1. Which one of the following will be the appropriate pricing strategy for a new product expecting an
expanding market?
(1) Monopoly pricing
(2) Skimming pricing
(3) Penetrating pricing
(4) Differential pricing
Answer: (3)
2. A state of demand where major part of the market dislikes the product and may even pay a price
to avoid it, may be called as:
(1) Declining Demand
(2) Overfull Demand
(3) Negative Demand
(4) Distractive Demand
Answers: (3)
3.Indicate the correct code for the scope of managerial economics from the following:
a. Demand Analysis
b. Production and Cost Analysis
c. Pricing and Investment Decisions
d. Factor pricing Decisions
e. Economic Environmental Analysis
Codes:
(1) a, b, c, d (2) b, c, d, e
(3) a, b, c, e (4) a, c, d, e
Answer: (3)
4. Match the items of the List. I with those of the
List. II and suggest the correct code from the following:
List - I List - II
i. Loss Leader a. Locational price differentials
ii. Unchanged Pricing b. Products with high initial demands
iii. Basing Point Pricing c. Product line pricing
iv. Skimming Pricing d. Oligopoly pricing
Codes:
i ii iii iv
(1) a b c d
(2) c d a b
(3) d b a c
(4) c a b d
Answer: (2)
5. From the following two statements of Assertion (A) and Reasoning (R), indicate the correct code:
Assertion (A): The quantity of a product demanded invariably changes inversely to changes in its price.
Reason (R): The price effect is the net result of the positive substitution effect and negative income
effect.
Codes:
(1) (A) and (R) both are correct.
(2) (A) is incorrect but (R) is correct.
(3) (A) is correct but (R) is incorrect.
(4) (A) and (R) both are incorrect.
Answer: (2)
6. Match the items of the List – I with that of the
List – II and suggest the correct code from the following:
List – I List – II
i. Cost function a. Kinked demand
ii. Supply function b. Isoquants
iii. Production function c. Engineering method
iv. Oligopoly d. Factor prices
Codes:
i ii iii iv
(1) c d a b
(2) b a c d
(3) a b d c
(4) d c b a
Answer: (4)
7. Which one of the following combinations may not render the investment multiplier inapplicable?
(1) Net imports, undistributed profits and taxation.
(2) Excess stocks of consumption goods, debt cancellation and savings.
(3) Price inflation, public investment programmes and strong liquidity preference.
(4) Closed economy, unemployment in the economy, constant marginal propensity to consume.
Answer: (4)
8. Match the items of List – I with the items of List – II and select the code of correct matching:
List – I List – II
a. Latent demand i. More consumers would like to buy the product than can satisfied.
b. Full demand ii. Consumers may be attracted to products that have undesirable social
consequences.
c. Overfull demand iii. Consumers may share a strong need that cannot be satisfied by an existing product.
d. Unwholesome demand iv. Consumers are adequately buying all products put into the market place.
Codes:
a b c d
(1) iii i iv ii
(2) iii iv i ii
(3) iv iii i ii
(4) i ii iii iv
Answer: (2)
9. Select the correct sequence of steps in setting a pricing policy:
(a) Determining Demand
(b) Analyzing competitors’ Costs, Prices and Offers
(c) Selecting the Final Price
(d) Selecting the Pricing Objective
(e) Estimating costs
(f) Selecting a pricing method
Codes:
(1) (d), (a), (e), (b), (f) and (c)
(2) (a), (e), (b), (d), (f) and (c)
(3) (a), (b), (e), (d), (f) and (c)
(4) (a), (b), (c), (d), (e) and (f)
Answer: (1)
10. The following is the demand function: Q = 100 – 5P
What will be the point price elasticity of demand at price ` 10?
(1) 2.00
(2) 1.00
(3) 0.85
(4) 0.50
Answer: (2)
11.The short-run cost function of a firm is as under: TC = 200 + 5Q + 2Q2
What will be the level of output at which AC and MC will be equal?
