Introduction to Business Economics
Business economics is that discipline which uses economic concepts, principles and economic analysis in taking business decision and formulating future plans. It integrates economic theory with business practice for choosing business policies. Business economics lies on the borderline between economics and business management and bridges the gap between the two.
According to McNair and Meriam: “Managerial economics ……. Is the use of economics modes of thought to analyze business situation.”
About Business Economics MCQs
In this post you will get Business Economics MCQs which are especially for UGC NET and SET exams of various states such as SLET NE, GSET, WBSET. JKSET, Rajasthan SET, MP SET, MH SET, KSET and Kerala SET.
We try to cover all the questions asked in above mentioned exams relating to Business Economics MCQs. Visit our website regularly for latest contents.
Business Economics MCQs for UGC NET and SET Exams
1. Implicit costs are: [GSET]
(A) equal to total fixed cost.
(B) comprised entirely of variable cost.
(C) ‘payments’ for self-employed resources.
(D) always greater in the short-run than in the long-run.
Ans: (C) ‘payments’ for self-employed resources.
2. In the case of Giffen good: [GSET]
(A) the substitution effect is more than the income effect.
(B) the substitution effect and income effect are same.
(C) the income effect is more than the substitution effect.
(D) the income and substitution effect cancel out each other.
Ans: (C) the income effect is more than the substitution effect.
3. When Average Revenue (AR) is constant, Marginal Revenue (MR) is [GSET]
(A) More than AR.
(B) Less than AR.
(C) Equal to AR.
(D) Equal to zero.
Ans: (C) Equal to AR.
4. _______ refers to the determination of all goods and services by the interaction of the forces of demand and supply without any external interference. [GSET]
(A) Product mechanism.
(B) Price mechanism.
(C) Cost mechanism.
(D) Revenue mechanism.
Ans: (B) Price mechanism.
5. The backward-bending labour supply curve is due to [GSET]
(A) The shape of individual’s indifference curves between leisure and income.
(B) The fact that people’s response to a wage rise is just the same at high levies of income as it is at low levels of income.
(C) The fact that the income and substitution effect of an increase in the wage rate work in the same direction.
(D) The fact that the income and substitution effect of an decrease in the wage rate work in the same direction.
Ans: (A) The shape of individual’s indifference curves between leisure and income.
6. The law of diminishing returns only applies in cases where: [GSET]
(A) there is increasing scarcity of factors of production.
(B) the price of extra units of a factor is increasing.
(C) there is at least one fixed factor of production.
(D) Capital is a valuable factor.
Ans: (C) there is at least one fixed factor of production.
7. The law of diminishing return assumes [GSET]
(A) There are not fixed factors of production.
(B) There are not variable factors of production.
(C) Utility maximized when marginal product falls.
(D) Some factors of production are fixed.
Ans: (D) Some factors of production are fixed.
8. Imperfect competition was introduced by: [GSET]
(A) Marshall.
(B) Chamberlin.
(C) Keynes.
(D) Adam Smith.
Ans: (B) Chamberlin.
9. An indifference curve is always: [GSET]
(A) Vertical straight line.
(B) Convex to the origin.
(C) Concave to the origin.
(D) Horizontal straight line.
Ans: (B) Convex to the origin.
10. All the following curves are U-shaped except: [GSET]
(A) Average Variable Cost Curve.
(B) Average Fix Cost Curve.
(C) Average Cost Curve.
(D) Marginal Cost Curve.
Ans: (B) Average Fix Cost Curve.
11. The term group equilibrium is related to: [GSET]
(A) Monopolistic competition.
(B) Oligopoly.
(C) Duopoly.
(D) Perfect competition.
Ans: (A) Monopolistic competition.
12. The kinked demand curve explains: [GSET]
(A) Price rigidity.
(B) Price flexibility.
(C) Demand rigidity.
(D) Demand flexibility.
Ans: (A) Price rigidity.
