goods tend to become more elastic with the passage of time.
(a)True (b) False
13 If two goods are substitutes, then an increase in the price of one good will leads to an
increase in the demand for the other good.
(a)True (b) False
14 If two goods are complements, then a decrease in the price of one good will results in
a decrease in the demand of the other good.
(a)True (b) False
15 The price elasticity of demand is the same as the slope of the demand curve.
(a)True (b) False
16 If demand is price elastic, then:

a. a rise in price will raise total revenue.
b. a fall in price will raise total revenue.
c. a fall in price will lower the quantity demanded.
d. a rise in price won't have any effect on total revenues.
17 Complementary goods have:

a. The same elasticity’s of demand.
b. very low price elasticity of demand.
c. negative cross price elasticity of demand with respect to each other.
d. positive income elasticity of demand.
18 The price elasticity of demand generally tends to be:

a. smaller in the long run than in the short run.
b. smaller in the short run than in the long run.
c. larger in the short run than in the long run.
d. unrelated to the length of time.
19 If the price elasticity of supply of doodads is 0.60 and the price increases by 3 percent,
then the quantity supplied of doodads will rise by
a. 0.60 percent.
b. 0.20 percent
c. 1.8 percent
d. 18 percent.
20 If the cross-price elasticity between two commodities is 1.5,

a. The two goods are luxury goods.
b. The two goods are complements.
c. The two goods are substitutes.
d. The two goods are normal goods.

1 (c) 2 (a) 3 (d) 4 (a) 5 (d)
6 (b) 7 (d) 8 (a) 9 (b) 10 (a)
11(a) 12(a) 13(a) 14(b) 15(b)
16(b) 17(c) 18(b) 19(c) 20(c)
Chapter-7
SUPPLY ANALYSIS
1 The cost of factor inputs like land, labor, and capital has a major influence on supply.
(a)True (b) False
2 Which of the following factors will make the demand for a product more elastic?
(Assume the product has a straight-line, downward sloping demand.)
a. The product has no close substitutes.
b. A very small proportion of income is spent on the good.
c. A long time period has elapsed since the product’s price changed.
d. A lower price
3 For a given normal supply curve, the amount of a tax paid by the buyer will be larger
a. the more elastic the demand.
b. the more inelastic the demand.
c. the income elasticity is equal to zero
d. when the price is high.
4 With a perfectly elastic demand and a normal supply (upward-slopping)

a. consumers will bear the entire tax burden.
b. consumers will not bear any tax burden.
c. consumers and producer will split the tax burden in half.
d. producers will not bear any tax burden.
5 Which of the following leads to the producers paying all of a tax?

a. The supply is perfectly elastic.
b. The supply is perfectly inelastic.
c. The demand is unit elastic.
d. The demand is perfectly inelastic.
6 The incidence (split) of sales tax is determined by the

a. level of government which imposes the tax.
b. federal government in all cases.
c. greed of the seller.
d. price elasticity of supply and demand.
7 The market supply curve is the horizontal sum of the individual supply curve.
(a)True (b) False
8 Supply determinants are five ceteris paribus factors that are held constant when a
supply curve is constructed.
(a)True (b) False
9 Supply is the willingness and ability of producers to make a specific quantity of output
available to consumers at a particular price over a given period of time.
(a)True (b) False
10 Individuals supply factors of production to firms.

(a)True (b) False
11 The supply curve for tomatoes is not thus more elastic in the short run than in the
momentary period.
(a)True (b)False
12 Macroeconomic studies are based on empirical evidence.

(a)True (b)False
13 Demand curve slopes upwards from left to right.

(a) True (b)False
14 In the market, anyone who agrees to pay the requisite price of a product would be
excluded from their consumption.
(a) True (b)False
15 Aglets are the metal or plastic tips on shoelaces that make it easier to lace your shoes.
The demand for aglets is probably
a. perfectly elastic.
b. inelastic.
c. elastic but not perfectly elastic.
d. unit elastic.
16 The cross elasticity of demand measures the responsiveness of the quantity demanded
of a particular good to changes in the prices of
a. Its complements but not its substitutes.
b. its substitutes but not its complements.
c. its substitutes and its complements
d. neither its substitutes nor its complements.
17 If goods are complements, definitely their

a. income elasticity’s are negative
b. income elasticity’s are positive.
c. cross elasticity’s are positive.
d. cross elasticity’s are negative.
18 If a rise in the price of good 1 decreases the quantity of good 2 demanded,
a. the cross elasticity of demand is negative
b. good 1 is an inferior good.
c. good 2 is an inferior good
d. the cross elasticity of demand is positive.
19 The price elasticity of demand generally tends to be:

a. smaller in the long run than in the short run.
b. smaller in the short run than in the long run.
c. larger in the short run than in the long run.
d. unrelated to the length of time.
20 The demand for your services becomes more elastic.
(a)True (b)False

1 (a) 2 (c) 3 (b) 4 (b) 5 (b)
6 (d) 7 (a) 8 (a) 9 (a) 10 (a)
11(b) 12(a) 13(b) 14(b) 15(b)
16(c) 17(d) 18(a) 19(b) 20(a)
Chapter-8
PRODUCTION DECISION
1 Which of the following functions is not a core function of an organisation?

a. The product/service development function
b. The operations function
c. The accounting and finance function
d. The marketing (including sales) function
2 Most operations produce a mixture of both products and services. Which of the
following businesses is closest to producing “pure” services?
a. IT company
b. A Restaurant
c. Counsellor/therapist
d. Steel company
3 Operations can be classified according to their volume and variety of production as

well as the degree of variation and visibility. Which of the following operations would be
classified as high volume, low variety?
a. A family doctor
b. A carpenter
c. A front office bank
d. A fast food restaurant
4 Which of the following activities is not a direct responsibility of operations

management?
a. Designing the operation’s products, services and processes
b. Planning and controlling the operation
c. Developing an operations strategy for the operation
d. Determining the exact mix of products and services that customers will want
5 Operations can be classified according to the degree of variation in demand and

visibility of the operation as well as their volume and variety of production. Which of the
following operations would be classified as high variation and high visibility?
a. A front office bank
b. A family doctor
c. A fast food restaurant
d. A carpenter
6 The production function incorporates the technically efficient method of ………….

a. production.
b. process
c. function
d. All of these
7 A fixed input is one whose quantity cannot be varied during the time under
consideration.
(a)True (b)False
8 Economists find it convenient to distinguish between the ………….and the long run.
a. short run
b. large run
c. big run
d. None of these
9 The law of variable proportions states that as the quantity of one factor is increased,
keeping the other factors fixed, the marginal product of that factor will eventually
decline.
(a)True (b)False
10 MRP stands for

a. Marginal Revenue Product
b. Marginal Revenue process
c. Both (a) and (b)
d. None of these
11 The book value of old equipment is not a relevant cost in a decision.

