ARAVALI COLLEGE OF ENGINEERING

AND MANAGEMENT
MCQ-2 ECONOMICS for engineers

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18ME16
Q-1 Slope of production possibility curve is ______________.

A) a straight line

B) convex to the point of origin

C) Concave to the point of origin

D) None of these

Clear selection

Q-2 Which of the following best describes the three fundamental economic
questions?

A) What to produce, when to produce, and where to produce?

B) What time to produce, what place to produce, and how to produce?

C) What to produce, when to produce, and for whom to produce?

D) What to produce, how to produce, and for whom to produce?

Clear selection

Q-3 On the vertical axis, the production possibilities curve shows ________; on
the horizontal axis,the production possibilities frontier shows ________.

A) the quantity of a good; a weighted average of resources used to produce the good

B) the quantity of a good; the number of workers employed to produce the good

C) the quantity of a good; the price of the good

D) the quantity of one good; the quantity of another good

Clear selection
Q-4 A production possibilities curve does NOT illustrate

A) attainable and unattainable points.

B) the exchange of one good or service for another.

C) the limits on production imposed by our limited resources and technology.

D) opportunity cost.

Clear selection

Q-5 Scarcity is represented on the production possibilities curve by

A) the fact that there are only two goods in the diagram.

B) technological progress.

C) the amount of the good on the horizontal axis forgone.

D) the fact there are attainable and unattainable points.

Clear selection

Q-6 A point inside a production possibilities curve

A) implies that too much capital and not enough labor are being used.

B) is more efficient than points on the production possibilities frontier.

C) could indicate that some resources are unemployed.

D) is unattainable

Clear selection
Q-7 Time value of money indicates that

a) A unit of money obtained today is worth more than a unit of money obtained in
future

b) A unit of money obtained today is worth less than a unit of money obtained in
future

c) There is no difference in the value of money obtained today and tomorrow

d) None of the above

Clear selection

Q-8 Time value of money supports the comparison of cash flows recorded at
different time period by

a) Discounting all cash flows to a common point of time

b) Compounding all cash flows to a common point of time

c) Using either a or b

d) None of the above.

Clear selection
Q-9 If the nominal rate of interest is 10% per annum and there is quarterly
compounding, the effective rate of interest will be:

a) 10% per annum

b) 10.10 per annum

c) 10.25%per annum

d) 10.38% per annum

Clear selection

Q-10 Relationship between annual nominal rate of interest and annual effective
rate of interest, if frequency of compounding is greater than one:

a) Effective rate > Nominal rate

b) Effective rate < Nominal rate

c) Effective rate = Nominal rate

d) None of the above

Clear selection
Q-11 Mr. X takes a loan of Rs 50,000 from HDFC Bank. The rate of interest is 10%
per annum. The first installment will be paid at the end of year 5. Determine the
amount of equal annual installments if Mr. X wishes to repay the amount in five
installments.

a) Rs 19500

b) Rs 19400

c) Rs 19310

d) None of the above

Clear selection

Q-12 Heterogeneous cash flows can be made comparable by

a) Discounting technique

b) Compounding technique

c) Either a or b

d) None of the above

Clear selection
Q-13 Financial managers use the time value of money to

make business decisions.

compare cash flows of different projects.

determine the price of common stock.

both A and B.

all of the above.

Clear selection

Q-14 Interest paid (earned) on only the original principal borrowed (lent) is often
referred to as?

(a) Compound interest

(b) Future value

(c) Present value

(d) Simple interest

Clear selection

Q-15 Nominal Interest Rate is also known as?

(a) Annual percentage rate

(b) Effective interest Rate

(c) Periodic interest rate

(d) Coupon rate

Clear selection
Q-16 The concept of compound interest refers to?

(a) The process of gradually retiring a debt through periodic payments of principal
and interest

(b) The process of servicing a debt with regular interest payments, followed lump sum
payment of principal and interest at the end of the loan term

(c) The process of converting future lump sums and annuities into present values at a
stated interest rate

(d) The process of earning interest on an original amount, plus interest on interest
previously earned

Clear selection

Q-17 The value of money to be received in the future is _______the value of the
same amount of money in hand today?

(a) Higher than

(b) Lower than

(c) The same as

(d) None of the above

Clear selection
Q-18 The Time value of money must be considered in total outlay decision
because?

(a) Cash inflows and out flows occur at different point

(b) Inflation greatly reduce the outflows

(c) A dollar received in future is more value able than a dollar today

(d) Cash flows are not known with certainty

Clear selection

Q-19 Interest paid (earned) on both the original principal borrowed (lent) and
previous interest allowed (earned) is often referred to as __________?

(a) Compound interest

(b) Double interest

(c) Simple interest

(d) Present value

Clear selection

Q-20 Money has time value because?

(a) Individuals prefer future consumption to present consumption

(b) Money today is worth more than money tomorrow in terms of purchasing power

(c) There is a possibility of earning risk free return on money invested today

(d) B and C above

Clear selection
Q-21 Payback period____________________?

A) And economic life of a project are the same

B) Is the length of time over which the earnings on a project equals the investment

C) Is affected by the variation in earnings after the recovery of the investment

D) All A, B. and C

Clear selection

Q-22 Payback period Technique is based on

A. all cash flows

B. only higher cash flows

C. earlier cash flows

D. selected cash flows

Clear selection

Q-23 Microeconomics deals with the study of __________economic entities.

a. Aggregate

b. Individual

c. Macro

d. Socio

Option 2

Clear selection
 Q-24 Macroeconomics deals with _________economic entities

a. Aggregate

b. Individual

c. Micro

d. Socio

Clear selection

Q-25 Who is the founder of modern economics?

a) Robbins

B) Marshell

C) Adam smith

D) Samuelson

Clear selection

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