Economic Analysis For Business Decisions Mcqs Economic Analysis For Business Decisions Mcqs

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Economic Analysis for Business Decisions MCQs
Mba (Savitribai Phule Pune University)
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Economic Analysis for Business

Decisions
Chapter 1
Basic Concepts of Economics
1. The resources in an economy
(a) Are always fixed? (b) Can never decrease?
(c) Always increase over time (d) Are limited at a moment in time
2. The sacrifice involved when you choose a particular course of action is called:
(a) Alternative (b) Opportunity cost
(c) Consumer Cost (d) Producer cost
3. Which one of the following is not one of the basic economic question?
(a) What to produce? (b) For whom to produce
(c) How to produce? (d) How to minimize economic growth?
4. Economics is the study of
(a) Production technology
(b) Consumption decisions
(c) How society decides what, how and for whom to produce?
(d) The best way to run society
5. The subject matter of economics is:
(a) A physical science (b) A natural science
(c) An exact science (d) A social science
6. In economics the central problem is
(a) Scarcity (b) Consumption
(c) Money (d) Allocation
7. Indicate below which is NOT a factor of production
(a) Land (b) Capital
(c) A bank Loan (d) Labour
8. The circular flow of money shows the relationship between
(a) Firms and households (b) Income and money
(c) Goods and services (d) Wages and salaries

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All in One Multiple Choice Questions 29
9. Who has presented the theory of invisible hand?

(a) David Recardo (b) Philip Kotler
(c) Adam Smith (d) Adam Ohlin
10. What all sectors are there in two sector model?
(a) Bank & Industry (b) Firm & Bank
(c) Household & Government (d) Firm & Household
11. Injection is when ____________ activity takes place in economy.
(a) Import (b) Export
(c) Advertising (d) Tax payment
12. Leakage is when ____________ activity takes place in economy.
(a) Import (b) Export
(c) Advertising (d) Tax payment
13. Which principal of economics studies an increase in cost for one additional unit?
(a) Incremental (b) Marginal
(c) Static (d) Opportunity cost
14. Which one in following is not an objective of firm?
(a) Profit Maximization (b) Investment Maximization
(c) Growth Maximization (d) Tax Maximization
15. When a hired person gives priority to individual goal rather than firm’s/owner’s it is
considered as…
(a) Principle agent problem (b) Principle shareholder problem
(c) Manager problem (d) Hired person’s problem
16. Which factor differentiates accounting and economic profit?
(a) Implicit cost (b) Production cost
(c) Labour cost (d) Procurement cost
17. All of the following is purview of micro economics except____________
(a) What to produce? (b) How to produce?
(c) For whom to produce? (d) Is economy growing?
18. Welfare economics deals with:
(a) Whether resources are optimally generated?
(b) How to identify a socially efficient allocation of resources?
(c) For whom to produce resources?
(d) Whether distribution is done on the basis of ability to pay principle?
19. The “invisible hand” refers to
(a) Fact that the tax system redistributes income from rich to poor.
(b) notion that, under competition, buying and selling decisions motivated by self-interest
promote the social interest
(c) tendency of monopolistic sellers to raise prices above competitive levels
(d) hands of shoplifters caught red-handed by video cameras at stores

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30 All in One Multiple Choice Questions
20. Which sectors form a three sector model of circular flow?

(a) Household, firm and bank (b) Household, firm, and rest of world
(c) Government, firm and bank (d) Household, government and bank
21. Which of the following is not an example of macro economics?
(a) National income (b) Employment
(c) Net profit of Infosys (d) Poverty
22. What is disposable income?
(a) Total income + taxes (b) Total income – taxes
(c) Total income + subsidies (d) Total income – subsidies
23. Which of the following is an objective of firm?
(a) Salary maximization (b) Interest maximization
(c) Wealth maximization (d) High employee turnover
24. Which of the following is not an objective of firm?
(a) Wealth maximization (b) Profit maximization
(c) Social concern (d) High employee turnover
25. What is maximization?
(a) Increasing profit
(b) Decreasing cost
(c) Increasing desired one at cost of anything
(d) Decreasing quality
26. What is optimization?
(a) Increasing profit without quality
(b) Increasing quality with high cost
(c) Decreasing undesired and increasing desired one.
(d) Decreasing cost
27. What is satisficing?
(a) Aiming for employee turnover
(b) Aiming for decreasing sales turnover
(c) Aiming for reducing economic profit
(d) Aiming for satisfactory results
28. What is principle agent problem?
(a) Conflict between employee and employer
(b) Conflict between employee and dealer
(c) Conflict between firm and government
(d) Conflict between firm and society
29. Economic profit includes ____________.
(a) Implicit and explicit cost (b) Implicit cost
(c) Explicit cost (d) Opportunity cost

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30. Accounting profit excludes____________.

