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Managerial Economics-converted.pdf

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Sankaranarayanan196410

Managerial Economics-converted

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Meaning and Importance of Managerial Economics Question 1 Which of these is a feature of managerial economics? Managerial economics also gives importance to the study of non-economic variables having implications on economic performance of the firm. For example, impact of technology, environmental forces, socio-political and cultural factors, etc. Managerial economics helps in determining the level of output at various periods, avoiding under or over production. Managerial economics helps in better material management of buying inputs and controlling inventory level, which cuts down costs of operations. Managerial economics helps the company to set realistic sales targets for each individual salesman and for the company as a whole. Question 2 Consider the following statements with respect to features of managerial economics:Statement 1. It uses various macroeconomic concepts like national income, inflation, deflation, trade cycles, etc. to understand and adjust its policies to the environment in which the firm operates.Statement 2. It all depends on the manager's ability, experience, expertise and intelligence to use different tools of economic analysis to find out the correct answers to business problems.State 'TRUE or 'FALSE. 1- TRUE, 2- 'FALSE 1- TRUE, 2- TRUE 1- FALSE, 2- TRUE 1- FALSE, 2- FALSE Question 3 The success of any business is based on proper management and adequate capital investment. Which objective of a firm best explains this? Demand analysis and forecasting Production and cost analysis Pricing decisions Capital managemnt Question 4 Which objective offers actual numerical solution to the problems of making optimum choices and it involves either maximisation of profits or minimisation of costs? Market structure and conditions Startegic planning
Linear programming and theory of games Profit management Question 5 "Managerial economics is the use of economic modes of thought to analyse business situation." Who proposedthis theory? Spencer and Siegelman Mc Nair and Meriam Brighman and Pappas Joel Dean Question 6 The term _____________ implies a consciously directed activity with certain predetermined goals and means to carry them out. Planning Decision Forward planning Decision making Question 7 The nature, extent and degree of competition, number of sellers and buyers, etc. determine the nature of policies to be adopted by a firm in the market. Which objective of the firm explains this? Strategic planning Market structure Capital management Production and Cost analysis Question 8 Which of these is a feature of managerial economics? Managerial economics also gives importance to the study of non-economic variables having implications on economic performance of the firm. For example, impact of technology, environmental forces, socio-political and cultural factors, etc. Managerial economics helps in determining the level of output at various periods, avoiding under or over production. Managerial economics helps in better material management of buying inputs and controlling inventory level, which cuts down costs of operations.
Managerial economics helps the company to set realistic sales targets for each individual salesman and for the company as a whole. Question 9 Basic objective of a firm today is _______________________. Profit Maximization Profit planning Profit forecasting Profit policies Question 10 Which objective offers actual numerical solution to the problems of making optimum choices and it involves either maximisation of profits or minimisation of costs? Market structure and conditions Strategic planning Linear programming and theory of games Profit management Question 11 Consider the following statements with respect to the scope of managerial economics: Statement 1. Cost controls, cost reduction, cost cutting and cost minimisation receive top most priority in production and cost analysis. Statement 2. The pricing decision does not depend on the revenue (amount), income (level) and profits (volume) earned by a firm. State TRUE or FALSE. 1- TRUE, 2- FALSE 1- FALSE, 2- TRUE 1- TRUE, 2- TRUE 1- FALSE, 2- FALSE Question 12 Consider the following statements with respect to functions of a managerial economist:Statement 1. The basic aim of making a decision is to select the best course of action which maximises the economic benefits and minimises the use of scarce resources of a firm.Statement 2. Managerial economist is a specialist and an expert in analysing and finding answers to business and managerial problems.State 'TRUE or 'FALSE. 1- TRUE, 2- FALSE 1- FALSE, 2- TRUE
1- TRUE, 2- TRUE 1- FALSE, 2- FALSE Question 13 The success of any business is based on proper management and adequate capital investment. Which objective of a firm best explains this? Demand analysis and forecasting Production and cost analysis Pricing decisions Capital management Question 14 "Managerial economics is the use of economic modes of thought to analyse business situation" - This theory was proposed by ___________________. Spencer and Siegelman Mc Nair and Meriam Brighman and Pappas Joel Dean Question 15 Which objective of the firm explains the nature, extent and degree of competition, number of sellers and buyers, etc. determine the nature of policies to be adopted by a firm in the market? Strategic planning Market structure Capital management Production and Cost analysis Question 16 Consider the following statements with respect to functions of a managerial economist:Statement 1. A business executive must be intelligent enough to think in advance, prepare a sound plan and take all possible precautionary measures to meet all types of challenges of the future business.Statement 2. Future planning is prepared in the background of certain and predictable environment. Hence future events and happenings can be predicted accurately.State 'TRUE or 'FALSE. 1- 'TRUE, 2- 'TRUE 1- FALSE, 2- FALSE 1- FALSE, 2 - TRUE
1- TRUE, 2- FALSE Question 17 Managerial economics is mainly a/an _______________ science. Diagonostic Analytical Prescriptive Budgetary Question 18 Which of the following points indicate the significance of the study of Managerial Economics in its right perspective? It gives guidance for identification of key variables in decision-making process. It helps in the optimum use of scarce resources of a firm to maximise its profits. It helps in the optimum use of scarce resources of a firm to maximise its profits. All of the above. Question 19 Two major functions of a managerial economist are ____ and ______. Decision-making, Short term Planning Decision-making, Forward Planning Consensus building, Short term Planning Consensus building, Forward Planning Question 20 The term _____________ implies a consciously directed activity with certain predetermined goals and means to carry them out. Planning Decision Forward planning Decision making Question 21 Managerial economics is basically a branch of __________ economics. Macro Micro
Applied Statistical Question 22 Managerial economics is the integration of economic theory with business practice for solving business and management problems. True False Question 23 Managerial economics fills up the gap between economic theory and practice. True False Question 24 Managerial economics includes concepts from both microeconomics and macroeconomics. True False Question 25 Managerial economics includes some theoretical tools and techniques which may not be applicable in the real world. True False Question 26 Managerial economics helps to take decisions that lead to an increase in a business firm�s profits.State 'TRUE or 'FALSE. True False Question 27 Forecasting of business performance can be done by using certain tools and techniques of managerial economics.State 'TRUE or 'FALSE. True False Question 28 Managerial economics is not related to other functional areas of business management.State 'TRUE or 'FALSE.
True False Question 29 Managerial economics gives importance to the study of theoretical economic concepts.State 'TRUE or 'FALSE. True False Demand Analysis Question 1 Demand is strengthened with a rise in price or weakened with a fall in price. This is stated by which exception to the law of demand? Giffen's paradox Veblen's effect Fear of shortage Fear of future rise in price Question 2 Which of the following statement best describes Demand Function? Responsiveness of demand or sales to change in advertising or other promotional expenses. Measures the effects of the substitution of one commodity for another Measures price elasticity of demand at different points on a demand curve. The demand for a product or service is affected by its price, the income of the individual, the price of other substitutes, population, habit, etc. Question 3 Demand is strengthened with a rise in price or weakened with a fall in price. This is stated by which exception to the law of demand? Giffens paradox Veblens effect Fear of shortage Fear of future rise in price Question 4
In case of any change in price, the quantity demanded will be perfectly constant. This is supported by which theory? Perfectly elastic demand Perfectly inelastic demand Relatively elastic demand Relatively inelastic demand Question 5 In which case iselasticity equal to unity? Relatively inelastic demand Relatively elastic demand Perfectly inelastic demand Unitary elastic demand Question 6 For commodities such as tooth paste, soaps and talcum powder; the demand tends to be elastic. Which determinant of price elasticity best describes this? Nature of the commodity Existence of substitutes Number of uses for the commodity Durability of the commodity Question 7 When the amount of money spent on buying a product is either too small or too big, demand tends to be inelastic. Which price elasticity of demand best describes this? Possibility of postponing the use of commodity Level of income of the people Range of prices Proportion of expenditure on the commodity Question 8 Which of these is a practical application of income inelasticity of demand? Helps in determining the rate of growth of the firm Helps in declaration of public utilities Helps in fixing the rate of taxes
Helps in determining the terms of trade Question 9 In case of any change in price, the quantity demanded will be perfectly constant. This is supported by which theory? Perfectly elastic demand Perfectly inelastic demand Relatively elastic demand Relatively inelastic demand Question 10 In which case is elasticity equal to unity? Relatively inelastic demand Relatively elastic demand Perfectly inelastic demand Unitary elastic demand Question 11 When the amount of money spent on buying a product is either too small or too big, demand tends to be inelastic. Which price elasticity of demand best describes this? Possibility of postponing the use of commodity Level of income of the people Range of prices Proportion of expenditure on the commodity Question 12 State True or False:1. Price elasticity of demand is a technical term used by economists to explain the degree of responsiveness of the demand for a product to a change in its price. 2. Elasticity of demand refers to the capacity of demand either to stretch or shrink to a given change in price or non-price determinant. 1- True, 2- False 1- False, 2- True 1- True, 2- True 1- False, 2- False Question 13 Which of the following statement best describes Point Method?
Responsiveness of demand or sales to change in advertising or other promotional expenses. Measures the effects of the substitution of one commodity for another Measures price elasticity of demand at different points on a demand curve. The demand for a product or service is affected by its price, the income of the individual, the price of other substitutes, population, habit, etc. Question 14 Which of these is a practical application of income inelasticity of demand? Helps in determining the rate of growth of the firm Helps in declaration of public utilities Helps in fixing the rate of taxes Helps in determining the terms of trade Question 15 For commodities such as tooth paste, soaps and talcum powder; the demand tends to be elastic. Which determinant of price elasticity best describes this? Nature of the commodity Existence of substitutes Number of uses for the commodity Durability of the commodity Question 16 State True or False:1. Substitute goods are those that are considered to be economically interchangeable by buyers. 2. Demand tends to be elastic in case of substitute and repairable goods. 1- True, 2- True 1- False, 2- False 1- False, 2 - True 1- True, 2- False Question 17 Which of the following statement best describes Substitution Elasticity? Responsiveness of demand or sales to change in advertising or other promotional expenses. Measures the effects of the substitution of one commodity for another Measures price elasticity of demand at different points on a demand curve.
The demand for a product or service is affected by its price, the income of the individual, the price of other substitutes, population, habit, etc. Question 18 Which of the following statement best describes Advertsing Elasticity? Responsiveness of demand or sales to change in advertising or other promotional expenses. Measures the effects of the substitution of one commodity for another Measures price elasticity of demand at different points on a demand curve. The demand for a product or service is affected by its price, the income of the individual, the price of other substitutes, population, habit, etc. Question 19 A change in a non-price determinant of demand leads to a movement along the demand curve.State 'TRUE or 'FALSE. True False Question 20 Surplus of a good in a market increases its prices while shortage leads to fall in its prices.State 'TRUE or 'FALSE. True False Question 21 When an increase in the price of one good lowers the demand for another good, the two goods are called complements.State True or False. True False Question 22 If the price of onions increases when the quantity of onions purchased in a market falls, this could have been caused by a decrease in supply and demand remaining constant.State True or False. True False Question 23 Cross elasticity of demand is negative in case of good substitutes, e.g. coffee and tea. (True/False) True
False Question 24 The cross elasticity is zero when commodities are independent of each other, for e.g., stainless steel, aluminium vessels, etc. (True/False) True False Question 25 Cross elasticity between two goods is postive when they are complements.(True/False) True False Question 26 High cross elasticity of demand exists for those commodities which are close substitutes. (True/False) True False Demand Forecasting Question 1 ___________ is the most important criterion of a demand forecast, even though cent percent accuracy about the future demand cannot be assured. Plausibility Accuracy Durability Flexibility Question 2 Which of the following statements applies to Plausibility? The techniques used and the assumptions made should be intelligible to the management. It is essential for correct interpretation of the results. Depends on the relationships of the variables considered and the stability underlying such relationships, as for instance, the relation between price and demand, between advertisement and sales, between the level of income and the volume of sales, etc. Should have a scope for adjustments to meet the changing conditions. Should be capable of yielding quick and useful results.
Question 3 Which of the following statements applies to Durability? The techniques used and the assumptions made should be intelligible to the management. It is essential for correct interpretation of the results. Depends on the relationships of the variables considered and the stability underlying such relationships, as for instance, the relation between price and demand, between advertisement and sales, between the level of income and the volume of sales, etc. Should have a scope for adjustments to meet the changing conditions. Should be capable of yielding quick and useful results. Question 4 Which of the following statements best describes the Evolutionary approach? The demand for the new product may be considered as an outgrowth of an existing product. The new product serves as a substitute for the existing product, the demand for this new product is worked out on the basis of �market share�. Offer the new product for sale in a sample market; say supermarkets or big marketing centres. The rate of growth and the ultimate level of demand for the new product are estimated on the basis of the pattern of growth of established products. Question 5 Which of the following statements best describes the Growth Curve approach? The demand for the new product may be considered as an outgrowth of an existing product. The new product serves as a substitute for the existing product, the demand for this new product is worked out on the basis of �market share�. Offer the new product for sale in a sample market; say supermarkets or big marketing centres. The rate of growth and the ultimate level of demand for the new product are estimated on the basis of the pattern of growth of established products. Question 6 Which of the following statements best describes the Sales Experience approach? The demand for the new product may be considered as an outgrowth of an existing product. The new product serves as a substitute for the existing product, the demand for this new product is worked out on the basis of �market share�. Offer the new product for sale in a sample market; say supermarkets or big marketing centres.
The rate of growth and the ultimate level of demand for the new product are estimated on the basis of the pattern of growth of established products. Question 7 Which of the following statements best describes the Substitute approach? The demand for the new product may be considered as an outgrowth of an existing product. The new product serves as a replacement for the existing product, the demand for this new product is worked out on the basis of �market share�. Offer the new product for sale in a sample market; say supermarkets or big marketing centres. The rate of growth and the ultimate level of demand for the new product are estimated on the basis of the pattern of growth of established products. Question 8 Which method is generally applied for the existing products? Survey method Growth curve approach Evolutionary approach Substitute approach Question 9 Demand forecasting is generally associated with ______________. Production planning Forecasting sales Business control Manpower planning  Question 10 In case of sample survey method, the selection of a few customers for interview is known as ______________. Sampling Evolutionary approach Economic indicator Trend projection method Question 11 Which movements imply sporadic changes in time series occurring due to unforeseen events such as floods, strikes, elections, earth quakes, droughts and similar natural calamities?
Random movements Cyclical movements Seasonal movements Secular or long run movements Question 12 In which method, the future demand for the product is based on the information gathered from the salesmen and market experts? Delphi method Trend projection method Economic indicators The collective opinion method  Question 13 A good demand forecasting method must be ______________ and plausible. Accurate Complex Inaccurate Rigid Question 14 Which method is generally applied for the existing products? Survey method Growth curve approach Evolutionary approach Substitute approach Question 15 In case of sample survey method, the selection of a few customers for interview is known as ______________. Sampling Evolutionary approach Economic indicator Trend projection method Question 16 A good demand forecasting method must be ______________ and plausible.
