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Managerial Economics

Unit1 - 2 Mark Quiz Questions

1.Decision-making implies

a. Giving judgement on a particular isuue

b. Taking a final decision on a particular issue

c. Selecting the best out of several alternative course of actions

d. Selecting alternative solutions.

2.Forward Planning implies

a. A plan to execute current programs

b. A Plan prepared in advace for future

c. A plan prepared in the background of certainties
d. A Plan prepared for past and present

3.Managerial Economics deals with

a. Provide alternative solutions to the problems

b. Providing solutions to various business and management problems
c. Providing tools and techniques to find answers for business and management

d. Analyzing various business and managerial problems of a firm.

4.Managerial Economics helps

a. To optimise abundant resources to maximise profits

b. To find answers only for present problems in the background of past events
c. To analyse present problems in the background of past
d. To find solutions for present and future problems on the basis of past and present

Unit2 - 2 Mark Quiz Questions
1.A product can be considered as inferior in economics if increase in disposable income
of the consumer causes

a. Increase in demand
b. No change in demand
c. Less than proportionate change in demand.

d. Decrease in demand

2.Demand Schedule of a firm shows quantities of a commodity

a. Purchased at varying prices at different periods of time.

b. That can be purchased at varying prices

c. Purchased at varying prices at a given period of time

d. Purchased at a price

3.In case of prestige goods, a fall in price lead to

a. A very high rise in demand

b. Decrease in demand
c. A small rise in demand
d. Increase in demand

4.In the long run, consumption habits of people become

a. Elastic
b. Inelastic
c. Perfectly elastic.
d. Relatively elastic
5.Market Demand Schedule shows the

a. Aggregate behaviour of the market

b. Sum of all individual demand schedules
c. Total price and demand
d. Total demand of all consumers

6.Over the years, the demand for textiles in India has grown inspite of rising pricies. It is
an example for

a. demand function
b. General tendency in rise in price

c. Exceptions to law of demand

d. Law of demand

7.The combined effect of change in price on demand for a product is.

a. Substitution effect plus price effect

b. Substitution effect plus income effect

c. Substitution effect minus income effect
d. Substitution effect plus demonstration effect.

8.The quantity of a commodity that an individual is willing to purchase over a specified

period of time is not a function of

a. His disposable income

b. Price of the commodity

c. price of factors of production.

d. Price of competitive goods
9.Two goods X and Y are considered as complementary to each other if

a. Fall in the price of one lead to fall in the demand of the other
b. Increase in price of one leads to increase in the demand of the other one

c. Increase in price of one leads to decrease in demand of other and vice-versa

d. Increase in price of one leads to increase in the demand of other and vice-versa.

10.When demonstration effect operate, consuners would buy more

a. Even at a lower price

b. At the same price

c. Even at higher price

d. At different prices.

11.When the buyer is badly in need of a product, in that case he would buy more

a. At higher prices
b. At different prices
c. At lower prices
d. At the same price

12.When there is an imporvement in quality of a product, there will be change in

consumption habits, in that case the demand curve of consumers would

a. Shift forward
b. Becomes steep
c. Becomes flat
d. Shift backwards

13.When two goods are complementary, a rise in the price of one comodity will induce
a. An upward shift in demand for the other commodity
b. A rise in the price of other commodity
c. No shift in the demand for the other commodity

d. A downward shift in the demand for the other commodity.

14.When utility of a product increases and its usefulness rises, in that case, there will be

a. Becomes horizontal
b. Backward shift in demaned curve

c. Forward shift in demand curve

d. Becomes vertical straight line.

15.X and Y are two products which are considered as close substitutes of each other if

a. Increase in the price of one leads to increase in the demand for the other and vice-

b. Increase in the price of one will have no impact on the demand for the other
c. Increase in the price of one leads to decrease in the demand of another and vice-
d. Fall in the price of one lead to fall in the demand of the other.

Unit3 - 2 Mark Quiz Questions

1.A firm can make use of the sales forecasts made by the industry.

a. As a powerful tool for formulating its price policy.

b. As a powerful tool for formulating its inventory policy.
c. As a powerful tool for formulating its sales policy & sales strategy.
d. As a powerful tool for formulating its profit policy.

