AURORA’S P.G.

COLLEGE
Nampally,Hyderabad.

Economics for Managers

Question Bank III Internal

1. Statement1:In Monopolistic competition differentiated products are seen

Statement 2:Unlike Perfect competition there is no homogeneity
Conclusion1:Selling Costs are to be unique as Products
Conclusion 2:In perfect competition there is no need to advertise since
products are homogeneous.
A. only 1Follows 1and 2 Statements
B. only 2 follows 1 and 2 Statements
C. Both Follows 1 and 2 Statements
D.None Follows

2.Statement1:In Monopolistic competition firms make constant attempts to

convince the buyers that their products are better than others
Statement 2:Effective advertising campaigns are undertaken to create Brand
Equity
Conclusions1:Large number of sellers with close competition
Conclusion 2:Popularity implies adding value to the product

A. only 1Follows 1and 2 Statements

B. only 2 follows 1 and 2 Statements
C. Both Follows 1 and 2 Statements
D.None Follows

3.Statement 1:.Monopolist sells blocks of output at different prices in Second

degree price discrimination
Statement 2: In Second Degree price Discrimination the monopolist captures
part of Consumer surplus
Conclusion1:Maximum price is charged for some with minimum block of
output
Conclusion 2:Producer’s surplus is achieved maximum in second degree
discrimination
A. only 1Follows 1and 2 Statements
B. only 2 follows 1 and 2 Statements
C. Both Follows 1 and 2 Statements
D.None Follows

4.Statement1:The firm divides its total output in to many sub markets in third
degree price discrimination
Statement 2:Demand elasticities of the markets will be different in Third
Degree discrimination
Conclusion1: Price of the product is set in each market in relation to the
demand elasticities
Conclusion 2: Higher Demand elasticities have less price
A. only 1Follows 1and 2 Statements
B. only 2 follows 1 and 2 Statements
C. Both Follows 1 and 2 Statements
D.None Follows

5. Statement1:.Monopoly firm equates supply and demand curve equilibrium

level of output.
Statement 2:Producer surplus is seen in monoploy
Conclusions 1:Supply is more than demand under monopoly
Conclusion 2:Price is charged differently to each buyer

A. only 1Follows 1and 2 Statements

B. only 2 follows 1 and 2 Statements
C. Both Follows 1 and 2 Statements
D.None Follows

6. Statement 1: Break -even point indicates Zero profit position

Statement 2:Break even chart is an instrument in determining the
profitable output.
Conclusion1:Total revenue is more than total cost at Break even point
Conclusion2:Marginal cost is less than marginal revenue in Break even
chart
A. only 1Follows 1and 2 Statements
B. only 2 follows 1 and 2 Statements
C. Both Follows 1 and 2 Statements
D.None Follows

7. Statement 1:Market period price is a very Short period Market

Statement 2:In perfect competition supply of the commodity tends to be
perfectly inelastic
Conclusion1:During market period potential supply and actual supply tend to
be identical
Conclusion2: Price is determined by the interaction of perfectly inelastic
demand for the product
A. only 1Follows 1and 2 Statements
B. only 2 follows 1 and 2 Statements
C. Both Follows 1 and 2 Statements
D.None Follows

8.Statement1: In economics, a production function represents the

relationship between inputs and outputs in the production process.
Statement 2. The production function demonstrates how much output can be
produced from a given set of input resources, such as labor and capital.
Conclusion1:Decisions regarding resource allocation and output levels in the
economy can be taken
Conclusion2:Efficiency in production processes can be achieved
A. only 1Follows 1and 2 Statements
B. only 2 follows 1 and 2 Statements
C. Both Follows 1 and 2 Statements
D.None Follows

9.Statement 1: The laws of returns to scale describe the effects of increasing

all inputs in the production process by a given proportion on the resulting
output.
Statement 2.These laws categorize production processes into three types:
increasing returns to scale, constant returns to scale, and decreasing returns
to scale.
Conclusion1:.Highlights their significance for analyzing the impact of
changes in input levels on output in the production process.
Conclusion2:It does not comprehend the implications of scaling up or down
production
A. only 1Follows 1and 2 Statements
B. only 2 follows 1 and 2 Statements
C. Both Follows 1 and 2 Statements
D.None Follows

