Master Test - 1 28-08-2023
Nature & Scope of Business Economics-Theory of Demand & Supply-Theory of Production & Cost
Time Allowed – One Hour Maximum Marks – 100
GENERAL INSTRUCTIONS TO CANDIDATES
There are 50 Questions
Each Question Carrying 2 Marks –0.5 for Negative Marking for Every Wrong Answer
1. Oikonomia means __________. 7. Micro economics is also known as __________.
(1) Industry (1) Public economics
(2) Management of household (2) Price theory
(3) Services (3) Income theory
(4) None of these (4) Demand theory
2. Business Economics is __________. 8. Amar : This year due to heavy rainfall my
(1) Abstract and applies the tools of option crop was damaged
Microeconomics Akbar : Climates affects crop yields. Some
(2) Involves practical application of economic years are bad, other are good
theory in business decision making Anthony: Don’t worry – Price increase will
(3) Incorporates tools from multiple compensate for the fall in quantity supplied
disciplines Priya: The Government ought to guarantee that
(4) (2) and (3) above our income will not fall.
In this conversation, the normative statement is
3. Business Economics is also known as? made by
(1) Applied Economics (1) Amar (2) Akbar
(2) Managerial Economics (3) Anthony (4) Priya
(3) Micro Economics
(4) All of the above 9. Economic Problem arises when:
(1) Wants are unlimited
4. The question of choice arises because our (2) Resources are limited
productive resources __________. (3) Alternative uses of resources
(1) Are limited (4) All of the above
(2) Can be employed in alternatives
(3) Both (1) & (2) 10. Which out of these are the feature of capitalism?
(4) None of the above (i) Profit motive
(ii) Human welfare
5. Macro economics does not study __________. (iii) Work through price mechanism
(1) Consumer behaviour (1) (i) and (ii) (2) (ii) and (iii)
(2) Factor pricing (3) (i) and (iii) (4) All of these
(3) General price level
(4) Firms equilibrium 11. Exploitation and inequality will be more in
__________.
6. Micro Economics Covers: (1) Socialism (2) Capitalism
(1) National Income and National Output (3) Mixed (4) All of the above
(2) External Value of Currency
(3) Overall level of Savings and Investment 12. Capitalistic Economy uses as principal means of
(4) Location of Industry allocating resources.
(1) Demand (2) Supply
(3) Price (4) All of the above
13. Under a free economy, prices are: 21. Consumer’s equilibrium takes at a point where-
(1) Regulated (1) MU=Price (2) MU< Price
(2) Determined through free inter-play of (3) MU> Price (4) None of these
demand and supply
(3) Partly regulated 22. Demand for a commodity refers to:
(4) None of these (1) Desire for the commodity
(2) Need for the commodity
14. The Concept of socialist economy was (3) Quantity demanded of that commodity
propounded by __________. (4) Quantity of the commodity demanded at a
(1) Karl Mark (2) Frederic Engels certain price during any particular period
(3) Adam Smith (4) Both (1) & (2) of time
15. Administered prices refer to: 23. Contraction of demand is the result of:
(1) Prices determined by forces of demand and (1) Decrease in the number of consumers
supply (2) Increase in the price of the good concerned
(2) Prices determined by sellers in the market (3) Increase in the prices of other goods
(3) Prices determined by an external authority (4) Decrease in the income of purchasers
which is usually the government
(4) None of the above 24. Which of the following pairs of goods is an
example of substitutes?
16. Which cost curve is known as rectangular (1) Tea and Sugar
hyperbola? (2) Tea and Coffee
(1) MC (2) AC (3) Pen and Ink
(3) AVC (4) AFC (4) Shirt and trousers
17. Which would be an implicit cost for a firm? The 25. In case of an Inferior good, the income elasticity
cost of demand is:
(1) of worker's wages and salaries for the firm (1) Positive (2) Zero
(2) paid for leasing a building for the firm (3) Negative (4) Infinite
(3) paid for production supplies for the firm
(4) of wages foregone by the owner of the firm 26. In case of an Normal/Luxury good, the income
elasticity of demand is:
(1) Positive (2) Zero
18. The supply function is given as Q= −50+10P.
Find the elasticity using point method, when (3) Negative (4) Infinite
price is Rs. 20.
(1) 1.33 (2) – 1.33 27. In case of necessaries goods the income
elasticity of demand is:-
(3) 13.33 (4) – 13.33
(1) Zero
(2) Positive
19. An isoquant for perfect substitutes would be
(3) Negative
(1) right angled shape
(4) equal to one
(2) negatively sloped straight line
(3) straight line parallel to the X-axis
28. If the demand for a good is inelastic, an increase
(4) straight line parallel to the Y-axis
in its price will cause the total expenditure of
the consumers of the goods to:
20. How AR and MR are correlated with each other (1) Remains the same
under perfect competitive market?
(2) Increase
(1) AR > MR (2) MR < AR (3) Decrease
(3) AR = MR (4) All of these (4) None of the above
29. The Law of Demand, assuming other things to remain 36. Which of the following is true about the Law of
constant, establishes the relationship between: Equi Marginal Utility?
