R.C.

Patel Educational Trust’s

Institute of Management Research & Development, Shirpur

FY BBA A2.2 Managerial Economics

MCQ - Question Bank

MCQ- CHAPTER 1

1. ___________ is the application of Economic theory to managerial practice.

(a) Economic Management

(b) Managerial Economics

(c) Economic Practice

(d) Managerial Theory

2. Managerial Economics relates to the use of tools and techniques of _______ to solve
managerial problems.

(a) Managerial Theory

(b) Economic Practice

(c) Economic Analysis

(d) None of the above

3. -------- has indicated that economic problem mainly arises because, human wants are unlimited
whereas the means to satisfy these wants are limited.

(a) Lionel Robbins

(b) Samuelson

(c) Milton Spencer

(d) James Pappas

4. Resources of an economy

(a) Land & Labour (b) Capital (c) Entrepreneurship (d) All of the above

5. Managerial economics is also called

(a) Micro economics (b) Theory of the firm (c) Economics of the firm (d) All of the above.
6. Which of the following is not included in functions of managerial economists

(a) Sales forecasting

(b) Industrial market research

(c) Advice on foreign exchange

(d) None of the above

7. Which subject studies the behavior of the firm in theory and practice?

(a) Micro Economics (b) Macro Economics (c) Managerial Economics (d) Welfare Economics

8. Which areas covered by the subject “Managerial Economics”.

(a) Operational issues

(b) Environmental issues

(c) Operational & Environmental issues

(d) None

9. Making decisions and processing information are the two Primary tasks of the Managers . It
was explained by the subject _____________________.

(a) Physics (b) Engineering Science (c) Managerial Economics (d) Chemistry

10. The theory of firm also called as_____________.

(a) Welfare Economics (b) Industrial Economics (c) Micro Economics (d) None

11. Managerial Economics is

(a) Dealing only micro aspects

(b) Only a normative science

(c) Deals with practical aspects

(d) All of the above

12. Which of the following is included in specific functions of managerial economists

(a) Economic analysis of competing companies

(b) Advice on pricing problems of industry

(c) Environmental forecasting

(d) All of the above

13. _______ is known as father of economics

(a). Marshal (b). Robins (c). Adam smith (d). A C Pigou

14. Welfare (neo classical) definition of economics is given by

(a). J B Say (b). Lionel Robbins (c). Adam Smith (d). Alfred Marshall

15. The principle reasons behind economic problems

(a). Unlimited wants

(b). Limited or Scarce of Means

(c). Alternatives Uses of Means

(d). All of the above

MCQ- CHAPTER 2

1. In economics, desire backed by purchasing power is known as

(a) Utility (b) Demand (c) Consumption (d) Scarcity

2. The demand has three essentials‐ Desire, Purchasing power and ………..

(a) Quantity (b) Cash (c) Supply (d) Willingness to purchase

3. .………… means an attempt to determine the factors affecting the demand of a commodity or
service and to measure such factors and their influences

(a) Demand planning (b)Demand forecasting (c) Demand analysis (d) Demand estimation

4. ______________ demand forecasting is related to the business conditions prevailing in the

economy as a whole.

(a) Macro level

(b) Industry level

(c) Firm level

(d) None of these

5. Purposes of Short term Demand forecasting doesn’t includes;

(a) Making a suitable production policy.

(b) To reduce the cost of purchasing raw materials and to control inventory

(c) Deciding suitable price policy

(d) Planning of a new unit or expansion of existing unit

6. ______________ Method is also known as Sales-Force – Composite method or collective

opinion method.

(a) Opinion Survey

(b) Expert Opinion

(c) Delphi Method

(d) Consumer interview method

7. Which of the following is not a method of demand forecasting of new products

(a) Trend Projection

(b) Substitute Approach

(c) Evolutionary Approach

(d) Sales Experience Approach

8. Criteria for good demand forecasting includes;

(a) Plausibility

(b) Simplicity

(c) Economy

(d) All the above

9. Method of demand forecasting is also called "economic model building"

(a) Opinion survey

(b) Complete enumeration

(c) Correlation and regression

(d) Delphi method

10. ______________ forecasting is more important from managerial view point as it helps the
management in decision making with regard to the firms demand and production.

(a) Macro level

(b) Industry level

(c) Firm level

(d) None of these

11. Under ______________ Method, a panel is selected to give suggestions to solve the
problems in hand

(a) Opinion Survey

(b) Expert Opinion

(c) Delphi Method

(d) Consumer Interview

12. Consumer Interview method of demand forecasting may undertaken by;

(a) Complete enumeration

(b) Smaple Survey

(c) End User Method

(d) All the above

13. ______________ is an "objective assessment of the future course of demand"

(a) Demand Estimation

(b) Demand Analysis

(c) Demand Fuction

(d) Demand Forecasting

14. Purposes of long term Demand forecasting includes

(a) Making a suitable production policy.