(1) 20 (2) 15
(3) 10 (4) 5
Answer: (3)
12 . Economic capacity of a plant represents the firm’s capability for
(A) Maximum physical output
(B) Maximum marginal output
(C) Break-even level of output and sale
(D) Output that equates average and marginal costs
Answer: (D)
13. Which of the following are the assumptions related to the theory of consumer behaviour as per the Cardinal utility approach?
(i) Consumer is rational.
(ii) No limit on money income.
(iii) Utility cardinally measurable.
(iv) Diminishing marginal utility of money.
(v) Diminishing marginal utility of commodities.
(vi) Maximization of satisfaction.
(vii) For calculating total utility, individual utilities of commodities are to be multiplied.
Codes:
(1) (i), (ii), (iii) and (iv)
(2) (iv), (v), (vi) and (vii)
(3) (i), (iii), (v) and (vi)
(4) (iii), (iv), (vi) and (vii)
Answer: (3)
14. Which one of the following is not the property of Cobb-Douglas Production Function?
(1) The multiplicative form of the power function can be changed into its log-linear form.
(2) Power functions are not homogeneous because the sum of the exponents is not equal to degree 1.
(3) The parameters in the function a and b represent the elasticity coefficient of output for inputs (capital and labour) respectively.
(4) Constants a and b in the function represent share of inputs capital and labour in total output.
Answer: (2)
15. Which one of the following is incorrect combination with regard to the types of market structures?
Market Structure No. of firms and degree of product differentiation Control over price
(1) Perfect competition Large number of firms with homogeneous products None
(2) Monopolistic Competition Many firms with real or perceived product differentiation Some
(3) Oligopoly Little or no product differentiation and many firms Some
(4) Monopoly Single firm with close substitute Some
Answer: (4)
16. Which one of the following is not studied in Macro-Economics?
(1) General Theory of Employment, Interest and Money.
(2) Market structure and Pricing decisions.
(3) Foreign Trade.
(4) Theories of economic growth.
Answer: (2)
17. Which one of the following assumptions is not related to consumer behaviour based on the cardinal utility approach?
(1) Rationality
(2) Diminishing marginal utility of money
(3) Utility cardinally measurable
(4) Maximization of satisfaction with limited money income
Answers: (2)
18. Statement – I: A rectangular hyperbola shaped demand curve has uniform slopes on all its points.
Statement – II: If the price elasticity is equal to unity, the marginal revenue corresponds to zero.
Code:
(1) Both the statements are correct
(2) Both the statements are incorrect
(3) Statement – I is correct while Statement – II is incorrect
(4) Statement – I is incorrect while Statement – II is correct
Answers: (4)
19. Match the items of List – I with the items of List – II and find the correct combination:
List – I List – II
(Market (Nature of Structure) industry where prevalent)
(a) Perfect (i) Aluminium and competition passenger cars
(b) Oligopoly (ii) Public utilities like Telephones and Electricity
(c) Monopoly (iii) Manufacturing: T.V. Sets, Refrigerators
(d) Monopolistic (iv)Farm Products: competition Grains
Codes:
(a) (b) (c) (d)
(1) (i) (ii) (iii) (iv)
(2) (iv) (i) (ii) (iii)
(3) (iii) (iv) (i) (ii)
(4) (ii) (iii) (iv) (i)
Answers: (2)
20. Which one of the following is not covered in macro-economics?
(1) Performance of the entire economy
(2) Price and output determination of a commodity
(3) Factors and forces of economic fluctuations
(4) Monetary and fiscal policies
Answers: (2)
21. When the Companies pay less attention to its own costs or demands and base its price largely on competitors’ prices, then it is known as:
(1) Value Pricing
(2) Going rate pricing
(3) Image pricing
(4) Psychological pricing
Answers: (2)
22 The theory of sales (revenue) maximization subject to some predetermined amount of profit was
advanced by ______.
(1) K.W. Rothschild
(2) Herbert Simon
(3) O.E. Williamson
(4) William J. Baumol
Answer: (4)
23. Suppose the demand function for a commodity is given as: Q = 5500 - 5P Where ‘Q’ denotes quantity of demand and ‘P’ denotes price of the commodity. The point price elasticity of demand at price ` 20 will be _____.