13. Find the correct matching of the items of List I with the items of List II: [GSET]
|
List I |
List II |
|
(a) Normal profit. (b) Economic profit. (c) Accounting profit. |
(1) Excess of total revenue over total explicit cost. (2) Total revenue equals total cost. (3) Excess of total revenue over total of explicit and implicit costs and a normal rate of return. |
Codes:
(A) (1)-(c), (2)-(a), (3)-(b).
(B) (1)-(b), (2)-(a), (3)-(c).
(C) (1)-(a), (2)-(b), (3)-(c).
(D) (1)-(a), (2)-(c), (3)-(b).
Ans: (A) (1)-(c), (2)-(a), (3)-(b).
14. Who gave the behavioristic explanation of consumers’ demand: [GSET]
(A) Alfred Marshall.
(B) J.R. Hicks.
(C) Paul Samuelson.
(D) Edgeworth.
Ans: (A) Alfred Marshall.
15. In a production it was found that production changes by 16% when all the inputs were changes by 3.6%. The output elasticity is: [GSET]
(A) 4.2.
(B) 4.4.
(C) 4.6.
(D) 4.8.
Ans: (B) 4.4.
16. Internal economies accruing to a firm do not include: [GSET]
(A) Financial economies.
(B) Managerial economies.
(C) Economies of superior technique.
(D) Economies of location.
Ans: (D) Economies of location.
17. During the short-run the optimum level of output corresponds to that level of output, where: [GSET]
(A) Marginal cost is minimum.
(B) Average variable cost is minimum.
(C) Average cost is minimum.
(D) Average fixed cost stops declining.
Ans: (C) Average cost is minimum.
18. The elasticity of demand over the demand curve is: [GSET]
(A) Different at each point.
(B) Same on each point.
(C) Constant for each demand curve.
(D) Zero.
Ans: (A) Different at each point.
19. If for a firm the sunk cost of a machinery is Rs. 6 crores, its opportunity cost would be: [GSET]
(A) Rs. 6 crores.
(B) More than Rs. 6 crores.
(C) Less than Rs. 6 crores.
(D) Zero.
Ans: (D) Zero.
20. A monopolist discriminates between two markets and charges Rs. 10 per unit in Market ‘A’ and Rs. 15 per unit in the market ‘B’, then price elasticity of demand is: [GSET]
(A) More elastic in Market ‘A’ and less elastic in Market ‘B’.
(B) More elastic in Market ‘B’ and less elastic in Market ‘A’.
(C) Equal elastic in Market ‘A’ and ‘B’.
(D) Unit elastic in Market ‘A’ and perfectly inelastic in Market ‘B’.
Ans: (A) More elastic in Market ‘A’ and less elastic in Market ‘B’.
21. In a monopoly market it was found that the price elasticity of demand was – 0.75. Then the monopoly power would be: [GSET]
(A) 1.33.
(B) 7.5.
(C) 1.
(D) 75.
Ans: (A) 1.33.
22. Which of the following is not a characteristic of Business Economics? [GSET]
(A) Economics of the firm.
(B) Both Science and Art.
(C) Decision making at managerial level.
(D) Firm and industry are synonym.
Ans: (D) Firm and industry are synonym.
23. If AR is average revenue, MR the marginal revenue and e the price elasticity of demand, then which of the following is correct? [GSET]
(A) AR/MR = e.
(B) MR/AR = e.
(C) MR = AR (1 – 1/e).
(D) AR = MR (1 – 1/e).
Ans: (C) MR = AR (1 – 1/e).
24. Which of the following is not the basic assumption of cardinal utility analysis? [GSET]
(A) Rationality of consumer.
(B) Utility is cardinally measurable.
(C) Diminishing marginal utility of money.
(D) Hypothesis of independent utilities.
Ans: (C) Diminishing marginal utility of money.
25. Incrementalism is a concept of: [GSET]
(A) Short run.
(B) Long run.
(C) Market period.
(D) Very short period.
Ans: (B) Long run.