(a)True (b)False
12. One of the dangers of allocating common fixed costs to a product line is that such
allocations can make the line appear less profitable than it really is.
(a)True (b)False
13. A differential cost is a variable cost.
(a)True (b)False
14. All future costs are relevant in decision making.
(a)True (b)False
15. Variable costs are always relevant costs.
(a)True (b)False
16 Only the variable costs identified with a product are relevant in a decision concerning
whether to eliminate the product.
(a)True (b)False
17 Managers should pay little attention to bottleneck operations because they have
limited capacity for producing output.
(a)True (b)False
18 A cost that does not affect a decision is called an

a. opportunity cost
b. incremental cost
c. avoidable cost
d. irrelevant cost
19. Costs that change between alternatives are called
a. fixed costs.
b. opportunity costs.
c. crelevant costs.
d. sunk costs.
20. A cost incurred in the past that cannot be changed by any future action is a(n)
a. opportunity cost
b. sunk cost
c. relevant cost
d. avoidable cost

1 (c) 2 (c) 3 (d) 4 (d) 5 (b)
6 (a) 7 (a) 8 (a) 9 (a) 10 (a)
11(a) 12(a) 13(b) 14(b) 15(b)
16(b) 17(b) 18(d) 19(c) 20(b)
Chapter-9
ISOQUANT AND PRODUCTION FUNCTION
1 Economists typically assume that the owners of firms wish to

a. produce efficiently.
b. maximize sales revenues.
c. maximize profits.
d. All of these.
2 Efficient production occurs if a firm
a. cannot produce its current level of output with fewer inputs.
b. given the quantity of inputs, cannot produce more output.
c. maximizes profit.
3 Limited liability is a benefit to
a. sole proprietorships.
b. partnerships.
c. corporations.
d. all of the above.
4 Which of the following statements best describes a production function?

a. the maximum profit generated from given levels of inputs
b. the maximum level of output generated from given levels of inputs
c. all levels of output that can be generated from given levels of inputs
d. all levels of inputs that could produce a given level of output
5 With respect to production, the short run is best defined as a time period
a. lasting about six months.
b. lasting about two years.
c. in which all inputs are fixed.
d. in which at least one input is fixed.
6 In the long run, all factors of production are

a. variable.
b. fixed.
c. materials.
d. rented.
7 The short-run production functions for Albert’s Pretzels. The marginal productivity of
labor equals the average productivity of labor
a. for all levels of labor.
b. at none of the levels of labor.
c. only for the first worker.
d. only for the fifth worker.
8 the short-run production function for Albert’s Pretzels. The law of diminishing
marginal productivity
a. appears with the second worker.
b. has not yet appeared for any of the levels of labor.
c. first appears with the fifth worker.
d. is refuted by this evidence.
9 If the average productivity of labor equals the marginal productivity of labor, then
a. the average productivity of labor is at a maximum.
b. the marginal productivity of labor is at a maximum.
c. Both A and B above.
d. Neither A nor B above.
10 Average productivity will fall as long as
a. marginal productivity is falling.
b. it exceeds marginal productivity.
c. it is less than marginal productivity.
d. the number of workers is increasing.
11 Factors of production are

a) inputs and outputs.
b) outputs only
c) inputs only
d) the minimum set of inputs that can produce a certain fixed quantity of output.
12 The set of all pairs (z1, z2) of inputs that yield the output y is the y-is quant.
(a)True (b)False
13 L-shaped isoquants imply that production requires that the inputs

are perfect substitutes.
a. are imperfect substitutes.
b. cannot be used together.
c. must be used together in a certain proportion.
d. None of these
14 Isoquants that are downward-sloping straight lines imply that the inputs
a. are perfect substitutes.
b. are imperfect substitutes.
c. cannot be used together.
d. must be used together in a certain proportion.
15 Isoquants that are downward-sloping straight lines exhibit
a. an increasing marginal rate of technical substitution.
b. a decreasing marginal rate of technical substitution.
c. a constant marginal rate of technical substitution.
d. a marginal rate of technical substitution that cannot be determined.
16 The profit maximization firm will choose the least cost combination of factors to
produce at any given level of output.
(a)True (b) False
17 The production function is useful in deciding on the additional value of employing a

variable input in the production process.
(a)True (b) False
18 The additional use of an input factor should be stopped when its marginal revenue
productivity just equals its price.
(a)True (b) False
19 The least cost combination of-factors or producer’s equilibrium is now explained with
the help of …………..curves and iso costs.
a. iso product
b. iso process
c. Both(a) and (b)
d. None of these
20 MRTS stands for……..
a. Marginal rate of technical structure
b. Marginal rate of technical substitution
c. Both(a) and (b)
d. None of these
1 (d) 2 (d) 3 (c) 4 (b) 5 (d)
6 (a) 7 (c) 8 (a) 9 (a) 10 (b)
11(c) 12(a) 13(c) 14(a) 15(c)
16(a) 17(a) 18(a) 19(a) 20(b)
Chapter-10
THEORY OF COST
1 The cost of capital is critically important in finance.

(a)True (b)False
An implicit cost is
a. the cost of giving up an alternative
b. the cost of a chosen alternative
c. calculated by subtracting the monetary cost.
3 The historical cost of an asset refers to the actual cost incurred at the time the asset was
acquired.
(a)True (b) False
4 An Explicit cost is a business expense accounted cost that can be easily identified such
as wage, rent and materials.
(a)True (b) False
5 Private is the cost that has to be paid by an individual who is directly involved in the
production or consumption of a particular good.
(a)True (b) False
6 Social cost or external cost is not the cost burden carried by individuals who are not
directly involved in the production or consumption of that particular good
(a)True (b) False
7 Average cost is the sum total of Average variable it and average fixed cost.
(a)True (b) False
8 Cost-output relationship facilitates many managerial relationships such as:

a. Formulating the standards of operations.
b. Formulating the rational policy on plant size.
c. Formulating a policy of profit prediction.
d. All of these
9 Cost in the short-run can be classified into………and variable cost.
a. fixed cost
b. asset
c. both (a) and (b)
d. None of these
10 Total fixed costs remained fixed irrespective of increase or decrease in production of
activity.
(a)True (b) False
11 Marginal costs is the change in total cost resulting from unit change in……..
a. output
b. input
c. both(a) and (b)
d. None of these
12 The ………. implies that the cost of production continues to be low till the firm reaches
the optimum scale (Marginal cost = Average cost).
a. V-shape
b. Q-shape
c. U-shape
d. All of these
13 Scale economies and returns to scale generally produce a U-shaped long-run average
cost curve, such as the one displayed to the right.
(a) True (b) False
14 __________ is concerned with the branch of economics relating the behavior of

principals and their agents.
a. Financial management
b. Profit maximization
c. Agency theory
d. Social responsibility
15 A concept that implies that the firm should consider issues such as protecting the
consumer, paying fair wages, maintaining fair hiring practices, supporting education,
and considering environmental issues.
a. Financial management
b. Profit maximization
c. Agency theory
d. Social responsibility
16 Which of the following is not normally a responsibility of the treasurer of the modern
corporation but rather the controller?
a. Budgets and forecasts
b. Asset management
c. Investment management
d. Financing management
17 The __________ decision involves determining the appropriate make-up of the right-
hand side of the balance sheet.
a. asset management
b. financing
c. investment
d. capital budgeting
18 A long-run is also expressed as a series of short-runs.