(1) - 0.50 (2) - 0.25
(3) - 0.20 (4) - 5
Answer: (2)
24. Suppose the demand and total cost functions for a monopoly firm are as follows:
Q = 100 - 0.2P
P = 500 - 5Q
TC = 50 + 20 Q + Q2
What will be the profit maximization output?
(1) 20 (2) 10
(3) 50 (4) 40
Answer: (4)
25. Statement (I): The elasticity of factor substitution is formally defined as the percentage change in the capital-labour ratio divided by the percentage change in the marginal rate of technical substitution.
Statement (II): Q=5K0.5 L0.3 is a production function where Q = output, K = units of capital and L= units of labour. This production function shows the application of increasing returns to scale.
Codes:
(1) Both statements are correct.
(2) Both statements are incorrect.
(3) Statement (I) is correct while statement (II) is incorrect.
(4) Statement (I) is incorrect while statement (II) is correct.
Answer: (3)
26. If the demand for using the Noida express way is given by: Q = 40,000 - 2500P Where Q is the number of users (vehicles) and P is the amount of toll collected per unit who uses the express way. In light of this information which of the following is true:
(1) At P5 = rupees 6 and Q = 14,000; demand is price inelastic.
(2) At P5 = rupees 7 and Q = 16,500; demand is unitary elastic.
(3) At P5 = rupees 4 and Q = 9,500, demand is price elastic.
(4) All of the above
Answer: (3)
27.. The demand function for commodity X, is QD=300-20P; where P is the price in rupees per
unit and QD is the quantity demanded in units per period. Which of the following is the price
level at which total revenue of a firm facing this demand function is maximised?
(1) 8.0
(2) 7.5
(3) 10. 5
(4) 12.5
Answer: (2)
28. Match the production functions List - I with the return to scale List - II.
List - I (Production function) List - II (Return to scale)
(a) Q = 10 K0.5L0.4E0.15M0.1 (i) increasing
(b) Q = 12 K0.5L0.5 (ii) constant
(c) Q = 100 K + 15L (iii) decreasing
(d) Q = 40 K0.3L0.5
Indicate the correct answer:
(a) (b) (c) (d)
(1) (ii) (ii) (i) (i)
(2) (i) (i) (ii) (ii)
(3) (ii) (i) (i) (iii)
(4) (i) (ii) (ii) (iii)
Answer: (4)
29. It costs a firm Rs. 90 per unit to produce product A, and Rs. 60 per unit to produce B individually. If the firm can produce both products together at Rs. 160 per unit of product A and B, this exhibits signs of:
(1) economies of scope
(2) diseconomies of scale
(3) diseconomies of scope
(4) economies of scale
Answer: (3)
30.Match the items given in List – I and List – II by considering which of the following are macroeconomic issues and which are microeconomic ones:
List – I List – II
a. The level of government revenue i. Microeconomic
b. The rate of inflation ii. Macroeconomic
c. The price of T.V. set
d. The amount saved last year by households
Codes:
a b c d
(A) ii i i ii
(B) ii i ii i
(C) i ii ii ii
(D) ii ii i ii
Answer: (D)
31.A decrease in supply will have the greatest effect on price, when the product’s demand is
(A) Elastic
(B) Inelastic
(C) Perfectly elastic
(D) Unitary elastic
Answer: (B)
32.For a production firm, the pecuniary economies arise from which one of the following sources?
(A) Large scale production
(B) Purchasing and market economies
(C) Indivisibility of factor inputs
(D) Learning economies of workers and managers
Answer: (B)
33. Your firm is selling 1,000 units at a price of Rs. 10 per unit. The firm’s total explicit cost is Rs. 8,000. The firm’s implicit cost is Rs. 1,000 and the opportunity cost of your time in managing the firm is Rs. 1,000.
In the above situation, which one of the following is true?
(A) Accounting profit is 0.