26. The economist who defined economics as “The science which studies human behaviour as a relationship between ends and scarce means which have alternative uses.” [GSET]
(A) Lionel Robbins.
(B) E.A.G. Robinson.
(C) Alfred Marshall.
(D) J.M. Keynes.
Ans: (A) Lionel Robbins.
27. If demand is inelastic and price increases, then: [GSET]
(A) total revenue will fall.
(B) total revenue will be unchanged.
(C) total revenue will increases.
(D) total revenue will change proportionately.
Ans: (C) total revenue will increases.
28. Which one is a related statement? [GSET]
(A) Organisation and interest.
(B) Land and rent.
(C) Labour and profits.
(D) Capital and wages.
Ans: (B) Land and rent.
29. Assertion (A): A monopoly firm’s revenue curve is downward sloping from left to right. [GSET]
Reason (R): The monopoly firm does not enjoy the freedom both, to fix the price to be charge and the quantity to be sold according to its whims and fancies.
(A) Both (A) and (R) are true.
(B) Both (A) and (R) are false.
(C) (A) is false, but (R) is true.
(D) (A) is true, but (R) is false.
Ans: (A) Both (A) and (R) are true.
30. Product differentiation is: [GSET]
(A) a form of price competition.
(B) a form of non-price competition.
(C) a form of price discrimination.
(D) none of the above.
Ans: (B) a form of non-price competition.
31. Demand for a product depends upon: [GSET]
(A) Economic factors only.
(B) Economic and quality factors.
(C) External factors.
(D) Number of consumers only.
Ans: (B) Economic and quality factors.
32. A consumer purchases a maximum of ten units of a product at any price. The price elasticity of demand for the product was found to be – 0.5. When the price is Rs. 4 per unit, the consumer would buy: [GSET]
(A) Ten units of the product.
(B) Six units of the product.
(C) Eight units of the product.
(D) Four units of the product.
Ans: (C) Eight units of the product.
33. The indifference curves in an indifference map cannot intersect because: [GSET]
(A) of their slope.
(B) these curves represent different levels of utility.
(C) these curves are drawn for two goods.
(D) these are decided by the income of the consumer.
Ans: (B) these curves represent different levels of utility.
34. The law of variable proportions works in which sequence? [GSET]
(A) constant returns, increasing returns, diminishing returns.
(B) Increasing returns, constant returns, diminishing returns.
(C) Diminishing returns, increasing returns, constant returns.
(D) None of the above.
Ans: (B) Increasing returns, constant returns, diminishing returns.
35. A price skimming strategy means: [GSET]
(A) Charging high prices initially and then reducing it as competition increases.
(B) Introduction of the product at a very low price.
(C) Charging different prices in different markets.
(D) Charging different prices from different consumers.
Ans: (A) Charging high prices initially and then reducing it as competition increases.
36. A measure of the responsiveness of quantity demanded to changes in the price of a related goods is known as: [GSET]
(A) Cross elasticity of demand.
(B) Substitution elasticity of demand.
(C) Complementary elasticity of demand.
(D) Price elasticity of demand.
Ans: (A) Cross elasticity of demand.
37. When consumers share a strong need that cannot be satisfied by an existing product, it is called: [GSET]
(A) Negative demand.
(B) Latent demand.
(C) Declining demand.
(D) Non-existent demand.
Ans: (B) Latent demand.
38. The market demand curve for a perfectly competitive market is QD = 12 – 2P. The market supply curve is QS = 3 + P. the market will be in equilibrium if: [GSET]
(A) P = 6, Q = 9.
(B) P = 5, Q = 2.
(C) P = 4, Q = 4.
(D) P = 3, Q = 6.
Ans: (D) P = 3, Q = 6.
39. When demand is price inelastic: [GSET]
(A) price and total revenue change in opposite directions.
(B) a seller should decrease the price to increase total revenue.
(C) too few goods are being produced from society’s pint of view.
(D) price and total revenue change in the same direction.
Ans: (D) price and total revenue change in the same direction.