(a) Labour cost (b) Explicit cost
(c) Opportunity cost (d) Travelling cost
31. This profit is considered for exit decision of firm ____________.
(a) Economic profit (b) Accounting profit
(c) Gross profit (d) Net profit
32. This profit is considered for calculation of tax liability____________.
(a) Economic profit (b) Accounting profit
(c) Abnormal profit (d) Supernormal profit
33. Accounting profit is determined by ____________.
(a) Sales – cost (b) Sales – opportunity cost
(c) Sales – variable cost (d) Sales – revenue
34. What is national accounting identity?
(a) Income = production (b) Income = tax liability
(c) Income = cost (d) Income = profit
35. Demand for a product refers to ____________.
(a) Need for a product (b) Desire for a product
(c) Desire to buy a product (d) Desire to buy a product with paying ability
36. Choice in economics is considered as
(a) Human Behaviour for dealing with scarcity
(b) Want
(c) Desire
(d) Purchasing ability
37. Micro economics deals with the problem of
(a) Economy (b) Unemployment
(c) Poverty (d) Firm
38. Who amongst the following is known as father of economics:
(a) Alfred Marshall (b) Adam Smith
(c) R. Coase (d) Peter Drucker
39. In which book the theory of invisible hand is described:
(a) The Nation of wealth (b) The wealth of nation
(c) The theory of moral sentiments (d) An enquiry into the nation
40. Existence of profit in market improves:
(a) Cost (b) Employment
(c) Poverty (d) Efficiency of firm
41. Which of the following is true
(a) Accounting profit and economic profit are same
(b) Economic profit is used for calculating tax liability

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(c) Accounting profit differs from economic profit

(d) Annual profit excludes implicit cost
42. Which of the following is the term of micro economics?
(a) Firm (b) National income
(c) Union budget (d) Employment
43. Accounting profit is determined by
(a) GAAP (b) GATT
(c) IFRS (d) Economic principles
44. Economic profit is determined by
(a) GAAP (b) GATT
(c) IFRS (d) Economic principles
45. Economics is the term derived from
(a) Japan (b) Greek
(c) Latin (d) India
46. What is market?
(a) Where selling activity takes place
(b) Where purchases take place
(c) Where buyer and seller meet to sell and buy
(d) Where cost of a product is determined
47. What is production function?
(a) Purchasing raw material (b) Purchasing factors of production
(c) Converting output in to input (d) Producing goods and services
48. What is short-run?
(a) All factors of production are flexible
(b) One factor of production is flexible
(c) At least a factor of production is constant
(d) All factors of production are constant
49. What is long-run perspective?
(a) All factors of production are flexible
(b) All factors of production are constant
(c) One factor of production is constant
(d) One factor of production is flexible
50. Which of the following is not an economic activity?
(a) A manager is taking decision of purchasing raw material
(b) An individual is paying tax
(c) Mr Right is taking care of his mother
(d) An agent is purchasing shares for client

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Answer Key of Chapter 1

1. (d) 11. (b) 21. (c) 31. (a) 41. (c)
2. (b) 12. (a) 22. (b) 32. (b) 42. (a)
3. (d) 13. (b) 23. (c) 33. (a) 43. (a)
4. (c) 14. (d) 24. (d) 34. (a) 44. (d)
5. (d) 15. (a) 25. (c) 35. (d) 45. (b)
6. (a) 16. (a) 26. (c) 36. (a) 46. (c)
7. (c) 17. (d) 27. (d) 37. (d) 47. (d)
8. (a) 18. (b) 28. (a) 38. (b) 48. (c)
9. (c) 19. (b) 29. (a) 39. (b) 49. (a)
10. (d) 20. (a) 30. (c) 40. (d) 50. (c)

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Chapter 2
Demand Analysis and Forecasting
1. Relationship between price and demand is ____________.
(a) Direct (b) Inverse
(c) Proportionate (d) Positive
2. The meaning of term ceteris paribus is ____________.
(a) Other things being equal (b) Other things are changeable
(c) Other things are different (d) Other things are movable
3. What is demand schedule?
(a) Table that shows relationship between price and quantity demanded
(b) Table showing relationship between price and quantity supplied
(c) Table that shows relationship between demand and income
(d) Table showing relationship between demand and supply
4. What is demand curve?
(a) Shows relationship between price and quantity supplied
(b) Indicates the quantity demanded at each price in a series of prices
(c) Graphs as an upward sloping line
(d) Shows the relationship between income and spending
5. Law of demand states…
(a) There is an inverse relationship between price and quantity demanded
(b) There is no relationship between price and quantity demanded
(c) There is positive relationship between price and quantity demanded
(d) Price changes as per the change in demand
6. Law of supply states ____________.
(a) There is inverse relationship between price and quantity supplied
(b) There is positive relationship between price and income
(c) There is positive relationship between price and quantity supplied
(d) There is positive relationship between supply and demand
7. What is schedule of supply?
(a) Table showing relationship between price and quantity demanded
(b) Table showing relationship price and quantity supplied
(c) Table showing relationship between price and income
(d) Table showing relationship between supply and demand
8. Historical data is used in estimating future demand under…
(a) Survey method (b) Expert opinion method
(c) Statistical method (d) Complete enumeration method
9. An increase in supply, demand remaining constant will change the equilibrium..
(a) Causing a fall in price (b) Causing a backward shift in demand curve
(c) Causing no change in price (d) Causing no change in income