(a)True (b)False
19 Which of the following are used in calculating opportunity costs?

a. monetary costs
b. the cost of time
c. preference
d. all of the above
20 An explicit cost is
a. the cost of giving up an alternative
b. the cost of a chosen alternative
c. calculated by subtracting the monetary cost of an alternative by the time invested

1 (a) 2 (a) 3 (a) 4 (a) 5 (a)
6 (b) 7 (a) 8 (d) 9 (a) 10 (a)
11(a) 12(c) 13(a) 14(c) 15(d)
16(a) 17(b) 18(a) 19(d) 20(b)
Chapter-11
MARKET STRUCTURE, AND PRICING
1 Which of the following cannot be classed as a market structure?

a. Oligopoly.
b. Perfect competition.
c. Communism.
d. Monopolistic competition.
2 Income and population are two variables that can be used in ______ segmentation:
a. psychographic
b. demographic
c. lifestyle
d. behavioural
3 Strong exchange rates can:

a. help estimate consumer purchasing power.
b. help predict change in lifestyle across Europe.
c. predict the evolution of sales for particular brands.
d. drive imports to become cheaper.
4 BERI stands for:
a. Business Economic Risk Index.
b. Business Economic Rating International.
c. Business Education Rating Indicator.
d. Business Environment Risk Index.
5 The size and liquidity requirements are based on the minimum invest ability
requirements for the MSCI Global Standard Indices.
(a) True (b) False
6 Oligopoly is a market structure in which a small number of firms account for the whole
industry’s output.
(a) True (b) False
7 The number of firms and product differentiation are extremely crucial in determining
the nature of competition in a market.
(a) True (b) False
8 type of market structure represented by the constant returns to scale (CRS) technology
includes
a. Monopolistic competition
b. Oligopoly
c. Duopoly
d. Perfect competition
9 In industries in which there are scale economies, the variety of goods that a country can
produce is constrained by
a. the fixed cost
b. the size of the labor force
c. the marginal cost
d. the size of the market
10 A monopoly firm engaged in international trade but enjoying a protected home
market will
a. equate marginal costs with foreign marginal revenues.
b. equate marginal costs with marginal revenues in both domestic and foreign
markets
c. equate average costs in local and foreign markets
11 Minimum efficient scale of production in relation to the overall industry output and
market requirement sometimes play a major role in shaping the market structure.
(a)True (b) False
12 Price and output decisions of firms that want to maximize profits always depend on
costs.
(a) True (b) False
13 Which of the following is NOT a financial objective of pricing?
a. Corporate growth.
b. Return on investment.
c. Profit maximization.
d. None of these
14 Which of the following is NOT a marketing objective?

a. Cash flow.
b. Positioning.
c. Volume sales.
d. None of these
15 Setting a price below that of the competition is called:

a. Skimming.
b. Penetration pricing.
c. Competitive pricing.
d. None of these
16 Which of the following is NOT a reason for cutting prices?

a. Capacity utilisation.
b. Increasing profit margins.
c. Market defence.
d. None of these
17 Which of the following is NOT a reason for increasing prices?

a. Cost pressures.
b. Price comparison.
c. Curbing demand.
d. None of these
18 The costs that depend on output in the short run are:

a. both total variable costs and total costs.
b. total costs only.
c. total fixed cost only.
d. total variable costs only
19 A firm will shut down in the short run if:

a. fixed costs exceed revenues.
b. total costs exceed revenues.
c. it is suffering a loss.
d. variable costs exceed revenues.
20 In the long run, every cost is variable cost. In this period, all costs ever incurred by the
firm must be recovered.
(a)True (b) False
1 (c) 2 (b) 3 (d) 4 (d) 5 (a)
6 (a) 7 (a) 8 (d) 9 (d) 10 (b)
11(a) 12(a) 13(a) 14(a) 15(b)
16(b) 17(b) 18(a) 19(d) 20(a)
Chapter-12
PERFECT COMPETITION
1. A perfectly competitive firm will maximize profit at the quantity at which the firm's
marginal revenue equals
a. price
b. average revenue
c. total cost
d. marginal cost
2 Which of the following is not a valid option for a perfectly competitive firm?
a. Increasing its output.
b. Decreasing its output.
c. Increasing its price.
d. Increasing its resources.
3 In the long run, a perfectly competitive firm will achieve all but which of the following:
a. Economic profit
b. Allocative Efficiency
c. Productive Efficiency
d. Normal profit
4 If the price a firm receives for its product is equal to the marginal cost of producing that
product, the firm is:
a. Always earning an economic profit
b. Always productively efficient.
c. Always allocatively efficient.
d. Always experiencing an economic loss.
5 A firm that is producing at the lowest possible average cost is always:
a. Earning an economic profit.

b. Productively efficient.
c. Dominating the other firms in the market.
d. Not producing enough output.
6 Which of the following is the best example of a perfectly competitive market?

a. diamonds
b. athletic shoes
c. soft drinks
d. farming
7 Perfect competition is an industry with

a. a few firms producing identical goods.
b. many firms producing goods that differ somewhat.
c. a few firms producing goods that differ somewhat in quality.
d. many firms producing identical goods.
8 In a perfectly competitive industry, there are

a. many buyers and many sellers.
b. many sellers, but there might be only one or two buyers.
c. many buyers, but there might be only one or two sellers.
d. one firm that sets the price for the others to follow.
9 In perfect competition, the product of a single firm

a. is sold to different customers at different prices.
b. has many perfect complements produced by other firms.
c. has many perfect substitutes produced by other firms.
d. is sold under many differing brand names.
10 In perfect competition, restrictions on entry into an industry

a. do not exist.
b. apply to labor but not to capital.
c. apply to both capital and labor.
d. apply to capital but not to labor.
11 Price for a firm under monopolistic competition is ______.

a. equal to marginal revenue
b. greater than marginal revenue
c. less than marginal revenue
d. greater than total revenue
12 In the long run, monopolistically competitive firms tend to experience ______.

a. high economic profits
b. zero economic profits
c. negative economic profits
d. substantial economic losses
13 Marginal revenue for a monopolist is ______

a. equal to price
b. greater than price
c. less than price
d. equal to average revenue
14 Perfect competitions describes a market structure whose assumptions are extremely

strong and highly unlikely to exist in most real-time and real-world markets.
(a)True (b) False
15 Monopolistic competition is a market structure characterized by a large number of

relatively small firms.
(a)True (b) False
16 A monopolist can sell more of his output only at a lower price and can reduce the sale
at a high price.
(a)True (b) False
17 A monopoly is a market structure in which there is not only one producer/seller for a
product.
(a)True (b) False
18 A perfectly competitive firm produces the profit-maximizing quantity of output that

equates marginal revenue and marginal cost.
(a)True (b) False
19 A perfectly competitive firm faces ………..production alternatives based on a

comparison of price, average total cost, and average variable cost.
a. four short-run
b. three short-run
c. five short-run
d. All of these
20 A perfectly competitive firm’s marginal cost curve that lies above the ………..of the
average variable cost curve is its supply curve.
a. minimum
b. maximum
c. both(a) and (b)
d. None of these

1 (d) 2 (c) 3 (a) 4 (c) 5 (b)
6 (d) 7 (d) 8 (a) 9 (c) 10 (a)
11(a) 12(b) 13(a) 14(a) 15(a)
16(b) 17(b) 18(a) 19(b) 20(a)
Chapter-13
OLIGOPOLY AND PRICING STRATEGIES
1 A price- and quantity-fixing agreement is known as:

a. game theory.
b. price leadership.
c. collusion.
d. price concentration.
2 A group of firms that gets together to make price and output decisions is called:
a. a cartel.
b. price leadership.
c. an oligopoly.
d. a concentrated industry
3 Products produced by oligopolistic firms are:

a. Homogeneous.
b. Heterogeneous.
c. Differentiated.
d. Heterogeneous or differentiated.
3 Oligopoly is the only market structure characterized by:

a. Interdependence in pricing and output decisions.
b. Differentiated products.
c. Barriers to entry.
d. Profit-maximizing behavior.
4 Oligopoly is characterized by all of the following except:
a. A few large firms.
b. Differentiated product.
c. Difficult entry into the industry.
d. Price competition
5 A major threat to longer term profits exists when barriers to entry into an industry are
high.
(a)True (b) False
6 Under kinked demand theory the prices of oligopolists are predicted to be rather rigid
or 'sticky'.
(a)True (b) False
7 In contestable markets, large oligopolistic firms end up behaving like:

a. a monopoly.
b. monopolistically competitive firms.
c. a cartel.
d. perfectly competitive firms
8 Which of the following types of oligopoly competition would you expect to result in
the highest market output, other things equal?
a. Stackelberg.
b. Bertrand.
c. Cornet.
d. Collusion
9 The demand curve has a kink at the price which is equal to full cost price.
(a) True (b) False
10. An profit maximizing, oligopolistic firms produces at an output level where:

a. P = ATC.
b. MR = MC.
c. MR = ATC.
d. AVC > MR.
e. P = MR
11 Cartels are most likely to arise in which of the following market structures?
a. Perfect competition.
b. Monopolistic Competition.
c. Oligopoly.
d. Monopoly.
12 A cartel is a formal collusive organization of the oligopoly firms in an industry.

