) Functionar is OBJECTIVE QUESTIONS : ji i ing concepts or Define . . Give meaning of following Pp D opporunity pe Business eco! ‘ i Incremental concept 4. Marginal concep! Functions Fill in the blanks : i refers to t practice. _ Business economies is no Demand analysis and forecasting is essen is narrower, in scope than cost analysis. ____ deals with various aspects of supply of a commodity. As price generate income to the firm, are important for busir A 1 3. 5. , mic theory with busi he integration of econo’ yw termed as tial for 2. 3. 4, 5. 6. economics. ‘ 7. The price determination theories in different market conditions en the firm to solve the problems. 8. The scope of business’economi j 0 ics cove sche rall-major aspects of _ 9. i mt nan the manger to become a more competent model buildé rs to the next best alternative foregone or sacrificed 11. The change i ge in total i reler as cost resulting from a particular decision of the firr 12. The me —— Measures the ch; : to the change in the inden in the dependent variable with resP = refers to.a lent variable. - si variables, tatement of equality of two ex : | Pression or econo! —— is the per unit Value 13. 14,Introduction to Business Economics SF 92° s2° i [Ans. (1) Business economics; (2) Managerial economics; (3). business planning; (4) Production analysis; (5) Supply analysis; (6) pricing practices; (2) pice fixation; (8) micro-economic; (9) Business economics; (10) Opportunity cost; (11) Incremental cost; (12) marginal concept; (13) Equations; (14) Averages] . 1. Multiple choice questions : is the economics of business or managerial decisions. a) Micro economics b) Macro economics c) Indian economy d) Business economics analysis helps to identity the various factors influencing the demand for a product. a) Supply b) Demand ©) Production d) Cost Cover topics such as cost concepts, methods of estimating costs etc. a) Production analysis b) Supply analysis ) Cost analysis d) Demand analysis —— is concerned with planning and control of capital expenditure. a) Capital management b) Profit management c) Market management d) None of these opportunity cost is also called as cost. a) Total b) Average ©) Marginal d) Alternative Incremental principle state that, a investment decision is profitable if a) revenue increase more than costs »b) cost reduce more than revenue ©) both (a) and (b) d) None of these The ratio of change in total revenue to’a unit change in output sold is a) Marginal revenue b) Marginal cost c) Average revenue d) Average cost ____ explains the dependence of one variable on the other variable. a) Functional relation b) Equations c) Both (a) and (b) d) None of these © The sum of the dependent variable is_. a) Total b) Average ©) Marginal d) None of these involves a cost-benefit comparison of various business activities. a) _ Cost analysis b) Production analysis ©) Demand analysis d) Marginal analysisBusiness Economics —1 (F.y. (5-4), (6— c), (7 — a), (8a), -o, 4- a), pans. (1 = o 2 b), 3 co-d Match the colume , Group ‘B' oul | ee i: [Seat | a) Changes in total cost ang inc | revenue eee pos Sconomics | b) Marginal revenue and cost 2. 7 = [incremental concept | c)__ Managerial economics 4 Marginal concept a Sactifices involved tans. (=e), 2-03 =a) (4-b = ML. Group ‘A’ Group . 1. Functional relations a) Equality of two expressions 2. _ Equations b) __ per unit value 3. Total ©) _ denoted by letter “f 4. Average d) __sum of dependent variable [Ans. (1 - 0), (2 - a), B= d), (4-b)} State whether the following statements are true or false : 1. Business economics does not involve decision — making process. 2. Business economics is the economics of business. 3. Business economics is applicable to several area of business. ‘4. There is no uniform pattern as regards to the scope of busin economics. 5. Cost analysis is more significant than production analysis. 6. Market management is crucial for any business economics. “7. Capital mangement implies planning of capital expenditure. 8. - Cost analysis is narrower in scope than production analysis. 9. Opportunity cost require ascertainment of sacrifices. 