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10. The market structure where very few sellers sell slightly different products referred to as…
(a) Perfect competition (b) Pure monopoly
(c) Duopoly (d) Oligopoly
11. Which of the following is an example of an economic barrier to entry?
(a) Network externalities (b) Copyrights
(c) Patent (d) Dumping
12. A monopoly that arises because of economies of scale is referred to
(a) Local monopoly (a) Natural monopoly
(b) Network monopoly (d) Regulated monopoly
13. Which of the following is not a condition of oligopoly?
(a) Each seller can influence the market prices
(b) Each firm must consider the behaviour of its rivals
(c) Each firm faces a perfectly elastic demand curve
(d) Entry into a market is difficult
14. Which one is not the type of elasticity of demand?
(a) Price (b) Consumer preferences
(c) Income (d) Cross
15. When do we say that product is elastic?
(a) No impact of price change on demand
(b) Change of income effects price
(c) Demand changes as per changes in price
(d) Demand does not change as per change in price
16. Which one is not the method of demand forecasting?
(a) Barometric (b) Multiple regression
(c) Moving average (d) Game theory
17. What is profit maximization point?
(a) AR=MR (b) MR=MC
(c) MC=AC (d) AC=MR
18. Which of following is not a characteristic of perfect competition?
(a) Free entry and exit (b) Heterogeneous products
(c) Good market knowledge (d) Price taker
19. What kind of profit firm earns in long-run perfect competition?
(a) Accounting (b) Normal
(c) Supernormal (d) Abnormal
20. Which two curves help to understand revenue and cost?
(a) AR & MC (b) AR & AC
(c) AC & MR (d) MC & MR

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21. When a fall in the price of one good reduces the demand for another good, the two goods are
called ____________.
(a) Complimentary goods (b) Substitutes
(c) Normal goods (d) Inferior goods
22. When a fall in the price of one good increases the demand for another good, the two goods are
called
(a) Complimentary goods (b) Substitutes
(c) Normal goods (d) Inferior goods
23. Upward-sloping line relating price to quantity supplied is called as ____________.
(a) Supply curve (b) Demand curve
(c) Supply schedule (d) Supply elasticity
24. Movement along the supply curve caused by a change in the market price of the product is
called as ____________.
(a) Change in supply (b) Change in quantity supplied
(c) Change in supply elasticity (d) Change in prices of products
25. A shift in the supply curve, either to the left or right caused by a change in a determinant other
than price is called as
(a) Change in supply (b) Change in quantity supplied
(c) Change in supply elasticity (d) Change in income elasticity
26. Which of the following is an exception to law of demand?
(a) Inferior goods (b) Bread and butter
(c) Shelter (d) Government taxes
27. Quantity demanded does not responds to change in price is called as
(a) Perfectly elastic (b) Perfectly inelastic
(c) Unitary elastic (d) Unitary inelastic
28. Quantity demanded changes infinitely with any change in price is called as ____________.
29. Quantity demanded changes by the same percentage as the price is called as ____________.
30. Which of the following is not an assumption of perfect competition?
(a) Restricted entry into the industry (b) Many firms
(c) Many buyers (d) Each firm sells an identical product
31. A monopolist is a
(a) Price taker
(b) Price setter
(c) Produces a product that has a close substitute
(d) Must constantly worry about the other firms entering into market

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32. Why monopoly earns economic profit in long-run?

(a) Because there is single firm in market
(b) Because the firm protected by barriers to entry
(c) Because there are close substitutes to firm’s product
(d) All the above
33. Price discrimination is the practice of charging different prices to
(a) Different countries because of tariffs and transportation cost
(b) Different customers because the costs of selling are different
(c) Different customers even though cost of selling to each is the same
(d) The same customers because of changes in cost
34. Monopolistic competition is a market structure in which
(a) There are barriers to entry
(b) A small number of firms compete
(c) Firms only compete on product price
(d) Each firm produces a differentiated product
35. In the long-run, in monopolistic competition firm earns ____________.
(a) Normal profit (b) Abnormal profit
(c) Supernormal profit (d) Net profit
36. An oligopoly is a market structure in which there are
(a) Many sellers selling a differentiated product.
(b) Only a few buyers but many sellers.
(c) A few products sold by many sellers.
(d) Only a few sellers selling either an identical or differentiated product.
37. The kinked demand curve model assumes that a firm's rivals will
(a) Follow the firm's price decreases but not its price increases.
(b) Not follow any of the firm's price changes.
(c) Follow any price change the firm makes.
(d) Follow the firm's price increases but not its price decreases.
38. In the short-run, a firm in monopolistic competition produces profit where
(a) MR = MC.
(b) MR = MC and economic profit is equal to zero.
(c) The given market price is equal to MC and economic profit is equal to zero.
(d) The given market price is equal to MC.
39. In monopolistic competition, a firm can determine what price to set for its product because
(a) There are many buyers.
(b) There are many sellers.
(c) The demand for its product is not perfectly elastic.
(d) The demand for its product is perfectly elastic.

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40. When a market is in equilibrium,

(a) There is no shortage and no surplus at the equilibrium price.
(b) Everyone has all they want of the commodity in question.
(c) The supply curve has the same slope as the demand curve.
(d) The number of buyers is exactly equal to the number of sellers.
41. When demand increases, the equilibrium price ____________ and the equilibrium quantity
____________.
(a) Falls; increases (b) Rises; increases
(c) Rises; decreases (d) Falls; decreases
42. If the demand for a good is elastic, that means that when price increases
(a) The demand will decrease.
(b) The quantity demanded will decrease by a greater percentage than the price increased.
(c) The quantity demanded will increase.
(d) The quantity demanded will decrease by a smaller percentage than the price increased.
43. If demand is inelastic, an increase in the price will
(a) Not change total revenue. (b) Increase the quantity demanded.
(c) Increase total revenue. (d) Decrease total revenue.
44. If the cross elasticity of demand between coffee and tea is positive, an increase in the price of
tea will shift the demand curve for
(a) Tea leftward. (b) Tea rightward.
(c) Coffee leftward. (d) Coffee rightward.
45. The income elasticity of demand is
(a) Always negative.
(b) Always positive.
(c) Negative for a normal good and positive for an inferior good.
(d) Positive for a normal good and negative for an inferior good.
46. Which of the following is a defining characteristic of a perfectly competitive industry?
(a) No restrictions on entry into the industry
(b) Persistent economic profits in the long-run
(c) Advertisements by well-known celebrities
(d) Higher prices being charged for certain name brands
47. Individual firms in perfectly competitive industries are price takers because
(a) Each individual firm is too small to affect the market price.
(b) The government sets all prices.
(c) Firms decide together on the best prices to charge.
(d) Buyers set prices.
48. The firm's goal is to
(a) Maximize its total revenue. (b) Maximize its normal profit.
(c) Maximize its economic profit. (d) Maximize its industry's revenue.

