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 Contents

Page
Preface
Acknowledgement

CHAPTER WISE TEST

Chapter 1: Nature & Scope of Business Economics 1-8

Chapter 2: Theory of Demand, Consumer Behavior and Supply 9-24

Chapter 3: Theory of Production and Cost 25-40

Chapter 4: Price Determination in Different Markets 41-55

Chapter 5: Business Cycle 56-63

Chapter 6: Determination of National Income 64-71

Chapter 7: Public Finance 72-87

Chapter 8: Money Market 88-96

Chapter 9: International Trade 97-105
Chapter 10: Indian Economy 106-113
FULL LENGTH TEST

TEST-1 114-128

TEST-2 129-144
TEST-3 145-159
TEST-4 160-174
TEST-5 175-190
TEST-6 191-205

CHAPTER WISE EXTRA MCQs (PRACTISE QUESTIONS) 206-326

Fast Track Notes 327-356

Business Economics

CHAPTER 1
NATURE & SCOPE OF BUSINESS ECONOMICS
Max Marks 50
Questions

1) The term Economics owes its origin to Greek word ______

a) Aikonomia
b) Wikonomia
c) Oikonomia
d) None of the above
2) Which one is the feature of Marshall's definition?
a) Limited ends
b) Scarce means
c) Study of wealth & mankind
d) Study of allocation of resources
3) Economics is the study of ______
a) How society manages its unlimited resources
b) How to reduce our wants
c) How society manages its scarce resources
d) How to fully satisfy our wants
4) _______________ refers to the process of selecting an appropriate alternative that will
provide the most efficient means of attaining a desired end, from two or more
alterative courses of action.
a) Decision making
b) Strategy
c) Problem Solving
d) Effectiveness
5) Business Economics is essentially a component of ____________ as it includes application
of selected quantitative techniques.
a) Pure Economics
b) Applied Economics,
c) Statistical Economics
d) None of the above
6) which of the following is not the subject matter of Business Economics?
a) Should our firm be in this business?
b) How much should be produced and at price should be kept?
c) How will the product be placed in the market?
d) How should we decrease unemployment in the economy?
7) A study of how increase in the corporate income tax rate will affect the natural
unemployment rate is an example of:
a) Micro Economics
b) Descriptive Economics

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c) Micro Economics
d) Normative Economics
Q.8) The heart of Business Economics is
a) Micro Economic Theory of the behaviour of consumers and firms in competitive markets.
b) Macro-Economic Theory of the national income
c)Economic analysis to analyze the industry
d) All of the above
Q.9) Economic goods are considered as scarce resources because
a) Inadequate quantity to satisfy the needs of the society
b) Not possible to increase in quantity
c) Limited hands to make goods
d) Primary importance in satisfying social requirements
Q.10) Who defines Economics in terms of Dynamic Growth and Development?
a) Robbins
b) Paul A Samuelson
c) Adam Smith
d) None of these
Q.11) In Economics, we use the term scarcity to mean -
(a) Absolute scarcity and lack of resources in less developed countries.
(b) Relative scarcity i.e. scarcity in relation to the wants of the society.
(c) Scarcity during times of business failure and natural calamities.
(d) Scarcity caused on account of excessive consumption by the rich.
Q.12) What implication(s) does resource scarcity have for the satisfaction of wants?
(a) Not all wants can be satisfied.
(b) We will never be faced with the need to make choices.
(c) We must develop ways to decrease our individual wants.
(d) The discovery of new natural resources is necessary to increase our ability to satisfy
wants.
Q.13) Unlimited ends and limited means together present the problem of .
(a) Scarcity of resources
(b) Choice
(c) Distribution
(d) None of the above
Q.14) is also called as command economy
(a) Socialist
(b) Capitalist
(c) Mixed economy
(d) None of the above
Q.15) Which of the following statements is/are correct regarding business economics?
(a) Business economics attempts to indicate how business policies are firmly rooted in
economic principles.

