Managerial economics mcq

1-Demand is determined by
a. Price of the product
b. Relative prices of other goods
c. Tastes and habits
d. All of the above
(Ans: d)

2-When a firms average revenue is equal to its average cost, it gets ________.
a. Super profit
b. Normal profit
c. Sub normal profit
d. None of the above
(Ans: b)

3-Managerial economics generally refers to the integration of economic theory with

business
a. Ethics
b. Management
c. Practice
d. All of the above
(Ans: c)

4-Given the price, if the cost of production increases because of higher price of raw
materials, the supply
a. Decreases
b. Increases
c. Remains same
d. Any of the above
(Ans: a)

5-The cost recorded in the books of accounts are considered as

a. Total cost
b. Marginal cost
c. Average cost
d. Explicit cost
(Ans: d)

6-A Joint Stock Company is managed by the Board of Directors elected by _____ .
a. Top management
b. Shareholders
c. Employees of company
d. None of the above
(Ans: b)

7-Under ______, price is determined by the interaction of total demand and total supply
in the market.
a. Perfect competition
b. Monopoly
c. Imperfect competition
d. All of the above
(Ans: a)

8-Under perfect competition, price is determined by the interaction of total demand and
________.
a. Total supply
b. Total cost
c. Total utility
d. Total production
(Ans: a)

9-The out of pocket costs are ________.

a. Sunk costs
b. Marginal costs
c. Explicit costs
d. Social costs
(Ans: b)

10-The short run Average Cost curve is __ shaped

a. V
b. U
c. L
d. Any of the above
(Ans: b)

11-Distinction between private sector and public sector is determined on the basis of
a. Economic system
b. Motive
c. Principle of pricing
d. All of the above
(Ans: d)

12-Goods produced on small scale have

a. Relatively inelastic supply
b. Highly elastic supply
c. Perfectly elastic supply
d. None of the above
(Ans: a)

13-Oligopoly is a type of ________ market. A ________ exists in the industry

a. Perfect, few firms
b. Imperfect, few firms
c. Perfect, many firms
d. Imperfect, many firms
(Ans: b)

14-The management of the _________ form of business organization is totalitarian in

nature.
a. Cooperative
b. Partnership
c. Individual proprietorship
d. All of the above
(Ans: a)

15-The demand curve has a _____ slope.

a. Undefined
b. Zero c
c. Negative
d. Positive
(Ans:)

1:
The concept of supply curve as used in economic theory is relevant only for the case of

A. Oligopoly competition
B. Perfect or pure competition

C. Monopolistic competition
D. Monopoly
Answer Report Discuss
Option: B

Explanation :

2:
Match the following :

(A) Principles of Economics 1. Gunnar Myrdal

(B) Diamond water paradox 2. J. K. Galbraith

(C) Value and Capital 3. Alfred Marshall

(D) Asian Drama 4. J. R. Hicks

(E) Language of Economics 5. Adam Smith

A.(A) (B) (C) (D) (E)

5 2 3 1 4
B.(A) (B) (C) (D) (E)
2 4 3 5 1
C.(A) (B) (C) (D) (E)
1 2 3 5 4
D.(A) (B) (C) (D) (E)
3 5 4 1 2
Answer Report Discuss
 Option: D

Explanation :

3:
Other things being equal, an increase in supply can be caused by

A A rise in the income of the consumer

.
B.An improvement in the techniques of production
C A rise in the price of the commodity
.
D An increase in the income of the seller
.
Answer Report Discuss
Option: B

Explanation :

4:
Match the following :

(A) Increasing cost industry 1. Horizontal long run supply curve

(B) Decreasing cost industry 2. Positively sloped long run supply curve

(C) Constant cost industry 3. Negatively sloped long run supply curve

A.(A) (B) (C)

3 2 1
B.(A) (B) (C)

1 2 3
C.(A) (B) (C)

2 3 1
D.(A) (B) (C)

2 1 3
Answer Report Discuss
Option: C

Explanation :

5:
Direct regulation of business has the potential to yield economic benefits to society when

A diseconomies of scale exist.