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49. A barrier to entry is

(a) A brick wall that a firm places around its corporate headquarters.
(b) The result of highly elastic demand.
(c) A natural or legal impediment that makes it difficult for new firms to enter a market.
(d) A necessary condition for perfect competition.
50. If marginal revenue exceeds marginal cost, to increase its profit the firm will
(a) Shut down. (b) Keep its output the same.
(c) Increase its output. (d) Decrease its output.

1. (b) 11. (a) 21. (b) 31. (b) 41. (b)
2. (a) 12. (b) 22. (a) 32. (b) 42. (b)
3. (a) 13. (c) 23. (a) 33. (c) 43. (c)
4. (b) 14. (b) 24. (b) 34. (d) 44. (d)
5. (a) 15. (c) 25. (a) 35. (a) 45. (d)
6. (c) 16. (d) 26. (a) 36. (d) 46. (a)
7. (b) 17. (b) 27. (b) 37. (a) 47. (a)
8. (c) 18. (b) 28. (a) 38. (a) 48. (c)
9. (a) 19. (b) 29. (c) 39. (c) 49. (c)
10. (d) 20. (b) 30. (a) 40. (a) 50. (c)

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Chapter 3
Cost Concepts
1. BENEFIT forgiven for an alternative choice is known as ____________.
(a) Loss (b) Opportunity cost
(c) Factor cost (d) Product cost
2. A cost that has already been incurred and thus can not be recovered is called as…
(a) Opportunity cost (b) Sunk cost
(c) Direct cost (d) Deferred cost
3. Which cost is not recorded in the books of accounts?
(a) Explicit cost (b) Implicit cost
(c) Direct cost (d) Factory cost
4. Economic profit includes which cost?
(a) Only Implicit cost (b) Only Opportunity cost
(c) Only Material cost (d) Implicit and explicit
5. Cost volume analysis is also known as____________.
(a) Break-even analysis (b) Regression analysis
(c) Technical analysis (d) Fundamental analysis
6. What is Break-even Point?
(a) No loss no profit situation (b) No profit situation
(c) No loss situation (d) Profit situation
7. Accounting profit excludes
(a) Explicit cost (b) Opportunity cost
(c) Material cost (d) Advertising cost
8. What is incremental cost?
(a) The additional cost for additional quantity
(b) The additional cost for one additional unit
(c) Cost of promotion
(d) Cost of research
9. CVP analysis helps to reach ____________.
(a) Cost minimization point (b) Marginal point
(c) Break-even point (d) Reengineering point
10. Everything manufactured is sold is an assumption of ____________.
(a) ABC analysis (b) XYZ analysis
(c) Fundamental analysis (d) CVP analysis
11. A situation in which there is more than one possible outcome to a decision and the probability
of each specific outcome is known or can be estimated is called as ____________.
(a) Certainty (b) Uncertainty
(c) Risk (d) No risk

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12. A situation in which there is more than one possible outcome to a decision and the probability
of each specific outcome is not known or can not be estimated is called as…
13. The situation where there is only one possible outcome to a decision and is known precisely is
called as ____________.
14. What is expected value?
(a) Sum of possible outcome (b) Average of possible outcome
(c) Discounted value of outcome (d) Compound value of outcome
15. What is risk management?
(a) Minimization of risk
(b) Maximization of certainty
(c) Identification, assessment and prioritisation of risks
(d) Evaluation of risk
16. Which of the following is not a technique of risk management?
(a) Insurance (b) Diversification
(c) Hedging (d) Investing in shares
17. Which of the following is the technique of risk management?
(a) Stock investment (b) Stock shortlisting
(c) Hedging (d) Loan syndication
18. What is hedging?
(a) Improving profitability (b) Increasing investment limit
(c) Strategy of reducing risk (d) Selling of investment
19. What is insurance?
(a) Person transfers the cost of potential loss to another entity in exchange for monetary
compensation.
(b) Increasing risk
(c) Decreasing profit
(d) Purchasing stock
20. What is diversification?
(a) Combining variety of investments in a portfolio
(b) Distribution of profit
(c) Distribution of maturity
(d) Selling investment
21. What helps to protect one’s capital against effects of inflation?
(a) Hedging (b) Insurance
(c) Fixed deposit (d) Real estates

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22. What is decision tree?

