A. Fill in.

the blanks with most appropriate term from those given

below each question : |
1. The nature of economic and business problem is
(a) identical (9) similar (c) different
2. The central problem of economics and business is of resources.
(a) plenty (by scarcity (c) variety
3. To bea successful manager the knowledge of and is.
_ very essential.
(a) economics and politics (J#) microeconomics and macroeconomics
(c) internal and international trade.
4. Macroeconomics is concerned with the analysis of behaviour of
(a) firm @) whole economy (c) industry|
studies the problems related to measurement of national
income. »
(a) Microeconomics (b) International economics (g/Macroeconomics
Ans. (1) - (b), (2) - (b), (3) - (b), (4) - (b), (5) - (©)
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 In every economy resources are
42) scarce (b) plenty (c) available
Human wants refer to all the goods and services individuals:
(a) need (bj desire (c) have :
Problem of is an universal problem.
(a) resources (Bj scarcity (c) wants
efficiency occurs when goods and services are distributed
according to consumer preferences.
(a) technical (bf allocative (c) productive
principle is integral to short-run decisions about profit
maximisation.
(a) equi-marginal (4 marginal (c) efficiency
The most notable incentive in economics is
(a) profit (ef price (c) revenue
Price mechanism is the system ina economy which brings about
equality between demand and supply.
a) market (b) socialist (c) mixed
___ the PPC.
8. If the production is not efficient the economy will be
7 |
{a) inside (b) outside (c) on
us to understand the
The trade-offs people and society face helps
concept of cost.
(a) money (byopportunity (c) total
is the profit.
10. An accountant's concept of profit
fey business (b) economic @(c) maximum
- (b), (5) - (b), (6) - (b), (7) - (a), (8) - (a)
(3) - (0),
Ans. (1) - (a), (2) - (b),
(9) - (b), (10) - (a)

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 Market economy suffers from which are responsible .for
problems like inflation, unemployment, etc.
fey imperfections (b) lack of resources (c) inefficiency
Imperfect information posses the problem of information.
fay asymmetric (b) inefficient (c) lack of
Market failure takes place due to
(a) perfect information (sj externalities (c) private goods
The goods having the features of non-rival in consumption and non-
excludability are called goods.
sey public (b) private (c) merit
We can improve economic efficiency by correcting
fay market failures (b) inflation (c) unemployment
6. In the case of goods with externalities the firms produce too
little of goods.
(a) negative (bY positive externalities (c) zero
~ Ans. (1) - (a), (2) - (a), (3) - (b), (4 - (a), (5) - (a), (6) - (b)

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 Select the most appropriate answer from the alternatives given and
rewrite the sentences:
1. A fallin the price of a commodity
(a).. increases the consumer's nominal income
{ef increases the consumer's real income
(c) decreases the consumer's real income
2. Which of the following is not the assumption of the law of demand ?
(a) Consumer's income does not change
(b) No change in consumer's taste and preferences
Y& Nochangein the priceofinputs -

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3. A change in the price of a commodity, with no change in oth
determinants result in
Sey change in quantity demanded
(b) ashift in the demand curve
(c) anincrease or decrease in demand
The bandwagon effect makes the market de mand
curve to bemd
4.
a

Say elastic | | (b) inelastic

|
(c) steeper
ma ke s the market de ma nd cu rve to be
5, The snob effect
(b) more elastic
Pol less elastic
(c) flatter
ef fe ct gi ve rise to market demand curve.
6. The v e b l e n
Sey" less elastic
(a) flatter
(c) no change
, B )- (@), @ )- (a), (5 )- (a), (6 )- (b )
Ans: (1) - (b), 2) - (0 ral a | i

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 swe Ve WA SHR ERE AW FER AEM FEO

—— price is the minimum price which the seller must get in order
to offer a part or the whole stock of goods for sale.
Aef Reservation (b) Supply
(c) Selling
Supply refers to the amount of a commodity that producers are ——
lO

to offer for sale. |

(a) able (b) willing
4ef ableand willing |
3. According to the law of supply, the relationship between price ani
supply is
Jey Positive (b) Inverse
(c) Proportional
4. Changein brings about a movement along the supply curve
JHE) Price (b) Input prices
(c) Exports
5. Achange in shifts the supply curve.
(a) Price {ef Government Policy
| |
(c) Taste
supply curve
6. When the elasticity of supply is less than one the