Accurate Complex Inaccurate Rigid Question 17 There are__________ methods of demand forecasting. 2 3 4 6 Question 18 Which movements imply sporadic changes in time series occurring due to unforeseen events such as floods, strikes, elections, earth quakes, droughts and similar natural calamities? Random movements Cyclical movements Seasonal movements Secular or long run movements Question 19 In which method, the future demand for the product is based on the information gathered from the salesmen and market experts? Delphi method Trend projection method Economic indicators The collective opinion method Question 20 State True or False with respect to learning theories:The success of the survey method is based on the nature of the product.The success of the survey method is based on the techniques of analysis. 1- True, 2- False 1- False, 2- False 1- False, 2- True 1- True, 2- True
Question 21 A change in a non-price determinant of demand leads to a movement along the demand curve.State 'TRUE or 'FALSE. True False Question 22 Surplus of a good in a market increases its prices while shortage leads to fall in its prices.State 'TRUE or 'FALSE. True False Question 23 When an increase in the price of one good lowers the demand for another good, the two goods are called complements.State True or False. True False Question 24 If the price of onions increases when the quantity of onions purchased in a market falls, this could have been caused by a decrease in supply and demand remaining constant.State True or False. True False Question 25 Cross elasticity of demand is negative in case of good substitutes, e.g. coffee and tea. (True/False) True False Question 26 The cross elasticity is zero when commodities are independent of each other, for e.g., stainless steel, aluminium vessels, etc. (True/False) True False Question 27 Cross elasticity between two goods is postive when they are complements.(True/False) True
False Question 28 High cross elasticity of demand exists for those commodities which are close substitutes. (True/False) True False Supply & Market Equilibrium Question 1 State True or False: Supply means the quantity which is actually brought in the market. Supply function is a comprehensive one as it analyses the causes for changes in supply in a detailed manner. 1- False, 2- True 1- False, 2- False 1- True, 2- True 1- True, 2- False Question 2 Which of the following statement best describes Market Supply Schedule? Is a geometrical representation of the supply schedule. Refers to the total quantity of commodity supplied at different prices in a market by the whole body of sellers. Is a tabular representation of different quantities of a commodity supplied at varying prices. Other things remaining constant, the quantity supplied varies directly with the price. Question 3 Which of the following statement best describes Supply Curve? Is a geometrical representation of the supply schedule. Refers to the total quantity of commodity supplied at different prices in a market by the whole body of sellers.
Is a tabular representation of different quantities of a commodity supplied at varying prices. Other things remaining constant, the quantity supplied varies directly with the price. Question 4 Which of the following statement best describes Supply Schedule? Is a geometrical representation of the supply schedule. Refers to the total quantity of commodity supplied at different prices in a market by the whole body of sellers. Is a tabular representation of different quantities of a commodity supplied at varying prices. Other things remaining constant, the quantity supplied varies directly with the price. Question 5 Which of the following statement best describes the law of supply? Is a geometrical representation of the supply schedule. Refers to the total quantity of commodity supplied at different prices in a market by the whole body of sellers. Is a tabular representation of different quantities of a commodity supplied at varying prices. Other things remaining constant, the quantity supplied varies directly with the price. Question 6 State True or False: If the seller wants to get rid of his products, then he will sell his products at reduced rates. If the seller is badly in need of money, he will sell less at higher prices. When heavy fall in price is anticipated, the seller may become panicky and sell more at a current lower price. An auction sale is an exception to the law of supply. Statements 1,2 & 3 are true Statements 1,3 & 4 are true
Statements 1,2 & 4 are true Statements 2,3 & 4 are true Question 7 State True or False: Higher the price, the greater is the inducement to the producers to produce and sell more and appropriate more profits.  Supply schedule represents the functional relationship between quantity supplied and price. 1- True, 2- False 1- False, 2- False 1- True, 2- True 1- False, 2- True Question 8 _____________ implies that less quantity is supplied at the same price or same quantity is supplied at a higher price. Equilibrium Decrease in supply Increase in supply Demand Question 9 State True or False: Expansion in supply means that less quantity is supplied at a lower price. Increase in supply implies that more supply at the same price or same quantity of supply at a lower price. 1- True, 2- False
1- False, 2- False 1- False, 2- True 1- True, 2- True Question 10 _____________ refers to the sensitiveness or responsiveness of supply to a given change in price. Elasticity of Supply Perfectly elastic supply Perfectly inelastic supply Unitary elastic supply Question 11 The price of _____________ depends upon the degree of elasticity of demand and supply. Supply Perfectly inelastic supply Commodity Elasticity of supply Question 12 State True or False: The price of a commodity depends upon the degree of elasticity of demand and supply. If the supply is inelastic, the imposition of tax will bring about any change in the supply. 1- True, 2- False 1- False, 2- False 1- True, 2- True 1- False, 2- True Question 13
Which of the following statement best describes Perfectly elastic supply? Supply of a commodity remains constant and does not change. A slight change in price leads to immeasurable changes in supply. If change in the supply is more than proportional to the change in price, elasticity of supply is greater than one. If the change in supply is less than proportional to a given change in price, then, elasticity of supply is said to be less. Question 14 Which of the following statement best describes Perfectly inelastic supply? Supply of a commodity remains constant and does not change. A slight change in price leads to immeasurable changes in supply. If change in the supply is more than proportional to the change in price, elasticity of supply is greater than one. If the change in supply is less than proportional to a given change in price, then, elasticity of supply is said to be less. Question 15 If the price increases there will be ____ in consumer surplus. Decrease Increase No change 0 Question 16 State True or False: Supply means the quantity which is actually brought in the market. Supply function is a comprehensive one as it analyses the causes for changes in supply in a detailed manner. 1- False, 2- True
1- False, 2- False 1- True, 2- True 1- True, 2- False Question 17 State True or False: The price of a commodity depends upon the degree of elasticity of demand and supply. If the supply is inelastic, the imposition of tax will bring about any change in the supply. 1- True, 2- False 1- False, 2- False 1- True, 2- True 1- False, 2- True Question 18 State True or False: Expansion in supply means that less quantity is supplied at a lower price. Increase in supply implies that more supply at the same price or same quantity of supply at a lower price. 1- True, 2- False 1- False, 2- False 1- False, 2- True 1- True, 2- True Question 19 State True or False:
If the seller wants to get rid of his products, then he will sell his products at reduced rates. If the seller is badly in need of money, he will sell less at higher prices. When heavy fall in price is anticipated, the seller may become panicky and sell more at a current lower price. An auction sale is an exception to the law of supply. Statements 1,2 & 3 are true Statements 1,3 & 4 are true Statements 1,2 & 4 are true Statements 2,3 & 4 are true Question 20 State True or False: Higher the price, the greater is the inducement to the producers to produce and sell more and appropriate more profits.  Supply schedule represents the functional relationship between quantity supplied and price. 1- True, 2- False 1- False, 2- False 1- True, 2- True 1- False, 2- True Question 21 A change in a non-price determinant of demand leads to a movement along the demand curve.State 'TRUE or 'FALSE. True False Question 22
Surplus of a good in a market increases its prices while shortage leads to fall in its prices.State 'TRUE or 'FALSE. True False Question 23 When an increase in the price of one good lowers the demand for another good, the two goods are called complements.State True or False. True False Question 24 If the price of onions increases when the quantity of onions purchased in a market falls, this could have been caused by a decrease in supply and demand remaining constant.State True or False. True False Question 25 Cross elasticity of demand is negative in case of good substitutes, e.g. coffee and tea. (True/False) True False Question 26 The cross elasticity is zero when commodities are independent of each other, for e.g., stainless steel, aluminium vessels, etc. (True/False) True False Question 27 Cross elasticity between two goods is postive when they are complements.(True/False) True
False Question 28 High cross elasticity of demand exists for those commodities which are close substitutes. (True/False) True False Production Analysis Question 1 When the economy helps in reducing the cost of production which economy are we referring to? Economies of superior techniques Economies of increased dimension Economies of linked processes Inventory economies Question 2 Functional specialisation forms a part of which economy? Commercial economy Financial economy Labour economy Managerial economy Question 3 Which economy includes expenses on establishment, administration and book-keeping etc.?
Storage economies Overhead economies Economies of vertical integration Survival economies Question 4 Which risk-bearing method are we referring to when we say that instead of buying raw materials and other inputs from only one source, it is better to purchase them from different sources? Diversification of output Diversification of market Diversification of supply of source Diversification of the process of manufacture Question 5 Which external economy is an advantage that arises from localisation of industry with respect to production? Economies of agglomeration Economies of information Economies of disintegration Economies of government action Question 6 Which diseconomy of scale are we referring to when we say that if output expands beyond a point, investment increases as a result of which the level of inventory goes up but the sales do not increase in proportion? Marketing diseconomies Managerial diseconomies Financial diseconomies Diseconomies of risk and uncertainty Question 7 Production creates ___________ or ___________ of value.
New utilities, addition old utilities, deletion old utilities, deletion New utilities, deletion Question 8 Production function explains _____________ or ________________ relationship between inputs and outputs. Scientific, mechanical Technological, engineering Scientific, economical Economical, geological Question 9 An iso-quant curve shows different alternative combinations of inputs which helps to produce same level of output where as an iso-cost curve shows ____________ combination of two inputs that can be purchased with a given amount of investment expenditure while prices of two factor inputs remain constant. no alternative, general Various alternative, particular 0 0 Question 10 When all inputs are increased by 8% and output increases by 13% then it is a case of law of ____________________. Diminishing returns Marginal Utility Demand Supply Question 11
Which one of the following is NOT a cause for diminishing returns to scale? Difficulty in effective and better supervision. Delays in management decisions. As the size of the plant increases, more output can be obtained at lower cost. Emergence of difficulties in co-ordination and control. Question 12 When both internal and external economies and diseconomies are exactly balanced with each other, ______________ to scale will operate. Diminishing returns Constant returns Increasing returns 0 Question 13 Which one of the following applies to diminishing returns to scale? When output increases less than proportionately when compared to the quantity of inputs used in the production process. When all factor inputs [scale] are increased in a given proportion leading to an equi-proportional increase in output. When the producer is increasing the quantity of all factors [scale] in a given proportion leading to a more than proportionate increase in output. 0 Question 14 Which one of the following applies to constant returns to scale? When output increases less than proportionately when compared to the quantity of inputs used in the production process. When all factor inputs [scale] are increased in a given proportion leading to an equi-proportional increase in output. When the producer is increasing the quantity of all factors [scale] in a given proportion leading to a more than proportionate increase in output. 0 Question 15 Which one of the following applies to increasing returns to scale?
When output increases less than proportionately when compared to the quantity of inputs used in the production process. When all factor inputs [scale] are increased in a given proportion leading to an equi-proportional increase in output. When the producer is increasing the quantity of all factors [scale] in a given proportion leading to a more than proportionate increase in output. 0 Question 16 When the economy helps in reducing the cost of production which economy are we referring to? Economies of superior techniques Economies of increased dimension Economies of linked processes Inventory economies Question 17 Which risk-bearing method are we referring to when we say that instead of buying raw materials and other inputs from only one source, it is better to purchase them from different sources? Diversification of output Diversification of market Diversification of supply of source Diversification of the process of manufacture Question 18 Which external economy is an advantage that arises from localisation of industry with respect to production? Economies of agglomeration Economies of information Economies of disintegration Economies of government action Question 19
Economies of scope refer to the benefits which arise to a firm when it produces more than _________________ rather than producing ________ separately by two firms. multiple product, individually One product, jointly One product, individually multiple product, jointly Question 20 Which one of the following is True about Economies of Scope? It is connected with increase or decrease in scale of production It shows change in output of a single product It is associated with supply side changes in output. It indicates savings in cost due to production of more than one product. Question 21 Which one of the following is NOT true about Economies of Scope? It is connected with increase or decrease in distribution & marketing. It indicates savings in cost due to production of more than one product. It is associated with demand side changes in output. It indicates savings in cost due to production of one product. Question 22 A change in a non-price determinant of demand leads to a movement along the demand curve.State 'TRUE or 'FALSE. True False Question 23 Surplus of a good in a market increases its prices while shortage leads to fall in its prices.State 'TRUE or 'FALSE. True False
Cost Analysis Question 1 ________________refers to the total monetary expenses (Both explicit and implicit) incurred by the producer in the process of transforming inputs into outputs. Cost of production Cost of business operations Cost of Anything Cost of Output Question 2 _________________ do not take the form of cash outlays and as such do not appear in the books of accounts. Explicit cost Implicit cost Money cost Actual cost Question 3 Salary to a divisional manager is an example of _________________. Indirect cost Real cost Direct cost Opportunity cost Question 4 Supplementary cost is also known as______________________. Fixed cost Variable cost Economic cost Future cost Question 5
The short run is a time period in which: All resources are fixed. The level of output is fixed. The size of the production plant can vary. Some resources are fixed and others are variable. Question 6 Which of the following is usually a fixed cost of production? Wages Cost of raw material Insurance Commission Question 7 When cost is expressed in terms of physical or mental efforts put in by a person in the making of a product, it is called as _________________.( Choose one ) Implicit cost Real cost Opportunity cost Future cost Question 8 ______________________ variable determines if a firm is able to produce higher output with a little quantity of inputs, in that case, the cost function becomes cheaper and vice-versa. Period of time Production function Market prices of inputs 0 Question 9 The ___________________ market prices of different factor inputs are high in that case, cost function becomes higher and vice-versa.
Production function Period of time Market prices of inputs 0 Question 10 _____________ variable determines if the cost function will be cheaper in the long run and it would be relatively costlier in the short run. Market prices of inputs Period of time Production function 0 Question 11 Consider the below mentioned statements with respect to Total Variable Cost(TVC).1. TVC curve slope upwards from left to right.2. TVC curve starts falling as output is expanded.State True or False:( Choose one ) 1-False, 2-False 1-True, 2-False 1-False, 2-True 1-True, 2-True Question 12 Consider the below mentioned statements with respect to Total Cost(TC).1. The total cost is measured in relation to the production function by multiplying the factor quantities with their prices.2. In short run, the total cost varies in the same proportion as Total Fixed Cost.State True or False:( Choose one ) 1-True, 2-False 1-True, 2-True 1-False, 2-False 1-False, 2-True
Question 13 Identify the features of long run Average Cost(LAC) curves from the following:1. LAC curve is L shaped.2. LAC curve is described as the planning curve of the firm.3. LAC curve is also known as envelope curve.4. LAC curve should always lies above the minimum point of short run Average Cost(SAC) curve.State True or False:( Choose one ) 1 & 2 1 & 3 3 & 4 2 & 3 Question 14 Consider the below mentioned statements with respect to Average Fixed Cost(AFC).1. Total Cost is divided by total units of output to obtain AFC.2. Average Fixed Cost and output have inverse relationship.State True or False:( Choose one ) 1-True, 2-False 1-True, 2-True 1-False, 2-True 1-False, 2-False Question 15 A change in a non-price determinant of demand leads to a movement along the demand curve.State 'TRUE or 'FALSE. True False Question 16 Surplus of a good in a market increases its prices while shortage leads to fall in its prices.State 'TRUE or 'FALSE. True False Question 17
When an increase in the price of one good lowers the demand for another good, the two goods are called complements.State True or False. True False Objectives of Firm Question 1 In case of several small businesses, the owners do not want to share their powers with many new partners and hence, they try to keep maximum powers in their hands. Which short-coming gets highlighted through this criticism? Ambiguous term Significance of other managerial gains Aversion to reduction in power. Official restrictions over profits of public utilities Question 2 In case of several small businesses, the owners do not want to share their powers with many new partners and hence, they try to keep maximum powers in their hands. Which short-coming gets highlighted through this criticism?( Choose one ) Ambiguous term Significance of other managerial gains Aversion to reduction in power. Official restrictions over profits of public utilities Question 3 The expenditure which is incurred by the Manager's indulgence in a company car is termed by Williamson as _____. Management perks Management slack
Management benefits Management incentives Question 4 Which model helps in predicting the reasonable behaviour of a firm with more accuracy?  Firm is not a charitable institution. Basic objective of traditional economic theory. Necessary for survival. Most realistic prediction of price-output behaviour. Question 5 Which model helps in predicting the reasonable behaviour of a firm with more accuracy? Firm is not a charitable institution. Basic objective of traditional economic theory. Necessary for survival. Most realistic prediction of price-output behaviour. Question 6 In which model of the firm, do we compare the revenue earned from one additional unit and cost incurred to produce one additional unit of output? TR and TC approach MR and MC approach Profit-maximisation approach Economist theory Question 7 In which model of the firm, do we compare the revenue earned from one additional unit and cost incurred to produce one additional unit of output?( Choose one ) TR and TC approach MR and MC approach
Profit-maximisation approach Economist theory Question 8 Which goal is to be organised on the basis of demand in the market? Production goal Inventory goal Sales goal Market-share goal Question 9 Which goal is to be organised on the basis of demand in the market? Production goal Inventory goal Sales goal Market-share goal Question 10 In the equationU = f(S,D) , S stands for ____ and D stands for ____. Shareholder expenditure, Debt Shareholder expenditure, Depreciation Staff expenditure, discretionary profit Staff expenditure, depreciation Question 11 Consider the following statements with respect to Marris' growth maximisation model:1. It is doubtful whether both managers and owners would maximise theirutility functions simultaneously, always.2. The assumption of constant price and production costs are correct.3. It is difficult to achieve both growth maximisation and profit maximisationtogether.State True or False: Statements 1 & 2 are true Statements 1 & 3 are true Statements 2 & 3 are true
Statements 1, 2 & 3 are true Question 12 Consider the following statements with respect to Profit Maximisation Model:1. Both small and large firms consistently make an attempt to maximise their profit by adopting novel techniques in business.2. The model is based on the assumption that each firm seeks to maximise its profit given certain technical and market constraints.3. Profit- maximisation implies earning highest possible amount of profit during a given period of time. 4. In the long run, a firm is able to make only slight or minor adjustments in the production process as well as in business conditions.State True or False: Statements 1, 2 & 3 are true All statements are true Statements 2, 3 & 4 are true Statements 1, 2 & 4 are true Question 13 Consider the following statements with respect to Marris' growth maximisation model:1. The management has to maintain a low liquidity ratio.2. The management has to maintain a proper leverage ratio between valueof debts / total assets.3. The management has to keep a high level of retained profits for furtherexpansion and development.together.State True or False: Statements 1 & 2 are true Statements 1 & 3 are true Statements 2 & 3 are true Statements 1, 2 & 3 are true Question 14 Consider the following assumptions with respect to Williamson’s managerial discretionary theory: 1. Existence of imperfect markets. 2. Ownership and management is separated.
