Sinhgad Technical Education Society’s

S.K.N. Sinhgad School of Business Management

Subject Specific Test-3

Under

Student Training programme

For the subject

102 Economic Analysis for Business Decision

Q. No.01
Which statement is FALSE?
a. Fixed costs are the difference between total costs
and total variable costs.
b. There are no fixed costs in the long run.
c. Fixed costs are zero if the firm is producing nothing.
d. Fixed costs do not depend on the firm's level of
output.
Correct Answer: c
Q. No.02
Which of the following is most likely to be a variable
cost for a firm?
a. The payroll taxes that are paid on employee wages.
b. The franchiser's fee that a restaurant must pay to
the national restaurant chain.
c. The monthly rent on office space that it leased for a
year.
d. The interest payments made on loans.
• Correct Answer: a.
Q. No.03
The short run, as economists use the phrase, is
characterized by:
a. a period where the law of diminishing returns does
not hold.
b. no variable inputs - that is, all of the factors of
production are fixed.
c. at least one fixed factor of production and firms
neither leaving nor entering the industry.
d. all inputs being variable.
• Correct Answer: c.
Q. No.04
A perfectly competitive market
has________________________
a. firms that set their own prices.
b. only one seller.
c. at least a few sellers.
d. many buyers and sellers.
e. none of these answers.
• Correct Answer: d.
Q. No.05
If an increase in the price of blue jeans leads to an
increase in the demand for
tennis shoes, then blue jeans and tennis shoes are:
a. complements.
b. inferior goods
c. normal goods.
d. substitutes.
e. none of these answers.
• Correct Answer: d
Q. No.06
If an increase in consumer incomes leads to a
decrease in the demand for camping equipment,
then camping equipment is
a. a normal good.
b. a substitute good.
c. an inferior good.
d. a complementary good.
Correct Answer: c
Q. No.07
A monopolistic market has
a. many buyers and sellers.
b. firms that are price takers.
c. at least a few sellers.
d. only one seller.
Correct Answer: d
Q. No.08
Which of the following shifts the demand for watches
to the right?
a. an increase in the price of watches
b. a decrease in consumer incomes if watches are a
normal good
c. a decrease in the price of watch batteries if watch
batteries and watches are complements
d. a decrease in the price of watches
• Correct Answer: c
Q. No.09
If the price of a good is above the equilibrium price,
a. there is a surplus and the price will rise.
b. there is a shortage and the price will fall.
c. there is a shortage and the price will rise.
d. the quantity demanded is equal to the quantity
supplied and the price remains unchanged.
e. there is a surplus and the price will fall
• Correct Answer: e
Q. No.10
If the price of a good is below the equilibrium price,
a. there is a shortage and the price will rise.
b. the quantity demanded is equal to the quantity
supplied and the price remains unchanged.
c. there is a shortage and the price will fall.
d. there is a surplus and the price will rise.
e. there is a surplus and the price will fall.
• Correct Answer: a
Q. No.11
If the price of a good is equal to the equilibrium price,
a. there is a shortage and the price will fall.
b. the quantity demanded is equal to the quantity
supplied and the price remains unchanged.
c. there is a surplus and the price will rise.
d. there is a shortage and the price will rise.
e. there is a surplus and the price will fall.
• Correct Answer:: b
Q. No.12
An increase (rightward shift) in the demand for a good
will tend to cause
a. an increase in the equilibrium price and quantity.
b. an increase in the equilibrium price and a decrease
in the equilibrium quantity.
c. a decrease in the equilibrium price and an increase
in the equilibrium quantity.`
d. a decrease in the equilibrium price and quantity.
• Correct Answer: a
Q. No.13
A decrease (leftward shift) in the supply for a good
will tend to cause
a. an increase in the equilibrium price and quantity.
b. a decrease in the equilibrium price and an increase
in the equilibrium quantity
c. a decrease in the equilibrium price and quantity.
d. an increase in the equilibrium price and a decrease
in the equilibrium quantity.
• Correct Answer: : d
Q. No.14
Suppose there is an increase in both the supply and demand for
personal computers. Further, suppose the supply of personal
computers increases more than demand for personal computers. In
the market for personal computers, we would expect
 
a. The change in the equilibrium quantity to be ambiguous and the
equilibrium price to fall.
b. The equilibrium quantity to rise and the equilibrium price to rise.
c. The equilibrium quantity to rise and the change in the equilibrium
price to be ambiguous.
d. The equilibrium quantity to rise and the equilibrium price to fall.
e. The equilibrium quantity to rise and the equilibrium price to remain
constant.
Correct Answer:: d
Q. No.15
Suppose a frost destroys much of the Florida orange
crop. At the same time, suppose consumer tastes
shift toward orange juice. What would we expect to
happen to the equilibrium price and quantity in the
market for orange juice?
a. Price will decrease; quantity is ambiguous.
b. The impact on both price and quantity is ambiguous.
c. Price will increase; quantity will increase.
d. Price will increase; quantity will decrease.
e. Price will increase; quantity is ambiguous.
• Correct Answer: e
Q. No.16
Monopolies may derive their market power from:
a. Patent rights.
b. Control of productive resources.
c. Economies of scale.
d. Government franchise.
e. All of the above.
• Correct Answer: e
Q. No.17
Firms in perfectly-competitive industries may be
characterized as:
a. price takers.
b. price creators.
c. price makers.
d. price setters.
e. price negotiators
• Correct Answer: a
Q. No.18
A firm operating in a perfectly-competitive industry
faces a demand that is:
a. vertical.
b. horizontal.
c. downward sloping.
d. upward sloping
 
Correct Answer:: b
• Q. No. 19.
In the short run, perfectly-competitive firms may
earn:
a. positive economic profit.
b. positive accounting profit.
c. normal profit.
d. negative economic profit.
e. all of the above
Correct Answer:: e
• Q. No. 20.
To maximize profit, a perfectly-competitive firm
should produce up to the output level where:
a. MR = MC
b. P=MR
c. P=MC
d. P=ATC
e. A and C are correct.

• Correct Answer: e