Steeper (b) Flatter

(c) Vertical
J
7. When the supply is perfectly elastic the supply curve is
(a) Vertical Ay Horizontal
(c) Upward sloping
Ans: @ - (a), (2) - (c), (3) - (a), (4) - (a), (5) - (b), (6) ~ (a), (7) - (b)

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i
re answer an d rew ement
rite the ststaattem s::
ents
apcitca
ee elasti y of demand is def ine d
:
Price as
- the change i f i e des perc
, ge
enta
a) ge in quantity dema nded resul ting from one
change in price.
tage changeae
the percenet in pri Tat t change in
p)
quantity e ML Prce resulting from one uni

ge cha nge in i t age ing from one

lt
the pe rc en ta an tt y de ma nd ed re su
percen fapé ching = ick au

in the pri ce of a go od di vi ded by the re . sulting change |

(d) an ge
the itschquantity ean tl good
in divi

e price ela sti cit y of de ma nd for a part icular brand of cho colate is
Th
estimated to be 2. If quantity demanded has increased by 10 percent a
rice must have _ -
(b) ‘risen by5 percent
) fallen by percent
(c) fallen by 10 percent © (d) risen by 10 percent »
an y straight-line ne ga tive ly sl oping demand curve
Along
both vary.
the price elasticity and slope will
Sw

(a)
sti cit y var ies , but the slo pe rem ains the same —
the price ela
op e va ri es , bu t the pr ic e ela sticity remains the same
(c) the sl
the pric e el as ti ci ty an d slope remain the same
(d)
ans that
A price elasticity of 1 me
is vertical
(a) the demand curve
e is horizontal
(b) the demand curv an d qu antity are equal —
ge s in pr ic e
the relative chan cr ea se if price is reduced
the go od wo ul d in
(d) expenditure on a de te rm in an t of th e price elasticity
ining will not be
Which of the follow
o dity?
of demand for acomm for the good
of su bs ti tu te
(a) Availability
Th e ra ng e of pr ic e cha nge |
(b) n g the commodity
of p ro d u c i curve pertains
AX The cost od to which th e d e m a n d
of time peri en
(d ) Th e le ng th
in th e pric e of the product, th
due to a fall
If TR increases to on e a
1s eq ua l
(a) price elasticity
as ti ci ty is le ss than one
-(b) price el
ZeETO
(c) price elasticity is
ci ty 1S gr ea te r than one
eS price elas ti

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-—~ Yew me wn
4

7° rise inie price iPeer then the producer is operating 0M

If a a
a th w the mid-pint of the demand curv
e segment above the mid-pint of the demand curve
(c) the mid-point of the demand curve | |
(d) -the Y-intercept of the demand curve
revert anes
When demand is relatively inelastic, price and total
take place in the _ direction. |
(b)_ opposite mi
apy BaMme ty of
(c) negative . fa ll in pr ic e, the price elastici
y
e n TR is in cr easing with ever ve!
Wh | a
|
demand is y greater than one
( e
(a) equal to one (d ) equal to zero
(c) less than one c o m p l e m e n tary goods 15
of demand fo r
10. Cross elasticity (b) positive
negati ve one (d) demand fo
(c) zero p a r a d o x of bum per h
fo r th e .
11. The reaso n
food items is Ler inelastic
(a) elastic
y el as ti c in the supply of fam
unitar ading to reduct
ion
po li cy le
cy vovernment ?
72. ficial for whom
products is bene Farmers
(a) Consumers and:
Go v e rn m e nt e o n b u ye rs when dem
(c)
of ta x o n a good is mor
e
13. The incidenc pply:
relative to su (b) elastic -
inelastic
lastic c i d e n c e of tax is relat
mining the in
saportant factor deter
14. the
elasticities of (b) supply
.
(a) demand
upply
demand and s e e q u i l ib r i u m price it 1s
ing is below th
(b) not binding
t h e p r i c e c e il
15. When
bindingeffect
(c) having ne
w a g e is an e x ample of
16. Minimum price floor
(a) price ceiling
(c) firm's policy ie
—
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 ~~ ey eeetseawe awe VOL OD WMA ACL .