(B) Economic profit is less than the accounting profit
(C) Marginal cost is Rs. 1,000
(D) Economic profit is Rs. 1,000
Answer: (B)
34. In case the price (P), quantity (Q), and changes (') are represented by respective symbols given in
the brackets, the price elasticity of demand (Ed) measured by
(A) Ed = 'Q/'P
(B) Ed = ('Q/Q)/('P/P)
(C) Ed = 'P/'Q
(D) Ed = ('P/P)/('Q/Q)
Answer: (B)
35. Law of Diminishing Return applies when the gaps among the successive ‘multiple-level of output’ isoquants
(A) decreases
(B) remains constant
(C) increases
(D) remains irregular
Answer: (C)
36.In case the demand elasticity under imperfect competition is unity, the marginal revenue will be
(A) more than utility, but less than infinity.
(B) equal to unity.
(C) less than unity, but more than zero.
(D) equal to zero.
Answer: (D)
37. Rise in general price level along with declining output in the economy is called
(A) Inflation
(B) Deflation
(C) Stagflation
(D) Demand-pull inflation
Answer: (C)
38. National income equilibrium is not at the level where
(A) aggregate investment equals aggregate savings
(B) aggregate expenditure equals aggregate income
(C) inflationary and deflationary gaps are absent
(D) aggregate consumption is constant
Answer: (D)
39. In case a decrease in price of a commodity results in an increase in its demand on a negatively sloping demand curve, it is called
(A) An increase in demand
(B) An increase in quantity demanded
(C) Law of demand
(D) Any of the above
Answer: (B)
40. Production function is not based on the assumption of the
(A) Substitutability of inputs
(B) Complementarity of inputs
(C) Marketability of products
(D) Specificity of inputs
Answer: (C)
41. Match the items of the following two lists and indicate the correct code:
List – I List – II
a. Trade channel discounts i. Oligopoly pricing
b. Tie-up sales ii. Locational price differentials
c. Price being non responsive
to changes in demand costs iii. Differential pricing
d. Basing-point pricing iv. Product line pricing
Codes:
a b c d
(A) iv ii iii i
(B) iii iv i ii
(C) ii i iv iii
(D) i iii ii iv
Answer: (B)
42. The Marshallian utility analysis is based on a less valid assumption of
(A) cardinal measurement of utility
(B) constant marginal utility of money
(C) diminishing marginal utility of goods
(D) additivity of the utility
Answer: (B)
43. An appropriate pricing strategy for a new product to be introduced in the market will be
(A) Average/Marginal cost-plus pricing
(B) Skimming/Penetrating pricing
(C) Product-line pricing
(D) Differential pricing
Answer: (B)
44. In which type of market situation competitors offer same type of products and services for the same price with no differentiation?
(A) Monopolistic competition
(B) Monopoly
(C) Oligopoly
(D) Perfect competition
Answer (D)
45. Additional revenue generated by selling an additional unit is
(A) Incremental revenue
(B) Marginal revenue
(C) Total revenue
(D) Average revenue
Answer (B)
46. Emerging market economies are :
(A) A part of developed countries
(B) Newly industrializing countries
(C) A part of developing countries
(D) A part of third world countries
Answer (C)
47. The term Opportunity Cost refers to
(A) Variable Cost
(B) Short-run cost
(C) The cost forgone in favour of production of another product
(D) Cost related to an optimum level of production
Answer C)
48.If two commodities are complementary, then a rise in the price of one commodity will induce
(A) A rise in the price of the other commodity
(B) An upward shift of demand curve
(C) No shift in demand for the other commodity
(D) A backward shift in demand for the other commodity
Answer (D)