(a) Graph that uses a branching method to illustrate every possible outcome of a decision.
(b) Taking multiple decisions
(c) Distribution of risk
(d) Distribution of cost
23. Which type of node is not a part of decision tree?
(a) Decision node (b) Outcome node
(c) Chance node (d) End node
24. Decision node is represented by
(a) Square (b) Rectangle
(c) Circle (c) Triangle
25. Chance node is represented by
(c) Circle (d) Triangle
26. End node is represented by
(c) Circle (d) Triangle
27. What is marginal cost?
(a) Cost of material (b) Cost of an additional unit
(c) Cost of labour (d) Cost of overheads
28. Who is the regulator of insurance market?
(a) RBI (b) SEBI
(c) IRDA (d) WTO
29. What is cost?
(a) the amount of money needed to buy, do, or make something
(b) selling price
(c) market price
(d) economic value of an asset
30. What is fixed cost?
(a) Cost which does not remain constant
(b) Cost which does not change
(c) Cost that varies
(d) Cost which is flexible
31. What is variable cost?
(a) Cost which changes as per the production change.
(b) Cost which does not change
(c) Cost which remains constant
(d) Cost which does not vary

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32. A cost that can be directly related to producing specific goods or performing a specific service
is called as ____________.
(a) Indirect cost (b) Selling price
(c) Production cost (d) Direct cost
33. A cost that has occurred but it is not initially shown or reported as a separate cost is called as
____________.
(a) Explicit cost (b) Promotion cost
(c) Total cost (d) Implicit cost
34. A cost that has occurred and is clearly reported as a separate cost is called as ...
(a) Explicit cost (b) Total cost
(c) Selling cost (d) Implicit cost
35. Which of following is not a technique of marginal costing?
(a) PV Ratio (b) BEP
(c) PV analysis (d) Cost sheet
36. Which of the following is an assumption of CVP analysis?
(a) Whatever is produced is sold (b) Sales vary as per demand
(c) Sales prices changes as per supply (d) Everything produced is not sold
37. Which of the following is not an assumption of CVP analysis?
(a) Sales price is constant (b) Sales price varies
(c) Fixed cost is constant (d) Whatever is produced is sold
38. What is contribution?
(a) Sales- Fixed cost (b) Sales – Variable cost
(c) Sales – Profit (d) Sales – total cost
39. Which of the following is true?
(a) Profit = sales – (Variable cost + Fixed Cost)
(b) Profit = sales – contribution
(c) Profit = sales – variable cost
(d) Profit = sales – fixed cost
40. Which of the following is not a part of Break-even Analysis?
(a) Sales (b) Variable cost
(c) Fixed cost (d) Capital
41. What is incremental principle?
(a) Estimating sales prices at increased level
(b) Estimating revenue at increased level
(c) Estimating cost reduction at increased level
(d) Estimating the impact of decision alternative on cost & revenue

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42. What is incremental revenue?

(a) Total revenue of historical year
(b) Total revenue of current year
(c) Total revenue resulting from a decision
(d) Total estimated revenue
43. Which of following is true?
(a) Decision is profitable if is it increases revenue than cost
(b) Decision is profitable if is reduces cost & revenue
(c) Decision is profitable if it increases cost
(d) Decision is profitable if it reduces cost and total revenue
44. Which of the following is not true about incremental analysis?
(a) Cost & revenue are the components of incremental analysis
(b) Alternative decisions are available
(c) Decision impacts on cost and revenue
(d) Decision does not impacts on cost and revenue
45. Which of following is true?
(a) Marginal cost is cost for increased production
(b) Marginal cost is cost of additional one unit
(c) Marginal cost is cost decreased production
(d) Marginal cost is not recorded in books of accounts
46. Which of the following is not an example of sunk cost?
(a) Rent (b) Research and development cost
(c) Advertising (d) Capital
47. Which of following is not an example of explicit cost?
(a) Labour cost (b) Material cost
(c) Overhead cost (d) Opportunity cost
48. Sales made over and above BEP is known as
(a) Margin of safety (b) Marginal cost
(c) Contribution (d) Surplus margin
49. Point at which total revenue and total cost is equal is called as ____________.
(a) CVP (b) BEP
(c) Marginal point (d) Central point
50. Maturity date of an investment is 23rd November 2016, is an example of ____________.
(a) Uncertainty (b) Certainty
(c) Risk (d) None of the above

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1. (b) 11. (c) 21. (a) 31. (a) 41. (d)
2. (b) 12. (b) 22. (a) 32. (d) 42. (c)
3. (b) 13. (a) 23. (b) 33. (d) 43. (a)
4. (d) 14. (b) 24. (a) 34. (a) 44. (d)
5. (a) 15. (c) 25. (c) 35. (d) 45. (b)
6. (a) 16. (d) 26. (d) 36. (a) 46. (d)
7. (b) 17. (c) 27. (b) 37. (b) 47. (d)
8. (a) 18. (c) 28. (c) 38. (b) 48. (a)
9. (c) 19. (a) 29. (a) 39. (a) 49. (b)
10. (d) 20. (a) 30. (b) 40. (d) 50. (b)

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Chapter 4
Money and Capital Markets in India
1. What is money market?
(a) A place where only debt instruments are traded
(b) Bond market
(c) A place where high liquid financial instruments are traded
(d) A place where high maturity financial instruments are traded
2. Who regulates money market?
(a) RBI (b) SEBI
(c) IRDA (d) SIDBI
3. Which is not the instrument of money market?
(a) CP (b) CD
(c) T-Bill (d) Fixed Deposit
4. Which of the following is an instrument of money market?
(a) Debentures (b) Preference shares
(c) ADR (d) Bill of Exchange
5. What is the minimum amount limit in Treasury bill?
(a) 26000 (b) 25000
(c) 30000 (d) 100000
6. What is the tenure of T-Bill?
(a) Less than one year (b) More than one year
(c) Two years (d) One year
7. What is bill of exchange?
(a) Unconditional order to pay a sum of money.
(b) Saving certificate with fixed maturity
(c) Unsecured short-term debt instrument
(d) Long-term debt instrument
8. Which of the following is not a party involved in bill of exchange?
(a) Society (b) Drawer
(c) Payee (d) Endorsee
9. What is commercial paper?
10. What is the tenure of commercial paper?
(a) 30 days to 270 days (b) 300 days
(c) 360 days (d) 2 years

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11. What is certificate of deposit?