(b) To reduce the cost of purchasing raw materials and to control inventory

(c) Deciding suitable price policy

(d) Planning of a new unit or expansion of existing unit

15. Tools and techniques for demand estimation includes;

(a) Consumer Surveys

(b) Consumer Clinincs and focus groups

(c) Market experiment

(d) All of the above

16. Which of the following is not a survey method of demand forecasting

(a). Consumers interview method

(b). Expert opinion method

(c). Barometric method

(d). Collective opinion method

CHAPTER 3- PRODUCTION FUNCTION AND COST FUNCTION

Q1) Production Function is an expression of ________ Relationship between input and Output

(A). Financial (B). Technical (C). Social (D). None of the above

Q2 A Production function states that there exist technical relationship between

(A). Input Prices and Output Prices

(B). Input Prices and Quantity of Output

(C). The quantity of Input and Quantity of Output

(D). None of the above

Q3) Production has been defined as :

(A). Utility creation (B). Providing services (C). Agricultural activity (D). Any of the above
Q4 ) The objective of production activity is

(A). To earn profit

(B). To create employment

(C). Raise national income

(D). To improve standard of living

Q5) The law of diminishing returns refers to an eventual fall in

(A). Total product of all the factors of production

(B). Total revenue of the firm

(C). Marginal product of the variable factor

(D). All of the above

Q6) Average Product can have

(A). Positive Values only

(B). Negative Values only

(C). Both

(D). Neither Positive nor negative

Q7) What is Modern name of Law of return to factors

(A). Law of equal Proportions

(B). Law of diminishing Proportions

(C). Law of Increasing Proportions

(D). Law of Variable Proportions

Q8) The law of Variable proportion applies when

(A). All the Inputs are fixed

(B). All the Inputs are variable

(C). All the factor of production fixed

(D). at least one input is fixed and other inputs are variable
Q 9) Short run production function is related to

(A). The law of Variable proportions

(B). Return to Scale

(C). Both A and B

(D). None of the above

Q10) Law of Variable proportion explains three stages of production at the end of second stage

.(A) AP rises and MP Falls

(B). TP rises and MP Falls

(C). TP Maximum and MP Zero

(D). None

Q11 In describing given production technique the short run is best described as

(A). Upto 6 Months from now

(B). Upto 12 Months from now

(C). Upto 2 Months from now

(D). As long as one input is fixed

Q12 The law of diminishing return refers to an eventually fall in

(A). Productivity of factor of production

(B). Total earning of the firm

(C). Marginal product of the variable factor

(D). None of these

Q13 Law of Variable proportion was introduced by

( A). Sir Edward West (B). Adam Smith (C). Ricardo (D). All of the above

Q14) Increasing returns to scale arises

(A). If percentage change of the output of a firm increases more than in proportionate to
an increase in all inputs
(B). when all inputs are increased by a certain percentage the output increases by the same
percentage.

(C). when output increases in a smaller proportion than the increase in inputs

(D). All of the above

Q15) Law of return to scale applies in case of

(A). Perfect Market (B). Monopoly Market (C). All firms of market (D). Small firms

Q16) During short run diminishing return may follow because

(A). Quantity of labour is fixed

(B). Quantity of any one factor is fixed

(C). All factors are fixed

(D). None of the above

17) In production function, production is a function of:

(a) Price

(b) Factors of Production

(c) Total Expenditure

(d) None of these

18) Which of the following explains the short-run production function ?

(a) Law of Demand

(b) Law of Variable Proportion

(c) Returns to Scale

(d) Elasticity of Demand

19) Long-run production function is related to:

(a) Law of Demand

(b) Law of Increasing Returns

(c) Laws of Returns to Scale

(d) Elasticity of Demand

20) Law of variable proportion explains three stages of production. In the first stage of
production:

(a) Both MP and AP rise

(b) MP rises

(c) AP Falls

(d) MP is zero

21) At which time all the factors of production may be changed ?

(a) Short run

(b) Long run

(c) Very Long run

(d) All the three

22) Production function is expressed as:

(a) Qx = Px

(b) Qx = f(A, B, C, D)

(c) Qx = Dx

(d) None of these

23) Which factors among following we find in short-run production process ?

(a) Fixed Factors

(b) Variable Factors

(c) Both (a) and (b)

(d) None of these

24) Which of the following is a source of production ?