2.Demand forecasting helps in determining the level of output at various periods and

a. Risks in production.
b. Unnecessary competition.

c. Under or over production.

d. Cost escalation.
3.Demand forecasting is undertaken at.

a. Firm level only.

b. Firm level, industry level and macro level.

c. Macro level only.
d. Industry level only.

4.Demand forecasting reduces production uncertainties and helps in.

a. Achieving the set goals.

b. Reducing the cost of production.
c. Promoting the sales.

d. Stabilizing the activities of the firm.

5.Demand forecasts of particular products become the basis for.

a. The evaluation of the progress of the firm.

b. Demand forecasting of other related industries.

c. The formulation of the tax policy.
d. Demand forecasting of the entire industry.

Unit4 - 2 Mark Quiz Questions

1.A firm would like to supply goods at a price which is

a. Less than the cost of production

b. More than the cost of production

c. Equal to cost of production.
d. Considered as a reserve price
2.Market supply schedule shows the

a. Total stock & total supply.

b. Aggregate behaviour of the market.

c. Total amount produced by the industry.
d. Sum of all individual supply schedules.

3.Supply schedule of a firm shows quantities of a commodity

a. Offered for sale at varying prices.

b. That can be delivered at varying prices.
c. Produced at varying prices.
d. Planned at varying prices.

4.The management will have to decide upon the quantity to be supplied and the quantity
to be held back based upon

a. Position of the firm.

b. Needs of the consumer.

c. Price.
d. Policy of the firm.

5.The market supply schedule helps a firm to formulate its

a. Production policy.
b. Management policy.

c. Sales policy. 1
d. Investment policy.
Unit5 - 2 Mark Quiz Questions
1.A rational producer will operate in the ____ stage of law of variable proportions

a. Any of these

b. 2nd
c. 1st
d. 3rd

2.A stage of decreasing return implies

a. MP is negative

b. MP is decreasing
c. AP is negative
d. Both a and b

3.At the point of inflexion, the marginal product is

a. minimum

b. Maximum
c. Decreasing
d. Increasing

4.Diminishing returns occur

a. When the qty of the fixed input is increased and return to the variable input falls
b. when units of a variable input are added to a fixed input and marginal product

c. when the size of the plant is increased in the long run
d. when units of a variable input are added to a fixed input and total product falls.
5.If a production function is homogenous of degree one it implies that

a. There is constant return to scale

b. None of these
c. There is decreasing return to scale
d. There is Increasing return to scale

6.In the long run

a. All factors become inelastic

b. All factors become fixed
c. All factors become redundant

d. All factors become variable

6.In the production of wheat all of the following are variable factors that are used by the
farmer except

a. The tractor used by the farmer in planting and cultivating not only wheat but also
b. The number of hours that the farmer spends in cultivating the wheat fields

c. The field that has been cleared of trees and in which the crop is planted
d. The seed and fertilizer used when the crop is planted

7.Increasing return inplies

a. Maximum cost

b. Decreasing cost
c. Increasing cost
d. Constant cost
8.Iso-quant curve cannot be a straight line as it would imply the operation of

a. Increasing returns to scale

b. increasing M.R.TS

c. constant MRTS
d. diminishing

9.Iso-quant curve is convex to the origin due to ______

a. Increasing returns to scale

b. Constant returns to scale

c. D.M.R.T S
d. I.M.R.TS

10.Larger production of goods would lead to higher production in future

a. public goods
b. agricultural goods
c. consumer goods

d. capital goods

11.Marginal product curve is above the A.P.C when the AP is

a. Increasing
b. Decreasing
c. Zero
d. c. Constant

12.Production and productivity is one and the same

a. May be

b. I do not agree
c. I agree
d. May not be
13.Production economics is

a. A branch of macro economics

b. A branch of micro economics

c. A management Jargon
d. A branch of pure economics

14.Production function refers to

a. Relationship between output and cost

b. Relationship between physical input and output

c. Relationship between input and output
d. Relationship between cost and output

15.Returns to factors is the other name of

a. Law of Returns to scale

b. None
c. Return to fixed proportion

d. Law of variable proportions

16.The law of diminishing returns

a. states that beyond some level of a variable input, the marginal product of that