12. What is the tenure of certificate of deposit?
(a) 2 years (b) 1.5 years
(c) 7 days to one year (d) 1 day to 365 days
13. CBLO stands for ____________.
(a) Collateralized Borrowing and Lending Obligation
(b) Central borrowing & lending Obligation
(c) Commercial borrowing and liquidity object
(d) Collateral borrowing and legal obligation
14. What is collateralized borrowing and lending obligation?
(a) a money market instrument that represents an obligation between a borrower and a lender
as to the terms and conditions of the loan.
(b) A capital market instrument that represents an obligation between a borrower and a lender
as to the terms and conditions of the loan
(c) A forex market instrument that represents an obligation between a borrower and a lender
(d) A share market instrument that represents an obligation between a borrower and a lender
15. What is the tenure of CBLO?
(a) More than a year (b) A year
(c) Less than a year (d) 1year to 2 years
16. BOP is ____________.
(a) Record of country’s payments
(b) Record of all economic transactions between country residents and rest of world
(c) Record of payment transactions between country residents and rest of world
(d) Record of all receipts between country residents and rest of world
17. BOP stand for ____________.
(a) Bills of payment (b) Balance of payment
(c) Borrowing for payment (d) Balance of policy
18. Which of the following is an apex institution of Indian economy?
(a) SEBI (b) RBI
(c) SBI (d) IRDA
19. RBI is established in ____________.
(a) 1935 Mumbai (b) 1935 Kolkata
(c) 1937 Mumbai (d) 1937 Calcutta

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20. SEBI stands for ____________.

(a) Social Economic Board of India (b) Securities Economic Board of India
(c) Securities Exchange Board of India (d) Securities Extending Board of India
21. SEBI is established in ____________.
(a) 1991 (b) 1992
(c) 1990 (d) 1993
22. Which of the following is not the function of SEBI?
(a) Issuer (b) Creditor
(c) Regulator (d) Protector
23. Which of the following is not the function of money market?
(a) Promotes liquidity (b) Regulates currency
(c) Mobility (d) Provides funds
24. Which among the following is not the function of SEBI?
(a) Regulating capital market (b) Regulating money market
(c) Regulating credit rating agencies (d) Regulating underwriters
25. Which among the following is function of RBI?
(a) Regulating capital market (b) Regulating money market
(c) Regulating goods market (d) Regulating insurance policies
26. Which among the following is not the function of RBI?
(a) Regulating capital market (b) Regulating currency
(c) Regulating BOP (d) Regulating money market
27. Which among the following is the central bank of India?
(a) RBI (b) SBI
(c) BOI (d) BOM
28. Balance of payment defines the relationship between ____________.
(a) Foreign exchange (b) Local trade
(c) Borrowing and lending (d) Receipts and payments
29. What is capital market?
(a) Financial market dealing with long-term instruments
(b) Financial market dealing with insurance instruments
(c) Financial market dealing with liquid instruments
(d) Financial market dealing with cash instrument
30. What is composition of Capital market?
(a) Primary & secondary market
(b) Primary and forex market
(c) Secondary and debt market
(d) Secondary and forex market
31. How many companies are considered for calculating BSE index?
(a) 25 (b) 50
(c) 30 (d) 42

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32. Who regulates capital market?

(a) RBI (b) SBI
(c) SEBI (d) IRD
33. How many companies are considered for calculating NSE index?
(a) 25 (b) 50
(c) 30 (d) 42
34. Stock exchanges are regulated by ____________.
(a) SEBI (b) BSE
(c) SBI (d) RBI
35. OMO stands for ____________.
(a) Obligation monetary operations
(b) Open market operations
(c) Open money operation
(d) Open monetary operation
36. Which among the following is the stock exchange of India?
(a) NASDAQ (b) HKSE
(c) NSE (d) ESE
37. Who amongst the following is not a part of capital market?
(a) Primary market (b) Secondary market
(c) Debt market (d) Liquid market
38. Who amongst the following is not a part of money market?
(a) Secondary market (b) Liquid instrument market
(c) Insurance market (d) Primary market
39. GDR stand for
(a) Global Depository Receipts (b) Global Debt Receipt
(c) Global Doubtful Receipts (d) Global Depository Regulator
40. ADR stands for
(a) American Doubtful Receipt (b) American Depository Receipt
(c) American Debt Receipt (d) Asian Debt Receipt
41. What is debenture?
(a) Debt instrument (b) Share instrument
(c) Liquid instrument (d) Depositary instrument
42. What is a share?
(a) Debt instrument (b) Stock
(c) Depositary instrument (d) Insurance instrument
43. What is bond?
(a) Debt instrument (b) Depositary instrument
(c) Share instrument (d) Stock

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44. What is hedge fund?