49. What is the characteristic of a purely competitive market ?
(A) Large number of buyers and sellers
(B) A few sellers
(C) A few buyers
(D) Abnormal profit
Answer (A)
50.Willingness to pay minus actual payment is called
(A) Consumer’s surplus
(B) Producer’s surplus
(C) Utility cost
(D) Supplier’s surplus
Answer (A)
51. Match List – I with List – II and select the correct answer using the codes given below the lists :
List – I List – II
a. Cost Function 1. Kinky Demand Curve
b. Supply Function 2. Isoquants
c. Production Function 3. Engineering Method
d. Oligopoly 4. Factor Prices
Codes :
a b c d
(A) 3 4 2 1
(B) 4 3 1 2
(C) 3 2 1 4
(D) 1 2 3 4
Answer A
52. A market structure which consists of one buyer and one seller is referred as
(A) Monopsony
(B) Bilateral monopoly
(C) Monopoly
(D) Duopoly
Answer (A)
53. Match the following:
a. Percentage change in quantity demanded to 1. Perfect competition
percentage change in price
b. Percentage change in demand to percentage 2. Market demand
change in the price of some other commodity
c. Homogeneous products 3. Price elasticity
d. Relationship between quantity 4. Cross elasticity
of the product demanded and
factors that affect the quantity
Codes:
a b c d
(A) 3 4 1 2
(B) 4 3 1 2
(C) 3 2 1 4
(D) 4 2 1 3
Answer (A)
54. The hypothesis that ‘consumption in one period would be a function of income in that period and the returns on savings of the previous period’ is given by
(A) Irving Fisher
(B) Franco Modigliani
(C) Duesenberry
(D) Robert Hall
Answer (B)
55. From the following identify one which is not a property of Indifference curve?
(A) Indifference curves are downward sloping.
(B) Indifference curves are concave to the origin.
(C) Indifference curves are convex to the origin
(D) Indifference curves do not intersect each other
Answer (B)
56. From the following identify one which is not a collusive oligopoly model
(A) Cartels
(B) Edgeworth Model
(C) Price Leadership
(D) Market Share Model
Answer: (B)
57.The rate at which the consumer can trade one good for another is termed as marginal rate of substitution in
(A) Exchange
(B) Consumption
(C) Production
(D) The distribution
Answer: (A)
58. If demand equation is given by D = 1000 – P and the supply equation is given by S = 100 + 4P, price will be
(A) 160
(B) 180
(C) 170
(D) 200
Answer: (B)
59. Arrange the following steps, involved in the estimation of a demand function using econometric analysis, in the proper order
(i) Collection of data
(ii) Estimating the parameters of the model
(iii) Mathematical specification of the relationship among the variables
(iv) Using the estimates to arrive at the estimates of variables.
(v) Identification of variables
Codes:
(A) (v), (i), (iii), (iv), (ii)
(B) (i), (ii), (iii), (iv), (v)
(C) (i), (ii), (iv), (iii), (v)
(D) (v), (i), (iii), (ii), (iv)
Answer: (D)
60. Match the items given in Column A with the suitable items given in Column B:
Column A Column B
a. Maximisation of society’s welfare even when individuals behave selfishly to further their own economic status. i. Equilibrium
b. State of balance from which there is no tendency to change. ii. Non-Satiation
c. Best possible state within a given set of constraints. iii. The invisible hand
d. A situation wherein a customer always prefer more of goods to less of goods. iv. Optimisation
Codes:
a b c d
(A) iv i iii ii
(B) ii i iv iii
(C) iii i iv ii
(D) iv i ii iii
Answer: (C)
61. In case a decrease in price of a commodity results in an increase in its demand on a negatively sloping demand curve, it is called
(A) An increase in demand
(B) An increase in quantity demanded
(C) Law of demand
(D) Any of the above
Answer (B)
62. Production function is not based on the assumption of the
(A) Substitutability of inputs
(B) Complementarity of inputs
(C) Marketability of products
(D) Specificity of inputs
Answer C
63. Macroeconomics basically concerns with which of following in an economy?
(A) Industry, Trade and Commerce
(B) Agriculture, Industry & Trade
(C) Employment, Inflation & Growth
(D) Population, Income and Economic Planning
Answer (C)
64. Indicate the correct code matching the items in List – I with those in List – II as follows :
List – I List – II
a. Competitive parity in advertising i. Variations in advertising
b. Promotional elasticity of product ii. Advertising scheduling
c. Optimal promotion mix iii. Advertising expenditure
d. Pulsing advertising iv. Marginal equivalence of advertising media outlay
Codes :
a b c d
(A) ii iii i iv
(B) iii i iv ii
(C) i iv ii iii
(D) iv ii iii i
Answer(B)
65. Match the items of List – I with the items of List – II and select the code of correct
matching :
List-I List-II
a. Sales Revenue Maximization i. Williamson’s Model
b. Maximization of a firm’s growth rate ii. Cyert-March Hypothesis
c. Maximization of Managerial iii. Baumol’s Theory
Utility function
d. Satisficing behaviour model iv. Marri’s Theory
Codes :
a b c d
(A) iii iv i ii
(B) i ii iv iii
(C) ii iii i iv
(D) iv iii ii i
Answer (A)
