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BUSINESS ECONOMICS OBJECTIVES

1: The kinked demand curve explains


A. Price rigidity

B. Price flexibility

C. Demand rigidity

D. Demand flexibility

2: Imperfect competition was introduced by


A. Marshall

B. Chamberlin

C. Keynes

D.None

3: A situation in which the number of competing firms is relatively small is known as


A. Monopoly

B. Perfect competition

C. Monophony

D.Oligopoly

4. Demand is a function of
A. Price

B. Firm

C. Product

D.Cost
5: The term group equilibrium is related to
A. Monopolistic competition

B. Oligopoly

C. Duopoly

D.Perfect competition

6: Price effect in indifference curve analysis arises

A. When the consumer becomes either better off or worse off because price change is not
compensated by income change.
B. When the consumer is betler off due to a change in income and price
C. When income and price change

D.None of the above

7: A situation where there is only one buyer is called


A. Monopoly

B. Oligopoly

C. Monopsony

D.Perfect competition

8: Elasticity of demand measures the

A. Sensitivity of sales to changes in a particular causal factor


B. Sensitivity of production to changes in a particular cost
C. Value of price and cost

D.Volume of product

9:Facotrs responsible for creating conditions for emergence & growth of monopoly are
A. Control over strategic raw materials

B. Patents

C. Licensing

D.All of the above


10: In the case of an inferior good, the income effect
A. Partially offsets the substitution effect

B. Is equal to the substitution effect

C. Reinforces the substitution effect

D.More than offsets the substitution effect

ANSWERS:

1. A
2. B
3. D
4. A
5. A
6. A
7. C
8. A
9. D
10. A
11: A market in which only two firms exist is
A.Oligopoly

B. Duopoly

C.Duopsony

D.Oligopsony
12: Value maximization theory fails to address the problem of
A.self-serving management.

B. risk

C.uncertainty

D.sluggish growth.
13: Selling costs have to be incurred in case of
A.Perfect competition

B. Monopolistic competition

C.Imperfect competition

D.None

14: Which type of competition leads to exploitation of consumer?


A.Oligopoly

B. Monopolistic competition

C.Monopoly

D.All of the above

15: The equilibrium is unstable and indeterminate under


A.Edgeworth model

B. Cournot Model

C.Sweezy Model

D.Pareto Model
16: Price elasticity of demand provides
A.A measure of the responsiveness of the quantity demanded to changes in the price of the
product, holding constant
the values of all other variables in the demand function.
B. A technical change in the goodwill of the firm
C.A technical change in the cost of product

D.Technical change in the value.


17: Demand curve is related to
A.MU curve

B. Marginal revenue
C.Both (a) and (b)

D.None of these
18: Market with one buyer and one seller is called
A.Monopsony

B. Monopoly

C.Bilateral Monopoly

D.None of the above


19: The upper portion of the kinked demand curve is relatively
A.More inelastic

B. More elastic

C.Less elastic

D.Inelastic
20:
Which of the following is an important dynamic variable?

A.Superior's style and behaviour

B. Organisational nature

C.The task structure

D.Cultural variables
ANSWERS:

11. B

12. A

13. B

14. D

15. A

16. A

17. C

18. C

19. B

20. C
21: In the calculation of elasticity, there is error in case of
A.Arc elasticity

B. Point elasticity

C.Both (a) and (b)

D.None

22: How many sellers are present in duopoly?


A.1

B. 2

C.3

D.4

23: Efficient allocation of resources is achieved to greatest extent under


A.Monopoly

B. Perfect competition

C.Oligopoly

D.Monopolistic competition

24: For maximisation of profit in the short run, the condition is


A.AR = AC

B. MR = MC

C.MR = AR

D.MC = AC

25: Study of collusive agreement is


A.Collusive oligopoly

B. Non-Collusive oligopoly

C.Monopoly

D.All of the above


26: Under perfect competition, price of the product
A.Can be controlled

B. Cannot be controlled

C.Can be controlled within certain limit

D.None of the above

27: If the demand curve confronting an individual firm is perfectly elastic, then firm is
A.Price taker

B. Adjust output

C.Adjust price

D.All of these
28: Given:
Epx = Percentage change in Qy / Percentage change in Px

The above relationship is :