10. peemena concept is closely related to the cost only. 5 ba snes two expression or variables. _ runt nal relationship is denoted by symbol per unit value. . Many economic decisions dep iiss : end on marginal analysi ns. True : 2, 3, 4,5, 6, 7,9, 11, 14 fi Bees ear 13) 2° 9°yeeros pl ecg For the demand equation Q=90-3h% aor’ ‘tity i). What is the quantity demanded for price °F the YAY Ans be willing t P 4 i ye willl ii) | What price one would. is = 60. OBJECTIVE QUESTIONS Give meaning of the following concepts or Define Demand function Demand curve Demand curve under pert Demand curve under monopoly Demand curve under oligopoly fect competition Fill in the blanks : i Astraight line demand curve implies —— demand function. Dx =a—b Px is,a case of demand function. Demand and price have —— relationship- The demand curve is elastic. explains the relationship between deman' determinants. Zs The demand curve for a perfectly. competitive firm iss The monopoly firm faces a demand curve. An ____ firm does not face a definite demand curve. 9. Price of ___and demand for the other goods are directly related. 10. Price of ____ and demand for the other goods are inversely related. [Ans. (1) Linear; (2). Linear; (3) inverse; (4) perfectly; (5) Demand func d for a commodity ar pee PND . (6) perfectly elastic; (7) downward, sloping;. (8) Oligopoly; (9) Subst (10) Complement] Multiple choice questions : 1. Demand is a desire backed by 3 both a afd b willingness 19 P d) none of these 2, i a Which of the following is a case of linear demand function? a) Dy = f(PX) 5 b) Dy = f(Px, Py) Sore ere &) Dx= 100-5?Demand Function & Supply Function ° S3° sp” 25 3. A linear demand function is depicted through : a) a straight line demand curve b) a downward slopping demand curve ©) a vertical demand curve d) none of the above 4. Allof the following are determinants of demand except a) Consumer income b) Price of related goods ©) Quantity supplied 4) Size of population 5. Ina typical demand schedule quantity demanded = a) Varies directly with price b) Vaties inversely with price ©) _ Is independent of price 4) Various proportionately with price 6. A perfect Competitive firm faces a — demand curve for its product. a) upward sloping b) downward sloping ©) vertical Straight line d) horizontal straight line 7. The demand curve under Monopoly isa curve. a) upward sloping b) downward sloping ©) horizontal straight line d) None of the above 8. “When demand is perfectly elastic, the demand curve is a) horizontal straight line b) vertical straight line ©) Steep d) None of the above 9. is the desire for a commodity which is backed by ability and willingness to Pay its price. a) Demand b) Supply c) . Demand function d) Supply function 10. Under oligopoly the firm faces a___ demand curve. a) °) horizontal upward sloping TAns. (1 — ¢), (2 — d), (3 ~ a), (4 - °), (10 - d)] D. Match the columns : b) vertical 4). Kinked (Indeterminate) ( —b), 6 ~d), (7 -b), (@- a), (9 - a), I. Group ‘A’ Group ‘B’ 1. Demand function a) __Indeterminate demand curve 2. Perfect competition 6) Downward. sloping demand curve 3. Monopoly ©)__Horizontal demand curve 4. Oligopoly d)Dx=F (Px, Y, Pr T Ans. (1 d), (2-0), (3b), 4—a)]rx os Business Economics —I (F.Y.) (Sem Group ‘A’ Group ‘B’ : 1. Perfect competition a) - Few seller 2. | Monopoly b) Downward sloping curve 3.. Oligopoly ©) Large number of buyers ang sellers 4, Demand curve d) Single seller [Ans. (1 — c), (2 — d), (3 —a), (4—b)] State whether the following statements are true or false : 1. Demand function explains the functional relationship between price an demand. lemand behaviour. 2. A linear demand function implies proportionate d 3. Demand for a commodity depends only on price and income of th commodity. . 4. A linear demand function may be stated as D = a — bP. 5. The demand curve for a perfectly competitive firm is perfectly elastic. 6. A monopoly firm faces a upward sloping demand curve. ~ 7. The demand curve under monopolistic competition is more elastic i comparison to demand curve under monopoly. 8. Demand varies directly with price. 9. The demand curve for an oligopoly firm is indeterminate. 10. In a homogeneous oligopoly the firm try to differentiate their produc! from the other competitors. 11. The monopoly firm faces a downward sloping demand curve. 