3. A minimum level of profit is to be achieved by a firm to pay dividends to shareholders together. State True or False: Statements 1 & 2 are true Statements 1 & 3 are true Statements 2 & 3 are true Statements 1, 2 & 3 are true Question 15 Consider the following statements with respect to Cyert and March's behaviour: 1. Cyert and March theory makes an attempt to explain the behaviour of inter-group conflicts and their multiple objectives in an organisation2. Cyert and March explain how complicated decisions are taken in big industrial houses under various kinds of risks and uncertainties in an imperfect market in the background of limited data and information. 3. It analyses the impact of the potential entry of new firms into the industry and the behaviour of the well-established firms in the market.4. If actual performance and achievements of the organisation is much better than expected aspirations and target level, there will be an upward revision in their demands and vice-versa.State True or False: All statements are true Statements 1, 2 & 3 are true Statements 2, 3 & 4 are true Statements 1, 2 & 4 are true Question 16 Consider the following statements with respect to economist theory of the firm:1. Physical production deals with the production of outputs by a firm, by employing different factor outputs in proper proportions. 2. The basic function of a firm is to produce those goods and services which are demanded by consumers in the market. 3. According to this theory, a traditional firm is a group with a particular organisational and management structure, having command over its own property
rights.4. The nature of working of a firm depends on several factors like number of firms in the market, size of the firm, volume of production, entry and exit of firms, degree of competition, existence of alternative substitutes, prices of goods, etc.State True or False: Statements 1, 2 & 4 are true All statements are true Statements 1, 2 & 3 are true Statements 2, 3 & 4 are true Question 17 For static model, which of the following assumptions is true? The model is applicable to different time durations. The firm aims at maximising its sales revenue subject to a minimum profit constraint. The demand curve of the firm slopes downwards from right to left. The average cost of the firm is a vertical line Question 18 For static model, which of the following assumptions is true? The model ia applicable to different time durations. The firm aims at maximising its sales revenue subject to a minimum profit constraint. The demand curve of the firm slopes downwards from right to left. The average cost of the firm is a vertical line Question 19 Which of the following statements is true with respect to characteristics of a firm? The owner has the social permission to run the firm. The owner cannot enter into contract for supply of productive resources until there is government sanction. The owner needs to take decisions as per market conditions to maximise his profits. The owner can direct and dictate the suppliers of productive resources in the desired manner by entering into legal contracts. Question 20
Which of the following statements is true with respect to characteristics of a firm? The owner has the social permission to run the firm. The owner cannot enter into contract for supply of productive resources until there is government sanction. The owner needs to take decisions as per market conditions to maximise his profits. The owner can direct and dictate the suppliers of productive resources in the desired manner by entering into legal contracts. Revenue Analysis and Pricing Policies Question 1 Under imperfect conditions, which amongst the following is true? TR will be lower when MR is zero. TR falls when MR becomes negative. AR and MR both decline but, fall in AR will be greater than the fall in MR. The relationship between AR and MR is determined by the gradient of the curve. Question 2 Which of the following statement holds true under perfect market conditions? Under perfect competition, an individual firm by its own action can influence the market price. The market price is determined by the interaction between elasticity of demand and ability to supply. A firm can sell only a limited amount of goods at the existing market prices. The TR of the firm would increase proportionately with the output offered for sale. Question 3 Consider the following statements:1. When elasticity coefficient is negative for any given price, the corresponding marginal revenue will be zero.2. Marginal revenue is always positive when the elasticity coefficient is greater than one.State True or False: 1- True, 2- False
1- False, 2- True 1- True, 2- True 1- False, 2- False Question 4 Consider the following statements: 1. If the price elasticity of demand for the firm's product is relatively elastic, it will be advantageous to reduce price as it increases the firm's total revenue. 2. If the price elasticity of demand for the firm's product is relatively inelastic, it should raise the price as it decreases total revenue. State True or False: 1- True, 2- False 1- False, 2- True 1- True, 2- True 1- False, 2- False Question 5 Which amongst these is an internal factor to decide on the pricing policy? Size of the market Elasticity of demand and supply Availability of substitutes and complements. Production costs Question 6 Consider the following statements:1. Pricing policy basically depends on price theory that is the cornerstone of economic theory. 2. Fixing prices is the most important function of managerial decision making because market price changed by the company affects the present and future production plans, pattern of distribution, nature of marketing etc.State True or False: 1- True, 2- False 1- False, 2- True 1- True, 2- True
1- False, 2- False Question 7 Which objective of pricing does this statement fits best:"Earning the most reasonable profit has become a part and parcel of a sound pricing policy of a firm in recent years". Profit maximisation in short term Profit optimisation in long run Price stabilisation Maintenance of market share Question 8 Higher price can be charged to those who can afford to pay. Which policy does this statement reinforce? Ability to pay Long run welfare of the firm Ethical pricing Achieving a target return Question 9 Consider the following statements:1. A stable price policy only can win the confidence of customers and may add to the goodwill of the concern.2. Capturing the market share refers to the share of a firms sales of a particular product in the total sales of all firms in the market.State True or False: 1- True, 2- True 1- False, 2- False 1- False, 2 - True 1- True, 2- False Question 10 Which pricing is also known as charm price? Marginal cost pricing Customary pricing
Pricing of a new product Administered pricing Question 11 Which amongst these is an internal factor to decide on the pricing policy? Size of the market Elasticity of demand and supply Availability of substitutes and complements. Production costs Question 12 Consider the following statements:1. Pricing policy basically depends on price theory that is the cornerstone of economic theory. 2. Fixing prices is the most important function of managerial decision making because market price changed by the company affects the present and future production plans, pattern of distribution, nature of marketing etc.State True or False: 1- True, 2- False 1- False, 2- True 1- True, 2- True 1- False, 2- False Question 13 Under imperfect conditions, which amongst the following is true? TR will be lower when MR is zero. TR falls when MR becomes negative. AR and MR both decline but, fall in AR will be greater than the fall in MR. The relationship between AR and MR is determined by the gradient of the curve. Question 14 Which amongst these is an internal factor to decide on the pricing policy? Size of the market
Elasticity of demand and supply Availability of substitutes and complements. Production costs Question 15 Which objective of pricing does this statement fits best: ""Earning the most reasonable profit has become a part and parcel of a sound pricing policy of a firm in recent years"". Profit maximisation in short term Profit optimisation in long run Price stabilisation Maintenance of market share Question 16 Higher price can be charged to those who can afford to pay. Which policy does this statement reinforce? Ability to pay Long run welfare of the firm Ethical pricing Achieving a target return Question 17 Which pricing is also known as charm price? Marginal cost pricing Customary pricing Pricing of a new product Administered pricing Question 18 Which of the following statement holds true under perfect market conditions? Under perfect competition, an individual firm by its own action can influence the market price.
The market price is determined by the interaction between elasticity of demand and ability to supply.. A firm can sell only a limited amount of goods at the existing market prices. The TR of the firm would increase proportionately with the output offered for sale. Question 19   Consider the following statements: 1. Knowledge of cost and revenue concepts is of very great importance in understanding the various methods of price-output determination and pricing policies under both perfect and imperfect markets. 2. Total revenue refers to the total receipts from the sale of the goods.   3. The relationship between revenue and price elasticity of demand has practical significance in real business life.   4. Skimming prices are the prices statutorily determined by the government for certain important goods like steel, cement etc. State True or False: All statements are true Statements 1, 2 & 3 are true Statements 2, 3 & 4 are true Statements 1, 2 & 4 are true Question 20   Consider the following statements:        
                                       1. Rate of return pricing is the opposite of full cost pricing generally followed under oligopoly market. 2. Different pricing policies and methods give an insight into the actual functioning of a firm.  3. Dynamic conditions of the market necessitate frequent changes in the pricing policies and methods followed by a firm.  4. The main objectives of the pricing policy are profit maximisation, price stabilization, facing competitive situation, capturing the market etc. State True or False: All statements are true Statements 1, 2 & 3 are true Statements 2, 3 & 4 are true Statements 1, 2 & 4 are true Price Determination under Perfect Competition Pricing Under Imperfect Competition Macro Economics and some of its measures Question 1 The scope of macroeconomics covers Particular demand and aggregate supply Aggregate income and expenditure
Aggregate income and particular expenditure Particular savings and investments Question 2 Macroeconomic background provides a solid basis for the working of a Macro Unit Micro Unit 0 0 Question 3 Consider the following statements with respect to basic concepts:1. Capital is defined as all man- made aids that are used for further production of wealth.2.The term in economics also refers to creation of new assets or additions to the existing stock of productive assets. 1- False, 2- False 1- True, 2- False 1- False, 2- True 1- True, 2- True Question 4 At which point, an economic unit maximises its benefits or gains? Ex-ante Ex-post Equilibrium Disequilibrium Question 5 A quantity which can be measured in terms of a specific period of time and not at a point of time is ____________ Stock Variable Dependent Variable Flow Variable Independent Variable Question 6 In which variable, the value of one variable will influence the value of another variable? Dependent Variable
Ratio Variables Independent Variables Stock Variable Question 7 Consider the following statements with respect to macroeconomic ratios:1. The volume of output generally determines the rate of growth in the real income of the people in an economy. 2. Capital output ratio would be higher in the case of capital goods industries, and in industries using capital intensive techniques of production, and lower in the case of consumer goods industries. 1- True, 2- False 1- False, 2- True 1- True, 2- True 1- False, 2- False Question 8 Consider the following statements with respect to macroeconomics ratio:1. Each commercial bank, with a view to make profits, follows a customary cash reserve ratio for the sake of liquidity and safety.2. The income earning capacity of a bank helps in deciding the cash reserve ratio. 1- True, 2- False 1- False, 2- True 1- True, 2- True 1- False, 2- False Question 9 What is indicated by the percentage of income earned by capital in the form of interest, out of total national income? Labourer's share of income Cash reserve ratio Cash income ratio Capital's share of income Question 10 Which ratio is represented by Y= C + S, given that Y= Income, C= Consumption and S=Spend/ Save? Consumption income ratio Saving income ratio
Capital output ratio Capital labour ratio Question 11 Which ratio is also called as production function in economics? Input-output ratio Output-labour ratio Capital-labour ratio Value added-output ratio Question 12 Consider the following statements with respect to index numbers:1. When a number of commodities and their prices at two different periods are arranged in a tabular form, it is called as an index schedule.2. Economists have developed index numbers to measure the changes in the value of money over a period of time 1- True, 2- False 1- False, 2- True 1- True, 2- True 1- False, 2- False Question 13 Index numbers help us measure1. Level of chanes in prices.2. Degree of inflation and deflation. 1- True, 2- True 1- True, 2- False 1- False, 2- True 1- False, 2- False Question 14 Index number is a statistical measure by which changes in the prices are calculated for Same articles at different periods Different articles at one point of time Same articles at one point of time Different articles at different periods Question 15 Item that can be included in CPI is Minerals
Fertilizer Machinery Sugar Question 16 An index of prices paid by producers for their input is Wholesale Price Index (WPI) Consumer Price Index (CPI) Wage Index Number (WIN) Producer Price Index (PPI) Question 17 Deflator cannot be calculated for Green National Product Net National Product Gross Domestic Product Net Domestic Product Question 18 GNP Deflator is the ratio of Nominal GNP to Real GNP PIN of base year to PIN of chosen year Real GNP to Nominal GNP PIN of chosen year to PIN of base year Question 19 Consider the following statements with respect to macroeconomics ratio:1. Output labour ratio is the relationship between the quantity of output produced and the effort of 'x' number of labourers against that output.2. The knowledge of output labour ratio would help the management of an organisation to employ the right types of labour in the right quantity. 1- True, 2- False 1- False, 2- True 1- True, 2- True 1- False, 2- False
Question 20 The investment, which is independent of the level of income, is called as ________. Induced Investment Autonomus Investment Private Investment Public Investment Consumption Function and Investment Function Question 1 The relationship between consumption and income is called _____________. Consumption Function Investment Function 0 0 Question 2 Investment function explains the relationship between_________ aggregate income and aggregate investment. aggregate income and net investment. net income and net investment. net income and aggregate investment. Question 3 Identify the objective factor which influence consumption function in the long run. Precaution
Calculation Independence Changes in expectations Question 4 Which law states that Supply creates its own demand? Say's law of markets Psychological law of consumption Fundamental law of consumption. Fundamental law of Demand Question 5 Identify the technical characteristics of Marginal propensity to consume(MPC) from the following. MPC goes down as income decreases. MPC is greater than zero. MPC of the poor is lesser than that of the rich In the long-run, MPC is stable Question 6 Consumption function refers to Different amounts of consumption at different levels of income. Different amounts of consumption at same level of income. Same amount of consumption at different levels of income. Same amount of consumption at same level of income. Question 7 As a proposition of �fundamental law of consumption�, as income increases _______ will not necessarily go up. Consumption Spending Savings Investments Question 8
Identify the objective factor, which influences consumption function in the long run. Precaution Calculation Independence Changes in expectations Question 9 Which law states that Supply creates its own demand? Say's law of markets Psychological law of consumption Fundamental law of consumption. Fundamental law of Demand Question 10 Identify the technical characteristics of Marginal propensity to consume(MPC) from the following. MPC goes down as income decreases. MPC is greater than zero. MPC of the poor is lesser than that of the rich In the long-run, MPC is stable Question 11 Induced investment refers to the _________________. Investment, which is independent of the level of income Investment, which consists of excess of exports over the imports of a country. Investment, which is undertaken by the public authorities like central, state and local authorities. Investment, which varies with the changes in the level of national income Question 12 Which of the following factor determines Marginal efficiency of capital(MEC) in long run? Changes in income
Current state of expectations Rate of growth of population Higher propensity to consume Question 13 The term "accelerator" refers to _________________. Tool of economic analysis, which shows the effect of changes in consumption on induced investment. Tool of economic analysis, which explains the effects of investment on consumption. The functional relationship that exists between income and the level of consumption. The functional relationship between aggregate income and aggregate investment. Question 14 Consider the below mentioned statements with respect to prerequisite conditions for the working of the multiplier: 1. Existence of involuntary unemployment. 2. Existence of an agricultural economy. State True or False: 1-True, 2-False 1-False, 2-False -False, 2-True 1-True, 2-True Question 15 Consider the below mentioned statements with respect to Marginal efficiency of capital(MEC). 1. MEC of a capital falls as investment increases. 2. The MEC of a particular type of asset means, what an investor
expects to earn from an additional unit of it compared with what it costs him. State True or False: 1-True, 2-False 1-True, 2-True 1-False, 2-False 1-False, 2-True Question 16 Identify the assumptions of the multiplier from the following statements: 1. There should be time gap between successive expenditure on consumption. 2. Existence of full employment condition. 3. There should be a net increase in investment. 4. Availability of consumer goods. 1 & 2 1 & 3 3 & 4 2 & 3 Question 17 Consider the below mentioned statements with respect to the types of investments: 1. Autonomous investments are income-elastic. 2. Private investments are profit elastic. State True or False:
1-True, 2-False 1-True, 2-True 1-False, 2-True 1-False, 2-False Question 18 Consider the below mentioned statements with respect to the reasons causing Leakages in the multiplier. 1. People keeping more idle cash balances with them. 2. People using a part of their income to repay their old debts 3. Spending maximum income on consumer goods. 4. Undistributed profits of joint stock companies State True or False: Statement 1, 2 & 4 are true Only statement1, 2 is true Statement 1, 3 and 4 are true Statement 1,2 & 3 are true Question 19 Identify the factors that affect Marginal efficiency of capital(MEC) in short run. 1. Expectation of increased demand. 2. Higher propensity to consume. 3. State of business confidence. 4. Productive capacity of existing capital equipments.
