Economics Test

Q:1 Business Economics is

1. Abstract and applies the tools of Microeconomics.

2. Involves practical application of economic theory in business decision
making.
3. Incorporates tools from multiple disciplines.
4. (b) and (c) above.

Q:2 A capitalist economy uses __________________ as the principal means of

allocating resources.

1. demand
2. Supply
3. Efficiency
4. prices

Q:3 Demand for a commodity refers to:

1. desire backed by ability to pay for the commodity

2. need for the commodity and willingness to pay for it
3. the quantity demanded of that commodity at a certain price.
4. the quantity of the commodity demanded at a certain price during any
particular period of time.

Q:4 When income increases the money spent on necessaries of life may not
increase in the same proportion, This means

1. income elasticity of demand is zero

2. income elasticity of demand is one
3. income elasticity of demand is greater than one
4. income elasticity of demand is less than one
Q:5 Potato chips and popcorn are substitutes. A rise in the price of potato chips
will ___________ the demand for popcorn and the quantity of popcorn sold will
_______

1. increase, increase
2. increase; decrease
3. decrease, decrease
4. decrease, increase

Q:6 In Economics, when demand for a commodity increases with a falling its
price it is known as:

1. Contraction of demand
2. Expansion of demand
3. No change in demand
4. None of the above

Q:7 Demand for a good will tend to be more inelastic if it exhibits which of the
following characteristics?

1. The good has many substitutes.

2. The good is a luxury (as opposed to a necessity).
3. The good is a small part of the consumer's income.
4. There is a great deal of time for the consumer to adjust to the change in
prices

Q:8 Elasticity of supply is measured by dividing the percentage change in

quantity supplied of a good by________

1. Percentage change in income

2. Percentage change in quantity demanded of goods
3. Percentage change in price
4. Percentage change in taste and preference
Q:9 If the price of air-conditioner increases from Rs 30,000 to Rs 30,010 and
resultant change in demand is negligible, we use the measure of _______ to
measure elasticity.

1. Point elasticity of demand since it is a small change

2. Arc elasticity of demand since it is a small change
3. Price elasticity based on average prices method
4. Any of the above

Q:10 Suppose the income elasticity of education in private school in India is 3.6.
What does this indicate:

1. Private school education is highly wanted by rich

2. Private school education is a necessity.
3. Private school education is a luxury.
4. We should have more private schools.

Q:11 Which of the following is considered production in Economics?

1. Tiling of soil.
2. Singing a song before friends.
3. Preventing a child from falling into a manhole on the road.
4. Painting a picture for pleasure.

Q:12 Hours of labour Total Output Marginal Product

0 _ _
1 100 100
2 _ 80
3 240 _
What is the total output when 2 hours of labour are employed?

1. 80
2. 100
3. 180
4. 200
Q:13 Output (O) 0 1 2 3 4 5 6
Total Cost (TC) ₹ 240 ₹ 330 ₹ 410 ₹ 480 ₹ 540 ₹ 610 ₹ 690
The average fixed cost of 2 units of output is

1. 80
2. 85
3. 120
4. 205

Q:14 A firm producing 7 units of output has an average total cost of ₹ 150 and
has to pay ₹ 350 to its fixed factors of production whether it produces or not.
How much of the average total cost is made up of variable costs?

1. ₹ 200
2. ₹ 50
3. ₹ 300
4. ₹ 100

Q:15 An isoquant shows

1. All the alternative combinations of two inputs that can be produced by using
a given set of output fully and in the best possible way.
2. All the alternative combinations of two products among which a producer is
indifferent because they yield the same profit.
3. All the alternative combinations of two inputs that yield the same total
product.
4. Both (b) and (c).

Q:16 Suppose the first four units of a variable input generate corresponding total
outputs of 200, 350, 450, 500. The marginal product of the third unit of input is:

1. 50
2. 100
3. 150
4. 200
Q:17 The marginal cost for a firm of producing the 9th unit of output is ₹ 20.
Average cost at the same level of output is ₹ 15. Which of the following must be
true?

1. marginal cost and average cost are both falling

2. marginal cost and average cost are both rising
3. marginal cost is rising and average cost is falling
4. it is impossible to tell if either of the curves are rising or falling

Q:18 Which of the following statements is incorrect?

1. The LAC curve is also called the planning curve of a firm.

2. Total revenue = price per unit x number of units sold.
3. Opportunity cost is also called alternative cost.
4. If total revenue is divided by the number of units sold we get marginal
revenue.

