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1 BUSINESS ECONOMICS (PAPER IV-PART I) (60 MARKS) Q1: Macroeconomics is also called economics (a) applied (b) aggregate (c) experimental (d) none Q2: A Study of how increase in the corporate income tax rate will affect the national unemployment rate is an example of: (a) Macro economics (b) Descriptive economics (c) Micro economics (d) Normative economics Q3: A capitalist economy uses as the principal means of allocating resources. (a) demand (b) supply (c) efficiency (d) prices Q4: Large production of goods would lead to higher production in future. (a) Consumer goods (b) Capital goods (c) Agriculture goods (d) Public goods Q5: Exploitation and inequality are minimal under: (a) Socialism (c) Mixed economy (b) Capitalism (d) None Q6: In case of an inferior good, the income elasticity of demand is: (a) Positive (b) 0 (c) Negative (d) Infinity Q7: If a good is a luxury, its income elasticity of demand is: (a) Positive and less than 1 (b) Negative but greater than -1 (c) Positive and greater than 1 (d) 0 Q8: A Vertical supply curve to y-axis implies that the elasticity of supply is (a) 0 (b) Infinity (c) 1 (d) -1 Q9: The price of tomatoes increases and people buy tomato puree. You infer that tomato puree and tomatoes are: (a) Normal goods (b) Complements (c) Substitutes (d) Inferior goods

2 Q10: If price of computers increases by 10% and supply increases by 25%. The elasticity of supply is: (a) 2.5 (b) 0.4 (b) (-) 2.5 (d) ( ) 0.4 Q11: Elasticity of supply is zero means: (a) Perfectly inelastic supply (c) Imperfectly elastic supply (b) Perfectly elastic supply Q12: The supply curve of perishable commodities is: (a) Elastic (b) Inelastic (c) Perfectly elastic (d) Perfectly inelastic Q13: Diminishing marginal returns implies: (a) Decreasing average variable costs (c) Increasing marginal costs (b) Decreasing marginal costs (d) Decreasing average fixed costs Q14: In the short run, when the output of a firm increases, its average fixed cost: (a) Increases (b) Decreases (c) Remains constant (d) First declines and then rises Q15: With which of the following is the concept of marginal cost closely related? (a) Variable cost (b) Fixed cost (c) Opportunity cost (d) Economic cost Q16: A firm s average fixed cost is `20 at 6 units of output. What will it be at 4 units of output? (a) `60 (b) `30 (c) `40 (d) `20 Q17: Which of the following is a function of an entrepreneur? (a) Initiating a business enterprise (b) Risk bearing (c) Innovating Q18: Marginal product, mathematically is the slope of: (a) Total product curve (b) Average product curve (c) Marginal product curve (d) Implicit product curve Q19: Which is the first order condition for the profit of a firm to be maximum? (a) AC = MR (b) MC = MR (c) MR = AR (d) AC = AR Q20: Average revenue curve is also known as: (a) Profit curve (c) Average cost curve (b) Demand curve (d) Indifference curve Q21: When, we know that the firms are earning just normal profits. (a) AC = AR (b) MC = MR (c) MC = AC (d) AR = MR

3 Q22: Which of the following markets would most closely satisfy the requirement for a perfectly competitive market? (a) Electricity (b) Cable television (c) Cola (d) Milk Q23: Price discrimination is one of the features of (a) Monopolistic competition (b) Monopoly (c) Perfect competition (d) Oligopoly Q24: Stock exchange is an example of: (a) Unregulated market (c) Spot market (b) Regulated market Q25: Which of the following is not a characteristic of a price-taker? (a) TR = P x Q (b) AR = Price (c) Negatively sloped demand (d) Marginal Revenue = Price Q26: Which cost increases continuously with the increase in production (a) AC (b) MC (c) FC (d) VC Q27: Production may be defined as an act of: (a) Creating utility (c) Destroying utility (b) Earning profit (d) Providing services Q28: New firms are barred from entering the market in: (a) Perfect competition (b) Oligopoly (c) Monopolistic competition (d) Monopoly Q29: The law of consumer surplus is based on: (a) Indifferent curve analysis (c) Law of substitution (b) Revealed preference theory (d) The law of diminishing marginal utility Q30: A perfectly competitive firm has control over (a) Price (b) Production as well as price (c) Production, price and consumers Q31: Which of the following is not within the scope of Business Economics? (a) Capital Budgeting (b) Risk Analysis (c) Business cycles (d) Accounting standards Q32: In a free market economy the allocation of resources is determined by (a) Voting done by consumers (b) A central planning authority (c) Consumer preferences (d) The level of profits of firms Q33: Freedom of choice is the advantage of (a) Socialism (c) Communalism (b) Capitalism