(a) True (b) False
13 Needs such as training the group, setting standards and maintaining discipline, and
appointing sub-leaders may be called:
a. team functions.
b. work functions.
c. individual functions.
d. task functions.
14 The Hall and flitch model of the kinked demand curve is based on an empirical survey
of a sample of 38 well managed arms in England.
(a) True (b) False
15 The model uses the analytical tools of reaction functions of the duopolists derived on
the basis of is not profit curves.
(a) True (b) False
16 The important models of non-collusive oligopoly are: (a) Cournot model, (b) Kinked
Oligopoly demand curve models.
(a) True (b) False
17 Which of the following is not an operations strategy?

a. response
b. low-cost leadership
c. differentiation
d. technology
18 Which of the following is not one of the leadership styles identified in House’s path-
goal theory?
a. Participative.
b. Employee-centered.
c. Directive.
d. Achievement-oriented.
19 The petroleum industry is an example of

a. monopolistic competition.
b. pure oligopoly.
c. duopoly.
d. differentiated oligopoly.
20 The kinked demand curve model assumes that

a. firms match price increases, but not price cuts.
b. demand is more elastic for price cuts than for price increases.
c. changes in marginal cost can never lead to changes in market price.
d. None of the above is correct.

1 (c) 2 (a) 3 (d) 4 (a) 5 (d)
6 (b) 7 (a) 8 (b) 9 (b) 10 (a)
11(b) 12(c) 13(a) 14(a) 15(b)
16(a) 17(d) 18(b) 19(b) 20(d)
Chapter-14 PROFIT ANALYSIS

1. A variable cost is a cost that
a. varies per unit at every level of activity
b. occurs at various times during the year
c. varies in total in proportion to changes in the level of activity
d. may not be incurred, depending on management's discretion
2. A cost which remains constant per unit at various levels of activity is a

a. variable cost
b. fixed cost
c. mixed cost
d. manufacturing cost
3. A fixed cost is a cost which

a. varies in total with changes in the level of activity
b. remains constant per unit with changes in the level of activity
c. varies inversely in total with changes in the level of activity
d. remains constant in total with changes in the level of activity
4. Cost behavior analysis is a study of how a firm's costs
a. relate to competitors' costs
b. relate to general price level changes
c. respond to changes in activity levels within the company
d. respond to changes in the gross national product
5. Cost behavior analysis applies to

a. retailers
b. wholesalers
c. manufacturers
d. all entities
6. The relevant range of activity refers to the

a. geographical areas where the company plans to operate
b. activity level where all costs are curvilinear
c. levels of activity over which the company expects to operate
d. level of activity where all costs are constant
7. Which of the following is not a plausible explanation of why variable costs

often behave in a curvilinear fashion?
a. Labor specialization
b. Overtime wages
c. Total variable costs are constant within the relevant range
d. Availability of quantity discounts
8. Firms operating constantly at 100% capacity

a. are common
b. are the exception rather than the rule
c. have no fixed costs
d. have no variable costs
9. Which one of the following is a name for the range over which a
company expects to operate?
a. Mixed range
b. Fixed range
c. Variable range
d. Relevant range
10 The graph of variable costs that behave in a curvilinear fashion will

a. approximate a straight line within the relevant range
b. be sharply kinked on both sides of the relevant range
c. be downward sloping
d. be a stair-step pattern
11. A mixed cost contains

a. a variable cost element and a fixed cost element
b. both selling and administrative costs
c. both retailing and manufacturing costs
d. both operating and non-operating costs
12. The variable costing method is also known as the

a. direct costing method
b. indirect costing approach
c. absorption costing method
d. period costing approach
13. The costing approach that charges all manufacturing costs to the product
is referred to as
a. variable costing
b. contribution margin costing
c. direct costing
d. absorption costing
14. Variable costing is acceptable for

a. financial statement purposes
b. profit tax purposes
c. internal use by management only
d. profit tax purposes and for internal use by management
15. CVP analysis does not consider

a. level of activity
b. fixed cost per unit
c. variable cost per unit
d. sales mix
16. Which of the following is not an underlying assumption of CVP analysis?

a. Changes in activity are the only factors that affect costs
b. Cost classifications are reasonably accurate
c. Beginning inventory is larger than ending inventory
d. Sales mix is constant
17. Which of the following would not be an acceptable way to express

contribution margin?
a. Sales minus variable costs
b. Sales minus unit costs
c. Unit selling price minus unit variable costs
d. Contribution margin per unit divided by unit selling price
18. The level of activity at which total revenues equal total costs is the
a. variable point
b. fixed point
c. semi-variable point
d. break-even point
19. The break-even point is where

a. total sales equals total variable costs
b. contribution margin equals total fixed costs
c. total variable costs equal total fixed costs
d. total sales equals total fixed costs
20. Gross profit also includes rent that arises from the entrepreneur’s own
land used in his production of output.
a. True
b. False

1. (c) 2.(a) 3.(d) 4.(c) 5.(d) 6. (c)
7.(c)
8. (b) 9.(d) 10.(a) 11.(a) 12.(a) 13.(d)
14.(c)
15. (b) 16.(b) 17.(b) 18.(d) 19.(b) 20. (a)
Chapter-15
1. There are ……. methods which can be used to appraise any investment project:
(a) 1
(b) 2
(c) 3
(d) 4
2. National income is the total of the value of the goods and the services which are
produced in an economy.
(a) True (b) False
3. Which two of the following are likely to raise the equilibrium value of National
Income?
(a) Rise in savings.
(b) Rise in imports.
(c) Rise in government spending.
(d) Rise in exports.
4. Which two of the following are excluded when measuring National Income?
(a) Value added in the output method.
(b) Value of intermediate inputs in the output method.
(c) Consumer spending in the expenditure method.
(d) Transfer payments in the income method.
5. The return on an investment comes in the form of a stream of earnings in the future.
(a) True (b) False
6. Cost-benefit analysis is a process for evaluating the merits of a particular project or
course of action in a systematic and rigorous way.
(a) True ` (b) False
7. ‘Real’ investment is not