Q:19 Scarcity definition of Economics is given by-

1. Alfred Marshall
2. Samuelson
3. Robinson
4. Adam Smith

Q:20 Mr. Satish hired a business consultant to guide him for growth of his
business. The consultant visited his factory and suggested some changes with
respect to staff appointment, loan availability and so on.
Which approach is that consultant using?

1. Micro economics
2. Macro economics
3. None of the above
4. Both a and b

Q:21 In the table below what will be equilibrium market price?

Price Demand (tonnes per annum) Supply (tonnes per annum)
(₹)
1 1000 400
2 900 500
3 800 600
4 700 700
5 600 800
6 500 900
7 400 1000
8 300 1100

1. ₹ 2
2. ₹ 3
3. ₹ 4
4. ₹ 5

Q:22 Suppose the technology for producing personal computers improves and, at
the same time, individuals discover new uses for personal computers so that there
is greater utilisation of personal computers. Which of the following will happen
to equilibrium price and equilibrium quantity?

1. Price will increase; quantity cannot be determined.

2. Price will decrease; quantity cannot be determined.
3. Quantity will increase; price cannot be determined.
4. Quantity will decrease; price cannot be determined

Q:23 Price-taking firms, i.e., firms that operate in a perfectly competitive

market, are said to be "small" relative to the market. Which of the following best
describes this smallness?

1. The individual firm must have fewer than 10 employees

2. The individual firm faces a downward-sloping demand curve.
3. The individual firm has assets of less than ₹ 20 lakhs.
4. The individual firm is unable to affect market price through its output
decisions.

Q:24 When ___________ ,there will be allocative efficiency meaning thereby that
the cost of the last unit is exactly equal to the price of consumers are willing to
pay for it and so that the right goods are being sold to the right people at the
right price.
 1. MC = MR
2. MC = AC
3. MC = AR
4. AR = MR

Q:25 The market for hand tools (such as hammers and screwdrivers) is
dominated by Draper, Stanley, and Craftsman. This market is best described as

1. Monopolistically competitive
2. a monopoly
3. an oligopoly
4. perfectly competitive

Q:26 In Economics, the term 'market' refers to a:

1. place where buyer and seller bargain a product or service for a price
2. place where buyer does not bargain
3. place where seller does not bargain
4. none of the above

Q:27 The market for the ultimate consumers is known as

1. whole sale market

2. regulated market
3. unregulated market
4. retail market

Q:28 Which of the following statements is incorrect?

1. Under monopoly there is no difference between a firm and an industry.

2. A monopolist may restrict the output and raise the price.
3. Commodities offered for sale under a perfect competition will be
heterogeneous.
4. Product differentiation is peculiar to monopolistic competition.
Q:29. The amount realized by the firm by selling certain units of commodity is
called as :
(a) Average Revenue
(b) Cost of Operations
(c) Total Revenue
(d) Marginal Revenue

Q:30. When TR is at its peak then MR is equal to __________.

(a) Zero
(b) Positive
(c) Negative
(d) None of the above

Q:31. When the price of a commodity is ₹ 20, the quantity demanded is 9 units
and when its price is ₹ 19, the Quantity demanded is 10 units. Based on this
information what will be the marginal revenue resulting from an increase in
output from 9 units to 10 units.
(a) ₹ 20
(b) ₹ 19
(c) ₹ 10
(d) ₹ 01

Q:32. Which one of the following expressions is correct for Marginal Revenue?
(a) MR = AR(1−ee)
(b) MR = TRn – TRn+1
(c) MR = ΔTRΔQ
(d) MR = TRQ

Q:33. When e = 1 then MR is __________.

(a) Positive
(b) Zero
(c) One
(d) Negative

Q:34. When e < 1 then MR is:

(a) Negative
(b) Zero
(c) Positive
(d) One

Q:35. When e > 1 then MR is:

(a) Zero
(b) Negative
(c) Positive
(d) One

Q:36. Demand for a product is unitary elastic then:

(a) MR = 0
(b) MR > 0
(c) MR < 0
(d) None of the above

Q:37. Given, AR = 5 and Elasticity of demand = 2 Find MR.