4 Q34: A movement along the demand curve for soft drinks is best described as (a) An increase in demand (b) A decrease in demand (c) A change in quantity demanded (d) A change in demand Q35: In case of a Giffen Good, the demand curve will be: (a) Horizontal (b) Downward sloping to right (c) Vertical (d) Upward sloping to right Q36: A good which can t be consumed more than once is: (a) Durable good (b) Non-durable good (c) Producer good Q37: Conspicuous goods are also known as: (a) Prestige goods (c) Veblen goods (b) Snob goods Q38: When total demand for a commodity whose price has fallen increases, it is due to: (a) Income effect (b) Substitution effect (c) Complementary effect (d) Price effect Q39: If the quantity supplied is exactly equal to the relative change in price then the elasticity of supply is (a) Less than one (b) Greater than one (c) One Q40: Which of the following cost curves is never U shaped? (a) Average cost curve (b) Marginal cost curve (c) Average variable cost curve (d) Average fixed cost curve Q41: Which of the following statement is true of the relationship among the average cost functions? (a) ATC = AFC AVC (b) AVC = AFC + ATC (b) AFC = ATC + AVC (d) AFC = ATC AVC Q42: The average product of labour is maximised when marginal product of labour (a) Equal the average product of labour (b) Equals zero (c) Is maximised (d) None of the above Q43: Laws of production does not include (a) Returns of scale (c) Law of diminishing returns to a factor (b) Law of variable proportions (d) Least cost combination of factors Q44: Marginal cost changes due to changes in (a) TC (b) AC (c) VC (d) Quantity of output Q45: Which of the following is not an essential condition of pure competition? (a) Large number of buyers and sellers (b) Homogenous product (c) Freedom of entry (d) Absence of transport cost

5 Q46: Price discrimination will be profitable only if the elasticity of demand in different sub market is: (a) Uniform (b) Different (c) Less (d) 0 Q47: In which form of the market structure is the degree of control over the price of its product by a firm very larger? (a) Monopoly (b) Imperfect competition (c) Oligopoly (d) Perfect competition Q48: Agricultural goods markets depict characteristics close to (a) Perfect Competition (b) Oligopoly (c) Monopoly (d) Monopolistic Competition Q49: Under monopoly, the degree of control overprice is (a) None (b) Same (c) Very considerable (d) Very much Q50: When the products are sold through a centralised body, oligopoly is knows as: (a) Organised oligopoly (b) Partial oligopoly (c) Competitive oligopoly (d) Syndicated oligopoly Q51: Who defined business economics? (a) Prof. Adam Smith (c) Prof. Pigou (b) Prof. Joel Dean (d) Economist Amit Bali Q52: When the perfectly competitive firm and industry are in long run equilibrium then: (a) P = MR = SAC = LAC (b) D = MR = SMC = LMC (c) P = MR = Lowest point on LAC Curve (d) All Q53: Price discrimination is a situation when a producer: (a) Charges different prices in different markets (b) Charges same prices (c) Charges many price Q54: Two categories of which business issues to which economic theories can be directly applied? (a) Micro and Macro (b) Positive and normative (c) Internal and external (d) Explicit and implicit Q55: In case of an inferior good the income elasticity of demand is: (a) +ve (b) 0 (c) ve (d) Infinite Q56: At shut down point (a) Price = AVC (c) Total loss = TFC Q57: Forecasting of demand is (a) Science only (c) both a and b (b) TR = TVC (b) Art only (d) Neither science nor art

6 Q58: In the case of two perfect substitutes, the IC will be: (a) Straight line (b) L-shaped (c) U-shaped (d) C-shaped Q59: Which of the following falls under Micro Economics? (a) National Income (b) General price level (c) Factor Pricing (d) National Saving & Investment Q60: Free hand projection method refers to (a) Point method (c) Geometrical method (b) Graphical method