(a) Land

(b) Labour
(c) Capital

(d) All of these

25) Law of variable proportion is related to :

(a) Both short-run and long run

(b) Long-run

(c) Short-run

(d) Very Long-run

26) An active factor of production is:

(a) Capital

(b) Labour

(c) Land

(d) None of these

27) Which of the following is not fixed cost ?

(a) Insurance Premium

(b) Interest

(c) Cost of Raw Material

(d) Rent of the Factory

28) With the increase in production the difference between total cost and total fixed cost:

(a) Remains Constant

(b) Increases

(c) Decreases

(d) Both Increases or Decreases

29) Changes in production quantity affect:

(a) Both Fixed and Variable Cost

(b) Only Variable Cost

(c) Only Fixed Cost

(d) None of the above

30) What happens when production is shut down ?

(a) Fixed Cost Increases

(b) Variable Costs Decline

(c) Variable Costs become zero

(d) Fixed Costs become zero

31) Which statement of the following is true ?

(a) AC=TFC – TVC

(b) AC = AFC + TVC

(c) AC=TFC + AVC

(d) AC = AFC + AVC

32) The shape of average cost curve is :

(a) U-shaped

(b) Reactangular Hyperbola shaped

(c) Line parallel to x-axis

(d) None of these

33) The average fixed cost at 5 units of output is Rs. 20. Average variable cost at 5 units of
output is Rs. 40. Average cost of producing 5 units is:

(a) Rs. 20

(b) Rs. 40

(c) Rs.56

(d) Rs.60

34) Which of the following is correct ?

(a) TVC = TC – TFC

(b) TC = TVC-TFC

(c) TFC = TVC + TC

(d) TC = TVC x TFC

35) Average variable costs can be defined as:

(a) TVC x Q

(b) TVC + Q

(c) TVC-Q

(d) TVC ÷ Q

36) The absolute value of the slope of the isoquant is the:

(a) Marginal rate of technical substitution

(b) Marginal product of capital

(c) Marginal rate of substitution

(d) Value marginal product of labor

37) Which of the following are the properties of Isoquant Product?

(a) Iso-Product Curves Slope Downward from Left to Right

(b) Isoquants are Convex to the Origin

(c) No Isoquant can Touch Either Axis

(d) All of the above

38) Higher Iso-Product Curves Represent

(a) Higher Level of Output

(b) Same Level of Output

(c) Lower Level of Output

(d) None of these

CHAPTER 4- PRICING POLICIES

1. While setting the price, companies

(a) Select the pricing objective

(b) Estimate demand

(c) Analysis competitors cost, offers and prices

(d) All of the above

2. The pricing objectives are

(a) Maximum current profit, market share and market skimming

(b) Survival

(c) Product quality

(d) All of the above

3. If companies face intense competition and plagued with over-capacity, the pricing
objective is

(a) Survival (b) Maximum current profit (c) Maximum market share (d) None of the above

4. Marketers focus on ___________ while maximizing market share.

(a) Higher sales volume (b) Lower unit costs (c) Both a and b (d) None of the above

5. Market-penetration pricing strategy can be adopted when

(a) Market is highly price sensitive

(b) Low price stimulates market growth

(c) Both a & b

(d) None of the above

6. In the process of maximum market skimming,

(a) Prices start high and slowly decline over time

(b) Prices start low and gradually increase over time

(c) Prices remain constant

(d) All of the above

7. In going rate pricing an organization bases its price based on

(a) Consumers preferences (b) Competitors price (c) Self decision (d) None of the above

8. Setting price below of that competition

(a) Penetration Pricing

(b) Competitive Pricing

(c) Skimming

9. A profit calculated on the basis of a percentage of the selling price is called

(a) Breakeven

(b) Margin

(c) Mark Up

10. A profit calculated on the basis of a percentage of the cost of production is called

(a) Breakeven

(b) Margin

(c) Mark Up

11. What is value-based pricing?

(a) Companies base their prices on buyers' perceptions of value, not their own costs

(b) Offering just the right combination of quality and good service at a fair price

(c) Companies set prices to make a target profit and to get some value for their production and
marketing efforts

(d) Companies set prices to break-even on production and marketing costs

12. ______________ costs do not vary with production levels or sales levels.

(a) Total (b) Variable (c) Fixed (d) All of the above

13. Which of the following element generates revenue?

(a) Promotion (b) Price (c) Place (d) Product

14. The pricing approach where prices are set based on costs is called:___________

(a) Cost Oriented Approach

(b) Value Oriented Approach

(c) Competitor Oriented Approach

(d) Demand Oriented Approach

16. The pricing approach where prices are set based on what customers believe to offer
value is called the:

(a) Cost Oriented Approach

(b) Value Oriented Approach

(c) Competitor Oriented Approach

(d) Demand Oriented Approach

17) Which of the following is not an issue when making a pricing decision?