Choose the correct answer and rewrite the statements :

- 1... Indifference curve measures satisfaction in
(a) cardinal numbers fof ordinal numbers
(c) ' geometrical method : a be
2. Anindifference curve must be
Aaf convex - (b) concave
(c) neither convex nor concave to the origin
|
3. Two indifference curves cannot be
(a) parallel . intersecting
er
;
(c) _ identical
higher leve l of satisf act ion is sho wn by shifting the indifferen
4. A
curve |
outward (b) inward
|
(c) neither (a) nor (b)
ind iff ere nce cur ve, sat isfaction at different points Is
5. Onthe same
different Sby same
(a)
(c) increases
nnot be |
6. Anindifference curve ca
vertical (b) horizontal»
(a)
(c) upward sloping all the above
ne ce ss ar y co nd it io n of co ns um er 's equilibrium is
Th e
Aoy MRSxy = Px / Py -
(a) MRSxy > Px / Py
| %
(c) MRSxy < Px / Py
-
Ans. (1) - (b), (2) - (a), (3) - (b), (4) - (a), (5) - (b), (6) - (d), (7)

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 ~—T

B. Fillin the blanks with most appropriate term from the terms given: |,
Income effect refers to a change in consumer's equilibrium when his
ee alone changes. (a) price (b) taste
(ef income
2. Aninferior good is one, the consumption of which ______ as income
increases.
(a) increases (bydecreases (c) remains constant
S When demand for a commodity increases with an increase in income,
it is called WW commodity.
normal commodity
{efity
(a) Giffen commod (c) inferior commodity
4. A backward sloping PCC indicates _____ price effect.
(a) positive (b) neutral {ef negative
Ans. (1) - (c), (2) - (b), (3) ~ (b), (4) - (©)
Cc. Choose the correct answer and rewrite the statements:
1. Incase of inferior good ICC slopes
(a) upward (b) downward
wr either to the left or right

Baer eS
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| pie vated
Compensator ¥ Variation In-income a
leaves the consumer on
(a) higher level of Satisfaction (by same level of satisfaction
(c) lower level of satisfaction
When price effect is nega
tive, PCC slopes
backwards 6b) vertical
| (c) horizontal
Inferior good is one when |
(a) price effect is negative ASy income effect is negative
(c) both income and price effects are negative
Giffen good is one when |
(a) income effect is positive but price effect is negative
(b) income and price effects are positive
4cy_ income and price effects are negative
6, Indifference curve analysis is applicable to .
faf only substitutes (b) only complementaries
(c) for both : | |
Ans, (1) - (c), (2) - (b), (3) - (a), (4) - (b), (5) - (0), (6) - (a)
rad t__.
8 Cen Bh WL sae fo a_i
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 Choose the correct answer and rewrite the statements; 4
A.
1. In the short run, increasing mar ginal rerarsis * take place due ty. ‘
variability of all factors i
~ (a)
6) abundance of fixed factors
(c) abundance of variable factors
(d). economies of scale.
n.
Zs Increasing marginal returns come to an end whe
- (a) APintersects MP
_ (b) TP begins to decline —
4ey TP begins to rise at a diminishing rate
(d) MP becomes negative
3. When TP is maximum, MP is |
sey Zero | . (b) Negative
(c) Maximum | (d) Constant
4. When AP is maximum, the following statement is true -
(a) TP is rising at an increasing rate
(b) TPis constant 3
Af TPis rising ata diminishing rate
(d). TP is declining
5. WhenMP is maximum, which of the following is true?
(a) AP is equal to MP (b) AP is declining
(c) | AP is maximum SB AP is rising

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b proportions’ : |
a) The state of technology ;
1S given and constant
a All factors are variable
() All units of variable factors are homogenou
s
(d) At least one factor remains constant
In the short run, which of the following statements describes the
presence of diminishing returns? ,
(a) The marginal product of a factor is positive and rising
AS The marginal product of a factor is positive and falling
_(c) The marginal product of a factor is falling and negative
(d) The marginal product of a factor is constant
; Negative marginal returns occur due to
Het Relative abundance of variable factors
(b) Relative abundance of fixed factors
(c) Relative scarcity of variable factors
(d) Scarcity of fixed and variable factors
iy (1)- (vb), (2)- (), (3)- (a), (4)- (0), (5)- (a), (©)- (b), (7)- (b), (8)- (a)
2 ot
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 .
SS.