(a) +2.5
(b) – 2.5
(c) + 1.5
(d) + 2.0

Q:38. The Law of Demand, assuming other things to remain constant, estab-
lishes the relationship between:
(a) Income of the consumer and the quantity of a good demanded by him.
(b) Price of a good and the quantity demanded.
(c) Price of a good and the demand for its substitute.
(d) Quantity demanded of a good and the relative prices of its complementary goods.

Q:39. When Price of a commodity increases what will be the affect on Quantity
demanded?
(a) Increases
(b) Decreases
(c) No change
(d) None of these

Q:40. An increase in the demand for computers, other things remaining same,
will:
(a) Increase the number of comput-ers bought.
(b) Decrease the price but increase the number of computers bought.
(c) Increase the price of computers.
(d) Increase the price and number of computers bought.

Q:41. In case of Normal goods, Rise in price leads to ________?

(a) Fall in demand
(b) Rise in demand
(c) No Change
(d) Initially rise then ultimately fall

Q:42. A decrease in the demand for cameras, other things remaining the same
will.
(a) Increase the number of cameras bought.
(b) Decrease the price but increase the number of cameras bought.
(c) Increase the price of cameras.
(d) Decrease the price and decrease in the number of cameras bought.

Q:43. Comforts lies between ________.

(a) Inferior goods and necessaries.
(b) Luxuries and inferior goods.
(c) Necessaries and luxuries.
(d) None of the above.

Q:44. If price of the commodity increases, what will be the effect on Quantity
demanded?
(a) Decreases
(b) Increases
(c) No change
(d) Can’t say

Q:45. Who has given the law of Demand?

(a) Alfred Marshall
(b) Paul Samuelson
(c) Robbins
(d) J.B. Say

Q:46. A Table which represents the different prices of a good and the cor-
responding quantity demanded per unit of time is called as ________.
(a) Demand Curve
(b) Demand Table
(c) Demand Schedule
(d) Demand Tabulation

Q:47. The Demand Schedule depicts ________ relationship between price and
quantity demanded.
(a) Direct
(b) Inverse
(c) Adverse
(d) None of these

Q:48. ________ is a graphical pre-sentation of the ________.

(a) Demand Curve, Demand Sched-ule
(b) Demand Schedule, Demand Curve
(c) Demand Curve, Supply Schedule
(d) Supply Curve, Demand Schedule

Q:49. All but one of the following are assumed to remain the same while drawing
an individual’s demand curve for a commodity. Which one is it?
(a) The preference of the individual.
(b) His monetary income.
(c) Price of the commodity.
(d) Price of related goods.

Q:50. The demand curve has a ________ Slope.

(a) Positive
(b) Negative
(c) Circular
(d) No
Q:51 A variable that tends to move later than aggregate economic activity is
called

1. a leading variable.
2. a coincident variable.
3. a lagging variable.
4. a cyclical variable.

Q:52 During recession, the unemployment rate _____________ and output

__________.

1. Rises; falls
2. Rises, rises
3. Falls; rises
4. Falls; falls

Q:53 Which of the following is not a characteristic of business cycles?

1. Business cycles have serious consequences on the well-being of the society.

2. Business cycles occur periodically, although they do not exhibit the same
regularity
3. Business cycles have uniform characteristics and causes.
4. Business cycles are contagious and unpredictable.

Q:54 Which of the following is not an example of coincident indicator?

1. Industrial production
2. Inflation
3. Retail sales
4. New orders for plant and equipment

Q:55 Which of the following statements is correct?

1. The business cycle largely affects the agricultural sector

 2. The business cycle largely affects small employees
3. The business cycle generally affects all sectors of economy but business
sector in particular.
4. The business cycle affects low wages workers
Q:56. Select the odd out:
(a) Expansion
(b) Boom
(c) Upswing
(d) Trough

Q:57. _________ represents the steady growth lien or the growth of the economy
when there are no business cycles.
(a) Peak
(b) Trend
(c) Depression
(d) Expansion

Q:58. In _________ phase, the overall economic activities (i.e. Production and
Employment) are at the lowest level.
(a) Expansion
(b) Trough
(c) Peak
(d) Bottom

Q:59. _________ state continues till there is full employment of resources and
production is at its maximum possible level using available productive resources.
(a) Expansion
(b) Peak
(c) Contraction
(d) Depression

Q:60. The different phases of a business cycle _________

(a) Do not have the same length and severity
(b) Expansion phase always last more than ten years
(c) Last many years and are difficult to get over in short periods
(d) None of the above