66. Which of the following is the condition for equilibrium for Monopolist?
(A) MR = MC
(B) MC = AR
(C) MR = MC = Price
(D) AC = AR
Answer: (A)
67.Cardinal measure of utility is required in
(A) Utility Theory
(B) Indifference Curve Analysis
(C) Revealed Preference
(D) Inferior Goods
Answer: (A)
68. Match List-I with List-II and select the correct answer using the codes given below the lists.
List – I List – II
(Demand (Steps Estimation involved)Method)
(A) Customer Interview Method 1. Consumers Interview
(B) Market Experiment Method 2. Time series or Cross Section Data
(C) Regression Method 3. Market Stimulation
(D) Demand Forecasts 4. Market Experiments’ Survey
Codes:
(a) (b) (c) (d)
(A) 1 3 4 2
(B) 1 3 2 4
(C) 2 4 3 1
(D) 4 2 1 3
Answer: (B)
69. Other things being equal an increase in income leads to a decrease in demand for
(A) Superior Goods
(B) Inferior Goods
(C) Both (A) and (B)
(D) None of the above
Answer: (B)
70. Which one of the following statements is true?
(A) Business decisions cannot be taken without a sound knowledge of Macro Economic Theories.
(B) Knowledge of Economic Theory is misleading in making business decisions.
(C) With the help of Economic Theories, it is always possible to predict the future accurately.
(D) Every Economic Theory is based on realistic facts which are common to all societies.
Answer: (A)
71. GDP includes which of the following measures?
(A) The size of a population that must share a given output within one year.
(B) The negative externalities of the production process of a nation within one year.
(C) The total monetary value of all final goods and services produced within a nation within one
year.
(D) The total monetary value of goods and services including barter transactions within a nation in
one year.
Answer: (C)
72. The elasticity of demand is greater than unity, when
(A) Percentage change in demand is equal to the percentage change in price.
(B) Percentage change in demand is more than the percentage change in price.
(C) Percentage change in demand is less than the percentage change in price.
(D) There is change in price.
Answer: (B)
73. Match the following:
List – I
(A) The producers will offer more of a product at a higher price (i) Market in equilibrium
equal to the quantum that consumers want to buy.
(C) The sensitivity of consumers to price changes. (iii) Co-efficient of price elasticity of demand.
(D) Percentage change in quantity demanded to percentage change in price.(iv) Price elasticity of demand
Codes:
(a) (b) (c) (d)
(A) (ii) (i) (iii) (iv)
(B) (iv) (i) (ii) (iii)
(C) (ii) (iv) (iii) (i)
(D) (ii) (i) (iv) (iii)
Answer: (A)
74. Statement I: The slope of an indifference curve is the Marginal Rate of Substitution in the consumption (MRSc), which is increasing.
Statement II: The slope of the budget line is ratio of the prices of two goods and is the Marginal Rate of
Substitution in exchange (MRSe)
(A) Statement I and II are correct.
(B) Statement I is correct, but II is incorrect.
(C) Statements I and II are incorrect.
(D) Statement I is not correct, but II is correct.
Answer: (D)
75. The sum of the value of all final goods and services produced within a country and net factor
income from abroad is termed as
(A) GNP
(B) Nominal GDP
(C) NNP
(D) Real GDP
Answer: (A)
76. Statement I: Demand for a commodity refers to quantity of the commodity demanded at a certain
price during any particular period of time.
Statement II: Contraction of demand is the result of increase in the price of the goods concerned.
(A) Both I & II are correct.
(B) Both I and II are incorrect.
(C) I is correct and II is incorrect.
(D) II is correct and I is incorrect.
Answer: (A)
77. In a mixed economy, the central problems are solved through which of following?
(A) Price mechanism
(B) Regulated market mechanism
(C) Market mechanism and economic planning
(D) Economic planning and control
Answer: (C)
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