variable begins to decrease steadily

b. States that beyond some level of a variable input, the average product of that
variable input begins to increase steadily
c. Informs a producer whether or not to use a factor input
d. Assumes that there is technological improvement over time
17.The law of variable proportions come into operation when

a. There is a fixed factor and a variable factor

b. Variable factors yield less result
c. There are only two variable factors
d. All factors are variable

18.The slope of the total production curve measures

a. Maximium production

b. Marginal production
c. Average production
d. Minimum production

19.Which of the following is considered as production in Economics ?

a. A farmer tilling of soil

b. A doctor treating his own wife
c. Singing a song before friends
d. Painting a picture for pleasure

Unit6 - 2 Mark Quiz Questions

1.At the aggregate level, profit maximisation is possible when

a. TR> AR
b. AR> AC
c. MR> MC

d. TR> TC
2.In a perfectly competitive market a profit maximising firm is

a. A price-searcher

b. A price- taker
c. A price-maker
d. A price avoider

3.In which case profit maximisation is not justified

a. Firm working for promoting the well being of the people

b. A firm is not a chartible institution
c. It is necessary for the very survival of the firm
d. It is a natural principle of a firm

4.One of the main character of the classical firm is

a. The risk of loss is spread over a large number of persons
b. The day to day management is entrusted to Board of directors
c. More scope for division of labor
d. The owner is entitled to enjoy the residual income after making payments to all

the factors inputs

5.Profit maximisation implies

a. Higher level of profit
b. optimum level of profit

c. Highest possible level of profit

d. large amount of profit

6.Profit maximising model is of the view that the success a firm depends on
a. sales maximisation

b. profit maximisation
c. Market share expansion
d. Growth maximisation
7.Slack payment implies

a. Reduction in payments by the management

b. Slow payments by the management
c. Relaxation in payments by the management

d. Excess payment by the management as an incentive

8.Theory of firm deals with

a. The traditional firm

b. The owner-entrepreneurial preneurial firm

c. The partnership firm

d. The classical firm

Unit7 - 2 Mark Quiz Questions

1.Suppose a firm is selling 5 units of the output at the price of Rs.15 per unit. Now if it
wants to sell 6 units instead of 5 units and there by the price of the product falls to Rs.14
then the marginal revenue will be

a. Rs.14.
b. Rs.10.

c. Rs.9.
d. Rs.15.

2.Suppose that the price of a product is Rs.6 and the elasticity is 3 at that price MR will

a. 6.
b. 2.

c. 4.
d. 3.
3.To sell an additional unit of the commodity, seller

a. Need not reduce the price on all units.

b. Should reduce the price for all the units.

c. Has to reduce the price for the additional unit.
d. Need not reduce the price at all.

4.When AR = MR = P a firm can sell

a. More only at a reduced price.

b. More at the same price.

c. Less at a higher price.
d. More at a higher price.

Unit8 - 2 Mark Quiz Questions

1.A firm can increase its output in the short run only by the

a. Improvement in its organization.

b. Intensive utilization of existing plant and machinery.
c. Improvement in its techniques of production.
d. Improvement in its marketing techniques.

2.A firm operating under conditions of perfect competitions can

a. Determine only the size of its output.

b. Promote the sales through effective advertisement.
c. Determine the price of its product.
d. Capture the market by cutting down the price.
3.A firm under perfect competition

a. Can fix the price according to his choice.

b. Has to fix the price according to the cost.

c. Has to accept the price prevailing in the market.

d. Can fix the most remunerative price.

4.A firm under perfect competition will not produce any output unless the price is at least
equal to the minimum

a. AFC.
b. MC.
c. AC.

d. AVC.

5.An individual firm forms to be a very small portion of the market , not in a position to
influence market output or price under

a. Oligopoly.
b. Imperfect competition.

c. Perfect competition.
d. Duopoly.