(a) the amount that shareholders are willing to provide for shares in a company
(b) the cost of development of a new product
(c) expenditure on public relations, staff training or research and development
(d) expenditure on non-current assets such as plant, machinery, land and buildings
8. Which of the following statements about IRR and NPV is not correct?
(a) NPV always gives the correct investment decision.
(b) IRR gives an unreliable answer with non-conventional projects.
(c) IRR can accommodate changes in the cost of capital.
(d) IRR is a useful relative measure if comparing projects of differing sizes.
9. Gross Domestic Product (GDP) is the total market value of all final goods and services
currently produced within the domestic territory of a country in a year.
(a) True (b) False
10. Which of the following will not be a relevant factor when using the payback method
of capital investment appraisal?
(a) The timing of the first cash inflow
(b) The total cash flows generated by the asset
(c) The cash flows generated by the asset up to the payback period
(d) The cost of the asset
11. Why the payback method is often considered inferior to discounted cash flow in
capital investment appraisal?
(a) I is more difficult to calculate
(b) It does not calculate how long it will take to recoup the money invested
(c) It does not take account of the time value of money
(d) It only takes into account the future income of a project
12. Gross National Product is the total market value of all final goods and services
produced in a year.
(a) True (b) False
13. In 2005………. was the least significant liability of U. S. nonfinancial businesses in
terms of total value.
(a) bonds and mortgages
(b) bank loans
(c) inventories
(d) trade debt
14. …………..are examples of financial intermediaries.
(a) Commercial banks
(b) Insurance companies
(c) Investment companies
(d) All of the above
15. Financial assets ………..
(a) directly contribute to the country's productive capacity
(b) indirectly contribute to the country's productive capacity
(c) contribute to the country's productive capacity both directly and indirectly
(d) do not contribute to the country's productive capacity either directly or indirectly
16. The means by which individuals hold their claims on real assets in a well-
developedeconomy are
(a) investment assets.
(b) depository assets.
(c) derivative assets
(d) financial assets
17. Capital budgeting is the process of evaluating and selecting long-term investments
that are consistent with the goal of the firm.
(a) True (b) False
18. Although derivatives can be used as speculative instruments, businesses most often
use them to
(a) attract customers.
(b) appease stockholders.
(c) offset debt.
(d) hedge
19. The investment in fixed assets increases the fixed cost of the firm which must be
recovered from the benefit of the same project.
(a)True (b) False
20. National Income is defined as the sum total of all the goods and services produced in
a country, in a particular period of time.
(a) True (b) False
Answer
1. (c) 2.(a) 3.(c) 4.(b) 5.(a) 6.(a) 7.(a) 8.(c) 9.(a) 10.(b)
11.(c) 12.(a) 13.(b) 14.(d) 15.(b) 16.(d) 17.(a) 18.(d) 19.(a) 20.(a)
Chapter-16
1. In period of inflation, phantom or paper profits may be reports as a result of using the:
(a) FIFO costing assumption
(b) Perpetual inventory method
(c) LIDO costing assumption
(d) Periodic inventory method
2. Inflation is:
(a) an increase in the overall price level.
(b) an increase in the overall level of economic activity.
(c) a decrease in the overall level of economic activity.
(d) a decrease in the overall price level.
3. Aggregate supply is the total amount:
(a) produced by the government.
(b) of goods and services produced in an economy.
(c) of labour supplied by all households.
(d) of products produced by a given industry.
4. The value of a dollar does not stay constant when there is inflation.
(a) True (b) False
5. The inflation rate in India was recorded at 7.23% in……………...
(a) April of 2009
(b) April of 2010
(c) April of 2011
(d) April of 2012
6. The function of money that helps assess the opportunity cost of an activity is money's
use as a
(a) medium of exchange.
(b) store of value.
(c) unit of account.
(d) store of debt.
7. An official measure of money in the United States is M1, which consists of the sum of
(a) currency plus traveler's checks.
(b) currency plus checkable deposits.
(c) currency plus traveler's checks plus checkable deposits.
(d) currency plus traveler's checks plus time deposits.
8. Implies no trade-off between unemployment and inflation.
(a) GDP deflator
(b) Shoe leather’ costs
(c) Long-run Phillips curve
(d) ‘Menu’ costs
9. The inflation rate is used to calculate the real interest rate, as well as real increases in
wages.
(a) True (b) False
10……………… the quantity of money in the United States.
(a) The State Department controls
(b) The Department of Treasury controls
(c) The Federal Reserve System controls
(d) Commercial banks control
11. There are broadly ….. ways of controlling inflation in an economy.
(a) 2
(b) 3
(c) 4
(d) 5
12. The balance of payments of a country is said to be in equilibrium when the demand
for foreign exchange in exactly equivalent to the supply of it.
(a) True (b) False
13. A general decline in prices is often caused by a reduction in the supply of………..
(a) money or debit
(b) money or credit
(c) money
(d) None of these
14. The opportunity cost of holding money is the
(a) inflation rate minus the nominal interest rate.
(b) nominal interest rate.
(c) real interest rate.
(d) unemployment rate.
15. If the Fed is worried about inflation and wants to raise the interest rate, it
(a) increases the demand for money.
(b) increases the supply of money.
(c) decreases the demand for money.
(d) decreases the supply of money.
16. The circular flow of goods and incomes shows the relationship between:
(a) income and money.
(b) goods and services.
(c) firms and households.
(d) wages and salaries.
17. Fiscal measures to control inflation include taxation, government expenditure and
public borrowings.
(a) True (b) False
18. Hyperinflation
(a) occurs in the United States during each business cycle.
(b) occurs only in theory, never in reality.
(c) has never occurred in the United States.
(d) happens in all countries at some time during their business cycle.
19. Hyperinflation refers to a situation where the prices rise at an alarming high rate.
(a) True (b) False
20. The inflation rate is used to calculate the real interest rate, as well as real increases in
wages.
(a)True (b) False
Answer
1. (b) 2.(a) 3.(b) 4.(a) 5.(d) 6.(c) 7.(c) 8.(c) 9.(a) 10.(c)
11.(a) 12.(a) 13.(b) 14.(c) 15.(d) 16.(c) 17.(a) 18.(c) 19.(a) 20.(a)
Economic Analysis for Business Decisions
Unit-1: Basic Concepts of Economics
1. In a free-market economy the allocation of resources is determined by:
a. Votes taken by consumers b. A central planning authority

c. By consumer preferences d. The level of profits of firms
2. A rational person does not act unless:
a. The action is ethical

b. The action produces marginal costs that exceed marginal benefits
c. The action produces marginal benefits that exceed marginal costs
d. The action makes money for the person
3. Economics is a ----- science which deals with human wants and their satisfaction.
a. Social b. Political c. Natural d. Physical
4. ------ defined economics as a study of mankind in the ordinary business of life.
a. Adam smith b. Lionel Robbins c. Samuelson d. Alfred Marshall
5. The growth of an economy is indicated by an
a. Increase in savings b. Increase in investment

c. Increase in general prices d. Increase in national income
6.-----------equals revenue minus all explicit costs.
a. Accounting profit b. Economic profit c. Normal profit d. Loss
7. The father of New Economics is :
a. Marshall b. J.M.Keynes c. Adam Smith d. Karl Marx
8. The ------------------ problem refers to the possibility that owners and their managers may have
different objectives.
a. Company- Manager problem b. Principal-Agent Problem

c. Firm-Employee problem d. Problem of different objectives
9. Economic profit refers to ------------ minus all relevant costs , both explicit and implicit.
a. Profit b. Cost c. Expenses d. Revenues

10. The interaction of individuals and firms in a market can be described as a ----------------- of
money, goods and services and resources through product and factor markets.
a. Constant flow b. Stable flow c. Circular Flow d. Regular Flow
11. ----------------- focuses on the behavior of the individual actors on the economic stage , that is,
firms and individuals and their interaction in markets.
a. Macroeconomics b. Microeconomics c. Managerial Economics d. Economics
12. In free market economy, the organization and interaction of producers and consumers is
accomplished through the -------------- system.
a. Price b. Cost c. Profit d. Revenue
13. An economic system:
a. Requires a grouping of private markets linked to one another.