(a) Pool of underlying securities (b) Pool of fixed deposits
(c) Pool of debentures (d) Pool of currencies
45. What is gold ETF?
(a) Units representing in physical gold, which may be in paper or dematerialized form
(b) Units representing in mutual gold
(c) Units representing gold in paper form only
(d) Units representing gold in dematerialized form only
46. Which of the following is not a type of debenture?
(a) Fully convertible
(b) Partially convertible
(c) Non-convertible
(d) Mutually convertible
47. What is the core function of capital market?
(a) Provides liquid sources of funds
(b) Provides long-term sources of funds
(c) Regulating mutual funds
(d) Regulates currency
48. What is the core function of money market?
(a) Provides liquid sources of funds
(b) Provides long-term sources of funds
(c) Regulating mutual funds
(d) Regulates currency
49. What is ADR?
(a) Securities of non U. S. company that trades in U. S market
(b) Securities from U. S. company that trades in U.S. market
(c) Securities of Indian company that trades in U.S. market
(d) Securities of U. S. company that trades in Indian Market
50. What is GDR?
(a) a bank certificate issued in more than one country for shares in a foreign company
(b) a bank certificate issued in one country for shares in Indian company
(c) Securities of Indian company that trades in U.S. market
(d) Securities of U. S. company that trades in Indian Market

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1. (c) 11. (b) 21. (b) 31. (c) 41. (a)
2. (a) 12. (d) 22. (b) 32. (c) 42. (b)
3. (d) 13. (a) 23. (b) 33. (c) 43. (a)
4. (d) 14. (a) 24. (b) 34. (a) 44. (a)
5. (b) 15. (c) 25. (b) 35. (b) 45. (a)
6. (a) 16. (b) 26. (a) 36. (c) 46. (d)
7. (a) 17. (b) 27. (a) 37. (d) 47. (b)
8. (a) 18. (b) 28. (a) 38. (c) 48. (a)
9. (c) 19. (b) 29. (a) 39. (a) 49. (a)
10. (a) 20. (c) 30. (a) 40. (b) 50. (a)

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Chapter 5
Public Finance Infrastructure
1. GDP stands for ____________.
(a) Gross Demand of Product (b) Gross Domestic Product
(c) Global Demand of Product (d) Gross Domestic Price
2. GNP Stands for ____________.
(a) Global Net Product (b) Gross National Price
(c) Gross National Product (d) Global Net Price
3. PPP stands for ____________.
(a) Public private parity (b) Public private performance
(c) Public purchase power (d) Purchase power parity
4. GATT Stands for ____________.
(a) Gross agreement on trade and tariff
(b) General agreement on trade and tariff
(c) General agreement on tariff and trade
(d) Gross agreement on tariff and trade
5. WTO stands for ____________.
(a) World Trade Organisation (b) World Trade Office
(c) World Tourism Organisation (d) World Transportation Organisation
6. WTO was established in ____________.
(a) 1993 (b) 1994
(c) 1995 (c) 1998
7. The headquarter of WTO is in ____________
(a) Singapore (b) USA
(c) UK (d) Switzerland
8. Which of the following is added to national income while calculating personal income?
(a) Transfer payments to individuals (b) Social security contributions
(c) Corporate taxes (d) Undistributed profits
9. Which of the following method/s is/are used to calculate national income in India?
(a) Production method (b) Expenditure method
(c) Income method (d) All the above
10. The national income estimation is the responsibility of
(a) NSSO (b) CSO
(c) Finance Ministry (d) National Income Committee
11. Consider the following statements and identify the right ones.
(i) The data for NI and PCI are collected at current prices.
(ii) They are deflated using the deflator index to get value at constant prices.

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(a) (i) only (b) (ii) only

(c) both (d) none
12. The most appropriate measure of a country's economic growth is
(a) GDP (b) NDP
(c) Per capita real income (d) GNP
13. Consider the following statements and identify the right ones.
(i) National income is the monetary value of all final goods and services produced.
(ii) Depreciation is deducted from gross value to get the net value
(a) (i) only (b) (ii) only
(c) both (d) none
14. The net value of GDP after deducting depreciation from GDP is
(a) Net national product (b) Net domestic product
(c) Gross national product (d) Disposable income
15. When depreciation is deducted from GNP, the net value is
(a) Net national product (b) Net domestic product
(c) Gross national product (d) Disposable income
16. The value of NNP at consumer point is
(a) NNP at factor cost (b) NNP at market price
(c) GNP at market price (d) GNP at factor cost
17. The value of NNP at production point is called
(a) NNP at factor cost (b) NNP at market price
(c) GNP at market price (d) GNP at factor cost
18. The value of national income adjusted for inflation is called
(a) Per capita income (b) Disposable income
(c) Inflation rate (d) Real national income
19. The average income of the country is
(a) Per capita income (b) Disposable income
(c) Inflation rate (d) Real national income
20. Which among the following statement in true ____________.
(a) National Expenditure = National Income
(b) National Expenditure = National Income+ National savings
(c) National Expenditure = National Income +Taxes
(d) National Expenditure = National Income – Taxes
21. Which statement is true?
(a) National Income = National expenditure - Indirect taxes
(b) NI = GNP – NNP
(c) NI = NNP – Indirect taxes
(d) NI = PI