40. Match the following: [GSET]
|
(a) Group behaviour. (b) Duopoly. (c) Oligopsony. (d) Kinky Demand Curve. |
(1) Two sellers. (2) One buyer, one seller. (3) Paul Sweezy. (4) Prof. Chamberlin. |
Codes:
(A) (a)-(2), (b)-(3), (c)-(1), (d)-(4).
(B) (a)-(4), (b)-(1), (c)-(2), (d)-(3).
(C) (a)-(1), (b)-(2), (c)-(3), (d)-(4).
(D) (a)-(2), (b)-(1), (c)-(4), (d)-(3).
Ans: (B) (a)-(4), (b)-(1), (c)-(2), (d)-(3).
41. Income elasticity of demand for inferior goods is [GSET]
(A) Positive.
(B) Negative.
(C) Zero.
(D) Greater than one.
Ans: (B) Negative.
42. In the case of a Giffen good, a fall in its price tends to [GSET]
(A) Demand remains constant.
(B) Increases demand.
(C) Reduces demand.
(D) Abnormal change in demand.
Ans: (C) Reduces demand.
43. The major point on which Business Economies differs from pure economics is: [GSET]
(A) It is more normative in nature leading to decisions.
(B) It is more analytical.
(C) It uses data.
(D) It relates to money.
Ans: (A) It is more normative in nature leading to decisions.
44. A supplier of machine parts should: [GSET]
(A) Focus only on customers’ demand.
(B) Focus on customers’ and market demand.
(C) Focus on its supply price only.
(D) None of the above.
Ans: (B) Focus on customers’ and market demand.
45. A producer found that for a production of 1039 units the average cost was minimum. For this level of production: [GSET]
(A) Marginal cost will be equal to average cost.
(B) Average cost will be higher than total cost.
(C) Average cost will be higher than marginal cost.
(D) Average cost will be zero.
Ans: (A) Marginal cost will be equal to average cost.
46. A firm can earn maximum profit when: [GSET]
(A) Average cost is equal to average revenue.
(B) Average cost is equal to marginal revenue.
(C) Marginal revenue is maximum.
(D) Marginal revenue is equal to marginal cost.
Ans: (D) Marginal revenue is equal to marginal cost.
47. Which one is not normally possible in case of monopoly? [GSET]
(A) MC = MR.
(B) AC = AR.
(C) MR = AR.
(D) MR = P.
Ans: (C) MR = AR.
48. The demand curve slopes downward because: [GSET]
(A) Increase in prices increases quantity demanded.
(B) Decrease in prices increases quantity demanded.
(C) Price change does not change quantity.
(D) Change in quantity does not depend on change in prices.
Ans: (B) Decrease in prices increases quantity demanded.
49. The income elasticity of a product was found to be negative which indicates that: [GSET]
(A) More quantity would be purchased if income decreased.
(B) More quantity would be purchased if income increased.
(C) Less quantity would be purchased if income decreased.
(D) Same quantity would be purchased if income increased.
Ans: (A) More quantity would be purchased if income decreased.
50. For maximising utility, a consumer is constrained by: [GSET]
(A) Its income.
(B) Choices of the products.
(C) Prices of the products.
(D) All of the above.
Ans: (D) All of the above.
51. A consumer benefits most in: [GSET]
(A) Oligopolistic market.
(B) Perfectly competitive market.
(C) Monopoly market.
(D) Regulated market.
Ans: (B) Perfectly competitive market.
52. A seller sells in two different markets. In first market the price elasticity of demand is – 0.6 and in the second market it is – 0.3. The seller wants to increase sales by 10% in both the markets. The seller will: [GSET]
(A) reduce the price by the same percentage in both markets.
(B) increase the price in the first market and decrease the price in the second market.
(C) decrease the price in the first market and increase the price in the second market.
(D) decrease the price in the first market and second market both, but a larger decrease in the second market.
Ans: (D) decrease the price in the first market and second market both, but a larger decrease in the second market.