b. Is a particular set of institutional arrangements and a coordinating mechanism used to
respond to the economizing problem.
c. Requires some sort of centralized authority (such as government) to coordinate economic
activity.
d. Is a plan or scheme that allows a firm to make money at some other firm's expense
14. The regulatory mechanism of the market system is:
a. Self-interest. b. Private property. c. Competition. d. Specialization.
15. Which of the following is not an economic cost?
a. Wages. b. Rents. c. Economic profits.

d. Payments made to the entrepreneur for organizing production
16. From society's point of view the economic function of profits and losses is to:
a. Promote the equal distribution of real assets and wealth.

b. Achieve full employment and price level stability.
c. Contribute to a more equal distribution of income.
d. Reallocate resources from less desired to more desired uses.
17. The invisible hand refers to the:
a. Fact that the U.S. tax system redistributes income from rich to poor.
b. Notion that, under competition, decisions motivated by self-interest promote the social
interest. c. Tendency of monopolistic sellers to raise prices above competitive levels.
d. Fact that government controls the functioning of the market system.
18. The invisible-hand concept suggests that: .
a. Market failures imply the need for a national economic plan.

b. Big businesses are inherently more efficient than small businesses.
c. The competitiveness of a capitalistic market economy invariably diminishes over time.
d. Assuming competition, private and public interests will coincide
19. Two major virtues of the market system are that it:
a. Allocates resources efficiently and allows economic freedom.

b. Results in an equitable personal distribution of income and always maintains full employment.
c. Results in price level stability and a fair personal distribution of income.
d. Eliminates discrimination and minimizes environmental pollution.
20. The simple circular flow model shows that:
a. Households are on the buying side of both product and resource markets.
b. Businesses are on the selling side of both product and resource markets.
c. Households are on the selling side of the resource market and on the buying side of the
product market.
d. Businesses are on the buying side of the product market and on the selling side of the resource
market.
21. The two basic markets shown by the simple circular flow model are:
a. Capital goods and consumer goods. b. Free and controlled.

c. Product and resource. d. Household and business.
22. Which of the following is a limitation of the simple circular flow model?
a. Product markets are ignored. b. Resource markets are ignored.

c. The determination of product and resource prices is not explained.
d. Households are included, but not businesses.
23. In economics the central problem is:
a. Money. b. Scarcity. c. Allocation. d. Production.
24. Macroeconomics deals with:
a. The behavior of firms. b. Economic aggregates.

c. The behavior of the electronics industry. d. The activities of individual units.
25. Microeconomics is not concerned with the behavior of:
a. Consumers. b. Aggregate demand. c. Firms. d. Industries.

26. The total demand for goods and services in an economy is known as:
a. Aggregate demand. b. Gross national product.

c. Economy-wide demand. d. National demand.
27. Unemployment means that:
a. People are not willing to work at the going wage rate.

b. At the going wage rate, there are people who want to work but cannot find work.
c. There are some people who will not work at the going wage rate.
d. There is excess demand in the labour market.
28. Opportunity cost is
a. A cost that cannot be avoided, regardless of what is done in the future.

b. The cost incurred in the past before we make a decision about what to do in the future.
c. That which we forgo, or give up, when we make a choice or a decision.
d. The additional benefit of buying an additional unit of a product.
29. The circular flow of goods and incomes shows the relationship between:
a. Firms and households. b. Goods and services.

c. Income and money. d. Wages and salaries.
30. In a planned or command economy, all the economic decisions are taken by the:
a. Workers. b. Consumers. c. Voters. d. Government.
31. Which one of the following is a normative statement?
a. The richest 10 per cent of the population has had a bigger percentage increase in incomes over
the past 10 years than the poorest 10 per cent.
b. The proportion of people's income paid in taxes is higher under this government than under
the previous one.
c. Inflation is rising.
d. Inequality in the distribution of income is a more serious problem than unemployment.
32. Continues consumption of homogeneous product is a assumption for:
a. Law of Demand. b. Law of Supply. c. Law of Diminishing Marginal Utility.
33. Goods and Services bought and sold in:
a. Product Market. b. Factor Market. c. Capital Market. d. Money Market.

34. In Product market money flows from:
a. Individual to firm. b. Business to households. c. Government to household.
35. In factor market suppliers are:
a. Firms. b. Households. c. Government
36. In economic activities which are the outflows:
a. Government spending. b. Investment. c. Savings.
37. Indian economy is:
a. Capitalist Economy b. Socialist Economy c. Mixed Economy
38. Father of Economics:
a. Lionel Robbins. b. Adam Smith. c. Alfred Marshal.
39. Implicit Cost added in:
a. Accounting cost. b. Economic cost. c. Both.
40. Business Economics is also known as………….
a. Managerial Economics b. Economics for Executives

c. Economic analysis for business decisions d. All the above
41. State whether economics is
a. A positive science only b. Neither a positive nor normative science

c. A science but not art
d. A science or an art depending on who uses economics and for what purpose.
42. The branch of economics wherein mathematics and statistics are used to measure and analyze
economics activities is called……………..
a. Applied Economics b. Econometrics c. Statistics d. Macro Economics
43. The opportunity cost of a machine which can produce only one product is:
a. Low b. Infinite c. High d. Medium

44. It is defined as a state of knowledge in which one or more alternatives result in a set of
specific outcomes but where the probabilities of the outcomes are neither known nor meaningful.
a. Risk b. Uncertainty c. Peril d. All of the above
45. Opportunity cost is term which describes
a. A bargain for a factor of production b. Costs related to an optimum level of production

c. Average variable cost d. None of these
46. It is also known as prescriptive economics
a. Positive Economics b. Micro economics c. Normative economics d. Economics
47. ……cost are also known as Imputed Costs
a. Opportunity b. Marginal c. Total d. Historical
48. There are ……branches of economics.

a. 2 b. 3 c. 4 d. 6
49. It is the study of economics actions of individuals and small groups of individuals.
a. Micro-Economics b. Macro-Economics c. Managerial Economics d. Business Economics
50. An input should be so allocated that the value added by the last unit is the same in all cases.
a. Opportunity Cost Principle b. Equi-Marginal Principle

c. Incremental Principle d. Discounting Principle
51. The term Èconomics‟ in English language has its origin in ------word.
a. Greek b. Italic c. Latin d. Indian
52. Economics includes the following economic activities:
a. Production b. Consumption c. Exchange d. All of the above
53. It refers to the determination of prices of all goods and services by the interaction of the
forces of demand and supply without any external interference.
a. Product-mechanism b. Price-mechanism c. Cost-mechanism d. None of these
54. The principle reasons behind economic problems
a. Unlimited wants b. Limited or Scarce of Means

c. Alternatives Uses of Means d. All of the above
55. Income flow is also known as------.
a. Product Flow b. Money flow c. Profit flow d. Cash flow
56. Flows of the factor of production and the goods and services between the different sectors is -
-----.
a. Real flow b. Money flow c. Cash flow d. Product flow
57. It is also called output flow or real flow
a. Profit flow b. Cash flow c. Product flow d. None of these
58. Accounting profit=------------Explicit Costs
a. Total Revenue b. Total Cost c. Implicit cost d. None of these
59. According to Professor S.E.Landsbury, “Firm is an organization that produces and sells
goods with the goal of------its profits”.
a. Minimizing b. Maximizing c. Optimizing d. All of the above
60. According to profit maximization theory of the firm, management.
a. Decides output level which maximizes revenue

b. Output level which minimizes cost.
c. Output level which maximizes difference between the two
d. None of these
61. According to Simon if a firm fails to achieve its target initially results in:
a. A sense of helplessness b. Search behavior

c. Sacking of its managerial team d. Appropriate revision of the aspiration level
62. Managerial utility function is expressed as:
a. U = S (S,M,I) b. U = S (S,M) c. U = f (S,M,I) d. U = F(S,M,I)
63. It is the difference between total revenue and total economic cost
a. Accounting Profit b. Economic Profit c. Gross Profit d. Net Profit
64. Invisible hand theory is given by----------

a. Lord Robbins b. Samuelson c. Marshall d. Adam Smith
65. Managers are Agent when:

a. Managers and workers. b. Shareholders and managers. c. Managers and contractors.
66. Accounting cost include:
a. Owner`s land for company establishment. b. Depreciation c. Management skill of a owner
67. If economic profit equal to zero then:
a. Owners receive a profit more than their opportunity cost.