6.At a point where P=RR=AC=MR=MC the firm will be earning

a. Reasonable profit.
b. Subnormal profit.
c. Abnormal profit.

d. Only normal profit.

7.If the price is above the AVC and below the AC it is called as

a. Economic zone.
b. Maximum loss zone.
c. Normal profit zone.

d. Loss minimization zone.

8.If the price is equal to AVC the firm will not be able to cover its fixed cost and suffers

a. So it will wind up its operation.

b. It will continue in business with the hope that the price may go up in future.
c. It will reduce its output
d. It will expand its output.

9.If the price of the product is inadequate to cover either the AFC or the AVC the firm
will have to

a. Improve its capacity.

b. Reduce its output.
c. Expand its output.

d. Wind up its operation.

10.In order to maximize its benefit an economic unit always has a tendency to move

a. Strengthening of its position in the market

b. The highest point of output.
c. The lowest cost of production.

d. The equilibrium point.

11.In the short run a firm can increase its output only by varying

a. The variable factors.

b. The application of capital.
c. All the factors of production.
d. A few factors of production

12.The market situation which acts as a yardstick against which all other models can be
compared and evaluated is

a. Duopoly.
b. Monopoly.
c. Monopolistic competition.

d. Perfect competition.

13.There is absolute freedom for the firms to enter or quit the industry under

a. Imperfect competition.
b. Bilateral monopoly.
c. Oligopoly.

d. Perfect competition.

Unit9 - 2 Mark Quiz Questions

1.Consumers' surplus will be more in case intensity for a product is

a. Low

b. Very high
c. Very low
d. High
2.In which case consumers' surplus will be more?

a. Cost

b. benefit
c. When both are less
d. Benefit> cost
e. Cost > benefit

3.The volume of consumers' surplus will be more in case of

a. Lower middle income countries.

b. Middle income countries
c. Poor nations

d. Rich nations

4.There is

a. An inverse relationship between consumers' surplus and price.

b. A direct relationship between consumer's surplus and price
c. A direct relationship between price and consumers' surplus

d. An inverse relationship between price and consumers' surplus

5.There is a direct and definite relationship between expected and realised satisfaction

a. Always

b. Some cases
c. None of the above
d. Difficult to say
6.There is a direct relationship between price and consumers' surplus in case of

a. Independent goods
b. Comforts

c. Status symbol goods.

d. Necessaries of life

Unit10 - 2 Mark Quiz Questions

1."Which of the activity is included in the calculation of the national income of a

a. A maid servant rendering her service in a house

b. A teacher teaching his own son
c. A doctor treating his own wife
d. A student singing in a college competition

2.Choose one answer.

a. CPI=Price existing at current year/Price existing at coming yearX100

b. CPI=Price existing at current year/price at base yearX100

c. CPI=Price existing at base year/price at current yearX100
d. CPI=Price existing at coming year/Price existing at current yearX100

3.Identify the incorrect answer.

a. The value of money is inversely related to the general price level

b. The prices of all goods does not change in a uniform manner
c. "d. The value of money is inversely related to purchasing power and directly

related to general price level."

d. The value of money is derivate
4.In order to cosntruct CPI which of the following item is not taken in to account?

a. prices existing at the base year and the prices in the current year
b. Price data from retail outlets

c. Price data from wholesale market

d. Family budget surveys from time to time

5.National income in general refers to

a. NNP at market prices

b. NNP at factor cost

c. GNP at market prices
d. GNP at factor cost

6.Which of the following statement is correct?

a. If NI rises, welfare of the people must also rise

b. If NI rises, Per capita income must also rise
c. If population increases, per capita income must also fall

d. None of the above

Unit11 - 2 Mark Quiz Questions

1.Does the increase in income always leads to an increase in consumption expenditure

a. Yes consumption expenditure increases at a less than proportionate rate.

b. Consumption increases more than proportionately.
c. Yes a great increase in consumption expenditure.
d. No, there will be no increase in consumption expenditure
2.Keynes psychological law of consumption states that as aggregate income increases
consumption expenditure shall also increase but by a

a. More than proportionate rate.

b. Smaller amount.
c. Greater amount.
d. Proportionate rate.