A. Choose the correct answer and rewrite the statements: .

i. Anisoquant curve shows |
: Aaj all the alternative combinations of two inputs that yield the same
_ total product. |
the altern ati ve com bin ati ons of two pro duc ts that can be
(b) all wa y.
us in g a gi ve n set of inp uts in the bes t pos sib le
produced by
e co mb in atio ns of tw o pr od uc ts am on g whicha
(c) all the alternativ profit.
be ca us e the y yield the sa me
producer is indifferent the same
of tw o inp uts that ha ve
(d) all alternative combinations
| cost. |
of te ch ni c al su bs ti tu ti on 1s
2 The marginal rate one factor for
a pr oddu ce r is ab le to exchange
4éy the rate at which of output produced. —
fe ct in g he qu an ti ty
another, without af one factor for
d u c e r is ab le to ex c hange
‘(b) the rate at which a pro st of fa c tor inputs.
g th e to ta l co
another, without affectin
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 eatiaaiie “vaurvuoiness Decisions (M.COMe + yg
(c) the rate at which a. producer is able to exchange
ON factor for i
another, without affecting the total quantity of factor inputs Useg
(d) the rate at whicha producer is able to exchange OM product for
used,
_ another, without affecting the quantity of facto¥ inputs
Which of the following statements is not true of 4 smooth convey
Isoquant?
(a) Itrepresents continuous substitutability of factors.
sey It represents limited substitutability of factors.
(c) It represents the same level of output. .
(d) Its slope is measured by MRTS,,
The negative slope of the isoquant shows -
(a) declining marginal rate of technical substitution
_ (b) perfect substitutability of factors
_(c) declining cost of production
of
(& that when the amount of one factor is increased the quantity
: the other factor must be reduced
An isocost line identifies
(a) the least costly combination of inputs needed to produce a give;
quantity of output.
{ey the relative prices of inputs.
(c) the technological relationships among inputs.
(d) the rate at which one input can be substituted for another inthe
production process. |
then
Given the monetary resources, if the factor prices change,
the slope of the iso-cost line will change.
(b) there willbea parallel shift in the iso-cost line.
(c) the slope of iso-cost line will not change
there will be no impact on the iso-cost line. /
(d)
If the cost of acquiring labour declines, with no change in the ct
capital and the firm’s monetary resources, then
(a) the iso-cost line will shift upward.
(b) the iso-cost line will shift downward.
(c) only the Y-intercept of the iso-cost line will change.
4 only the X-intercept of the iso-cost line will change. J
A tangency point between an isoquant and an iso-cost fine io? 4
(a) the least cost combination of inputs required to produce ie
levels of outputs. ae{
g ay
(b) the various levels of output that can be produced usin
1 re

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 a

(C) the various combinations of inputs that can be used to pro

duce
* 81ven level of output. |
#4F the least cost combination of inputs required to produce a given
level of output.
Q. The ex Pansion path identifies
Mey” the least cost combination of inputs required to produce various
levels of output.
(b) the firm’s demand curves for the inputs.
(c) the various combinations of inputs that can be used to produce
a given level of output.
(d) the least-cost combination of outputs.
(ns. (1) ~ (a), (2) ~ (a), (3) - (b), (4) - (d), (5) ~ (b), (6) - (a), (7) - (d), (8) - (A),
(9) - (a)

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\ Choose the correct answer and rewrite the statements:
| Incase of decreasing returns to scale, the distance between subsequent
isoquants
(a) Remainconstant (by~ Increase
(c) Decrease | (d) None of the above

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2. .Returns to scale déterthirie the behaviour
of |