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Business Economics
(b) Business economics uses micro economic analysis of the business unit and macro
economic analysis of business environment.
(c) Business economics takes a pragmatic approach towards facilitating an integration
between economic theory and business practices.
(d) All the above.
Q.16) Mr. Satish hired a business consultant to guide him for growth of his business. The
consultant visited his factory and suggested some changes with respect to staff
appointment, loan availability and so on. Which approach is that consultant using?
(a) Micro economics
(b) Macro economics
(c) None of the above
(d) Both a and b
Q.17) Profit motive is a merit of
(a) Socialism
(b) Capitalism
(c) Mixed economy
(d) None of the above
Q.18) The managerial economics –
(a) Is Applied Economics that fills the gap between economic theory and business practice
(b) Is just a theory concept
(c) Trains managers how to behave in recession
(d) Provides the tools which explain various concepts
Q.19) Administered prices refer to:
(a) Prices determined by forces of demand and supply
(b) Prices determined by sellers in the market
(c) Prices determined by an external authority which is usually the government
(d) None of the above
Q.20) Exploitation and inequality are minimal under:
(a) Socialism
(b) Capitalism
(c) Mixed economy
(d) None of the above
Q.21) Which of the following is not one of the features of capitalist economy?
(a) Right of private property
(b) Freedom of choice by the consumers
(c) No profit, No Loss motive
(d) Competition
Q.22) Freedom of choice is the advantage of -
(a) Socialism
(b) Capitalism
(c) Communism
(d) None of the above

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Q.23) Macro Economics is the study of .

(a) all aspects of scarcity.
(b) the national economy and the global economy as a whole.
(c) big businesses.
(d) the decisions of individual businesses and people.
Q.24) Larger production of goods would lead to higher production in future.
(a) consumer goods
(b) capital goods
(c) agricultural goods
(d) public goods
Q.25) The economic system in which all the means of production are owned and controlled by
private individuals for profit.
(a) Socialism
(b) Capitalism
(c) Mixed economy
(d) Communism
Q.26) Capital intensive technique would get chosen in a
(a) labour surplus economy where the relative price of capital is lower.
(b) capital surplus economy where the relative price of capital is lower.
(c) developed economy where technology is better.
(d) developing economy where technology is poor.
Q.27) In a mixed economy -
(a) all economic decisions are taken by the central authority.
(b) all economic decisions are taken by private entrepreneurs.
(c) economic decisions are partly taken by the state and partly by the private
entrepreneurs.
(d) none of the above.
Q.28) Which of the following is considered as a disadvantage of allocating resources using the
market system?
(a) Income will tend to be unevenly distributed.
(b) People do not get goods of their choice.
(c) Men of Initiative and enterprise are not rewarded.
(d) Profits will tend to be low.
Q.29) The central problem in economics is that of
(a) comparing the success of command versus market economies.
(b) guaranteering that production occurs in the most efficient manner.
(c) guaranteering a minimum level of income for every citizen.
(d) allocating scarce resources in such a manner that society’s unlimited needs or wants
are satisfied in the best possible manner.

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Q.30) Which of the following is a normative economic statement?

(a) Unemployment rate decreases with industrialization
(b) Economics is a social science that studies human behaviour.
(c) The minimum wage should be raised to ` 200/- per day
(d) India spends a huge amount of money on national defence.
Q.31) Consider the following and decide which, if any, economy is without scarcity:
(a) The pre-independent Indian economy, where most people were farmers.
(b) A mythical economy where everybody is a billionaire.
(c) Any economy where income is distributed equally among its people.
(d) None of the above.
Q.32) Which of the following is not a subject matter of Micro-economies?
(a) The price of mangoes.
(b) The cost of producing a fire truck for the fire department of Delhi, India.
(c) The quantity of mangoes produced for the mangoes market.
(d) The national economy’s annual rate of growth.
Q.33) Ram: My corn harvest this year is poor.
Krishan: Don’t worry. Price increases will compensate for the fall in quantity supplied.
Vinod: Climate affects crop yields. Some years are bad, others are good.
Madhu: The Government ought to guarantee that our income will not fall.
In this conversation, the normative statement is made by -
(a) Ram
(b) Krishan
(c) Vinod
(d) Madhu
Q.34) Which of the following does not suggest a macro approach for India?
(a) Determining the GNP of India.
(b) Finding the causes of failure of ABC Ltd.
(c) Identifying the causes of inflation in India.
(d) Analyse the causes of failure of industry in providing large scale employment
Q.35) Which of the following statements does not apply to a market economy?
(a) Firms decide whom to hire and what to produce.
(b) Firms aim at maximizing profits.
(c) Households decide which firms to work for and what to buy with their incomes.
(d) Government policies are the primary forces that guide the decisions of firms and
households.
Q.36) A capitalist economy uses as the principal means of allocating resources.
(a) demand
(b) supply
(c) efficiency
(d) prices

