Business Economics

Weekly Test - Foundation Level: Section E

FM: 50

Time : 1 hr

1. Which group may be disadvantaged by the introduction of division of labor?

(a) consumers who prefer standardized goods

(b) companies where the production process has many sub-divisions
(c) the government, if the product is taxed
(d) workers who prefer a variety of tasks

2..When supply decreases, the impact on equilibrium price and quantity is

a. both increase
b. both decrease
c. price falls but quantity increases
d. quantity falls but price increases

3. If the price changes by 4% and the supply curve is elastic, the quantity supplied changes by:

a. 8%
b. 3%
c. 2%
d. Quantity does not change

4. The law of equimarginal utility was propounded by

A. Marshall

B. Robbins

C. Adam Smith
 D. Gossen

5.Which of the following is a characteristic of goods that are complement?

A. Joint demand.
B. Joint supply.
C. Indivisibility in production.
D. Positive cross elasticity of demand.

6. What is treated as a variable in constructing a market demand curve?

a) consumer's tastes
b) the distribution of income
c) the price of related goods
d) the price of the good

7.The supply function is given as Q = -100 + 10P. Find the elasticity using point method, when price is ` 15.
(a) 4
(b) -3
(c) -5
(d) 3

8. A rise in sale of which type of good is expected in the case of recession:

(a) Luxury

(b) Necessity

(c) Inferior

(d) Normal

9. Surplus is a situation when

a. demand= supply
b. demand > supply
c. supply > demand
d. none of the above

10.A firm learns that the own price elasticity of a product it manufactures is 3.5. What would be the
correct action for this firm to take if it wishes to raise its total revenue?
a. Lower the price because demand for the good is elastic.
b. Raise the price because demand for the product is inelastic.
c. Raise the price because demand is elastic.
d. We need information in order to answer this question.

11. The cross elasticity between Rye bread and whole Wheat bread is expected to be

a. Negative
b. Positive
c. Zero
d. One

12. What is the new quantity demanded when price elasticity is 1 and price changes from Rs 15
to Rs 10 and the original quantity demanded is 10 units?

a. 15 units
b. 20 units
c. 8 units
d. 12 units
 13. What is a production function?
(a) Technical relationship between physical inputs and physical output.
(b) Relationship between fixed factors of production and variable factors of
production.
(c) Relationship between a factor of production and the utility created by it.
(d) Relationship between quantity of output produced and time taken to produce
the output

14.Assume that rice is a substitute for potatoes. If there is a decrease in the supply of potatoes,
what is likely to happen to the market for rice in the short run?

A. Demand will decrease and the price will decrease.

B. Supply will decrease and the price will increase.

C. Demand will increase and the price will increase.

D. Supply will increase and the price will decrease.

15. The market demand equation for a good is given by Qd = 310 - 20 p and the supply equation
by Qs = 10 + 10 p, where p denotes the price of the good.

What is the equilibrium quantity?

a. 5 (b) 110 (c) 10 (d) 20

16. During a certain period, 10 000 units of a normal good are sold at a price of 20 c. During a
later Period, 12 000 units are sold at a price of 22 c. What could explain this change?

A. a reduction in consumers' incomes

B. an increase in the cost of raw materials

C. an increase in the price of a substitute commodity

D. an increase in the productivity of factors of production

17. A beggar wants to buy a car

 (a). it is demand

(b). it is effective demand

(c). it is desire

(d). none of the above

18. A manufacturer’s ability to increase supply in the short run will be greater

A. if labour is immobile.

B. if the product is perishable.

C. if there is spare capacity.

D. if unemployment is low.

19. What ensures that demand for a product is effective?

A. The consumer must be in the private sector of the economy.

B. The consumer must have sufficient income to buy the product.

C. The consumer must receive consumer surplus.

D. The consumer must want to buy the product.

20. A price ceiling set below the equilibrium price will

(a) creates the shortage

(b) has no effect
(c) price rises
(d) Creates surplus.

21. The demand for factors of production is………….

(a) Fundamental demand

 (b) Derived demand
(c) Market demand.
(d) Joint demand.

22. Exception to the law of demand

(a) Speculative effect

(b) Fear of Shortage

(c) Ignorance

(d) All of the above

23. Which of these is not a complementary good for pen?

(a) Refills.
(b) paper
(c) Notebooks.
(d) Wheat

24. Short run supply curve of industry is

(a) Downward sloping.

(b) Vertically parallel.
(c) Horizontally parallel.
(d) Horizontal summation of short run supply curve of firms.

25. What is correct about short run supply curve of firm?

(a) Downward sloping.