12. Demand is a relative term. 13. A demand curve has a negative slope [Ans. True : 1, 4, 5, 7, 9, 11,12, 13. ; False: 2,3, 6, 8, 10] SP° S2°S?°> = EEE RUESTIONS ‘A. _ Give meaning of th ; 1 apeeara 8 of the following concepts or Define 3. Market Demand 2. Supply 5. Equilibrium point 4. Market Supply B. Fill in the blanks : 1. ____ refers to the total Taare ‘al demand for a commodity by all buyer in the 2.- The market demand 7 price and déinahd, schedule shows an ___ relationship between 3. The market demand curve slopes 4, ____ refers t iti : i ee aagacee fo the total quantities of commodity offered for sale by all in > When the market schedule is plotted on a graph we get curve. &. The market supply curve slopes to the right. . The is determined by the interaction of market demand and supply. 8. The point at which quantity demand equals to supply is the - 9. With an increase in supply, demand remaining unchanged, the equilibrium price___. 10, Shift in the supply curve to the left will the equilibrium price. 11. Shift in the supply curve to the left will increase the ___. [Ans. (1) Market demand; (2) inverse; (3) downward; (4) market supply; (5) market supply; (6) upwards; (7) market price; (8) equilibrium point; (9) falls; (10) increase; (11) equilibrium price] C. Multiple choice questions : 1. The market demand curve slopes ____ from left to right. a) downward b) upward d) vertical c) horizontal 2. The market supply schedule shows quantity supplied. a) inverse c) no 3. The point ai a) total supply ¢) equilibrium point 4. A case of increase in relationship between price and b) direct d) none of these which the quantity demanded equals supplied is the __. b) total demand d) none of these demand, supply remaining unchanged, the equilibrium price a rises b) falls c) constant d) none of these 5. A case of decrease in supply, demand remaining unchanged, the Se ea constant , d) None of these a) falls b) rises °> Business Economics — (RY) ‘s a °° ; , quantity demanded decreases and quantity Suppy 36 6. As price a decreas b) increases a 1 c) remain constant d) None ee 7. Market is derived by adding up all the individual demand, : a) Demand b) Supply d) None of these ©) price fAns. (1 — a), (2 —b), (3 - 0), (4-a), (5 — b), (6b), (7 -a)] D. Match the columns : 1 [ Group ‘A’ 1. Market demand curve E Market supply curve [3. Equilibrium point °) fAns. (1 — b), (2 — c), (3 —a)] State whether the following statements are true or false : 1. The market demand schedule shows a direct relationship between pri and quantity demanded. 2. The market supply curve slopes upwards to the right. Group ‘B’ a) __ demand = supply b)__ downward sloping upward sloping 5. With an increase in supply, demand remaining unchanged, th equilibrium price rises, y 6. Shift in the supply curve to the left will increase the equilibrium price. 7. Shift in the demand curve to the left will increase the equilibrium Price. [Ans. True : 2, 4,6; False: 1, 3, 5, 7] ° SP” SP° sp°| yee Give meaning of the followin: if Elasticity of demand pace oasticitY of deman Income elasticity of demand 5 Promotional elasticity of demand demand. Fill in the blanks : 1. 2. 3. An endless demand at the given price is the case of ——— Asteeper demand curve represent relatively demand. if income rise by 10%, demand too rise by 10%, then income ©! of demand is “ Income elasticity of demand.is negative for If two goods are unrelated to each other, then it is of demand. ‘Advertisement elasticity of demand is always __— Different are indicated by differently sloping income demand curve. A vertical straight line demand curve implies elasticity. 3 Commodities which requires a | i Ir 15 j Slave ee arge portion of consumer’s income tend lasticity goods. cross elasticity degree of priceElasticity of Demand 29's" 57 10. Jointly demanded goods tend to have demand. 11. A flatter demand Curve represent relatively demand. 