1, 2 and 3 1, 3 and 4 2, 3 and 4 1, 2 and 4 Question 20 Consider the below mentioned statements with respect to the importance of the multiplier: 1. It is a major tool of microeconomic theory focusing attention on investment. 2. It describes how income is generated in an economic system. 3. It has great practical significance in formulating anti-cyclical policy to smoothen business fluctuations in an economy. 4. It helps to understand how equality between saving and investment is brought about. State True or False: Statement 1, 2 & 4 are true Only statement1, 2 is true Statement 2, 3 and 4 are true Statement 1,2 & 3 are true Question 21 For the economy as a whole, consumption must equal saving. True False Question 22 When a country saves a large portion of its income, it will have more capital and more productivity. True
False Stabilization Policies Question 1 _____________ development is subject to disturbances necessitating various kinds of corrective measures. Economic Monetary Fiscal Financial Question 2 ______ is not an instrument of economic stability Monetary Policy Financial Policy Fiscal Policy Physical Policy Question 3 Which amongst the following statements holds true for qualitative techniques of credit control? Purchases of securities. Varying reserve ratio. Business activities when the interest rates are low. Changes in margin requirements. Question 4 Introduction of _______________, leads to control the volume of credit money and its distribution. Effective central banking. Savings through banks. Investments through savings.
Monetisation of economy. Question 5 Consider the following statements with respect to general objectives of monetary policy:1. According to neutral money policy, money should be a passive factor having only one function, namely to facilitate exchange.2. A monetary policy that can maintain a reasonable degree of price stability and keep employment reasonably full sets the stage of economic development. 1- True, 2- False 1- True, 2- True 1- False, 2- True 1- False, 2- False Question 6 Consider the following statements with respect to objectives of monetary policy in developing countries:1. It is the job of the monetary authorities to employ suitable monetary measures to set right any disequilibrium in the balance of payments of a country. 2. Cash reserves maintained by commercial banks is called liquidity reserve and the reserve over and above the liquidity reserves is called minimal reserve. 1- True, 2- False 1- False, 2- True 1- True, 2- True 1- False, 2- False Question 7 Consider the following statements with respect to monetary policy:1. Monetary policy basically deals with total supply of legal tender money.2. Monetary policy is passive when the central bank decides to abstain deliberately from applying monetary measures. 3. It is active when the central bank makes use of certain instruments to achieve the desired objectives. It may be positive or negative. 4. It is negative when
it promotes economic activities and it is positive when it restricts or curbs economic activities. Statements 1, 2 & 3 are true All statements are true Statements 2, 3 & 4 are true Statements 1, 2 & 4 are true Question 8 Which role does the fiscal policy play in the economic development when there is introduction of various kinds of insurance schemes? Optimum allocator of resources. Act as saver. Act as an investor. Act as price stabiliser. Question 9 _________________ imply automatic changes in tax collections and transfer payments or public expenditure programmes so that it may reduce the destabilising effect on aggregate effective demand. Deficit financing. Built-in stabilisers. Fiscal tools. Public debt. Question 10 Inequality can be reduced if more money is spent towards the poorer sections of the society and money is collected from richer sections through various taxation policies. Which role does the fiscal policy play here in economic development? Optimum allocator of resources. Act as economic stabiliser. Act as employment generator. Act as income redistributors.
Question 11 Which instrument of fiscal policy implies printing of fresh and new currency notes by the government by running down the cash balances with the central bank? Public revenue Public expenditure policy Public debt policy Deficit financing Question 12 Consider the following statements with respect to instruments of fiscal policy:1. Public revenue refers to the income or receipts of public authorities. It is classified into two parts - tax-revenue and non-tax revenue. 2. Appropriate fiscal policy has to be formulated in order to control the inflation, deflation and stagflation and ensure a reasonable degree of price stability in the country. 1- True, 2- False 1- False, 2- True 1- True, 2- True 1- False, 2- False Question 13 Consider the following statements with respect to instruments of fiscal policy:1. Fiscal policy should direct investment in the desired channels only in public sectors by providing suitable incentives. 2. Administrative revenues are the bi-products of administrate functions of the government.3. Direct taxes include personal and corporate income tax, property tax, expenditure tax, and indirect taxes such as customs duties, excise duties, sales tax (now called VAT). 4. Non-plan expenditure includes defence expenditure, subsidies, interest payments and debt servicing changes. All statements are true Statements 2, 3 & 4 are true
Statements 1, 2 & 3 are true Statements 1, 2 & 4 are true Question 14 Consider the following statements with respect to physical policy or direct controls:1. When monetary and fiscal measures are inadequate to control prices, government resorts to direct control.2. In a planned economy, the objective of price control is to bring about allocation of resources in accordance with the objects of plan.3. Monetary and fiscal controls will not have a general impact on the economy while physical controls can be employed to affect specific scarcity areas.4. Price control normally involves some control of supply or demand or both. These are done by control of distribution of commodities through rationing. All statements are true Statements 1, 2 & 3 are true Statements 2, 3 & 4 are true Statements 1, 2 & 4 are true Question 15 Which is not a form of direct control Control over capital Control over consumption Control over investment Control over foreign trade Question 16 Consider the following statements with respect to physical policy or direct controls:1. When prices are falling in times of depression, there is pressure for government to fix minimum prices.2. Government may fix ceiling prices for various commodities. If the government is forced to revise such prices from time to time, it will avoid hoarding and black- marketing.
1- True, 2- True 1- False, 2- False 1- False, 2 - True 1- True, 2- False Question 17 Following are advantages of direct controls:1. They can be introduced quickly and easily, hence the effects of these can be rapid.2. Direct controls can be more discriminatory than monetary and fiscal controls.3. Direct controls need a cumbersome, honest and efficient administrative organisation if they are to work effectively.4. Gross disturbances may appear when the controls are removed. Statements 1, 2 & 3 are true Statements 1 & 2 are true All statements are true Statements 1, 2 & 4 are true Question 18 Following are disadvantages of direct controls:1. There can be variation in the intensity of the operation of controls from time to time in different sectors.2. Direct controls suppress individual initiative and enterprise.3. Direct controls inhibit innovations, such as new techniques of production, new products, etc. Statements 2 & 3 are true All statements are true Statements 1, & 3 are true Statements 1, & 2 are true Question 19 Consider this statement with respect to economic stability: Stabilization policies in the short run yield to higher output and lower unemployment True
False Business Cycle Question 1 Which of the following statement stands true for business cycles? When there is expansion, he/she should adopt suitable measures in the field of advertisement, pricing, inventory, the employment of labour etc According to Von Hayek, innovations in the field of production are responsible for the cyclical fluctuations. The stage of boom is characterised by rising prices, interest rate and expansion of bank credit and confidence and optimism in the environment. There are five phases of a trade cycle depression, recovery, full employment, boom and recession. Question 2 A wave-like fluctuation in the overall level of economic activity particularly in national output, income, employment and prices that occur in a more or less regular time sequence. Recession Depression Prosperity Business cycle Question 3 Economic evolution is characterised by which of the following factor? Period of prosperity that lasts throughout. Period of debts followed by a period of credits. Period of hyperinflation followed by period of creeping inflation. Period of recession followed by period of revival. Question 4 Which characteristic of business cycle mentioned below stands true? Business cycle is a random fluctuation. Although it is a repetitive feature, it does not have a recognisable pattern. The upward movement is more sudden and violent than the change from upward to downward. The prosperity phase takes double the time taken by the depression phase.
Question 5 Which of the following statements is true with respect to the phases of business cycle? Depression phase is also known as the period of slump. A lot of excess capacity exists in capital and consumer goods industries which work much below their capacity due to lack of demand in the recovery phase. The cumulative process of recovery continues till the economy reaches over employment. Full employment refers to an artificial and temporary prosperity in an economy. Question 6 According to ___________ bank rates and policies cause business fluctuations in economy. Hawtrey Hayek Schumpeter Samuelson Question 7 The changes in the level of income caused by the operation of the multiplier have been explained in five different types of fluctuations. 1. Cycle less path based only on the accelerator effect.2. A damped cyclical path fluctuating around the static multiplier level and gradually subsiding to that level.3. Cycles of constant amplitude repeating them around the accelerator level.4. Explosive cycles.5. Cycle less explosive approaching an upward path. All statements are true Statements 2, 4 & 5 are true Statements 1, 3 & 5 are true Statements 2, 3 & 5 are true Question 8 During the period of inflation, a price control policy has to be adopted whereas during depression, a price-support policy has to be followed. Which measure does this indicate to control business cycles? Monetary measure Fiscal policy Physical controls Miscellaneous measures Question 9 Which of the following statement holds true for business cycles?
During the expansionary phase, business decisions are to be made carefully after assessing the market situation properly. Quick liquidation of inventories is possible during the expansionary phase of business cycle. By adopting a very cautious policy of planning during the period of contraction when all costs are low, a firm can postpone the expansion and extension programmes. He/she should avoid overinvestment, overproduction and overexpansion and also avoid excessive inventories of raw materials and finished goods during the contraction phase. Question 10 Consider the following statements:1. During the period of inflation, a price control policy has to be adopted whereas during depression, a price-support policy has to be followed. 2. The cumulative result of fiscal policy measures would reduce the supply of money in circulation, purchasing power and demand. 3. A rise in the bank rate, by raising the lending rates of the commercial banks and making credit costly will have a discouraging effect on more borrowings. 4. Monetary measures are found to be very successful in controlling unwieldy expansion of the economy. All statements are true Statements 1, 2 & 3 are true Statements 2, 3 & 4 are true Statements 1, 2 & 4 are true Question 11 When the economy is moving fast in the upward direction, the monetary measures should aim at:1. Restricting the issue of legal tender money2. Restricting the expansion of bank credit.3. Restricting the issue of laundered tender money4. Restricting the contraction of bank credit Statements 1 & 2 are true Statements 2, 3 & 4 are true Statements 1, 2 & 4 are true Statements 1 & 3 are true Question 12 Economic evolution is characterised by which of the following factor? Period of prosperity that lasts throughout Period of debts followed by a period of credits Period of hyperinflation followed by period of creeping inflation Period of recession followed by period of revival.
Question 13 Which characteristic of business cycle mentioned below stands true? Business cycle is a random fluctuation Although it is a repetitive feature, it does not have a recognisable pattern. The upward movement is more sudden and violent than the change from upward to downward. The prosperity phase takes double the time taken by the depression phase Question 14 Which of the following statements is true with respect to the phases of business cycle? Depression phase is also known as the period of slump. A lot of excess capacity exists in capital and consumer goods industries which work much below their capacity due to lack of demand in the recovery phase. The cumulative process of recovery continues till the economy reaches over employment Full employment refers to an artificial and temporary prosperity in an economy Question 15 During the period of inflation, a price control policy has to be adopted whereas during depression, a price-support policy has to be followed. Which measure does this indicate to control business cycles? Monetary measure Fiscal policy Physical controls Miscellaneous measures Question 16 Which of the following statement stands true for business cycles? When there is expansion, he/she should adopt suitable measures in the field of advertisement, pricing, inventory, the employment of labour etc According to Von Hayek, innovations in the field of production are responsible for the cyclical fluctuations. The stage of boom is characterised by rising prices, interest rate and expansion of bank credit and confidence and optimism in the environment. There are five phases of a trade cycle depression, recovery, full employment, boom and recession Question 17 Which of the following statement holds true for business cycles?
During the expansionary phase, business decisions are to be made carefully after assessing the market situation properly. Quick liquidation of inventories is possible during the expansionary phase of business cycle. By adopting a very cautious policy of planning during the period of contraction when all costs are low, a firm can postpone the expansion and extension programmes. He/she should avoid overinvestment, overproduction and overexpansion and also avoid excessive inventories of raw materials and finished goods during the contraction phase. Question 18 Consider the following statements: 1. During the period of inflation, a price control policy has to be adopted whereas during depression, a price-support policy has to be followed. 2. The cumulative result of fiscal policy measures would reduce the supply of money in circulation, purchasing power and demand. 3. A rise in the bank rate, by raising the lending rates of the commercial banks and making credit costly will have a discouraging effect on more borrowings. 4. Monetary measures are found to be very successful in controlling unwieldy expansion of the economy. State True or False: All statements are true Statements 1, 2 & 3 are true Statements 2, 3 & 4 are true Statements 1, 2 & 4 are true Question 19 Consider the following statements: 1. During the expansionary phase, there is a business boom. The firm has slackness in growth, contraction of economic activity, increasing unemployment, falling incomes, etc. 2. A prudent businessman/businesswoman should adopt all possible precautionary measures to avoid and minimise the business problems as much as possible. 3. A business firm should have a comprehensive view of the entire market internal and external factors affecting the business in order to adopt an efficient business programme and prevent the adverse effects of cyclical changes on business.4. A firm should gear up itself to face the challenges of cyclical changes in a most befitting manner. All statements are true
Statements 1, 2 & 3 are true Statements 2, 3 & 4 are true Statements 1, 2 & 4 are true Question 20 The statement with respect to business cycles and business decisions �Prosperity digs its own grave� is true for which type of economy: Capitalist economy Socialist economy Communist economy 0 Question 21 Following are measures adopted to mitigate the harmful effects of contraction:1. Increase in cost of production.2. Adoption of new selling methods.3. Increase in marketing and distribution costs4. Improvement in quality. Statements 2, 3 & 4 are true Statements 1, 2 & 4 are true Statements 1 & 3 are true Statements 1 &2 are true Question 22 Prosperity is a result of boom. True False Question 23 Schumpeter�s �innovations theory of business cycles� compliments the assumption of full employment and the financing of innovations by means of bank loans. True False Inflation and Deflation

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Managerial Economics-converted.pdf

  • 1. Meaning and Importance of Managerial Economics Question 1 Which of these is a feature of managerial economics? Managerial economics also gives importance to the study of non-economic variables having implications on economic performance of the firm. For example, impact of technology, environmental forces, socio-political and cultural factors, etc. Managerial economics helps in determining the level of output at various periods, avoiding under or over production. Managerial economics helps in better material management of buying inputs and controlling inventory level, which cuts down costs of operations. Managerial economics helps the company to set realistic sales targets for each individual salesman and for the company as a whole. Question 2 Consider the following statements with respect to features of managerial economics:Statement 1. It uses various macroeconomic concepts like national income, inflation, deflation, trade cycles, etc. to understand and adjust its policies to the environment in which the firm operates.Statement 2. It all depends on the manager's ability, experience, expertise and intelligence to use different tools of economic analysis to find out the correct answers to business problems.State 'TRUE or 'FALSE. 1- TRUE, 2- 'FALSE 1- TRUE, 2- TRUE 1- FALSE, 2- TRUE 1- FALSE, 2- FALSE Question 3 The success of any business is based on proper management and adequate capital investment. Which objective of a firm best explains this? Demand analysis and forecasting Production and cost analysis Pricing decisions Capital managemnt Question 4 Which objective offers actual numerical solution to the problems of making optimum choices and it involves either maximisation of profits or minimisation of costs? Market structure and conditions Startegic planning
  • 2. Linear programming and theory of games Profit management Question 5 "Managerial economics is the use of economic modes of thought to analyse business situation." Who proposedthis theory? Spencer and Siegelman Mc Nair and Meriam Brighman and Pappas Joel Dean Question 6 The term _____________ implies a consciously directed activity with certain predetermined goals and means to carry them out. Planning Decision Forward planning Decision making Question 7 The nature, extent and degree of competition, number of sellers and buyers, etc. determine the nature of policies to be adopted by a firm in the market. Which objective of the firm explains this? Strategic planning Market structure Capital management Production and Cost analysis Question 8 Which of these is a feature of managerial economics? Managerial economics also gives importance to the study of non-economic variables having implications on economic performance of the firm. For example, impact of technology, environmental forces, socio-political and cultural factors, etc. Managerial economics helps in determining the level of output at various periods, avoiding under or over production. Managerial economics helps in better material management of buying inputs and controlling inventory level, which cuts down costs of operations.