10. Statements 1:Diminishing returns to scale occur when all inputs in the
production process are increased by a certain proportion, resulting in a less
than proportional increase in output.
Statement 2: As production is scaled up, the additional units of input
contribute less and less to the overall output, leading to diminishing marginal
productivity at the firm level.
Conclusion1: The potential inefficiencies and cost increases associated with
expanding production cannot be known
Conclusion 2: Diminishing returns to scale in economics, emphasizing their
implications for production efficiency and cost considerations as input levels
are altered in the production process
A. only 1Follows 1and 2 Statements
B. only 2 follows 1 and 2 Statements
C. Both Follows 1 and 2 Statements
D.None Follows

11. Statement 1: Fixed costs do not vary with the level of production.
Statement 2. Variable costs fluctuate in direct proportion to the level of
production.
Conclusion1:.Fixed costs does not remain constant
Conclusion2:No change in variable costs as production levels vary.
A. only 1Follows 1and 2 Statements
B. only 2 follows 1 and 2 Statements
C. Both Follows 1 and 2 Statements
D.None Follows

12. Statement 1: Marginal cost represents the change in total cost resulting
from producing one additional unit.
Statement 2 : Average total cost is the total cost divided by the quantity of
output.

Conclusion1:marginal cost focuses on the additional cost of producing one

more unit
 Conclusion 2: Average total cost provides an overall cost per unit based on
the total production quantity.
A. only 1Follows 1and 2 Statements
B. only 2 follows 1 and 2 Statements
C. Both Follows 1 and 2 Statements
D.None Follows

13. Statement 1:.External economies of scale occur when multiple firms in

the same industry or location benefit from cost advantages as a result of the
industry's overall expansion.
Statement 2. External economies of scale are realized through factors such
as shared infrastructure, a larger and more skilled labor pool, and easier
access to specialized suppliers and support services.
Conclusions1:External economies of scale, leads to reduced cost.
Conclusion 2:Competitiveness will not increase with external economies of
scale.
A. only 1Follows 1and 2 Statements
B. only 2 follows 1 and 2 Statements
C. Both Follows 1 and 2 Statements
D.None Follows

14. Statement 1: Internal economies of scale occur when a firm experiences

cost advantages as it grows larger and its production levels increase.
Statement 2: Internal economies of scale are achieved through factors such
as increased specialization, improved resource allocation, and the ability to
invest in more efficient technology and equipment.
Conclusions 1: As firm expands its production and operational capacity, it can
benefit from internal economies of scale,
Conclusion 2:Internal economies leads to lower average costs and improved
competitive position in the market
A. only 1Follows 1and 2 Statements
B. only 2 follows 1 and 2 Statements
C. Both Follows 1 and 2 Statements
D.None Follows

15. Statement 1: In monopolistic competition, firms face downward-sloping

demand curves due to product differentiation.
Statement 2: Firm Y operates in a monopolistically competitive industry.
Conclusion1:Firm Y is likely to have a downward-sloping demand curve for its
product
Conclusion 2: Product differentiation is present in the product
A. only 1Follows 1and 2 Statements
B. only 2 follows 1 and 2 Statements
C. Both Follows 1 and 2 Statements
D.None Follows

16. Statement1: In monopolistic competition, firms differentiate their

products to create a degree of market power.
Statement 2. Company X operates in a monopolistically competitive market
Conclusion1:Company X is does not engage in product differentiation
Conclusion 2:To establish a degree of market power and influence its pricing
branding is not required.
A. only 1Follows 1and 2 Statements
B. only 2 follows 1 and 2 Statements
C. Both Follows 1 and 2 Statements
D.None Follows

17. Statement 1: In a perfectly competitive market, firms will produce at the

quantity where marginal cost equals marginal revenue.
Statement 2. The market for wheat is perfectly competitive.
Conclusion1:wheat producers will operate at a quantity where marginal cost
equals marginal revenue, equilibrium in the market.
Conclusion2:Equilibrium in the market is achieved when MR>MC

A. only 1Follows 1and 2 Statements

B. only 2 follows 1 and 2 Statements
C. Both Follows 1 and 2 Statements
D.None Follows

18. Statement 1. In a competitive market, the forces of supply and demand

drive prices toward an equilibrium.
Statement 2. The market for smartphones is competitive.
Conclusion1:The price of smartphones will tend to increase
Conclusion2: Price of smart phones is at an equilibrium where the quantity
supplied equals the quantity demanded.