.
B.barriers to entry are absent.
 C there are no good substitutes for a product.
.
D many firms serve a given market.
.
Answer Report Discuss
Option: C

Explanation :

6:
The Revealed Preference Theory is based on

A.Introspection
B.Utility and demand
C.The assumption of indifference
D.Observed consumer
behaviour
Answer Report Discuss
Option: D

Explanation :

7:
One would expect a firm to close down rather than continue producing in the short-period if

A.Variable costs were to fall below fixed costs

B.Total revenue were less than total variable cost
C.Total revenue were more than total variable cost
D.Variable costs were to rise above fixed costs
Answer Report Discuss
Option: B

Explanation :

8:
Marginal Utility (MU) curve is always

A.Parallel to X-axis
B.Falling
C.Rising
D.Parallel to Y-axis
Answer Report Discuss
Option: B
 Explanation :

9:
The Law of Diminishing Returns depends on the assumption that

A.Land is the factor kept constant

B.The state of technical knowledge is unchanged
C.Total output is constant
D.Average output declines faster than marginal output
Answer Report Discuss
Option: B

Explanation :

10:
MRn = TRn - TRn_1 is the algebraic expression of

A Information is insufficient
.
B.Marginal Revenue, the change in total revenue when there is a change in
quantity sold of the product.
C The addition to TR earned by selling n units of product instead of (n-1) units
.
D None of the above
.
Answer Report Discuss
Option: B

Explanation :

1:
Under perfect competition a firm can produce with

A.An optimum plant

B.Identical products at low cost
C.Maximum profit
D.An optimum output
Answer Report Discuss
Option: A

Explanation :

12:
If marginal cost is above average variable at a time when output is rising, then

A.Average variable cost is falling

B.Average variable cost is rising
C.Average total cost is falling
 D.Average total revenue is rising
Answer Report Discuss
Option: B

Explanation :

13:
Equilibrium of monopolist will never lie below the middle point of the average revenue curve
because below the middle point

A.Elasticity of demand is less than one

B.MR is negative
C.Both (a) and (b)
D.Market laws cease to be operate
Answer Report Discuss
Option: C

Explanation :

14:
The concept of indifference curve analysis was given scientific touch by

A.Slutsky in 1915
B.F. Y. Edgeworth in 1881
C.Irving Fisher in 1982
D.Alfred Marshall in 1921
Answer Report Discuss
Option: B

Explanation :

15:
In monopoly, the relationship between average revenue and marginal revenue curves is as follows :

A.Average revenue curve lies above the MR-curve

B.AR curve lies below the MR-curve
C.AR curve coincides with the MR-curve
D.AR curve is parallel to the MR-curve
Answer Report Discuss
Option: A

Explanation :
16:
Any supply curve which is a straight line passing through the origin whatever its slopes will
possess

A.An elasticity which is less than one

B.An elasticity which is greater than one
C.Unitary elasticity of supply
D.An elasticity which is greater than zero
Answer Report Discuss
Option: C

Explanation :

17:
A monopoly producer has

A.Control over production but not price

B.Control over production, price and
consumers
C.Control neither on production nor on price
D.Control over production as well as price
Answer Report Discuss
Option: A

Explanation :

18:
On an indifference map, higher indifference curves show

A.Levels of satisfaction among which the consumer is indifferent

B.The optimum level of satisfaction
C.The higher level of utility
D.The same lower level of satisfaction
Answer Report Discuss
Option: C

Explanation :

19:
Which of the following is the correct statement?