12. If elasticity of demand = 1, the marginal revenue is Ans. : (1) perfectly elastic; (2) inelastic; (3) unitary; (4) inferior; (5) zero; (6) positive; (7) Income elasticities; (8) zero; (9) elastic; (10) inelastic: (11) elastic; (12) zero} Multiple choice questions : 1. When @ greater change in price brings about less than proportionate change in quantity demanded it is said to be a) Unitary elasticdemand ,__b) Perfectly inelastic demand ©) Perfectly elastic demand d) Relatively inelastic demand is an important variable affecting the demand for a commodity a) Price b) Income ¢) Promotional d) All of these The cross price elasticity. of demand is defined as : a) The ratio. of percentage change in the demand to the percentage change in the price. b) The ratio of percentage change in the demand for a given product to the percentage change in the price of a related other product. ©) The ratio of percentage change in the demand for product X to the Percentage change in the demand for product Y. d) The ratio of two different elasticities, A positive cross-price elasticity coefficient implies that : a) Two products are substitutes b) Two products are jointly demanded ©) Two products are complementary d) Two products have no relations If two goods are complementary goods, then it is cross elasticity of demand. a) Positive b). Negative ©). Zero d)_ None of these If the price of a product increases from ® 5 to% 10 and corresponding change in demand is from 30 units to 12 units; it is the case of : a) Unitary elastic demand b) Elastic demand ©) Inelastic:demand d) Relatively elastic demand When demand is perféctly elastic, the demand curve is : a) Steep b) Non-linear ©) Linear d) Horizontal straight line e) Vertical Ona linear horizontal demand curve : a) Elasticity is zero b) Elasticity is infinity ©) Elasticity is low towards origin d) All of the above58 D. conan 9, Unitary elastic demand is represented by : meme : Gy 10. Which of the following product has nearly perfect se° SP" SB" Business & a) Horizontal demand curve b) Downward sloping demand curve ©) Vertical demand curve d) Hyperbola slope demand curve re 'y inelastic emang b) Electricity c) Petrol d) Higher Education in Management field 11, If elasticity of demand (e) < 1, then marginal revenue is always a) Positive b) Negative ©) Zero). Noneoits 12. If elasticity of demand = 1 than marginal revenue is__. a) positive b) _ negative ©) zero d)_noneoithee 13. If cross elasticity of demand is positive, goods are 4 a) Complementary b) Substitutes c) notrelated d) None of these 4 14. If a small reduction in price leads to a fall in total outlay, ebsiciy af demand is : a) less than one b) greater than one ¢) equal to one d) none of the above a} tAns. (1 @), @ —d), @ bj, (4a), G =b), GA, 7 ah O-OF (10 —a), (11 —b), (12 —c), (13 —b), (14 -a)] Match the columns : ____— 7 Group ‘A’ Group 1. Elasticity of demand (e) 2. Average Revenue (AR) 3. Marginal Revenue (MR) Promotional elasticity of demand Ans. (1 - ©), (2-a), 3 —d), 4@—b)] Group ‘A’ 1. Positive income elasticity 2. Negative income elasticity 3.__ Positive cross-clasticity 2 come 4, Negative Ccross-elasticity d) Substitutes, | [ans.: (I=), 2-a), @-a, Gol |Elasticity of Demand 83° 52°?” ad E, State whether the following statements are True or False : 1. N NOMRw 8. 9. 10. VW. 12. 13. If cross elasticity between two B00ds is positive, goods are necessarily complements. In case of inferior goods income elasticity of demand is positive. The cross elasticity of demand may be positive, negative or zero. A vertical demand curve implies zero price elasticity. Promotion elasticity is always positive. The concept of elasticity of demand has no useful application. A perfectly elastic demand is represented’ by rectangular hyperbola curve, A horizontal demand curve implies perfectly inelastic demand. In zero income elasticity, change in income has not effect on demand. If elasticity of demand is infinite, marginal revenue will be increase. When e = 1, total revenue reaches its maximum. Demand for electricity is elastic. Habits makes demand inelastic [Ans.: True: 3, 4,5,9,11,12,13 ; False: 1, 2, 6, 7, 8,10] S?°S2° s?°Sales (in thousand | 45 | 56 2) OBJECTIVE QUESTIONS Give meaning of the following Concepts or Define Demand forecasting 2. Survey method Statistical method 4. Regression method Fill in the blanks : 1. Moving averages can be used to measure a . 