  • 3. Managerial economics helps the company to set realistic sales targets for each individual salesman and for the company as a whole. Question 9 Basic objective of a firm today is _______________________. Profit Maximization Profit planning Profit forecasting Profit policies Question 10 Which objective offers actual numerical solution to the problems of making optimum choices and it involves either maximisation of profits or minimisation of costs? Market structure and conditions Strategic planning Linear programming and theory of games Profit management Question 11 Consider the following statements with respect to the scope of managerial economics: Statement 1. Cost controls, cost reduction, cost cutting and cost minimisation receive top most priority in production and cost analysis. Statement 2. The pricing decision does not depend on the revenue (amount), income (level) and profits (volume) earned by a firm. State TRUE or FALSE. 1- TRUE, 2- FALSE 1- FALSE, 2- TRUE 1- TRUE, 2- TRUE 1- FALSE, 2- FALSE Question 12 Consider the following statements with respect to functions of a managerial economist:Statement 1. The basic aim of making a decision is to select the best course of action which maximises the economic benefits and minimises the use of scarce resources of a firm.Statement 2. Managerial economist is a specialist and an expert in analysing and finding answers to business and managerial problems.State 'TRUE or 'FALSE. 1- TRUE, 2- FALSE 1- FALSE, 2- TRUE
  • 4. 1- TRUE, 2- TRUE 1- FALSE, 2- FALSE Question 13 The success of any business is based on proper management and adequate capital investment. Which objective of a firm best explains this? Demand analysis and forecasting Production and cost analysis Pricing decisions Capital management Question 14 "Managerial economics is the use of economic modes of thought to analyse business situation" - This theory was proposed by ___________________. Spencer and Siegelman Mc Nair and Meriam Brighman and Pappas Joel Dean Question 15 Which objective of the firm explains the nature, extent and degree of competition, number of sellers and buyers, etc. determine the nature of policies to be adopted by a firm in the market? Strategic planning Market structure Capital management Production and Cost analysis Question 16 Consider the following statements with respect to functions of a managerial economist:Statement 1. A business executive must be intelligent enough to think in advance, prepare a sound plan and take all possible precautionary measures to meet all types of challenges of the future business.Statement 2. Future planning is prepared in the background of certain and predictable environment. Hence future events and happenings can be predicted accurately.State 'TRUE or 'FALSE. 1- 'TRUE, 2- 'TRUE 1- FALSE, 2- FALSE 1- FALSE, 2 - TRUE
  • 5. 1- TRUE, 2- FALSE Question 17 Managerial economics is mainly a/an _______________ science. Diagonostic Analytical Prescriptive Budgetary Question 18 Which of the following points indicate the significance of the study of Managerial Economics in its right perspective? It gives guidance for identification of key variables in decision-making process. It helps in the optimum use of scarce resources of a firm to maximise its profits. It helps in the optimum use of scarce resources of a firm to maximise its profits. All of the above. Question 19 Two major functions of a managerial economist are ____ and ______. Decision-making, Short term Planning Decision-making, Forward Planning Consensus building, Short term Planning Consensus building, Forward Planning Question 20 The term _____________ implies a consciously directed activity with certain predetermined goals and means to carry them out. Planning Decision Forward planning Decision making Question 21 Managerial economics is basically a branch of __________ economics. Macro Micro
  • 6. Applied Statistical Question 22 Managerial economics is the integration of economic theory with business practice for solving business and management problems. True False Question 23 Managerial economics fills up the gap between economic theory and practice. True False Question 24 Managerial economics includes concepts from both microeconomics and macroeconomics. True False Question 25 Managerial economics includes some theoretical tools and techniques which may not be applicable in the real world. True False Question 26 Managerial economics helps to take decisions that lead to an increase in a business firm�s profits.State 'TRUE or 'FALSE. True False Question 27 Forecasting of business performance can be done by using certain tools and techniques of managerial economics.State 'TRUE or 'FALSE. True False Question 28 Managerial economics is not related to other functional areas of business management.State 'TRUE or 'FALSE.
  • 7. True False Question 29 Managerial economics gives importance to the study of theoretical economic concepts.State 'TRUE or 'FALSE. True False Demand Analysis Question 1 Demand is strengthened with a rise in price or weakened with a fall in price. This is stated by which exception to the law of demand? Giffen's paradox Veblen's effect Fear of shortage Fear of future rise in price Question 2 Which of the following statement best describes Demand Function? Responsiveness of demand or sales to change in advertising or other promotional expenses. Measures the effects of the substitution of one commodity for another Measures price elasticity of demand at different points on a demand curve. The demand for a product or service is affected by its price, the income of the individual, the price of other substitutes, population, habit, etc. Question 3 Demand is strengthened with a rise in price or weakened with a fall in price. This is stated by which exception to the law of demand? Giffens paradox Veblens effect Fear of shortage Fear of future rise in price Question 4
  • 8. In case of any change in price, the quantity demanded will be perfectly constant. This is supported by which theory? Perfectly elastic demand Perfectly inelastic demand Relatively elastic demand Relatively inelastic demand Question 5 In which case iselasticity equal to unity? Relatively inelastic demand Relatively elastic demand Perfectly inelastic demand Unitary elastic demand Question 6 For commodities such as tooth paste, soaps and talcum powder; the demand tends to be elastic. Which determinant of price elasticity best describes this? Nature of the commodity Existence of substitutes Number of uses for the commodity Durability of the commodity Question 7 When the amount of money spent on buying a product is either too small or too big, demand tends to be inelastic. Which price elasticity of demand best describes this? Possibility of postponing the use of commodity Level of income of the people Range of prices Proportion of expenditure on the commodity Question 8 Which of these is a practical application of income inelasticity of demand? Helps in determining the rate of growth of the firm Helps in declaration of public utilities Helps in fixing the rate of taxes
  • 9. Helps in determining the terms of trade Question 9 In case of any change in price, the quantity demanded will be perfectly constant. This is supported by which theory? Perfectly elastic demand Perfectly inelastic demand Relatively elastic demand Relatively inelastic demand Question 10 In which case is elasticity equal to unity? Relatively inelastic demand Relatively elastic demand Perfectly inelastic demand Unitary elastic demand Question 11 When the amount of money spent on buying a product is either too small or too big, demand tends to be inelastic. Which price elasticity of demand best describes this? Possibility of postponing the use of commodity Level of income of the people Range of prices Proportion of expenditure on the commodity Question 12 State True or False:1. Price elasticity of demand is a technical term used by economists to explain the degree of responsiveness of the demand for a product to a change in its price. 2. Elasticity of demand refers to the capacity of demand either to stretch or shrink to a given change in price or non-price determinant. 1- True, 2- False 1- False, 2- True 1- True, 2- True 1- False, 2- False Question 13 Which of the following statement best describes Point Method?
  • 10. Responsiveness of demand or sales to change in advertising or other promotional expenses. Measures the effects of the substitution of one commodity for another Measures price elasticity of demand at different points on a demand curve. The demand for a product or service is affected by its price, the income of the individual, the price of other substitutes, population, habit, etc. Question 14 Which of these is a practical application of income inelasticity of demand? Helps in determining the rate of growth of the firm Helps in declaration of public utilities Helps in fixing the rate of taxes Helps in determining the terms of trade Question 15 For commodities such as tooth paste, soaps and talcum powder; the demand tends to be elastic. Which determinant of price elasticity best describes this? Nature of the commodity Existence of substitutes Number of uses for the commodity Durability of the commodity Question 16 State True or False:1. Substitute goods are those that are considered to be economically interchangeable by buyers. 2. Demand tends to be elastic in case of substitute and repairable goods. 1- True, 2- True 1- False, 2- False 1- False, 2 - True 1- True, 2- False Question 17 Which of the following statement best describes Substitution Elasticity? Responsiveness of demand or sales to change in advertising or other promotional expenses. Measures the effects of the substitution of one commodity for another Measures price elasticity of demand at different points on a demand curve.
  • 11. The demand for a product or service is affected by its price, the income of the individual, the price of other substitutes, population, habit, etc. Question 18 Which of the following statement best describes Advertsing Elasticity? Responsiveness of demand or sales to change in advertising or other promotional expenses. Measures the effects of the substitution of one commodity for another Measures price elasticity of demand at different points on a demand curve. The demand for a product or service is affected by its price, the income of the individual, the price of other substitutes, population, habit, etc. Question 19 A change in a non-price determinant of demand leads to a movement along the demand curve.State 'TRUE or 'FALSE. True False Question 20 Surplus of a good in a market increases its prices while shortage leads to fall in its prices.State 'TRUE or 'FALSE. True False Question 21 When an increase in the price of one good lowers the demand for another good, the two goods are called complements.State True or False. True False Question 22 If the price of onions increases when the quantity of onions purchased in a market falls, this could have been caused by a decrease in supply and demand remaining constant.State True or False. True False Question 23 Cross elasticity of demand is negative in case of good substitutes, e.g. coffee and tea. (True/False) True
  • 12. False Question 24 The cross elasticity is zero when commodities are independent of each other, for e.g., stainless steel, aluminium vessels, etc. (True/False) True False Question 25 Cross elasticity between two goods is postive when they are complements.(True/False) True False Question 26 High cross elasticity of demand exists for those commodities which are close substitutes. (True/False) True False Demand Forecasting Question 1 ___________ is the most important criterion of a demand forecast, even though cent percent accuracy about the future demand cannot be assured. Plausibility Accuracy Durability Flexibility Question 2 Which of the following statements applies to Plausibility? The techniques used and the assumptions made should be intelligible to the management. It is essential for correct interpretation of the results. Depends on the relationships of the variables considered and the stability underlying such relationships, as for instance, the relation between price and demand, between advertisement and sales, between the level of income and the volume of sales, etc. Should have a scope for adjustments to meet the changing conditions. Should be capable of yielding quick and useful results.
  • 13. Question 3 Which of the following statements applies to Durability? The techniques used and the assumptions made should be intelligible to the management. It is essential for correct interpretation of the results. Depends on the relationships of the variables considered and the stability underlying such relationships, as for instance, the relation between price and demand, between advertisement and sales, between the level of income and the volume of sales, etc. Should have a scope for adjustments to meet the changing conditions. Should be capable of yielding quick and useful results. Question 4 Which of the following statements best describes the Evolutionary approach? The demand for the new product may be considered as an outgrowth of an existing product. The new product serves as a substitute for the existing product, the demand for this new product is worked out on the basis of �market share�. Offer the new product for sale in a sample market; say supermarkets or big marketing centres. The rate of growth and the ultimate level of demand for the new product are estimated on the basis of the pattern of growth of established products. Question 5 Which of the following statements best describes the Growth Curve approach? The demand for the new product may be considered as an outgrowth of an existing product. The new product serves as a substitute for the existing product, the demand for this new product is worked out on the basis of �market share�. Offer the new product for sale in a sample market; say supermarkets or big marketing centres. The rate of growth and the ultimate level of demand for the new product are estimated on the basis of the pattern of growth of established products. Question 6 Which of the following statements best describes the Sales Experience approach? The demand for the new product may be considered as an outgrowth of an existing product. The new product serves as a substitute for the existing product, the demand for this new product is worked out on the basis of �market share�. Offer the new product for sale in a sample market; say supermarkets or big marketing centres.
  • 14. The rate of growth and the ultimate level of demand for the new product are estimated on the basis of the pattern of growth of established products. Question 7 Which of the following statements best describes the Substitute approach? The demand for the new product may be considered as an outgrowth of an existing product. The new product serves as a replacement for the existing product, the demand for this new product is worked out on the basis of �market share�. Offer the new product for sale in a sample market; say supermarkets or big marketing centres. The rate of growth and the ultimate level of demand for the new product are estimated on the basis of the pattern of growth of established products. Question 8 Which method is generally applied for the existing products? Survey method Growth curve approach Evolutionary approach Substitute approach Question 9 Demand forecasting is generally associated with ______________. Production planning Forecasting sales Business control Manpower planning  Question 10 In case of sample survey method, the selection of a few customers for interview is known as ______________. Sampling Evolutionary approach Economic indicator Trend projection method Question 11 Which movements imply sporadic changes in time series occurring due to unforeseen events such as floods, strikes, elections, earth quakes, droughts and similar natural calamities?
  • 15. Random movements Cyclical movements Seasonal movements Secular or long run movements Question 12 In which method, the future demand for the product is based on the information gathered from the salesmen and market experts? Delphi method Trend projection method Economic indicators The collective opinion method  Question 13 A good demand forecasting method must be ______________ and plausible. Accurate Complex Inaccurate Rigid Question 14 Which method is generally applied for the existing products? Survey method Growth curve approach Evolutionary approach Substitute approach Question 15 In case of sample survey method, the selection of a few customers for interview is known as ______________. Sampling Evolutionary approach Economic indicator Trend projection method Question 16 A good demand forecasting method must be ______________ and plausible.