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22. How many methods are there to measure the national income ____________.
(a) 1 (b) 5 (c) 3 (d) 4
23. If we compare GDP and GNP, then:
(a) GNP = GDP – net income from abroad
(b) GNP = GDP + net income from abroad
(c) GNP = NNP – net income from abroad
(d) GNP = NNP + net income from abroad
24. It is deducted from GNP to get NNP:
(a) Indirect taxes (b) Depreciation
(c) Direct taxes (d) Transfer payment
25. It is added to GDP to get GNP ____________.
(a) allowance (b) Direct taxes
(c) Subsidies (d) Net income from abroad
26. Which is among the following has a largest figure ____________.
(a) NNP (b) GNP
(c) PCI (d) PI
27. The largest part of national income goes to ____________.
(a) Consumption (b) Investment
(c) Saving (d) Transfer payment
28. When national income is estimated by expenditure method, we include:
(a) All Govt. Expenditure
(b) All household expenditure
(c) All expenditure of the business sector
(d) All of the above
29. Total value of all final goods and services produced in a country during one year is:
(a) GDP (b) GNP
(c) NNP (d) NI
30. It is not included in estimation of national income:
(a) Illegal income (b) Services of housewife
(c) Imports (d) None of these
31. Which statement among the following is true ____________.
(a) NI = rent + interest + wages + profit
(b) NI = rent + interest + wages + taxes
(c) NI = Govt. expenditure + interest + wages + profit
(d) NI = rent + interest + wages + pensions
32. Determinants of national income are ____________.
(a) Natural resources, human resources, monetary resources
(b) Natural resources, capital resources, monetary resources

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(c) Natural resources, capital resources, human resources

(d) Natural resources, capital resources, foreign resources
33. What is GDP?
(a) Value of product in financial year.
(b) Value of product in financial year within country
(c) Total consumption and income in a financial year within country
(d) It includes import and export
34. How real GDP is calculated?
(a) Constant price (b) Current Price
(c) Cost plus price (d) mark-up price
35. WTO superseded which organization?
(a) International Trade Organization
(b) General Agreement on Tariff and Trade
(c) General Agreement on Trade and services
(d) International Chamber of Commerce
36. Union budget of India is presented in which month?
(a) January (b) March
(c) February (d) April
37. How many countries are the member of WTO in present?
(a) 23 (b) 130
(c) 160 (d) 159
38. What is factor cost?
(a) MP – Indirect tax + Subsidies (b) MP + Indirect tax + Subsidies
(c) MP + Indirect tax – Subsidies (d) MP – Indirect tax – Subsidies
39. What is market price?
(a) FC + Indirect tax – Subsidies (b) FC + Indirect tax + Subsidies
(c) FC – Indirect tax – Subsidies (d) FC – Indirect tax + Subsidies
40. In which year Indian economy introduced LPG policy?
(a) 1990 (b) 1991
(c) 1947 (d) 2001
41. When GATT was established?
(a) 1945 (b) 1995
(c) 1947 (d) 1950
42. How many countries were the member when GATT was established?
(a) 19 (b) 23
(c) 123 (d) 69
43. Who is the director general of WTO?
(a) Barak Obama (b) Roberto Azevedo
(c) Pascal Lamy (d) Ban ki Moon

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44. Who presents union budget in India?

(a) Prime Minister (b) Home Minister
(c) Commerce Minister (d) Finance Minister
45. Revenue account of budget does not consists of ____________.
(a) Exports (b) Direct Tax
(c) FDI (d) Indirect Tax
46. Capital account of budget includes
(a) Exports Income (b) Direct Tax
(c) Indirect Tax (d) FDI
47. Revenue deficit is defined as
(a) Expenditure – Income
(b) Income – Expenditure
(c) Planned revenue – Achieved revenue
(d) Planned Revenue – Planned Expenditure
48. Fiscal deficit is defined as
(a) Expenditure > Income (b) Income > Expenditure
(c) Cost > Profit (d) Income = Expenditure
49. Which among the following is not the part of non-planned expenditure of budget?
(a) Interest Payments (b) Rural Development
(c) Subsidies (d) Wages & Salary
50. Which is not the part of planned expenditure of budget?
(a) Electricity Generation (b) Rural Development
(c) Subsidies (d) Road Construction

1. (b) 11. (c) 21. (c) 31. (a) 41. (c)
2. (c) 12. (c) 22. (c) 32. (c) 42. (b)
3. (d) 13. (c) 23. (b) 33. (b) 43. (b)
4. (c) 14. (b) 24. (b) 34. (a) 44. (d)
5. (a) 15. (a) 25. (d) 35. (b) 45. (c)
6. (c) 16. (b) 26. (b) 36. (c) 46. (d)
7. (d) 17. (a) 27. (a) 37. (c) 47. (c)
8. (a) 18. (d) 28. (d) 38. (a) 48. (a)
9. (d) 19. (a) 29. (a) 39. (a) 49. (b)
10. (b) 20. (a) 30. (d) 40. (b) 50. (c)
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Economic Analysis for Business Decisions MCQs

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Economic Analysis for Business

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All in One Multiple Choice Questions 29

9. Who has presented the theory of invisible hand?

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30 All in One Multiple Choice Questions

20. Which sectors form a three sector model of circular flow?

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30. Accounting profit excludes____________.

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(c) Accounting profit differs from economic profit

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Answer Key of Chapter 1

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34 All in One Multiple Choice Questions

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36 All in One Multiple Choice Questions

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All in One Multiple Choice Questions 37

32. Why monopoly earns economic profit in long-run?

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38 All in One Multiple Choice Questions

40. When a market is in equilibrium,

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49. A barrier to entry is

Answer Key of Chapter 2

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42 All in One Multiple Choice Questions

22. What is decision tree?

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44 All in One Multiple Choice Questions

42. What is incremental revenue?

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All in One Multiple Choice Questions 45

Answer Key of Chapter 3

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All in One Multiple Choice Questions 47

11. What is certificate of deposit?

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20. SEBI stands for ____________.

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32. Who regulates capital market?

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