A. only 1Follows 1and 2 Statements

B. only 2 follows 1 and 2 Statements
C. Both Follows 1 and 2 Statements
D.None Follows

19. Statement1: Total costs are the sum of fixed and variable costs.
Statement 2: Fixed costs do not change with the level of output, while
variable costs do.
Conclusion1:Total costs will increase as the level of production increases
Conclusion2:Variable costs.increases with level of output
A. only 1Follows 1and 2 Statements
B. only 2 follows 1 and 2 Statements
C. Both Follows 1 and 2 Statements
D.None Follows

20 .Statement1. Oligopoly markets are characterized by a small number of

large firms dominating the industry.
Statement 2. Industry X is dominated by three major companies that control
the majority of market share.
Conclusion1:. Industry X is likely an oligopoly market due to the presence of
a small number of dominant firms.
Conclusion2: Industry X has major control on price determination
A. only 1Follows 1and 2 Statements
B. only 2 follows 1 and 2 Statements
C. Both Follows 1 and 2 Statements
D.None Follows

21.Statement 1: Oligopoly markets often result in limited price competition

due to the few dominant firms controlling the majority of the market.
Statement 2:Price wars are rare among the major firms in Industry B, despite
intense competition in other aspects.
Conclusion1:. Industry B is an oligopoly market where limited price
competition is observed due to the dominance of a few major players.
Conclusion2:Entry and Exit will be easy in oligopoly market
A. only 1Follows 1and 2 Statements
B. only 2 follows 1 and 2 Statements
C. Both Follows 1 and 2 Statements
D.None Follows

22. Statements 1:. Oligopoly markets often result in limited price competition
due to the few dominant firms controlling the majority of the market.
Statement 2: Price wars are rare among the major firms in Industry B,
despite intense competition in other aspects.
Conclusion1:Industry B is an oligopoly market
Conclusion 2: Limited price competition is observed due to the dominance of
a few major players.
A. only 1Follows 1and 2 Statements
B. only 2 follows 1 and 2 Statements
C. Both Follows 1 and 2 Statements
D.None Follows

23.Statement 1: Inflation erodes the purchasing power of the currency.

Statement 2: The government has implemented a new monetary policy to
control inflation.

Conclusion 1: The new monetary policy will increase the purchasing power of
the currency.
Conclusion 2: The government has successfully addressed the issue of
inflation.

A. only 1Follows 1and 2 Statements

B. only 2 follows 1 and 2 Statements
C. Both Follows 1 and 2 Statements
D.None Follows

24.Statement 1: High inflation leads to a decrease in consumer spending.

Statement 2: The central bank has raised interest rates to combat inflation.

Conclusion 1: Consumer spending is likely to decrease due to the rise in

interest rates.
Conclusion 2: The central bank's decision will effectively curb the inflation
rate.

A. only 1Follows 1and 2 Statements

B. only 2 follows 1 and 2 Statements
C. Both Follows 1 and 2 Statements
D.None Follows

25.Statement 1: Hyperinflation occurs when the general price level of goods

and services rises uncontrollably.
Statement 2: Demand-pull inflation happens when the demand for goods
and services exceeds their supply.

Conclusion 1: Hyperinflation is caused by excessive demand.

Conclusion 2: Demand-pull inflation leads to hyperinflation.

A. only 1Follows 1and 2 Statements

B. only 2 follows 1 and 2 Statements
C. Both Follows 1 and 2 Statements
D.None Follows

26. Statement 1: Cost-push inflation occurs when the cost of production

increases, leading to higher prices for goods and services.
Statement 2: Deflation is the general decline in prices of goods and services.

Conclusion 1: Deflation is the opposite of cost-push inflation.

Conclusion 2: Cost-push inflation always leads to a rise in the general price
level.

A only 1Follows 1and 2 Statements

B. only 2 follows 1 and 2 Statements
C. Both Follows 1 and 2 Statements
D.None Follows

27. Statement 1: Moderate inflation can be beneficial to the economy by

encouraging spending and investment.
Statement 2: Stagflation occurs when there is a combination of high
inflation, high unemployment, and stagnant economic growth.

Conclusion 1: Moderate inflation always leads to stagflation.

Conclusion 2: Stagflation is caused by moderate inflation.

A only 1Follows 1and 2 Statements

B. only 2 follows 1 and 2 Statements
C. Both Follows 1 and 2 Statements
D.None Follows

28.Statement 1: High inflation leads to a decrease in consumer spending.

Statement 2: The central bank has raised interest rates to combat inflation.