2. Under _____ method sales man are asked to estimates expected sales.Business Loonomiey “lay, "sn" °8 10 predict (uture resul "en y a's ing uses historical figures to predic ‘ull, forecasting uses . Ing is to perceive demang ly i oe of demand forec : — a F eal 4 The ai a eries data, produ hod uses time s The ——— method us ial to fix target, a and recasting Is very ‘imate f the demand, cus casting is an estimate of — ; 7. Demand foreca i pinion; (3) Time Series; (4) Future; 65) Treat ‘ tive Of 7 Ans. (1) Trend; (2) Collecti: , Ans. es; (7) Future] (6) Sales; (7) F ae Multiple choice questions ; 1, Trend refers to : 7 stem a Short-term Variations b) Long. m ©) Perfection . | Ovement of dala | l) Regression i ing i tial for . 2. Demand forecasting 'S very essen, @) Production Planning b) hee Price policy Growth ) All of the a 3. This method involves direct 'nlerview to the select consumers, a) Consumer survey meth id b) Collective Opinion Method ©) Market &xperimentation ime series Mode] 4 Demand forecasting is always : a) Conditional b) Unreliable © Accurate Trustworth 5+ This method ig also known ag sales polling Method ; Consumer Survey method ) Collective Pinion method o Market *Perimentatio None Of these 6 Demang fore ‘asting is an estimate Of the lemand, a nh ») Present ture None Of these 7 The metho, ie nd forecasting is are UrVvey met! eee 9 ony grehod by Bratistical methog 8 Te method USes time Series data, th (@) ang (by a) Pale survey bb ° borate, . elphi * Market enn rn inctation ) Trend a) sb Clude ° one ex imentatio, ) . 10, Econo, WY a es keting sm ettic Mog, i ; otha and 5 a) Econ, ie thee Mbination °) ! i tans, 4 ~pithematia tool tatisticay analysis (0~ ay “aL Ba 65 all of these we ~by,6 = Odmaul ratination and Forecasting pemandl D, Match the following + Group ‘A’ 1 Collective Opinion Method . ; Market Experimentation a w fans. (1 = ¢), (2 =a), (3 = d), (4b) f, _ State whether the following statements are true or false + Statistical method fs called qualitative method, Under consumer survey method the consumers are interviewed directly. In test marketing method, a market experiment is performed under artificial market situation, 4, Statistical method is more frequently used to estimate demand, 5. Demand forecasting will help to determine sales target. 6. Demand forecasting at firm level involves forecasting the demand for the whole industry, 7. Under consumer’s survey method opinion of different expert are collected. 8. Expert opinion method is more accurate and reliable. 9, Demand forecasting is important for the firms. 10, Regression method is prescriptive as well as descriptive. 11.. Regression method collect historical data on all the selected variables. 12. Time Series model does not address any other variables. 13. Experimentation in laboratory involves a formation of small laboratory and creating an artificial market situation. [Ans. True : 2,4, 5, 8,9,10,11,12,13 ; False: 1, 3, 6,7) StS proONUwa D> [ol product | 10 | 22 [36 [aa [ss Poo Lo | 2 1 54 1 | OBJECTIVE QUESTIONS Give meaning of the following concepts or Define Production function Average product lso-quant Law of return to scale Diseconomies of scale 2. Total product 4. Marginal product 6. Ridge lines 8. Economies of scalepro Fill 1 2. eens 17. incre economy; (9) Technical; (13) production function; ._A firm experiences . Localisation of industry confers . Economies of scale lead to 15. The scale of production can varied Ans. (1) transformation; Analysis Fast 0 in the blanks = production function refers to —— of input into Output. Addition made to total product by adding on extra unit of defined as the of labour. roducer’s output equilibrium Pree isovant and isocost lines, A proportional increase in out implies returns to scale, When percentage change in Output is phenomenon of returns to scale. When marginal product is zero to Labour economy is caused by When managerial costs A double decker bus is dimension. labour is is determined at the point of —a, Put in relation to the ch; large in input Greater than that of input, it is the tal product is - Per unit declines it is the case of an example of economy of increased —— &conomics of scale when its size expands, —— economic to the clustering firm. refers to total Product per unit of variable factor, is the functional relationship between physical inj —— in cost of production. only in the . jaw of diminishing returns, put and output. was initially called as the I The ___aré the locus of Points of an iso-quants where the marginal Product of factors are zero, (2) marginal Product; (3) tangency; (4) Constant; (5) easing; (6) maximum; (7) Specialisation/division of labour; (8) Managerial (10) Internal; (11) External; (12) average product; ° (14) reduction; (15) | long run; (16) law of variable Proportion; (17) Ridge line] Mult 1 tiple choice questions : Production refers to = a) Production function b) Creation of utilities ° Producing output d) Transformation The mathematical expression Q =f (a,b,c, . 