(1) Income of the consumer and that quantity (1) The law states that as a person consumes
of a good demanded by him more of a commodity, marginal utility
(2) Price of a good and the quantity demanded derived from each additional unit must
(3) Price of a good and the demand for its decline.
substitute (2) It is a situation where consumer attains
(4) Quantity demanded of a good and the maximum satisfaction
relative price of its complementary goods.
(3) A consumer will get maximum satisfaction
when ratios of MU of two commodities
30. In case of a straight-line demand curve meeting
and their respective prices are equal
the two axes, the price elasticity of demand at
the midpoint of the line would be: (4) None of the above
(1) 0 (2) 1
(3) 1.5 (4) 2 37. Which of the following is one of the important
conditions to attain Consumer Equilibrium in
31. If the price of Pepsi decreases relative to the case of Law of Diminishing Marginal Utility?
price of Coke and 7-Up the demand for: (1) MUx/Px = MUy/Py = MUm
(1) Coke will decrease (2) MUx =Px
(2) 7-Up will decrease (3) MUx>Px
(3) Coke and 7Up will increase (4) None of the above
(4) Coke and 7Up will decrease
38. Which of the following is true about MU
32. The supply function is given as Q= −10+5P. Curve?
Find the elasticity using point method, when
price is Rs. 10. (1) MU is derived from TU i.e., MUn = TUn -
TUn-1
(1) 1.25 (2) – 1.25
(3) 12.5 (4) – 12.5 (2) When MU falls as TU rise
(3) Both (1) and (2)
33. When will a consumer attain maximum (4) None of the above
satisfaction?
(1) MUx=Px (2) MUx>Px 39. What is the algebraic expression of the Budget
(3) Mux<Px (4) None of the above Line?
(1) M = Px × Qx + Py × Qy
34. Which of the following is/are the assumptions (2) Units of Y commodity willing to sacrifice/
of the Law of Diminishing Marginal Utility? Units of X commodity willing to sacrifice
(1) Only standard units of the commodity are
(3) Both (1) and (2)
consumed
(4) None of the above
(2) Consumption must be continuous
(3) Both (1) and (2)
(4) None of the above 40. What is a Budget Line?
(1) Budget line is a graphical representation of
all possible combinations of two goods
35. Which of the following is correct about the Law
which can be purchased with the given
of equi Marginal Utility?
income and prices such that the cost of
(1) The law states that as a person consumes each of these combinations is equal to the
more of a commodity, marginal utility money income of the consumer
derived from each additional unit must (2) It is a set of all possible combinations of
decline the two goods which a consumer can
(2) It is a situation where consumer attains afford given his income and prices in the
maximum satisfaction market
(3) A consumer will get maximum satisfaction (3) Both (1) and (2)
when ratios of MU of two commodities (4) None of the above
and their respective prices are equal
(4) None of the above
41. What is not Budget Set? 45. The reason the marginal cost curve eventually
(1) Budget line is a graphical representation of increases as output increases for the typical firm
all possible combinations of two goods is because:
which can be purchased with the given (1) of economies of scale
income and prices such that the cost of (2) of minimum efficient scale
each of these combinations is equal to the (3) of the law of diminishing returns
money income of the consumer
(4) normal profit exceeds economic profit
(2) It is a set of all possible combinations of
the two goods which a consumer can
afford given his income and prices in the 46. When internal economies of scale occur:
market (1) Total costs fall
(3) Both (1) and (2) (2) Marginal costs must increase
(4) None of the above (3) Average costs fall
(4) Revenue falls
42. When a firm doubles its inputs and finds that its
output has more than doubled, this is known as: 47. The first level of output at which the long run
(1) economies of scale average costs are first at their lowest level is
(2) constant returns to scale called:
(3) diseconomies of scale (1) The Minimum Efficient Scale
(4) a violation of the law of diminishing (2) The Minimum External Scale
returns (3) The Maximum External Scale
(4) The Maximum Effective Scale
43. If all resources used in the production of a
product are increased by 20 percent and output 48. Total cost increases from ₹500 to ₹600 when
increases by 20 percent, then there must be: output increases from 20 to 30 units. Fixed costs
(1) economies of scale are ₹200. Which of the following is true?
(2) diseconomies of scale (1) Marginal cost is equal to fixed cost
(3) constant returns to scale (2) Average cost falls
(4) increasing average total costs (3) Variable cost rises by ₹100
(4) Fixed costs rise
44. Economies and diseconomies of scale explain
why the: 49. The average variable cost curve in the long run
(1) short-run average fixed cost curve declines (1) Is derived from the average fixed costs
so long as output increases (2) Converges with the average cost as output
(2) marginal cost curve must intersect the increases
minimum point of the firm's average total (3) Equals the total costs divided by the output
cost curve (4) Equals revenue minus profits
(3) long-run average total cost curve is
typically U-shaped 50. If marginal cost is positive and falling:
(4) short-run average variable cost curve is U- (1) Total cost is falling
shaped
(2) Total cost is increasing at a falling rate
(3) Total cost is falling at a decreasing rate
(4) Total cost is increasing at an increasing
rate
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