Gt eemntic o lmenaat S
(a) Shortrunaveragecost — (b) Marginal cost:
c)

chit oie mi or a oo sane

leads to asmaller A.
ti on is said t perc en ta ge inc rea se= in output, a firm’s Pr
func 0 ind ica te
ale
ae decreasing returns to scale (b) con stant retu rs to sc
(c) increasing returns to scale (d) diseconomies © f scale
4. Whichisa true statement? | , |
marginal returns
(a) Decreasing returns to scale and diminishing
are two ways of stating the same thing. diminishing
concept, and
(b) Increasing returns to scale is a short-run
marginal returns is a long-run concept.
le is a sho rt- run c oncept, and decreasing
(c). Constant ret urn s to sca
t.
returns to scale is a long-run concep
g run conc ept and increasing
sé) Increasing returns to scale is a lon
concept.
marginal returns is a short run
lowing is not an ex am ple of internal economies of
5. | Which of the fol
scale?
uipment
) Cheaper materials and eq
lisation
(b) Division of labour and specia
lle r per cen tag e of inv ent ories to tot al output held
(c) Sma
ital equipment
(d) Use of specialised cap al e conomies of scale?
ing , is not due to ext ern
6. Whichof the follow
know-how
(a) Growth of technical
ctions
Managerial division of fun
industries
(c) Growth of subsidiary
ation services
(d) Development of inform s is an
ne c ks du e to ex ce ss iv e localisation of industrie
7 Transport bottle
example of
ale
(a) Internal economies of sc
le
(b) Internal diseconomies of sca
AS External diseconomies of scale
(d) External economies of scale
mies of scale is
8. Animportant cause of internal disecono
(a) Rising factor costs
isf Diminishing returns to management
(c) Transport congestions
(d) Pollution and health hazards
- (b), (2) - (d) , (3) - (a) , (4) - (d), (5) - (a), (6) - (), (7) - (ch, a)
Ans. (1)
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A. Choose the correct answer and rewrite the statements :
1. Inthe short run, a firm’s fixed cost
(a) is zero |
Oy will always have to be incurred
(c) can be zero if production is zero
(d) will decline with every increase in output
9. Which of the following would be an implicit cost for a firm ?
(a) payment of wages and salaries of workers
(b) payment to the supplier of raw materials
Ay salary that the business owner would have earned by working
elsewhere |
(d) interest to the bank for borrowed funds.
3. Accouting cost does not include |
(a) payment made to the accountants
(b) rent paid to the landlord
(c}“interest of own money invested by the entrepreneur
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“
Average fixed cost
(a) declines over a certain output range
Sey declines over the entire output range
(c) . is a long-run concept only
(d) is influenced by decreasing returns to scale
If average fixed cost is ¥ 40 and average variable cost is %80 f |
output level of 10, then the total costis | t ay.
fay 1200 (be) %120 |
(c) %40 ~ (dy © 400
The slope of the total cost curve equals
(a). average variable cost marginal cost
(c) average cost (d) mar ginal physical Produc,
- Which of the following statements about the relationship betwes
marginal cost and average cost is correct ? q

(a) When MC is rising, AC always rises

(b) MC equals AC at MC’s minimum point
_fe) When MC exceeds AC, AC will rise
(d). When AC exceeds MC, MC will rise
If the short-run average variable costs of production for a firm 7
rising, then this indicates that:
(a) average total costs are ata maximum.
(b) average fixed costs are constant.
AC) marginal costs are above average variable costs.
(d) average variable costs are below average fixed costs |
Which of the following statements is true of the long run average co
curve ?
Ab) _ its shape is influenced by the laws of returns to scale
(b) its shape is influenced by the law of variable proportions
(c) it isa declining function of output
10. LAC is used to determine
(a) the lowest possible AC for producing various levels of output
(b) the maximum output at lowest variable cost
(c) the output at which fixed cost is minimised
taj the optimum firm size
Ans. (1) - (b), (2) - (©), (3) ~ (c), (4) - (b), (5) - (a), (6) - (b), (7) - ig) |
(9) - (a), (10) - (d)
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