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Business Economics
Q.37) Which of the following is a normative statement?
(a) Planned economies allocate resources via government departments.
(b) Most transitional economies have experienced problems of falling output and
rising prices over the past decade.
(c) There is a greater degree of consumer sovereignty in market economies than
planned economies.
(d) Reducing inequality should be a major priority for mixed economies.
Q.38) An example of ‘positive’ economic analysis would be:
(a) an analysis of the relationship between the price of food and the quantity purchased.
(b) determining how much income each person should be guaranteed.
(c) determining the ‘fair’ price for food.
(d) deciding how to distribute the output of the economy.
Q.39) Macroeconomics is also called——— economics.
(e) applied
(f) aggregate
(g) experimental
(h) none of the above
Q.40) Which of the following would be considered a topic of study in Macroeconomics?
(a) The effect of increase in wages on the profitability of cotton industry
(b) The effect on steel prices when more steel is imported
(c) The effect of an increasing inflation rate on living standards of people in India
(d) The effect of an increase in the price of coffee on the quantity of tea consumed
Q.41) The difference between positive and normative Economics is:
(a) Positive Economics explains the performance of the economy while normative
Economics finds out the reasons for poor performance.
(b) Positive Economics describes the facts of the economy while normative Economics
involves evaluating whether some of these are good or bad for the welfare of the
people.
(c) Normative Economics describes the facts of the economy while positive Economics
involves evaluating whether some of these are good or bad for the welfare of the
people.
(d) Positive Economics prescribes while normative Economics describes.
Q.42) Which of the following is not within the scope of Business Economics?
(a) Capital Budgeting
(b) Risk Analysis
(c) Business Cycles
(d) Accounting Standards
Q.43) Which of the following statements is incorrect?
(a) Business economics is normative in nature.
(b) Business Economics has a close connection with statistics.
(c) Business Economist need not worry about macro variables.
(d) Business Economics is also called Managerial Economics.

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Q.44) Scarcity definition of Economics is given by-

(a) Alfred Marshall
(b) Samuelson
(c) Robinson
(d) Adam Smith
Q.45) The definition “Science which deals with wealth of Nation” was given by:
(a) Alfred Marshall
(b) A C Pigou
(c) Adam Smith
(d) J B Say
Q.46) Which of the following statements is correct?
(a) Micro economics is important for study of a particular household and a particular firm
(b) Macro economics is important for study of economic conditions of a country
(c) None of the above
(d) Both a and b
Q.47) Who defined Business economics in terms of the use of economic analysis in the
formulation of business policies?
(a) Adam Smith
(b) Robbins
(c) Joel Dean
(d) Alfred Marshall
Q.48) Concept of Business Economics was given by:
(a) Joel Dean
(b) Alfred Marshall
(c) Adam Smith
(d) L. Robbins
Q.49) The choice between labour- and Capital-intensive techniques is related with:
(a) What to Produce?
(b) How to Produce?
(c) For whom to Produce
d) All of the above.
Q.50) Which of the following is NOT a central issue in macroeconomics?
(a) How should the central bank of a country fight inflation?
(b) What is responsible for high and persistent unemployment?
(c) How do tax changes influence consumers' buying choices?
(d) What factors determine economic growth?

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ANSWERS

Q.1 b Q.21 c Q.41 b

Q.2 c Q.22 b Q.42 d
Q.3 c Q.23 b Q.43 c
Q.4 a Q.24 b Q.44 c
Q.5 b Q.25 b Q.45 c
Q.6 d Q.26 b Q.46 d
Q.7 c Q.27 c Q.47 c
Q.8 a Q.28 a Q.48 a
Q.9 a Q.29 d Q.49 b
Q.10 b Q.30 c Q.50 c
Q.11 b Q.31 d
Q.12 a Q.32 d
Q.13 b Q.33 d
Q.14 a Q.34 b
Q.15 d Q.35 d
Q.16 a Q.36 d
Q.17 b Q.37 d
Q.18 a Q.38 a
Q.19 c Q.39 b
Q.20 a Q.40 c