A.Arc Cross Price Elasticity

B. Cost Output

C.Cost Profit

D.Capital Budgeting

29: Cartels is a form of


A.Collusive oligopoly

B. Monopoly

C.Non-Collusive oligopoly

D.None of these
30: Which one is not normally possible in case of monopoly?
A.MC = MR

B. AC = AR

C.MR = AR

D.MR = P

ANSWERS:

21. A

22. B

23. B

24. B

25. A

26. B

27. A

28. A

29. A

30. C
31: A firm's marginal revenue
A.is always negative

B. can be positive

C.is always positive

D.is zero at point at which the total revenue is maximum

32: In a monopoly market, an upward shift in the market demand results in a new equilibrium
with
A.A higher quantity and a lower price

B. A higher quantity and the same price

C.A higher quantity and higher price

D.All of the above

33: Demand Analysis includes:


A.Demand Forecasting

B. Demand Differentials

C.Demand Determinations

D.All of the above

34: In the case of monopolistic competition


A.MR curve cannot be defined

B. AR curve cannot be defined

C.The short run supply curve cannot be defined

D.None of the above

35: Which economist stated the positive impact of monopoly?


A.Marshall

B. Adam Smith

C.Joseph Schumpeter

D.Pigou
36: Average revenue is calculated by
A.TRn - TRn-1

B. P x Q

C.TR / MR

D.TR / Q
37: Cross elasticity of demand between two perfect substitutes will be
A.low

B. high

C.zero

D.infinity
38: At elasticity of one, marginal revenue is equal to
A.one

B. zero

C.infinity

D.none

39: Shifts in demand curve include


A.Increase in Demand (Upward shift)

B. Extention in demand

C.Contraction in demand

D.None of the above

40: An indifference curve is always


A.A vertical straight line

B. Convex to the origin

C.Concave to the origin

D.A horizontal straight line


ANSWERS:

31. D

32. C

33. D

34. C

35. C

36. D

37. D

38. B If elasticity of demand is equal to one or E = 1, in that case MR = 0.


If E > 1, in that case MR will be positive.

39. A

40. B
41: Study of demand over two periods is called
A.Static

B. Comparative static

C.Dynamic

D.None of these
42: In case of monopoly, a firm in the long run can have
A.Loss

B. Super Normal Profit

C.Break even

D.All of these

43: Marginal cost curve cuts the average cost curve from below at

A.its lowest point

B. the left of the lowest point

C.right of the lowest point

D.All of the above

44: On an indifference map, if the income consumption curve slopes downwards to the right
it shows that
A.Both X and Y are superior goods

B. Y is an inferior good

C.X is an inferior good

D.Both X and Y are inferior goods

45: Impact of change in demand in one sector on other sectors is studied by


A.General equilibrium

B. Partial equilibrium

C.Both (a) and (b)


D.None of these
46: Price elasticity is computed by
A.ep =( (P1 - P2) / Q1 ) X ((P1+P2) / Q2)

B. ep = (((Q2- Q1) / Q1 ) / P1) X 100

C.ep = ((Q2- Q1) / Q1 ) / ((P2 - P1) / P1)

D.ep = (((Q2- Q1) / Q1 ) / Product) X 100

47: Income elasticity is computed by


A.ei = (Y2 - Y1 ) / e1

B. ei = (Y1 - Y2 ) / P1

C.ei = ( (Q2 - Q1 ) / Q1 ) / ( (Y2 - Y1 ) / Y1 )

D.ei = (Q2 - Q1 ) / P1

48: Put into chronological order on the basis of development:


l. Law of demand
2. Law of indifference
3. Law of diminishing marginal utility
4. Revealed preference curve
5. Indifference curve
A.1 3 4 2 5

B. 1 5 3 4 2

C.1 3 2 5 4

D.1 2 3 4 5

49: Other things remaining the same, when a consumer's income increases, his equilibrium
point moves to
A.A higher indifference curve
B. To the left-hand side on the same indifference curve
C.Remains unchanged on the same indifference curve
D.A lower indifference curve
50: Law of diminishing marginal utility is based on the assumption that
a. Tastes change over time
b. Consumption is continuous
c. Different units of goods consumed are homogeneous Of these statements:

A.Only a is true

B. a and c are true

C.b and c are true

D.All are true