b. Owners receive a profit less than their opportunity cost.
c. Owners receive a profit equal to their opportunity cost.
68. Trade-offs are required because wants are unlimited and resources are:
a. Economical. b. Unlimited c. Efficient d. Marginal e. Scarce
69. Economics is the study of:

a. how society manages its unlimited resources. b. how to reduce our wants until we are
satisfied. c. how society manages its scarce resources. d. how to fully satisfy our unlimited
wants. e. how to avoid having to make trade-offs
70. Which of the following statements regarding the circular-flow diagram is true?
a. If Vijay works for XYZ Solutions Ltd. and receives a salary payment, the transaction takes
place in the market for goods and services.
b. If XYZ Solutions Ltd. sells a military aircraft, the transaction takes place in the market for
factors of production.
c. None of these answers.
d. The factors of production are owned by households.
e. The factors of production are owned by firms.
71. Which of the following is not a Productive Resource?
a. Labour b. Land c. Money d. Capital e. All of these answers are factors of production.
72. Which of the following issues is related to microeconomics?
a. The impact of oil prices on car production b. The impact of money on inflation
c. The impact of technology on economic growth d. The impact of the deficit on saving
73. The word economy comes from the Greek word for
a. "Environment." b. "One who participates in a market." c. "One who manages a

household." d. "Conservation.“
74. Economics deals primarily with the concept of
a. Poverty. b. Scarcity. c. Change. d. Power.

75. The opportunity cost of an item is
a. The number of hours needed to earn money to buy it.

b. What you give up to get that item.
c. Always less than the dollar value of the item.
d. Always equal to the dollar value of the item.
76. Factors of production are :
a. Inputs into the production process.

b. Weather, social, and political conditions that affect production.
c. The physical relationships between economic inputs and outputs.
d. The mathematical calculations firms make to determine production.
77. In the circular-flow diagram,
a. Firms are sellers in the resource market and the product market.
b. Households are sellers in the resource market.
c. Firms are buyers in the product market.
d. Spending on goods and services flow from firms to households.
78. In the circular-flow diagram,
a. Spending on goods and services flow from firms to households.

b. Goods and services flow from households to firms.
c. Factors of production flow from firms to households.
d. Income from factors of production flows from firms to households.
79. Scarcity is a condition that exists when
a. There is a fixed supply of resources.

b. There is a large demand for a product.
c. Resources are not able to meet the entire demand for a product.
80. Company goals that are concerned with creating employee and customer satisfaction and
maintaining a high degree of social responsibility are called ___________ objectives.
a. Social b. Noneconomic c. Welfare d. Public Relations
81. The value of an entrepreneur‟s resources that she uses in production are known as:
a. Explicit costs. b. Sunk costs. c. Operating expenses. d. Technological expenses.

e. Implicit costs.
82. One of the most important differences between a firm‟s economic profit and its accounting
profit is the subtraction of:
a. Costs incurred when hiring labor, capital, and land.

b. Any explicit cost incurred by the entrepreneur for risk taking.
c. Any implicit charges for the use of capital owned by the entrepreneur.
d. Any taxes on the retained earnings of the firm.
e. The costs of distributing the firm‟s output.
83. That profit functions as an incentive for innovation was among the key contributions to
economic thought by:
a. Karl Marx. b. Frank Knight. c. Joseph Schumpeter. d. Adam Smith. e. Alfred Marshall.
84. Which two of the following are characteristics of the „principal-agent‟ problem?
a)Ownership and control in hands of same people

b)Ownership and control in hands of different people
c)Shareholders and managers pursue different objectives
d)Shareholders and managers pursue same objectives
e)Sole traders are the dominant form of business organization
a. b) and e)
b. b) and d)
c. b) and c)
d. a) and e)
e. a) and c)
85. Economic profit is…
a. Calculated by subtracting implicit costs of using owner-supplied resources from the firm's
total revenue.
b. a theoretical measure of a firm's performance and has little value in real world decision-
making.
c. Generally larger than accounting profit. d. Negative when costs exceed revenues.
86. Economic profit is…
a. The difference between total revenue and explicit costs.

b. The difference between total revenue and the opportunity cost of all the resources used
in production.
c. The difference between accounting profit and explicit costs.
d. The difference between accounting profit and the opportunity cost of the market-supplied
resources used by the firm.
87. The principal-agent problem arises when…
a. The principal and the agent have different objectives

b. The principal cannot decide whether the firm should seek to maximize the expected future
profits of the firm or maximize the price for which the firm can be sold.
c. The principal cannot enforce the contract with the agent or finds it too costly to monitor the
agent. d. Both a and c e. None of the above
88. Moral hazard…
a. Occurs when managers pursue profit maximization without regard to the interests of society in
general.
b. Is the cause of principal-agent problems.
c. Occurs only rarely in modern corporations.
d. Exists when either party to a contract has an incentive to cancel the contract.
E. Both a and b
89. Economic profit is the best measure of a firm's performance because…
a. Economic profit fully accounts for all sources of revenue.

b. Implicit costs are generally too difficult to measure accurately.
c. The opportunity cost of using ALL resources is subtracted from total revenue.
d. Only explicit costs influence managerial decisions since, in general, only explicit costs can be
subtracted from revenue for the purposes of computing taxable profit.
90. Business Economics is also known as _______
a. Managerial Economics b. Economics for Executive c. Economic Analysis for Business

Decision d. All the above
91. It is the study of economic actions of individuals and small groups of individuals:
a. Micro – Economics b. Macro Economics c. Managerial Economics d. Business

Economics
92. The principal reasons behind economic problems :
a. Unlimited Wants b. Limited or Scarce Resources

c. Alternative uses of Means d. All the above
93. Invisible hand theory is give by :
a. Lord Robbins b. Samuelson c. Marshal d. Adam Smith

94. The ultimate effect of the "invisible hand" of Adam Smith is that, in a competitive economy,
everyone:
a. Benefits if each acts in his/her own interest.