53. Match the items of List I with the items of List II and select the correct answer using the codes given below the lists: [GSET]
|
List I |
List II |
|
(a) Administered Price. (b) Parity Pricing. (c) Competitive Price. (d) Discriminating Price. |
(1) Landed cost of imports. (2) Liberalised economy. (3) Public enterprise. (4) Fixed by Government. |
Codes:
(A) (a)-(1), (b)-(2), (c)-(3), (d)-(4).
(B) (a)-(2), (b)-(3), (c)-(4), (d)-(1).
(C) (a)-(3), (b)-(4), (c)-(2), (d)-(1).
(D) (a)-(4), (b)-(2), (c)-(1), (d)-(3).
Ans: (B) (a)-(2), (b)-(3), (c)-(4), (d)-(1).
54. A perfectly competitive market is characterised by: [GSET]
(A) Very large number of buyers and sellers.
(B) Homogeneous product.
(C) Free-entry and exit of firms.
(D) All of the above.
Ans: (D) All of the above.
55. With reference to foreign exchange market the function of providing information to market making banks about prices at which there are firm buyers and sellers in a pair of currencies is performed by [GSET]
(A) Primary price makers.
(B) Secondary price makers.
(C) Brokers.
(D) Price takers.
Ans: (C) Brokers.
56. When a firm looks for new users in groups that might use the product but do not, the firm is using the _______ strategy. [GSET]
(A) New market segment.
(B) Market penetration.
(C) Geographical expansion.
(D) Product development.
Ans: (B) Market penetration.
57. Under perfect competition when price line (AR) passes through minimum point of AVC curve is called [GSET]
(A) minimum losses point.
(B) shut down point.
(C) breakeven point.
(D) profit point.
Ans: (B) shut down point.
58. In a structural diagram, who suggested the three ego states of an individual? [GSET]
(A) Chris Argyris.
(B) Eric Beme.
(C) Tom Peters.
(D) Ennest Dale.
Ans: (B) Eric Beme.
59. If MR < 0, then the TR will be [GSET]
(A) rising.
(B) highest.
(C) falling.
(D) zero.
Ans: (C) falling.
60. A subject which deals in economic theories, logic, tools and analysis that are widely applied to business management is named as: [GSET]
(A) Micro-economics.
(B) International Economics.
(C) Demand and Supply Economics.
(D) Business Economics.
Ans: (D) Business Economics.
61. Read the following statements are thereafter selects the correct alternative about these statements: [GSET]
(a) Revenue – Direct Expenses – All Indirect Expenses = Profit.
(b) Profit is indispensable for the survival of a business unit.
Alternatives:
(A) (a) is incorrect.
(B) (b) is incorrect but (a) is correct.
(C) (a) and (b) both are correct.
(D) Only (b) is correct.
Ans: (C) (a) and (b) both are correct.
62. In production unit, the fundamental objective of _______ is to identify and analyse the basic determinants of consumer needs and wants. Which one of the following will complete the statement in correct way? [GSET]
(A) Market Demand Function.
(B) Demand Analysis.
(C) Wealth Maximisation Process.
(D) Profit Maximisation.
Ans: (B) Demand Analysis.
64. When in a firm the productive services are increased in a certain proportion and by that the production enhances in the same proportion, then that law is known as: [GSET]
(A) Law of constant returns.
(B) Law of proportionate returns.
(C) Law of equimarginal returns.
(D) Law of diminishing returns.
Ans: (A) Law of constant returns.
65. The ratio of exchange between two groups in the indifference curve analysis is shown by _______. [GSET]
(A) Price line.
(B) Price consumption curve.
(C) Income consumption curve.
(D) Production Probability curve.
Ans: (A) Price line.
66. “The utility from a bundle of goods will be maximum when the marginal utility of each commodity is equal to the price multiplied by the marginal utility of money.’ Who has given this statement? [GSET]
(A) Hicks.
(B) Adam Smith.
(C) Marshall.
(D) Samuelson.
Ans: (C) Marshall.
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