  • 16. Accurate Complex Inaccurate Rigid Question 17 There are__________ methods of demand forecasting. 2 3 4 6 Question 18 Which movements imply sporadic changes in time series occurring due to unforeseen events such as floods, strikes, elections, earth quakes, droughts and similar natural calamities? Random movements Cyclical movements Seasonal movements Secular or long run movements Question 19 In which method, the future demand for the product is based on the information gathered from the salesmen and market experts? Delphi method Trend projection method Economic indicators The collective opinion method Question 20 State True or False with respect to learning theories:The success of the survey method is based on the nature of the product.The success of the survey method is based on the techniques of analysis. 1- True, 2- False 1- False, 2- False 1- False, 2- True 1- True, 2- True
  • 17. Question 21 A change in a non-price determinant of demand leads to a movement along the demand curve.State 'TRUE or 'FALSE. True False Question 22 Surplus of a good in a market increases its prices while shortage leads to fall in its prices.State 'TRUE or 'FALSE. True False Question 23 When an increase in the price of one good lowers the demand for another good, the two goods are called complements.State True or False. True False Question 24 If the price of onions increases when the quantity of onions purchased in a market falls, this could have been caused by a decrease in supply and demand remaining constant.State True or False. True False Question 25 Cross elasticity of demand is negative in case of good substitutes, e.g. coffee and tea. (True/False) True False Question 26 The cross elasticity is zero when commodities are independent of each other, for e.g., stainless steel, aluminium vessels, etc. (True/False) True False Question 27 Cross elasticity between two goods is postive when they are complements.(True/False) True
  • 18. False Question 28 High cross elasticity of demand exists for those commodities which are close substitutes. (True/False) True False Supply & Market Equilibrium Question 1 State True or False: Supply means the quantity which is actually brought in the market. Supply function is a comprehensive one as it analyses the causes for changes in supply in a detailed manner. 1- False, 2- True 1- False, 2- False 1- True, 2- True 1- True, 2- False Question 2 Which of the following statement best describes Market Supply Schedule? Is a geometrical representation of the supply schedule. Refers to the total quantity of commodity supplied at different prices in a market by the whole body of sellers. Is a tabular representation of different quantities of a commodity supplied at varying prices. Other things remaining constant, the quantity supplied varies directly with the price. Question 3 Which of the following statement best describes Supply Curve? Is a geometrical representation of the supply schedule. Refers to the total quantity of commodity supplied at different prices in a market by the whole body of sellers.
  • 19. Is a tabular representation of different quantities of a commodity supplied at varying prices. Other things remaining constant, the quantity supplied varies directly with the price. Question 4 Which of the following statement best describes Supply Schedule? Is a geometrical representation of the supply schedule. Refers to the total quantity of commodity supplied at different prices in a market by the whole body of sellers. Is a tabular representation of different quantities of a commodity supplied at varying prices. Other things remaining constant, the quantity supplied varies directly with the price. Question 5 Which of the following statement best describes the law of supply? Is a geometrical representation of the supply schedule. Refers to the total quantity of commodity supplied at different prices in a market by the whole body of sellers. Is a tabular representation of different quantities of a commodity supplied at varying prices. Other things remaining constant, the quantity supplied varies directly with the price. Question 6 State True or False: If the seller wants to get rid of his products, then he will sell his products at reduced rates. If the seller is badly in need of money, he will sell less at higher prices. When heavy fall in price is anticipated, the seller may become panicky and sell more at a current lower price. An auction sale is an exception to the law of supply. Statements 1,2 & 3 are true Statements 1,3 & 4 are true
  • 20. Statements 1,2 & 4 are true Statements 2,3 & 4 are true Question 7 State True or False: Higher the price, the greater is the inducement to the producers to produce and sell more and appropriate more profits.  Supply schedule represents the functional relationship between quantity supplied and price. 1- True, 2- False 1- False, 2- False 1- True, 2- True 1- False, 2- True Question 8 _____________ implies that less quantity is supplied at the same price or same quantity is supplied at a higher price. Equilibrium Decrease in supply Increase in supply Demand Question 9 State True or False: Expansion in supply means that less quantity is supplied at a lower price. Increase in supply implies that more supply at the same price or same quantity of supply at a lower price. 1- True, 2- False
  • 21. 1- False, 2- False 1- False, 2- True 1- True, 2- True Question 10 _____________ refers to the sensitiveness or responsiveness of supply to a given change in price. Elasticity of Supply Perfectly elastic supply Perfectly inelastic supply Unitary elastic supply Question 11 The price of _____________ depends upon the degree of elasticity of demand and supply. Supply Perfectly inelastic supply Commodity Elasticity of supply Question 12 State True or False: The price of a commodity depends upon the degree of elasticity of demand and supply. If the supply is inelastic, the imposition of tax will bring about any change in the supply. 1- True, 2- False 1- False, 2- False 1- True, 2- True 1- False, 2- True Question 13
  • 22. Which of the following statement best describes Perfectly elastic supply? Supply of a commodity remains constant and does not change. A slight change in price leads to immeasurable changes in supply. If change in the supply is more than proportional to the change in price, elasticity of supply is greater than one. If the change in supply is less than proportional to a given change in price, then, elasticity of supply is said to be less. Question 14 Which of the following statement best describes Perfectly inelastic supply? Supply of a commodity remains constant and does not change. A slight change in price leads to immeasurable changes in supply. If change in the supply is more than proportional to the change in price, elasticity of supply is greater than one. If the change in supply is less than proportional to a given change in price, then, elasticity of supply is said to be less. Question 15 If the price increases there will be ____ in consumer surplus. Decrease Increase No change 0 Question 16 State True or False: Supply means the quantity which is actually brought in the market. Supply function is a comprehensive one as it analyses the causes for changes in supply in a detailed manner. 1- False, 2- True
  • 23. 1- False, 2- False 1- True, 2- True 1- True, 2- False Question 17 State True or False: The price of a commodity depends upon the degree of elasticity of demand and supply. If the supply is inelastic, the imposition of tax will bring about any change in the supply. 1- True, 2- False 1- False, 2- False 1- True, 2- True 1- False, 2- True Question 18 State True or False: Expansion in supply means that less quantity is supplied at a lower price. Increase in supply implies that more supply at the same price or same quantity of supply at a lower price. 1- True, 2- False 1- False, 2- False 1- False, 2- True 1- True, 2- True Question 19 State True or False:
  • 24. If the seller wants to get rid of his products, then he will sell his products at reduced rates. If the seller is badly in need of money, he will sell less at higher prices. When heavy fall in price is anticipated, the seller may become panicky and sell more at a current lower price. An auction sale is an exception to the law of supply. Statements 1,2 & 3 are true Statements 1,3 & 4 are true Statements 1,2 & 4 are true Statements 2,3 & 4 are true Question 20 State True or False: Higher the price, the greater is the inducement to the producers to produce and sell more and appropriate more profits.  Supply schedule represents the functional relationship between quantity supplied and price. 1- True, 2- False 1- False, 2- False 1- True, 2- True 1- False, 2- True Question 21 A change in a non-price determinant of demand leads to a movement along the demand curve.State 'TRUE or 'FALSE. True False Question 22
  • 25. Surplus of a good in a market increases its prices while shortage leads to fall in its prices.State 'TRUE or 'FALSE. True False Question 23 When an increase in the price of one good lowers the demand for another good, the two goods are called complements.State True or False. True False Question 24 If the price of onions increases when the quantity of onions purchased in a market falls, this could have been caused by a decrease in supply and demand remaining constant.State True or False. True False Question 25 Cross elasticity of demand is negative in case of good substitutes, e.g. coffee and tea. (True/False) True False Question 26 The cross elasticity is zero when commodities are independent of each other, for e.g., stainless steel, aluminium vessels, etc. (True/False) True False Question 27 Cross elasticity between two goods is postive when they are complements.(True/False) True
  • 26. False Question 28 High cross elasticity of demand exists for those commodities which are close substitutes. (True/False) True False Production Analysis Question 1 When the economy helps in reducing the cost of production which economy are we referring to? Economies of superior techniques Economies of increased dimension Economies of linked processes Inventory economies Question 2 Functional specialisation forms a part of which economy? Commercial economy Financial economy Labour economy Managerial economy Question 3 Which economy includes expenses on establishment, administration and book-keeping etc.?
  • 27. Storage economies Overhead economies Economies of vertical integration Survival economies Question 4 Which risk-bearing method are we referring to when we say that instead of buying raw materials and other inputs from only one source, it is better to purchase them from different sources? Diversification of output Diversification of market Diversification of supply of source Diversification of the process of manufacture Question 5 Which external economy is an advantage that arises from localisation of industry with respect to production? Economies of agglomeration Economies of information Economies of disintegration Economies of government action Question 6 Which diseconomy of scale are we referring to when we say that if output expands beyond a point, investment increases as a result of which the level of inventory goes up but the sales do not increase in proportion? Marketing diseconomies Managerial diseconomies Financial diseconomies Diseconomies of risk and uncertainty Question 7 Production creates ___________ or ___________ of value.
  • 28. New utilities, addition old utilities, deletion old utilities, deletion New utilities, deletion Question 8 Production function explains _____________ or ________________ relationship between inputs and outputs. Scientific, mechanical Technological, engineering Scientific, economical Economical, geological Question 9 An iso-quant curve shows different alternative combinations of inputs which helps to produce same level of output where as an iso-cost curve shows ____________ combination of two inputs that can be purchased with a given amount of investment expenditure while prices of two factor inputs remain constant. no alternative, general Various alternative, particular 0 0 Question 10 When all inputs are increased by 8% and output increases by 13% then it is a case of law of ____________________. Diminishing returns Marginal Utility Demand Supply Question 11
  • 29. Which one of the following is NOT a cause for diminishing returns to scale? Difficulty in effective and better supervision. Delays in management decisions. As the size of the plant increases, more output can be obtained at lower cost. Emergence of difficulties in co-ordination and control. Question 12 When both internal and external economies and diseconomies are exactly balanced with each other, ______________ to scale will operate. Diminishing returns Constant returns Increasing returns 0 Question 13 Which one of the following applies to diminishing returns to scale? When output increases less than proportionately when compared to the quantity of inputs used in the production process. When all factor inputs [scale] are increased in a given proportion leading to an equi-proportional increase in output. When the producer is increasing the quantity of all factors [scale] in a given proportion leading to a more than proportionate increase in output. 0 Question 14 Which one of the following applies to constant returns to scale? When output increases less than proportionately when compared to the quantity of inputs used in the production process. When all factor inputs [scale] are increased in a given proportion leading to an equi-proportional increase in output. When the producer is increasing the quantity of all factors [scale] in a given proportion leading to a more than proportionate increase in output. 0 Question 15 Which one of the following applies to increasing returns to scale?
  • 30. When output increases less than proportionately when compared to the quantity of inputs used in the production process. When all factor inputs [scale] are increased in a given proportion leading to an equi-proportional increase in output. When the producer is increasing the quantity of all factors [scale] in a given proportion leading to a more than proportionate increase in output. 0 Question 16 When the economy helps in reducing the cost of production which economy are we referring to? Economies of superior techniques Economies of increased dimension Economies of linked processes Inventory economies Question 17 Which risk-bearing method are we referring to when we say that instead of buying raw materials and other inputs from only one source, it is better to purchase them from different sources? Diversification of output Diversification of market Diversification of supply of source Diversification of the process of manufacture Question 18 Which external economy is an advantage that arises from localisation of industry with respect to production? Economies of agglomeration Economies of information Economies of disintegration Economies of government action Question 19
  • 31. Economies of scope refer to the benefits which arise to a firm when it produces more than _________________ rather than producing ________ separately by two firms. multiple product, individually One product, jointly One product, individually multiple product, jointly Question 20 Which one of the following is True about Economies of Scope? It is connected with increase or decrease in scale of production It shows change in output of a single product It is associated with supply side changes in output. It indicates savings in cost due to production of more than one product. Question 21 Which one of the following is NOT true about Economies of Scope? It is connected with increase or decrease in distribution & marketing. It indicates savings in cost due to production of more than one product. It is associated with demand side changes in output. It indicates savings in cost due to production of one product. Question 22 A change in a non-price determinant of demand leads to a movement along the demand curve.State 'TRUE or 'FALSE. True False Question 23 Surplus of a good in a market increases its prices while shortage leads to fall in its prices.State 'TRUE or 'FALSE. True False
  • 32. Cost Analysis Question 1 ________________refers to the total monetary expenses (Both explicit and implicit) incurred by the producer in the process of transforming inputs into outputs. Cost of production Cost of business operations Cost of Anything Cost of Output Question 2 _________________ do not take the form of cash outlays and as such do not appear in the books of accounts. Explicit cost Implicit cost Money cost Actual cost Question 3 Salary to a divisional manager is an example of _________________. Indirect cost Real cost Direct cost Opportunity cost Question 4 Supplementary cost is also known as______________________. Fixed cost Variable cost Economic cost Future cost Question 5
  • 33. The short run is a time period in which: All resources are fixed. The level of output is fixed. The size of the production plant can vary. Some resources are fixed and others are variable. Question 6 Which of the following is usually a fixed cost of production? Wages Cost of raw material Insurance Commission Question 7 When cost is expressed in terms of physical or mental efforts put in by a person in the making of a product, it is called as _________________.( Choose one ) Implicit cost Real cost Opportunity cost Future cost Question 8 ______________________ variable determines if a firm is able to produce higher output with a little quantity of inputs, in that case, the cost function becomes cheaper and vice-versa. Period of time Production function Market prices of inputs 0 Question 9 The ___________________ market prices of different factor inputs are high in that case, cost function becomes higher and vice-versa.
  • 34. Production function Period of time Market prices of inputs 0 Question 10 _____________ variable determines if the cost function will be cheaper in the long run and it would be relatively costlier in the short run. Market prices of inputs Period of time Production function 0 Question 11 Consider the below mentioned statements with respect to Total Variable Cost(TVC).1. TVC curve slope upwards from left to right.2. TVC curve starts falling as output is expanded.State True or False:( Choose one ) 1-False, 2-False 1-True, 2-False 1-False, 2-True 1-True, 2-True Question 12 Consider the below mentioned statements with respect to Total Cost(TC).1. The total cost is measured in relation to the production function by multiplying the factor quantities with their prices.2. In short run, the total cost varies in the same proportion as Total Fixed Cost.State True or False:( Choose one ) 1-True, 2-False 1-True, 2-True 1-False, 2-False 1-False, 2-True
  • 35. Question 13 Identify the features of long run Average Cost(LAC) curves from the following:1. LAC curve is L shaped.2. LAC curve is described as the planning curve of the firm.3. LAC curve is also known as envelope curve.4. LAC curve should always lies above the minimum point of short run Average Cost(SAC) curve.State True or False:( Choose one ) 1 & 2 1 & 3 3 & 4 2 & 3 Question 14 Consider the below mentioned statements with respect to Average Fixed Cost(AFC).1. Total Cost is divided by total units of output to obtain AFC.2. Average Fixed Cost and output have inverse relationship.State True or False:( Choose one ) 1-True, 2-False 1-True, 2-True 1-False, 2-True 1-False, 2-False Question 15 A change in a non-price determinant of demand leads to a movement along the demand curve.State 'TRUE or 'FALSE. True False Question 16 Surplus of a good in a market increases its prices while shortage leads to fall in its prices.State 'TRUE or 'FALSE. True False Question 17
  • 36. When an increase in the price of one good lowers the demand for another good, the two goods are called complements.State True or False. True False Objectives of Firm Question 1 In case of several small businesses, the owners do not want to share their powers with many new partners and hence, they try to keep maximum powers in their hands. Which short-coming gets highlighted through this criticism? Ambiguous term Significance of other managerial gains Aversion to reduction in power. Official restrictions over profits of public utilities Question 2 In case of several small businesses, the owners do not want to share their powers with many new partners and hence, they try to keep maximum powers in their hands. Which short-coming gets highlighted through this criticism?( Choose one ) Ambiguous term Significance of other managerial gains Aversion to reduction in power. Official restrictions over profits of public utilities Question 3 The expenditure which is incurred by the Manager's indulgence in a company car is termed by Williamson as _____. Management perks Management slack
  • 37. Management benefits Management incentives Question 4 Which model helps in predicting the reasonable behaviour of a firm with more accuracy?  Firm is not a charitable institution. Basic objective of traditional economic theory. Necessary for survival. Most realistic prediction of price-output behaviour. Question 5 Which model helps in predicting the reasonable behaviour of a firm with more accuracy? Firm is not a charitable institution. Basic objective of traditional economic theory. Necessary for survival. Most realistic prediction of price-output behaviour. Question 6 In which model of the firm, do we compare the revenue earned from one additional unit and cost incurred to produce one additional unit of output? TR and TC approach MR and MC approach Profit-maximisation approach Economist theory Question 7 In which model of the firm, do we compare the revenue earned from one additional unit and cost incurred to produce one additional unit of output?( Choose one ) TR and TC approach MR and MC approach
  • 38. Profit-maximisation approach Economist theory Question 8 Which goal is to be organised on the basis of demand in the market? Production goal Inventory goal Sales goal Market-share goal Question 9 Which goal is to be organised on the basis of demand in the market? Production goal Inventory goal Sales goal Market-share goal Question 10 In the equationU = f(S,D) , S stands for ____ and D stands for ____. Shareholder expenditure, Debt Shareholder expenditure, Depreciation Staff expenditure, discretionary profit Staff expenditure, depreciation Question 11 Consider the following statements with respect to Marris' growth maximisation model:1. It is doubtful whether both managers and owners would maximise theirutility functions simultaneously, always.2. The assumption of constant price and production costs are correct.3. It is difficult to achieve both growth maximisation and profit maximisationtogether.State True or False: Statements 1 & 2 are true Statements 1 & 3 are true Statements 2 & 3 are true
  • 39. Statements 1, 2 & 3 are true Question 12 Consider the following statements with respect to Profit Maximisation Model:1. Both small and large firms consistently make an attempt to maximise their profit by adopting novel techniques in business.2. The model is based on the assumption that each firm seeks to maximise its profit given certain technical and market constraints.3. Profit- maximisation implies earning highest possible amount of profit during a given period of time. 4. In the long run, a firm is able to make only slight or minor adjustments in the production process as well as in business conditions.State True or False: Statements 1, 2 & 3 are true All statements are true Statements 2, 3 & 4 are true Statements 1, 2 & 4 are true Question 13 Consider the following statements with respect to Marris' growth maximisation model:1. The management has to maintain a low liquidity ratio.2. The management has to maintain a proper leverage ratio between valueof debts / total assets.3. The management has to keep a high level of retained profits for furtherexpansion and development.together.State True or False: Statements 1 & 2 are true Statements 1 & 3 are true Statements 2 & 3 are true Statements 1, 2 & 3 are true Question 14 Consider the following assumptions with respect to Williamson’s managerial discretionary theory: 1. Existence of imperfect markets. 2. Ownership and management is separated.