Conclusion 1: Consumer spending is likely to decrease due to the rise in

interest rates.
Conclusion 2: The central bank's decision will effectively curb the inflation
rate.
A only 1Follows 1and 2 Statements
B. only 2 follows 1 and 2 Statements
C. Both Follows 1 and 2 Statements
D.None Follows

29. Statement 1: Perfect competition is a market structure with many small

firms producing identical products.
Statement 2: Monopoly is a market structure with a single seller dominating
the entire market.

Conclusion 1: Perfect competition always leads to lower prices for

consumers.
Conclusion 2: Monopoly results in higher prices for consumers.

A only 1Follows 1and 2 Statements

B. only 2 follows 1 and 2 Statements
C. Both Follows 1 and 2 Statements
D.None Follows

30. Statement 1: Oligopoly is a market structure characterized by a few large

firms dominating the market.
Statement 2: Monopolistic competition is a market structure with many firms
selling differentiated products.

Conclusion 1: Oligopoly always leads to price collusion among the dominant

firms.
Conclusion 2: Monopolistic competition results in a wide variety of product
choices for consumers.
A .only one Follows I and II Statements
B. only 2 follows 1 and 2 Statements
C. Two Follows I and II Statements
D. None Follows

KEY
1 (C) 16 (D)
2 (C) 17 (A)
3 (A) 18 (B)
4 (C) 19 (C)
5 (B) 20 (C)
6 (D) 21 (A)
 7 (C) 22 (B)
8 (C) 23 (D)
9 (A) 24 (A)
10 (B) 25 (D)
11 (D) 26 (A)
12 (B) 27 (D)
13 (A) 28 (A)
14 (C) 29 (C)
15 (C) 30 (B)

ONE WORD QUESTIONS

1. Law of variable proportion is also called as ----------------------

A. Law of Diminishing returns

2. ISOQUANT curve is also called as --------------

A. Equal Product Curve

3. Break -even analysis is also known as ---------------

A. Cost volume profit analysis

4. Production function is tool used to explain the -------------- relationship

A. Input-output

5. The lines that separate the relevant from the irrelevant portions of the
isoquants
A. Ridge lines

6. The third stage of Law of variable proportions is called as ----------

A. Stage of negative Returns

7. Actual cost is also known as -------------

A. Outlay Cost

8. CES Stands for -----------------

A. Constant Elasticity substitution

9. A point where firms cost is equal to firms revenue is known as ----------

A. Break even point

10. The cost of Forgone alternatives is -----------

A. Oppurtunity Cost

11. When seller sells the same product at more than one price is known as -----
------
A. Price Discrimination
12. The negative slope of demand curve of a firm under monopolistic
competition is because of --------
A. Substitution Effect

13. The portion above the kink on the demand curve of an oligopolist is --------
A. More Elastic
14. A monoploy is ----------
A. A single producer of a single product

15. In ---------------- pricing the firms form a cartel to regulate prices and
output of all firms and avoid competition.
A. Collusive Pricing

16. The ratio of Total fixed cost and the number of units produced is ------------

A. Average Fixed Cost

17. The ratio of Total variable cost and the number of units produced as
output level is -----------

A. Average Variable cost

18. Disadvantages that arise due to expansion of production scale and leads
to rise in cost of production is -----------------
A. Diseconomies of Scale

19. Large organizations use -------------- pricing for carrying out transactions
among different divisions
A. Transfer Pricing

20. A set of Strategies in which each player thinks that he is doing the best it
can given the strategy of opponents
A. Nash Equilibrium

21. Per Capita income of aYear is calculated by ----------

A. National income/Population of the year
22. Personal income - Personal Taxes is --------
A . Disposable income

23. A constant variation in economic activities of capitalist economies is -------

A. Trade Cycle

24. When income increases at an Exponential rate it develops--------

A. Explosive oscillation

25. A situation where high rate of inflation occurs simultaneously with rate of
unemployment is------
A. Stagflation

26. Inflation caused by increase in aggregate demand due to increased

private and government spending is ------
A. Deamand pull Inflation

27. The inflation caused by drop in aggregate supply dure to increased prices
of inputs is -------
A. Cost -Push inflation

28. National income expressed in terms of general price levels by taking a

particular year as a base is------
A. Real income

29. The average income of the individual s in a nation in a given period of time
is--------
A. Per capita Income

30. NNP refers to --------

A .Net National Product