(1) The slope of the Isoquants represents the MRTS

(2) The MRTS of the inputs x and y = MPx/MPy

(3) The elasticity of substitution between two inputs x and y is proportionate change in the ratio of
two inputs divided by proportionate change in the MRTS.
(4) If degree of homogeneity is greater than one, the production function is increasing returns to
fixed factor

A.2, 3 and 4
B.1, 3 and 4
C.1, 2, 3
D.1, 2 and 3
Answer Report Discuss
Option: D

Explanation :

20:
When the TR curve and TC curve are parallel and TR exceeds TC

A.Total profit is minimised

B.Normal profit is minimised
C.Total profit is maximised
D.Normal profit is maximised
Answer Report Discuss
Option: C

Explanation :

21:
A circumstance in which it might pay a monopolist to cut the price of his product is where

A.MC is falling
B.MR is greater than MC
C.His advertising costs are
increasing
D.Average costs seem about to fall
Answer Report Discuss
Option: A

Explanation :

22:
From the resource allocation view point, perfect competition is preferable because

A.There is no restriction on entry and exit of firms

B.There is a whole variety of output produced
C.The firms operate at excess capacity levels
 D.There is no idle capacity
Answer Report Discuss
Option: D

Explanation :

23:
Put into chronological order on the basis of development:

1. Law of demand

2. Law of indifference

3. Law of diminishing marginal utility

4. Revealed preference curve

5. Indifference curve

A.1 3 4 2 5
B.1 5 3 4 2
C.1 3 2 5 4
D.1 2 3 4 5
Answer Report Discuss
Option: C

Explanation :

24:
The falling part of a TU curve shows

A.Zero marginal utility

B.Decreasing marginal utility
C.Increasing marginal utility
D.Negative marginal utility
Answer Report Discuss
Option: D

Explanation :

25:
Given the cost conditions

A.Monopoly output will be higher and prices lower than under pure
competition
B.Monopoly output will be lower and price higher than under pure competition
C.Monopoly output and price will be higher than under pure competition
D.Monopoly output and price will be lower than under pure competition
 Answer Report Discuss
Option: B

In perfect competition, there is a process of

A.Restricted entry and exit of the firms

B.Free entry and free exit of the firms
C.Free entry but restricted exit of the
firms
D.Semi-free exit but absolute free entry
Answer Report Discuss
Option: B

Explanation :

27:
'The increasing returns to scale occurs because larger scale provides greater specialisation to
various factors' according to

A.Paul A. Samuelson
B.Alfred Marshall
C.Chamberlain
D.Joan Robinson
Answer Report Discuss
Option: C

Explanation :

28:
The change in TR resulting from the sale of one unit more of output, means

A.AR from a given output

B.MR from a given output
C.MR from a given input
D.MR from MC
Answer Report Discuss
Option: B

Explanation :

29:
Price effect in indifference curve analysis arises

A When the consumer becomes either better off or worse off because price
. change is not compensated by income change.
B.When the consumer is better off due to a change in income and price
 C When income and price change
.
D None of the above
.
Answer Report Discuss
Option: A

Explanation :

30:
Marginal revenue will be positive if elasticity of demand is

A.Equal to one
B.More than one
C.Less than one
D.Equal to zero
Answer Report Discuss
Option: B

Explanation :

31:
The degree of monopoly power can be measured by the formula

A.P MC/P
B.MR/AR - MR
C.AR/AR MR
D.AR MR/MR
Answer Report Discuss
Option: A

Explanation :

32:
The supply curve for the short-run competitive firm is the same as

A.Average variable cost curve

B.Marginal cost curve
C.That part of the MC curve which equals or is greater than AVC
D.Average total cost curve
Answer Report Discuss
Option: C

Explanation :

33:
A centralised cartel

A Is illegal in the U.S.

.
B.Behaves as the multiplant monopolist if it wants to minimise the total cost of
production
C Leads to the monopoly situation
.
D All of the above
.
Answer Report Discuss
Option: D

Explanation :

34:
Match the following :

(A) Various combinations of two commodities that a consumer can purchase 1. Indifference map

(B) Various combinations of two commodities that give consumer equal satisfaction 2.
Indifference curve

(C) A set of indifference curves 3. Budget line

(D) Point of tangency of a budget line and an indifference curve 4. Consumer's equilibrium

A.(A) (B) (C) (D)

2 3 4 1
B.(A) (B) (C) (D)

4 3 2 1
C.(A) (B) (C) (D)

1 2 4 3
D.(A) (B) (C) (D)

3 2 1 4
Answer Report Discuss
Option: D

Explanation :