NATURE AND SCOPE OF BUSINESS ECONOMICS

Multiple Choice Questions

1. Economists regard decision making as important because:

a. The resources required to satisfy our unlimited wants and needs are
finite, or scarce.
b. It is crucial to understand how we can best allocate our scarce resources to
satisfy society’s unlimited wants and needs.
c. Resources have alternative uses.
d. All the above.
2. Business Economics is -
a. Abstract and applies the tools of Microeconomics.
b. Involves practical application of economic theory in business decision
making.
c. Incorporates tools from multiple disciplines.
d. (b) and (c) above.
3. 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.
4. 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.
5. 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.
6. In every economic system, scarcity imposes limitations on
a. households, business firms, governments, and the nation as a whole.
 b. households and business firms, but not the governments.
c. local and state governments, but not the federal government.
d. households and governments, but not business firms.
7. Macroeconomics is also called——— economics.
a. applied
b. aggregate
c. experimental
d. none of the above
8. 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.
9. A study of how increases in the corporate income tax rate will affect the
national unemployment rate is an example of -
a. Macro-Economics.
b. Descriptive Economics.
c. Micro-economics.
d. Normative economics.
10. 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
11. 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
12. 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.
13. 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.
14. The branch of economic theory that deals with the problem of allocation of
resources is-
a. Micro-Economic theory.
b. Macro-economic theory.
c. Econometrics.
d. None of the above.
15. 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?
16. 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.
17. 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
18. 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.
19. Which of the following is not within the scope of Business Economics?
a. Capital Budgeting
b. Risk Analysis
c. Business Cycles
d. Accounting Standards
20. 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.
21. Economic goods are considered scarce resources because they.
a. cannot be increased in quantity.
b. do not exist in adequate quantity to satisfy the requirements of the society.
c. are of primary importance in satisfying social requirements.
d. are limited to man made goods.
22. In a free market economy the allocation of resources is determined by
a. voting done by consumers.
b. a central planning authority.
c. consumer preferences.
d. the level of profits of firms.
23. A capitalist economy uses as the principal means of allocating resources.
a. demand
b. supply
c. efficiency
d. prices
24. 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.
25. 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.
26. 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.
27. 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.
28. 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.
29. Which of the following is not one of the four central questions that the study of
economics is supposed to answer?
a. Who produces what?
b. When are goods produced?
c. Who consumes what?
d. How are goods produced?
30. Larger production of goods would lead to higher production in future.
a. consumer goods
b. capital goods
c. agricultural goods
d. public goods
31. 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
32. 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.
33. Freedom of choice is the advantage of -
a. Socialism
b. Capitalism
c. Communism
d. None of the above
34. Exploitation and inequality are minimal under:
a. Socialism
b. Capitalism
c. Mixed economy
d. None of the above
35. 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
36. In Economics, the central economic problem means:
a. Output is restricted to the limited availability of resources
b. Consumer do not have as much money as they would wish
c. There will always be certain level of unemployment
d. Resources are not always allocated in an optimum way
37. Scarcity definition of Economics is given by-
a. Alfred Marshall
b. Samuelson
c. Robinson
 d. Adam Smith
38. 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
39. 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
40. There is need of economic study, because –
a. The resources are limited
b. The wants are unlimited
c. The resources are unlimited
d. Both a and b
41. The benefit of economic study is –
a. It ensure that all problems will be appropriately tackled
b. It helps in identifying problems
c. It enable to examine a problem in its right perspective
d. It gives exact solutions to every problem
42. 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
43. 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
44. 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
45. Profit motive is a merit of
a. Socialism
b. Capitalism
c. Mixed economy
d. None of the above

46. A________is also called as command economy

a. Socialist
b. Capitalist
c. Mixed economy
d. None of the above
47. 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.
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.
48. Unlimited ends and limited means together present the problem of .
a. Scarcity of resources
b. Choice
c. Distribution
d. None of the above