  • 40. 3. A minimum level of profit is to be achieved by a firm to pay dividends to shareholders together. State True or False: Statements 1 & 2 are true Statements 1 & 3 are true Statements 2 & 3 are true Statements 1, 2 & 3 are true Question 15 Consider the following statements with respect to Cyert and March's behaviour: 1. Cyert and March theory makes an attempt to explain the behaviour of inter-group conflicts and their multiple objectives in an organisation2. Cyert and March explain how complicated decisions are taken in big industrial houses under various kinds of risks and uncertainties in an imperfect market in the background of limited data and information. 3. It analyses the impact of the potential entry of new firms into the industry and the behaviour of the well-established firms in the market.4. If actual performance and achievements of the organisation is much better than expected aspirations and target level, there will be an upward revision in their demands and vice-versa.State True or False: All statements are true Statements 1, 2 & 3 are true Statements 2, 3 & 4 are true Statements 1, 2 & 4 are true Question 16 Consider the following statements with respect to economist theory of the firm:1. Physical production deals with the production of outputs by a firm, by employing different factor outputs in proper proportions. 2. The basic function of a firm is to produce those goods and services which are demanded by consumers in the market. 3. According to this theory, a traditional firm is a group with a particular organisational and management structure, having command over its own property
  • 41. rights.4. The nature of working of a firm depends on several factors like number of firms in the market, size of the firm, volume of production, entry and exit of firms, degree of competition, existence of alternative substitutes, prices of goods, etc.State True or False: Statements 1, 2 & 4 are true All statements are true Statements 1, 2 & 3 are true Statements 2, 3 & 4 are true Question 17 For static model, which of the following assumptions is true? The model is applicable to different time durations. The firm aims at maximising its sales revenue subject to a minimum profit constraint. The demand curve of the firm slopes downwards from right to left. The average cost of the firm is a vertical line Question 18 For static model, which of the following assumptions is true? The model ia applicable to different time durations. The firm aims at maximising its sales revenue subject to a minimum profit constraint. The demand curve of the firm slopes downwards from right to left. The average cost of the firm is a vertical line Question 19 Which of the following statements is true with respect to characteristics of a firm? The owner has the social permission to run the firm. The owner cannot enter into contract for supply of productive resources until there is government sanction. The owner needs to take decisions as per market conditions to maximise his profits. The owner can direct and dictate the suppliers of productive resources in the desired manner by entering into legal contracts. Question 20
  • 42. Which of the following statements is true with respect to characteristics of a firm? The owner has the social permission to run the firm. The owner cannot enter into contract for supply of productive resources until there is government sanction. The owner needs to take decisions as per market conditions to maximise his profits. The owner can direct and dictate the suppliers of productive resources in the desired manner by entering into legal contracts. Revenue Analysis and Pricing Policies Question 1 Under imperfect conditions, which amongst the following is true? TR will be lower when MR is zero. TR falls when MR becomes negative. AR and MR both decline but, fall in AR will be greater than the fall in MR. The relationship between AR and MR is determined by the gradient of the curve. Question 2 Which of the following statement holds true under perfect market conditions? Under perfect competition, an individual firm by its own action can influence the market price. The market price is determined by the interaction between elasticity of demand and ability to supply. A firm can sell only a limited amount of goods at the existing market prices. The TR of the firm would increase proportionately with the output offered for sale. Question 3 Consider the following statements:1. When elasticity coefficient is negative for any given price, the corresponding marginal revenue will be zero.2. Marginal revenue is always positive when the elasticity coefficient is greater than one.State True or False: 1- True, 2- False
  • 43. 1- False, 2- True 1- True, 2- True 1- False, 2- False Question 4 Consider the following statements: 1. If the price elasticity of demand for the firm's product is relatively elastic, it will be advantageous to reduce price as it increases the firm's total revenue. 2. If the price elasticity of demand for the firm's product is relatively inelastic, it should raise the price as it decreases total revenue. State True or False: 1- True, 2- False 1- False, 2- True 1- True, 2- True 1- False, 2- False Question 5 Which amongst these is an internal factor to decide on the pricing policy? Size of the market Elasticity of demand and supply Availability of substitutes and complements. Production costs Question 6 Consider the following statements:1. Pricing policy basically depends on price theory that is the cornerstone of economic theory. 2. Fixing prices is the most important function of managerial decision making because market price changed by the company affects the present and future production plans, pattern of distribution, nature of marketing etc.State True or False: 1- True, 2- False 1- False, 2- True 1- True, 2- True
  • 44. 1- False, 2- False Question 7 Which objective of pricing does this statement fits best:"Earning the most reasonable profit has become a part and parcel of a sound pricing policy of a firm in recent years". Profit maximisation in short term Profit optimisation in long run Price stabilisation Maintenance of market share Question 8 Higher price can be charged to those who can afford to pay. Which policy does this statement reinforce? Ability to pay Long run welfare of the firm Ethical pricing Achieving a target return Question 9 Consider the following statements:1. A stable price policy only can win the confidence of customers and may add to the goodwill of the concern.2. Capturing the market share refers to the share of a firms sales of a particular product in the total sales of all firms in the market.State True or False: 1- True, 2- True 1- False, 2- False 1- False, 2 - True 1- True, 2- False Question 10 Which pricing is also known as charm price? Marginal cost pricing Customary pricing
  • 45. Pricing of a new product Administered pricing Question 11 Which amongst these is an internal factor to decide on the pricing policy? Size of the market Elasticity of demand and supply Availability of substitutes and complements. Production costs Question 12 Consider the following statements:1. Pricing policy basically depends on price theory that is the cornerstone of economic theory. 2. Fixing prices is the most important function of managerial decision making because market price changed by the company affects the present and future production plans, pattern of distribution, nature of marketing etc.State True or False: 1- True, 2- False 1- False, 2- True 1- True, 2- True 1- False, 2- False Question 13 Under imperfect conditions, which amongst the following is true? TR will be lower when MR is zero. TR falls when MR becomes negative. AR and MR both decline but, fall in AR will be greater than the fall in MR. The relationship between AR and MR is determined by the gradient of the curve. Question 14 Which amongst these is an internal factor to decide on the pricing policy? Size of the market
  • 46. Elasticity of demand and supply Availability of substitutes and complements. Production costs Question 15 Which objective of pricing does this statement fits best: ""Earning the most reasonable profit has become a part and parcel of a sound pricing policy of a firm in recent years"". Profit maximisation in short term Profit optimisation in long run Price stabilisation Maintenance of market share Question 16 Higher price can be charged to those who can afford to pay. Which policy does this statement reinforce? Ability to pay Long run welfare of the firm Ethical pricing Achieving a target return Question 17 Which pricing is also known as charm price? Marginal cost pricing Customary pricing Pricing of a new product Administered pricing Question 18 Which of the following statement holds true under perfect market conditions? Under perfect competition, an individual firm by its own action can influence the market price.
  • 47. The market price is determined by the interaction between elasticity of demand and ability to supply.. A firm can sell only a limited amount of goods at the existing market prices. The TR of the firm would increase proportionately with the output offered for sale. Question 19   Consider the following statements: 1. Knowledge of cost and revenue concepts is of very great importance in understanding the various methods of price-output determination and pricing policies under both perfect and imperfect markets. 2. Total revenue refers to the total receipts from the sale of the goods.   3. The relationship between revenue and price elasticity of demand has practical significance in real business life.   4. Skimming prices are the prices statutorily determined by the government for certain important goods like steel, cement etc. State True or False: All statements are true Statements 1, 2 & 3 are true Statements 2, 3 & 4 are true Statements 1, 2 & 4 are true Question 20   Consider the following statements:        
  • 48.                                        1. Rate of return pricing is the opposite of full cost pricing generally followed under oligopoly market. 2. Different pricing policies and methods give an insight into the actual functioning of a firm.  3. Dynamic conditions of the market necessitate frequent changes in the pricing policies and methods followed by a firm.  4. The main objectives of the pricing policy are profit maximisation, price stabilization, facing competitive situation, capturing the market etc. State True or False: All statements are true Statements 1, 2 & 3 are true Statements 2, 3 & 4 are true Statements 1, 2 & 4 are true Price Determination under Perfect Competition Pricing Under Imperfect Competition Macro Economics and some of its measures Question 1 The scope of macroeconomics covers Particular demand and aggregate supply Aggregate income and expenditure
  • 49. Aggregate income and particular expenditure Particular savings and investments Question 2 Macroeconomic background provides a solid basis for the working of a Macro Unit Micro Unit 0 0 Question 3 Consider the following statements with respect to basic concepts:1. Capital is defined as all man- made aids that are used for further production of wealth.2.The term in economics also refers to creation of new assets or additions to the existing stock of productive assets. 1- False, 2- False 1- True, 2- False 1- False, 2- True 1- True, 2- True Question 4 At which point, an economic unit maximises its benefits or gains? Ex-ante Ex-post Equilibrium Disequilibrium Question 5 A quantity which can be measured in terms of a specific period of time and not at a point of time is ____________ Stock Variable Dependent Variable Flow Variable Independent Variable Question 6 In which variable, the value of one variable will influence the value of another variable? Dependent Variable
  • 50. Ratio Variables Independent Variables Stock Variable Question 7 Consider the following statements with respect to macroeconomic ratios:1. The volume of output generally determines the rate of growth in the real income of the people in an economy. 2. Capital output ratio would be higher in the case of capital goods industries, and in industries using capital intensive techniques of production, and lower in the case of consumer goods industries. 1- True, 2- False 1- False, 2- True 1- True, 2- True 1- False, 2- False Question 8 Consider the following statements with respect to macroeconomics ratio:1. Each commercial bank, with a view to make profits, follows a customary cash reserve ratio for the sake of liquidity and safety.2. The income earning capacity of a bank helps in deciding the cash reserve ratio. 1- True, 2- False 1- False, 2- True 1- True, 2- True 1- False, 2- False Question 9 What is indicated by the percentage of income earned by capital in the form of interest, out of total national income? Labourer's share of income Cash reserve ratio Cash income ratio Capital's share of income Question 10 Which ratio is represented by Y= C + S, given that Y= Income, C= Consumption and S=Spend/ Save? Consumption income ratio Saving income ratio
  • 51. Capital output ratio Capital labour ratio Question 11 Which ratio is also called as production function in economics? Input-output ratio Output-labour ratio Capital-labour ratio Value added-output ratio Question 12 Consider the following statements with respect to index numbers:1. When a number of commodities and their prices at two different periods are arranged in a tabular form, it is called as an index schedule.2. Economists have developed index numbers to measure the changes in the value of money over a period of time 1- True, 2- False 1- False, 2- True 1- True, 2- True 1- False, 2- False Question 13 Index numbers help us measure1. Level of chanes in prices.2. Degree of inflation and deflation. 1- True, 2- True 1- True, 2- False 1- False, 2- True 1- False, 2- False Question 14 Index number is a statistical measure by which changes in the prices are calculated for Same articles at different periods Different articles at one point of time Same articles at one point of time Different articles at different periods Question 15 Item that can be included in CPI is Minerals
  • 52. Fertilizer Machinery Sugar Question 16 An index of prices paid by producers for their input is Wholesale Price Index (WPI) Consumer Price Index (CPI) Wage Index Number (WIN) Producer Price Index (PPI) Question 17 Deflator cannot be calculated for Green National Product Net National Product Gross Domestic Product Net Domestic Product Question 18 GNP Deflator is the ratio of Nominal GNP to Real GNP PIN of base year to PIN of chosen year Real GNP to Nominal GNP PIN of chosen year to PIN of base year Question 19 Consider the following statements with respect to macroeconomics ratio:1. Output labour ratio is the relationship between the quantity of output produced and the effort of 'x' number of labourers against that output.2. The knowledge of output labour ratio would help the management of an organisation to employ the right types of labour in the right quantity. 1- True, 2- False 1- False, 2- True 1- True, 2- True 1- False, 2- False
  • 53. Question 20 The investment, which is independent of the level of income, is called as ________. Induced Investment Autonomus Investment Private Investment Public Investment Consumption Function and Investment Function Question 1 The relationship between consumption and income is called _____________. Consumption Function Investment Function 0 0 Question 2 Investment function explains the relationship between_________ aggregate income and aggregate investment. aggregate income and net investment. net income and net investment. net income and aggregate investment. Question 3 Identify the objective factor which influence consumption function in the long run. Precaution
  • 54. Calculation Independence Changes in expectations Question 4 Which law states that Supply creates its own demand? Say's law of markets Psychological law of consumption Fundamental law of consumption. Fundamental law of Demand Question 5 Identify the technical characteristics of Marginal propensity to consume(MPC) from the following. MPC goes down as income decreases. MPC is greater than zero. MPC of the poor is lesser than that of the rich In the long-run, MPC is stable Question 6 Consumption function refers to Different amounts of consumption at different levels of income. Different amounts of consumption at same level of income. Same amount of consumption at different levels of income. Same amount of consumption at same level of income. Question 7 As a proposition of �fundamental law of consumption�, as income increases _______ will not necessarily go up. Consumption Spending Savings Investments Question 8
  • 55. Identify the objective factor, which influences consumption function in the long run. Precaution Calculation Independence Changes in expectations Question 9 Which law states that Supply creates its own demand? Say's law of markets Psychological law of consumption Fundamental law of consumption. Fundamental law of Demand Question 10 Identify the technical characteristics of Marginal propensity to consume(MPC) from the following. MPC goes down as income decreases. MPC is greater than zero. MPC of the poor is lesser than that of the rich In the long-run, MPC is stable Question 11 Induced investment refers to the _________________. Investment, which is independent of the level of income Investment, which consists of excess of exports over the imports of a country. Investment, which is undertaken by the public authorities like central, state and local authorities. Investment, which varies with the changes in the level of national income Question 12 Which of the following factor determines Marginal efficiency of capital(MEC) in long run? Changes in income
  • 56. Current state of expectations Rate of growth of population Higher propensity to consume Question 13 The term "accelerator" refers to _________________. Tool of economic analysis, which shows the effect of changes in consumption on induced investment. Tool of economic analysis, which explains the effects of investment on consumption. The functional relationship that exists between income and the level of consumption. The functional relationship between aggregate income and aggregate investment. Question 14 Consider the below mentioned statements with respect to prerequisite conditions for the working of the multiplier: 1. Existence of involuntary unemployment. 2. Existence of an agricultural economy. State True or False: 1-True, 2-False 1-False, 2-False -False, 2-True 1-True, 2-True Question 15 Consider the below mentioned statements with respect to Marginal efficiency of capital(MEC). 1. MEC of a capital falls as investment increases. 2. The MEC of a particular type of asset means, what an investor
  • 57. expects to earn from an additional unit of it compared with what it costs him. State True or False: 1-True, 2-False 1-True, 2-True 1-False, 2-False 1-False, 2-True Question 16 Identify the assumptions of the multiplier from the following statements: 1. There should be time gap between successive expenditure on consumption. 2. Existence of full employment condition. 3. There should be a net increase in investment. 4. Availability of consumer goods. 1 & 2 1 & 3 3 & 4 2 & 3 Question 17 Consider the below mentioned statements with respect to the types of investments: 1. Autonomous investments are income-elastic. 2. Private investments are profit elastic. State True or False:
  • 58. 1-True, 2-False 1-True, 2-True 1-False, 2-True 1-False, 2-False Question 18 Consider the below mentioned statements with respect to the reasons causing Leakages in the multiplier. 1. People keeping more idle cash balances with them. 2. People using a part of their income to repay their old debts 3. Spending maximum income on consumer goods. 4. Undistributed profits of joint stock companies State True or False: Statement 1, 2 & 4 are true Only statement1, 2 is true Statement 1, 3 and 4 are true Statement 1,2 & 3 are true Question 19 Identify the factors that affect Marginal efficiency of capital(MEC) in short run. 1. Expectation of increased demand. 2. Higher propensity to consume. 3. State of business confidence. 4. Productive capacity of existing capital equipments.