 (b) Vertically parallel.
(c) Horizontally parallel.
(d) Possess direct relationship with price of good concern.

26. Which of the factors does not cause increase in demand?

(a) Rise in the price of substitute goods.

(b) Fall in the price of the product.
(c) Increase in population size
(d) Increase in income level of buyers.

27. The supply of sheep meat and wool from the same firm is…

A. Joint demand.

B. Joint supply.

C. Indivisibility in production.

D. Positive cross elasticity of demand.

28 Which of the following is true with references to total utility?

a. It is the product of the number of units and the marginal utility of the first unit.
b. The rate of increase in total utility increases with the number of unit.
c. Total utility decreases as the number of units increases.
d. It is the sum of marginal utilities up to that unit.
29. Which of the following good gives maximum amount of consumer surplus?
a. Ice-cream
b. Car.
c. Color Television
d. Water.
30. If the price level is high, the good will be

a. relatively elastic
b. relatively inelastic
c. unit elastic
d. zero

31 in which circumstances would a tax on alcohol be most effective in reducing drinking’s?

A. High income elasticity of demand for alcoholic drinks.

B. Low price elasticity of demand for alcoholic drinks.

C. Low income elasticity of demand for alcoholic drinks.

D. High price elasticity of demand for alcoholic drink.

32. Comforts lies between:

a) Inferior goods and necessaries

b) luxurious and inferior goods

c) necessaries and luxurious

d) none of the above

 33. Suppose a consumer’s income increases from ₹ 30,000 to ₹ 36,000. As a result,
the consumer increases her purchases of compact discs (CDs) from 25 CDs to 30 CDs.
What is the con-sumer’s income elasticity of demand for CDs? (Use Arc Elasticity
Method)
(a) 0.5
(b) 1.0
(c) 1.5
(d) None of the above

34. Which of the following is correct?

A. demand is flow concept

B. wealth is point concept

C. stock is point concept

D. all of the above

35. Giffen Paradox is an exception of

a) Law of Demand b) Law of Supply
c) Production Theory d) Utility Analysis

36. What is meant by the ceteris paribus assumption?

a) An assumption that is not supported by the facts
b) An assumption that consumers act rationally
c) An assumption that two factors are in equilibrium
d) An assumption that other factors are held constant

37. Which of the following utility approach is based on the theory of Alfred Marshall?

A. Ordinal utility approach

B. None of these

C. Cardinal utility approach

D. Independent variable approach

38. What is the addition to total utility by the consumption of one additional unit of the
commodity?

A. Total utility

B. Ordinal utility

C. Average utility

D. Marginal utility

39. The want satisfying power of a commodity is known as:

A. Supply

B. Consumption

C. Utility

D. Demand

40. Consumer surplus is zero when demand is

a. perfectly inelastic

b perfectly elastic

c.Unitary elastic

d.None of the above

41. In the case of consumer equilibrium, if MUx = 30 , Px = 5 , MUy = 40 the value of Py will be
(a) 10 (b) 15 (c) 6 (d) None of the above
42. From the following demand curve determine the price elasticity of demand at the given
price
Q = 1200 – 10P When P = 5
(a) Elastic (b) Inelastic
(c) Unitary elastic (d) none of these
43.When the supply of a good decreases, equilibrium price stays the same. What is the
price elasticity of demand of the good?
A. –1 B. Infinite C. +1 D. Zero

44. What can be measured by cross-elasticity of demand?

A. a change in real income as a result of a change in the price of consumer goods

B. a change in the demand for a good in response to a change in the price of a

complement

C. a change in the price of a good in response to a change in the demand for a substitute

D. a change in the price of a good when the demand for it changes

45.Additional made to total utility refers to?

(a) Total utility
(b) Average utility
(c) Marginal utility
(d) All of the above

46. The Consumer is in equilibrium when the following condition is satisfied:

(a) Budget line is tangent to the Ic curve
(b) MUx/Px=MUy/Py=MUz/Pz
(c) Both (a) and (b)
(d) None of the above

47. Cardinal approach is related to:

(a) Indifference curve
(b) Equi marginal utility
(c) Law of diminishing returns
(d) None of these
48. Which economist said that money is the measuring rod of utility?
(a) A.C. Pigou
(b) Marshall
(c) Adam Smith
(d) Robbins

49. Total utility is maximum when:

(a) Marginal utility is zero.
(b) Marginal utility is at its highest point.
(c) Marginal utility is negative.
(d) None of the above.

50. When TUn-1 is deducted from TUn, the resultant is ________.

(a) Marginal Utility
(b) Average Utility
(c) Total Utility
(d) Incremental Marginal Utility