3.Propensity to consume in the short period is generally

a. Stable.
b. More.
c. Unstable.
d. Less.

4.Rising MPC during depression and declining MPC during boom explain the

a. Way in which the economy is moving.

b. Turning points of the business cycles.

c. Level of fluctuations.
d. Rate of economic activity.

5.The sum of MPC and MPS

a. Equals 1.
b. Is greater than 1
c. Equals aggregate income.
d. Is less than 1.
Unit12 - 2 Mark Quiz Questions
1.A cheap money policy refer to

a. Reduction in the supply of credit.

b. Expansion of money supply.
c. Reduction the supply of money.

d. Reduction in the interest rates.

2.A dear money policy refer to

a. A rise in the rate of interest.

b. A reduction in the supply of credit.
c. A reduction in the supply of money.
d. Expansion in the supply of credit.

3.Countercyclical measures and the measures adopted to compensate for the predicted
changes in employment and output to improve community welfare are referred to as

a. Stabilization policy.
b. Monetary policy.
c. Fiscal measures.
d. Physical controls.

4.In order to promote smooth and unhindered international trade and free flow of foreign
exchange into a country what should be the objective of monetary policy?

a. Exchange rate stability.

b. Liberal.
c. Positive.
d. Price stability.
5.To attain full employment through adequate supply of money and credit available
resources are to be fully utilised

a. To raise effective demand in the economy.

b. To encourage investment.
c. To promote rapid economic growth.
d. To maintain equilibrium.

Unit14 - 2 Mark Quiz Questions

1.Authoritative persuasions , publicity campaigns etc., example compulsory purchase of
national savings certificates by the salaried class, companies to restrict dividend
distribution etc., is known as

a. Fiscal control.
b. Physical control.

c. Exhortations.
d. Monetary control.

2.Galloping inflation continuously reducing the purchasing power of money brings

a. Unprecedented growth of the economy.

b. Foreign flow of funds into the economy.

c. A total collapse of the monetary system.

d. Prosperity to the economy.

3.Periodic adjustments in money incomes of the people and in the value of financial
assets, saving deposits etc., held by the public in accordance with the changes in the price
level by the monetary authorities is known as
a. Adjustment.
b. Tuning.
c. Correction.

d. Indexing.
4.When the rise in prices is very slow like that of a snail or creeper it is called

a. Halting inflation.

b. Creeping inflation.
c. Hidden inflation.
d. Limping inflation.

Unit15 - 2 Mark Quiz Questions

1.Dumysing industrial wastage into a river, polluting, air,water,soil,noise,create bad
odour by an individual organisation

a. Micro level negative externalities

b. Macro level negative externalities
c. Macro level positive externalities
d. Micro level positive externalities

2.Expenditure on national defence, law and order control of terrorism etc are the example

a. Negative macro externalities

b. positive macro externalities

c. Positive micro externalities
d. negative micro externalities

3.Identify the incorrect answer, Sustainable economic development is possible when

a. There is proper balance between short run and long run interests
b. The stocks of various types of resources are maintained and further improved

c. Current national output is the highest possible

d. There is proper balance between present and future use of resosurces
4.Money spent on a temple, free hospital, old age house etc by an individual or
organisation is an example for

a. Negative micro externalities

b. Positive micro externalities

c. Negative macro externalities
d. Positive macro externalities

5.Negative externalities

a. Decrease social costs

b. Increase social benefits

c. Increase social costs

d. Decrease social benefits

6.Positive externalities

a. Decrease external social benefits

b. Increase external social benefits

c. Increase external social costs
d. Decrease external social costs

7.Society will get maximum benefits when_______

a. Social benefits < social costs

b. social costs
c. Social costs > social benefits
d. Social benefits> social costs
e. Social benefits
8.The negative externality created by a firm

a. Impose extra financial burden on a firm

b. Does not compensate people for the damages it has created
c. Impose extra financial burden on government
d. Does compensate people for the damages it has created