  • 59. 1, 2 and 3 1, 3 and 4 2, 3 and 4 1, 2 and 4 Question 20 Consider the below mentioned statements with respect to the importance of the multiplier: 1. It is a major tool of microeconomic theory focusing attention on investment. 2. It describes how income is generated in an economic system. 3. It has great practical significance in formulating anti-cyclical policy to smoothen business fluctuations in an economy. 4. It helps to understand how equality between saving and investment is brought about. State True or False: Statement 1, 2 & 4 are true Only statement1, 2 is true Statement 2, 3 and 4 are true Statement 1,2 & 3 are true Question 21 For the economy as a whole, consumption must equal saving. True False Question 22 When a country saves a large portion of its income, it will have more capital and more productivity. True
  • 60. False Stabilization Policies Question 1 _____________ development is subject to disturbances necessitating various kinds of corrective measures. Economic Monetary Fiscal Financial Question 2 ______ is not an instrument of economic stability Monetary Policy Financial Policy Fiscal Policy Physical Policy Question 3 Which amongst the following statements holds true for qualitative techniques of credit control? Purchases of securities. Varying reserve ratio. Business activities when the interest rates are low. Changes in margin requirements. Question 4 Introduction of _______________, leads to control the volume of credit money and its distribution. Effective central banking. Savings through banks. Investments through savings.
  • 61. Monetisation of economy. Question 5 Consider the following statements with respect to general objectives of monetary policy:1. According to neutral money policy, money should be a passive factor having only one function, namely to facilitate exchange.2. A monetary policy that can maintain a reasonable degree of price stability and keep employment reasonably full sets the stage of economic development. 1- True, 2- False 1- True, 2- True 1- False, 2- True 1- False, 2- False Question 6 Consider the following statements with respect to objectives of monetary policy in developing countries:1. It is the job of the monetary authorities to employ suitable monetary measures to set right any disequilibrium in the balance of payments of a country. 2. Cash reserves maintained by commercial banks is called liquidity reserve and the reserve over and above the liquidity reserves is called minimal reserve. 1- True, 2- False 1- False, 2- True 1- True, 2- True 1- False, 2- False Question 7 Consider the following statements with respect to monetary policy:1. Monetary policy basically deals with total supply of legal tender money.2. Monetary policy is passive when the central bank decides to abstain deliberately from applying monetary measures. 3. It is active when the central bank makes use of certain instruments to achieve the desired objectives. It may be positive or negative. 4. It is negative when
  • 62. it promotes economic activities and it is positive when it restricts or curbs economic activities. Statements 1, 2 & 3 are true All statements are true Statements 2, 3 & 4 are true Statements 1, 2 & 4 are true Question 8 Which role does the fiscal policy play in the economic development when there is introduction of various kinds of insurance schemes? Optimum allocator of resources. Act as saver. Act as an investor. Act as price stabiliser. Question 9 _________________ imply automatic changes in tax collections and transfer payments or public expenditure programmes so that it may reduce the destabilising effect on aggregate effective demand. Deficit financing. Built-in stabilisers. Fiscal tools. Public debt. Question 10 Inequality can be reduced if more money is spent towards the poorer sections of the society and money is collected from richer sections through various taxation policies. Which role does the fiscal policy play here in economic development? Optimum allocator of resources. Act as economic stabiliser. Act as employment generator. Act as income redistributors.
  • 63. Question 11 Which instrument of fiscal policy implies printing of fresh and new currency notes by the government by running down the cash balances with the central bank? Public revenue Public expenditure policy Public debt policy Deficit financing Question 12 Consider the following statements with respect to instruments of fiscal policy:1. Public revenue refers to the income or receipts of public authorities. It is classified into two parts - tax-revenue and non-tax revenue. 2. Appropriate fiscal policy has to be formulated in order to control the inflation, deflation and stagflation and ensure a reasonable degree of price stability in the country. 1- True, 2- False 1- False, 2- True 1- True, 2- True 1- False, 2- False Question 13 Consider the following statements with respect to instruments of fiscal policy:1. Fiscal policy should direct investment in the desired channels only in public sectors by providing suitable incentives. 2. Administrative revenues are the bi-products of administrate functions of the government.3. Direct taxes include personal and corporate income tax, property tax, expenditure tax, and indirect taxes such as customs duties, excise duties, sales tax (now called VAT). 4. Non-plan expenditure includes defence expenditure, subsidies, interest payments and debt servicing changes. All statements are true Statements 2, 3 & 4 are true
  • 64. Statements 1, 2 & 3 are true Statements 1, 2 & 4 are true Question 14 Consider the following statements with respect to physical policy or direct controls:1. When monetary and fiscal measures are inadequate to control prices, government resorts to direct control.2. In a planned economy, the objective of price control is to bring about allocation of resources in accordance with the objects of plan.3. Monetary and fiscal controls will not have a general impact on the economy while physical controls can be employed to affect specific scarcity areas.4. Price control normally involves some control of supply or demand or both. These are done by control of distribution of commodities through rationing. All statements are true Statements 1, 2 & 3 are true Statements 2, 3 & 4 are true Statements 1, 2 & 4 are true Question 15 Which is not a form of direct control Control over capital Control over consumption Control over investment Control over foreign trade Question 16 Consider the following statements with respect to physical policy or direct controls:1. When prices are falling in times of depression, there is pressure for government to fix minimum prices.2. Government may fix ceiling prices for various commodities. If the government is forced to revise such prices from time to time, it will avoid hoarding and black- marketing.
  • 65. 1- True, 2- True 1- False, 2- False 1- False, 2 - True 1- True, 2- False Question 17 Following are advantages of direct controls:1. They can be introduced quickly and easily, hence the effects of these can be rapid.2. Direct controls can be more discriminatory than monetary and fiscal controls.3. Direct controls need a cumbersome, honest and efficient administrative organisation if they are to work effectively.4. Gross disturbances may appear when the controls are removed. Statements 1, 2 & 3 are true Statements 1 & 2 are true All statements are true Statements 1, 2 & 4 are true Question 18 Following are disadvantages of direct controls:1. There can be variation in the intensity of the operation of controls from time to time in different sectors.2. Direct controls suppress individual initiative and enterprise.3. Direct controls inhibit innovations, such as new techniques of production, new products, etc. Statements 2 & 3 are true All statements are true Statements 1, & 3 are true Statements 1, & 2 are true Question 19 Consider this statement with respect to economic stability: Stabilization policies in the short run yield to higher output and lower unemployment True
  • 66. False Business Cycle Question 1 Which of the following statement stands true for business cycles? When there is expansion, he/she should adopt suitable measures in the field of advertisement, pricing, inventory, the employment of labour etc According to Von Hayek, innovations in the field of production are responsible for the cyclical fluctuations. The stage of boom is characterised by rising prices, interest rate and expansion of bank credit and confidence and optimism in the environment. There are five phases of a trade cycle depression, recovery, full employment, boom and recession. Question 2 A wave-like fluctuation in the overall level of economic activity particularly in national output, income, employment and prices that occur in a more or less regular time sequence. Recession Depression Prosperity Business cycle Question 3 Economic evolution is characterised by which of the following factor? Period of prosperity that lasts throughout. Period of debts followed by a period of credits. Period of hyperinflation followed by period of creeping inflation. Period of recession followed by period of revival. Question 4 Which characteristic of business cycle mentioned below stands true? Business cycle is a random fluctuation. Although it is a repetitive feature, it does not have a recognisable pattern. The upward movement is more sudden and violent than the change from upward to downward. The prosperity phase takes double the time taken by the depression phase.
  • 67. Question 5 Which of the following statements is true with respect to the phases of business cycle? Depression phase is also known as the period of slump. A lot of excess capacity exists in capital and consumer goods industries which work much below their capacity due to lack of demand in the recovery phase. The cumulative process of recovery continues till the economy reaches over employment. Full employment refers to an artificial and temporary prosperity in an economy. Question 6 According to ___________ bank rates and policies cause business fluctuations in economy. Hawtrey Hayek Schumpeter Samuelson Question 7 The changes in the level of income caused by the operation of the multiplier have been explained in five different types of fluctuations. 1. Cycle less path based only on the accelerator effect.2. A damped cyclical path fluctuating around the static multiplier level and gradually subsiding to that level.3. Cycles of constant amplitude repeating them around the accelerator level.4. Explosive cycles.5. Cycle less explosive approaching an upward path. All statements are true Statements 2, 4 & 5 are true Statements 1, 3 & 5 are true Statements 2, 3 & 5 are true Question 8 During the period of inflation, a price control policy has to be adopted whereas during depression, a price-support policy has to be followed. Which measure does this indicate to control business cycles? Monetary measure Fiscal policy Physical controls Miscellaneous measures Question 9 Which of the following statement holds true for business cycles?
  • 68. During the expansionary phase, business decisions are to be made carefully after assessing the market situation properly. Quick liquidation of inventories is possible during the expansionary phase of business cycle. By adopting a very cautious policy of planning during the period of contraction when all costs are low, a firm can postpone the expansion and extension programmes. He/she should avoid overinvestment, overproduction and overexpansion and also avoid excessive inventories of raw materials and finished goods during the contraction phase. Question 10 Consider the following statements:1. During the period of inflation, a price control policy has to be adopted whereas during depression, a price-support policy has to be followed. 2. The cumulative result of fiscal policy measures would reduce the supply of money in circulation, purchasing power and demand. 3. A rise in the bank rate, by raising the lending rates of the commercial banks and making credit costly will have a discouraging effect on more borrowings. 4. Monetary measures are found to be very successful in controlling unwieldy expansion of the economy. All statements are true Statements 1, 2 & 3 are true Statements 2, 3 & 4 are true Statements 1, 2 & 4 are true Question 11 When the economy is moving fast in the upward direction, the monetary measures should aim at:1. Restricting the issue of legal tender money2. Restricting the expansion of bank credit.3. Restricting the issue of laundered tender money4. Restricting the contraction of bank credit Statements 1 & 2 are true Statements 2, 3 & 4 are true Statements 1, 2 & 4 are true Statements 1 & 3 are true Question 12 Economic evolution is characterised by which of the following factor? Period of prosperity that lasts throughout Period of debts followed by a period of credits Period of hyperinflation followed by period of creeping inflation Period of recession followed by period of revival.
  • 69. Question 13 Which characteristic of business cycle mentioned below stands true? Business cycle is a random fluctuation Although it is a repetitive feature, it does not have a recognisable pattern. The upward movement is more sudden and violent than the change from upward to downward. The prosperity phase takes double the time taken by the depression phase Question 14 Which of the following statements is true with respect to the phases of business cycle? Depression phase is also known as the period of slump. A lot of excess capacity exists in capital and consumer goods industries which work much below their capacity due to lack of demand in the recovery phase. The cumulative process of recovery continues till the economy reaches over employment Full employment refers to an artificial and temporary prosperity in an economy Question 15 During the period of inflation, a price control policy has to be adopted whereas during depression, a price-support policy has to be followed. Which measure does this indicate to control business cycles? Monetary measure Fiscal policy Physical controls Miscellaneous measures Question 16 Which of the following statement stands true for business cycles? When there is expansion, he/she should adopt suitable measures in the field of advertisement, pricing, inventory, the employment of labour etc According to Von Hayek, innovations in the field of production are responsible for the cyclical fluctuations. The stage of boom is characterised by rising prices, interest rate and expansion of bank credit and confidence and optimism in the environment. There are five phases of a trade cycle depression, recovery, full employment, boom and recession Question 17 Which of the following statement holds true for business cycles?
  • 70. During the expansionary phase, business decisions are to be made carefully after assessing the market situation properly. Quick liquidation of inventories is possible during the expansionary phase of business cycle. By adopting a very cautious policy of planning during the period of contraction when all costs are low, a firm can postpone the expansion and extension programmes. He/she should avoid overinvestment, overproduction and overexpansion and also avoid excessive inventories of raw materials and finished goods during the contraction phase. Question 18 Consider the following statements: 1. During the period of inflation, a price control policy has to be adopted whereas during depression, a price-support policy has to be followed. 2. The cumulative result of fiscal policy measures would reduce the supply of money in circulation, purchasing power and demand. 3. A rise in the bank rate, by raising the lending rates of the commercial banks and making credit costly will have a discouraging effect on more borrowings. 4. Monetary measures are found to be very successful in controlling unwieldy expansion of the economy. State True or False: All statements are true Statements 1, 2 & 3 are true Statements 2, 3 & 4 are true Statements 1, 2 & 4 are true Question 19 Consider the following statements: 1. During the expansionary phase, there is a business boom. The firm has slackness in growth, contraction of economic activity, increasing unemployment, falling incomes, etc. 2. A prudent businessman/businesswoman should adopt all possible precautionary measures to avoid and minimise the business problems as much as possible. 3. A business firm should have a comprehensive view of the entire market internal and external factors affecting the business in order to adopt an efficient business programme and prevent the adverse effects of cyclical changes on business.4. A firm should gear up itself to face the challenges of cyclical changes in a most befitting manner. All statements are true
  • 71. Statements 1, 2 & 3 are true Statements 2, 3 & 4 are true Statements 1, 2 & 4 are true Question 20 The statement with respect to business cycles and business decisions �Prosperity digs its own grave� is true for which type of economy: Capitalist economy Socialist economy Communist economy 0 Question 21 Following are measures adopted to mitigate the harmful effects of contraction:1. Increase in cost of production.2. Adoption of new selling methods.3. Increase in marketing and distribution costs4. Improvement in quality. Statements 2, 3 & 4 are true Statements 1, 2 & 4 are true Statements 1 & 3 are true Statements 1 &2 are true Question 22 Prosperity is a result of boom. True False Question 23 Schumpeter�s �innovations theory of business cycles� compliments the assumption of full employment and the financing of innovations by means of bank loans. True False Inflation and Deflation