b. Will increase their profits in a free market. c. Should act to maximize economic growth.
d. Should act to promote the public interest.
95. The three fundamental questions of economic organization are:
a. When, for whom, and how. b. How, what, and for whom.
c. Who, how, and when. d. What, who, and why.
96. „„Economics is the science, which studies human behaviours as a relationship between ends
and scarce means which have alternative uses.‟‟ This definition of Economics is given by,
a. Lord Robbins b. Samuelson c. Alfred Marshal d. Adam Smith
97. Which of the following is true regarding the circular flow model?
a. Households provide the demand for the factor market and business provide the supply for the
goods and services market.
b. Households provide the demand for the goods and service market and business provides the
supply for the factor market.
c. Households provide the supply for the factor market and business provides the supply
for the goods and service market
d. Households provide both the supply and demand for the goods and services market
98. Income and revenues that are created within a country
a. always will remain within that country

b. Can leave that country only when goods are exported.
c. Can leave that country when goods are imported
d. Can leave that country when capital flows into that country's financial institutions.
99. In a circular flow model, the real variables are:
a. Money that flows from the factor market to the households.

b. Only the goods and services that are produced.
c. Only the resources that are used.
d. Both the goods and services produced and the resources that are used.
100. Money is
a. Backed by gold in Fort Knox b. The same as income.

c. The value of all coins and currency in circulation at any time.
d. Anything that is generally accepted as a medium of exchange.
101. The development of money as a medium of exchange has facilitated the expansion of trade
because
a. Holding money increases people's income b. No other mediums of exchange are available
c. Money eliminates the "double coincidence of wants" problem
d. Holding money increases people's wealth
102. As the interest rate falls, people hold ________ money instead of bonds because the
opportunity cost of holding money has ________.
a. More; fallen b. More; risen c. Less; fallen d. Less; risen
103. The concept of opportunity cost:
a. Suggests a major increase in public health-care spending means an expansion in other

areas will be harder to achieve.
b. Suggests all our wants can be achieved.
c. Would be irrelevant if we eliminated poverty.
d. Is relevant only for a capitalist economy like the United States.
104. Inflation is:
a. A decrease in the overall level of economic activity.

b. An increase in the overall level of economic activity.
c. An increase in the overall price level.
d. A decrease in the overall price level.
105. A recession is:
a. A period of declining unemployment. b. A period of declining prices

c. A period during which aggregate output declines d. A period of very rapidly declining
prices.
106. The statement "The unemployment rate for teens is higher than that for adults" is
a. A normative statement. b. A political statement.

c. An ethical statement. d. A positive statement
107. Which of the following is a positive statement?
a. Low rents will restrict the supply of housing.

b. Housing costs too much.
c. Low rents are good because they make apartments more affordable.
d. Owners of apartment buildings ought to be free to charge whatever rent they want.
108. A normative statement is
a. One that does not use the ceteris paribus clause. b. About what ought to be.
c. Always true. d. About what is.
109. The task of economic science is to discover ________ that are consistent with ________.
a. Positive statements; normative statements

b. Positive statements; what we observe
c. Normative statements; positive statements
d. Ways to make money; the law
110. Economic models
a. Are better if they include most of the detail of the real economy.
b. Rely on simplification.
c. Do not address questions about the economy.
d. Make no assumptions that have not been prove
111. An economic theory is

a. A generalization that summarizes what we understand about economic choices.
b. A positive statement that cannot use the ceteris paribus clause.
c. Usually more complex than the real world.
d. Always a mathematical, or nonverbal, model.
112. Ceteris paribus is the Latin expression for
a. A statement about the way the economic world ought to be.

b. An expression that means "other things being equal."
c. The (false) statement that what is true of the parts is true of the whole or what is true of the
whole is true of the parts.
d. The error of reasoning that a first event causes a second event because the first event
occurred before the second event.
113. Opportunity cost means
a. The accounting cost minus the marginal benefit. b. The highest-valued alternative forgone.
c. The monetary costs of an activity. d. The accounting cost minus the marginal cost
114. Economics is best defined as the study of how people, businesses, governments, and societies
a. Make choices to cope with scarcity. b. Attain wealth.

c. Choose abundance over scarcity. d. Use their infinite resources.
115. Scarcity requires that people must
a. Trade. b. Compete. c. Cooperate. d. Make choices

116. Microeconomics focuses on all of the following EXCEPT
a. The effect of increasing the money supply on inflation.

b. The purchasing decisions that an individual consumer makes.
c. The effect of an increase in the tax on cigarettes on cigarette sales.
d. The hiring decisions that a business makes.
117. Entrepreneurs do all of the following EXCEPT
a. Bear risk from business decisions.

b. Own all the other resources.
c. Come up with new ideas about what, how, when and where to produce.
d. Organize labor, land, and capital.
118. Principal Agent Problem is related to…….
a. Managers and Owner s b. Suppliers and Buyers

c. Producers and Sellers d. LIC Agents
119. Invisible Hand theory was described by …….
a. Robert Anthony b. Adam Smith c. Amartya Sen d. C.K. Pralhad
120. PV in Unit number one stands for ………
a. Postal Volume b. Past Value c. Programmable Value d. Present Value
121. Which of the following factor is important for demand along other factors?
a. Selling Power b. Ability to Buy c. Product Development d. New product Launch

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Multi Choices Questions for Managerial Economics

5-The cost recorded in the books of accounts are considered as

9-The out of pocket costs are ________.

10-The short run Average Cost curve is __ shaped

12-Goods produced on small scale have

13-Oligopoly is a type of ________ market. A ________ exists in the industry

14-The management of the _________ form of business organization is totalitarian in nature.

15-The demand curve has a _____ slope.

Staff name; Dr. R.Malathi

Class : III B.A ECONOMICS

UNIT I; Public finance;

2. Public Authorities Include:

4. The principle of Maximum Social Advantage have been suggested by

5. In the following which is the characterstic of a tax

6. Which is the main objective of a tax:

8. The Indian tax system is:

9. The burden of direct taxes is borne by :

10. Indirect taxes have an element of :

11. Direct taxes have the element of :

12. In proportional tax system, the rates of tax remain:

13. Expenditure Tax for India was recommended by:

14. Corporate Income tax is the tax levied on:

15. Which of the following is the major source of revenue in India:

16. Which of the following is not a Commodity Tax:

17. A duty levied on goods when they entering a town

18. Special Assessment means:

19. Non-exclusion principle is related to:

20. Education is an example of:

21. Public Goods are:

22. Who is the father of Public Finance:

23. Incidence of tax means:

24. Which is the tax shifting;

28. Incidence of a tax refers to the--------------burden of tax:

30. Advolorum duties are levied on:

31. Tax avoidance is:

32. The VAT was first introduced in:

33. Customs duties are imposed on commodities as they cross:

34. Contra-cyclical fiscal policy was popularized by:

35. Deficit financing as a tool of fiscal policy was suggested by:

36. Keynes popularized:

37. A budget where there is excess of expenditure over revenue is called:

38. The balanced budget principle was advocated by:

39. Which one of the following is not a tax base?

40. Equals treated equally in taxation leads to:

42. The largest component of revenue expenditure in India is:

43. The Classical economists asserted that public expenditure is:

44. Wagner’s Law is related to:

45. The largest component of revenue expenditure in India is:

46. .Adolph Wagner was a-----------------Economist:

47. Who is the exponent of Law of Increasing State Activities?

49. The financial year in India starts from:

50. Salaries and pensions paid by governments are called:

Multiple Choice Questions

1. Which of the following is not considered production in Economics?

2. Which of the following is not a characteristic of labour?

5. The long run, as economists use the phrase, is characterized by:

7. Which of the following is the best formula of the “production function”?

8. The “law of Returns to scale” applies to:

9. Law of Variable proportions passes from-

Use the following schedule to answer question 11-14.

11. What is the Avg. Product when 1 Unit of labour is employed?

12. What is the marginal product of the 2nd Unit of labour?

17. Economies of scale means increasing production with______ per unit

13-Oligopoly is a type of market. A exists in the industry