(a) Legal issues like collusion and oligopolies. (economic conditions)

(b) Political considerations (Government legislation)

(c) Environmental regulations

(d) Competition (Demand and supply)

18) The firm charges price in tune with the industry’s price is called

(a). competitive pricing (b). going rate pricing (c). tune pricing (d). target pricing

19) . Information for pricing decisions involves:

(a) Product Information (b) Market Information (c)Information to Macro Level (d) All of these

20) Which is the determinant of the pricing policy of a firm?

(a) Channel of distribution

(b) Age of product

(c) Consumer association

(d) All of these

 CHAPTER 5-DETERMINATION OF NATIONAL INCOME

1) Which shows equilibrium of national income

(a) Consumption = Investment

(b) Saving = Investment

(c) Saving < Investment

(d) Saving > Investment

2) This may cause an increase in national income:

(a) Rise in exports

(b) Rise in imports

(c) Fall in consumer spending

(d) Increasing in saving

3) If C = 200 and I = 40 then Y will equal:

(a) 160 (b) 240 (c) 800 (d) None of these

4) Aggregate demand is :

(a) Aggregate saving

(b) Aggregate investment

(c) Aggregate income

(d) Aggregate expenditure

5) As per Keynesian economics, the equilibrium level of income is determined at a level where

(a) Ex-ante savings = ex-ante investments

(b) Ex-post saving = ex-post investments

(c) Both (a) & (b)

(d) Neither (a) & (b)

6) Since AS = C + S and AD = C + I, the equilibrium will be established where C + S = C + I

(a) S = I

(b) S > I

(c) S < I

(d) All of these

7) Equilibrium level of income / output and employment is veiwed from which of the following
approaches ?

(a) AS = AD Approach

(b) S = I Approach

(c) Both (a) & (b)

(d) None

8) Alternative Approach to AD = AS approach is

(a) C = I

(b) C = S

(c) S = I

(d) None of these

9) Who is the author of the book ‘General Theory of Employment, Interest and Money’ ?

(a) A.C. Pigou

(b) Malthus

(c) J.M. Keynes

(d) Marshall

10) On which factor Keynesian Theory of Employment depends ?

(a) Effective Demand

(b) Supply

(c) Production Efficiency

(d) None of the above

11) Which one of the following is the determining factor of Equilibrium Income is Keynesian
View point ?

(a) Aggregate Demand

(b) Aggregate Supply

(c) Both (a) and (b)

(d) None of the above

12) In Keynesian viewpoint, the equilibrium level of income and employment in the economy
will be established where:

(a) AD > AS

(b) AS > AD

(c) AD = AS

(d) None of these

13) Keynesian multiplier establishes relationship between :

(a) Investment and Income

(b) Income and Consumption

(c) Saving and Investment

(d) None of the above

14) Multiplier can be expressed as:

(a) K = ΔS/ΔI

(b) K = ΔY/ΔI

(c) K = I – S

(d) None of these

15) Which of the following is true ?

(a) Employment level declines due to decrease in demand

(b) Price level falls due to deficient demand in the country

(c) Production level falls deficient demand

(d) All the above

16) Income and employment are determined by:

(a) Total demand

(b) Total supply

(c) Total demand and total supply both

(d) By market demand.

17) Which of the following is true for Multiplier effect?

(a) The number by which a change in investment must be multiplied to result in the final change
of total output.

(b) The concept proposes that an increase in private investment can increase output and
employment, and a decrease in investment will cause it to contract.

(c) The term multiplier is used to show that the spending done to boost investment has an
amplified effect on output.

(d) All of the above

18) The spending money on capital goods is called:

(a) consumption

(b) investment

(c) saving

(d) None of the above

19) A situation when people are engaged in jobs but they do not get these jobs according to their
capabilities, efficiency and qualifications, it is called:

(a) Employment

(b) Full Employment

(c) Under Employment

(d) Unemployment

21) Bob is unemployed if he

(a) is temporarily laif off

(b) is not looking for a job

(c) has looked for a job for two months and quit looking

(d) A and C are correct

21) Underemployed workers are considered to be visible or invisible, which type of

underemployed worker has been identified as visible?

(a) An unemployed worker currently looking for work

(b) Skilled worker in a low paying job

(c) A part time worker preferring full time

(d) Skilled worker in a low skilled job

22) Which is an example of an invisible underemployed worker?

(a) A seamstress who studied fashion design

(b) An umemployed worker

(c) A waiter working through medical school

(d) A workers whose skills or education is underutilized