1, T) represents ®) Short run Production function —_) Long-run production function 9 Both aandb d) None of these ) auction function refers to : a by he input output relationship in the process of production ) The technological impact °° th ’ Ie technology and other resources in operations ' Production methodsa ° Manage! . The slope of long-run cost a ua Manat erial economy am ‘conomics and diseconomics of scale @ re technical relationship - ion of ti i it fae automotive devices W! expanding scall a) | i 3 nee economy b) echnical ec” : al econom! Ie es mY ell 4 d) Technical forc' When its size is bi ized by the firm : i ig ) scale of operation qd) All of the above a ‘rere - - output varies with ie chan a ig shi for change d) qhere sl iM ct evel ca" be increased infinitely b) All factors are variable 4 e n nf can cae pet dof 10 ears an above d) product! evel refers to perio y' when the total product is maximum f a) average duct Is jaxium b) margin® roduct 16 maximu 4 O Margin® product is equal © average pro uc! d) Margin@! roduct IS zero increasin’ retul ns tO scale means al duct 'S con / 3 Mon ¢ change exceedin’ the proportion change " input ) The ma | produ t curve | declinin’ excellent anageme! the slope fan quant ef easurem nt of The argi al rate ni pstitution b) margin’ | physic | prod! f labou ) The pital efficiencY ) All of the above long-run averaB decline a5 output exPa” to a) J managemen ) Tecl logical 4! of nomics © scale d) Sprea fixed costs Labour econo! caused by * i pour bp) Time manage! d) Better organization ) Division of lal jal efficiencY rve is influenced by: ©) Within itselfer action srs Sv s2"s" ies Pr a External economics occur when : a) _ Size of firm expands b) Size of industry expands ©) Economy grows d) All of the above 15. type of iso-quant assumes perfect substitutability, a) _Leontief iso-quant b) Kinked iso-quant ©) Linear iso-quant 4) Smooth convex iso-quant 46. The area lying between the two ridge lines is the . a) non-economic region b) economic region c) economic of scope d) none of there 17. The point of tangency between iso-cost line and iso-quant is the point of 2) Consumer's equilibrium b) Producer's equilibrium ©) Both (a) and (b) d) None of these 18. Decreasing return to scale arises due to of large scale production. a) economies b) diseconomies ©) _ both (a) and (b) d) None of these fAns. (1— ©); (2—b); (3a); (4-0); (5-b); (6-d); (7-b); (8-a); (9-0), (10 — a), (11 — c), (12 ~ b), (13 - b), (14 - b), (15 = ©), (16 — b), D. Match the following : IAns. (1 — b), (2 — d), (3 — a), (4-)] B (17—b), (18 —b)} [ Group ‘A’ Group ‘B’ 1. _ Constant return to scale a) _Labour economies 2.__ Increasing return to scale b)__ Horizontal straight line 3.__Internal economies of scale_| c) _ Economies of information 4. External economies of scale_| d) _ Positive sloping curve Group ‘A’ Group ‘B’ 7.__ Short-run production function _| a) TP/QVF 2. Marginal product b)__ f(QVF) 3. Average product ©) TPa-TPhet [4 Total product @d _Q=f(Lk) 5. Long,run production function |) Gia zy lAns.: (1—e), (2-0), (3a), (4-b), (5 -d)] State whether the following statements are true or false : 1. When the average product is maximum, marginal product is greater than average product. 2. In long-run all factors tend to be variable,106 Business Economics —1(F.Y.)(S -Y) (Sem, al prov is ive it i product is negative it is called the stage of n \egative °S2° 3. When margin returns. 4. Production functi ct i 5. When marginal see Cte relationship. ct is zero, total oduct is mini 6. TPL falls when MPL falls. product is minimum. fe eee increasing returns : MP > AP - e : é ee of variable proportions assumes all factors should remain 9. With the division of labour specialisation leads to technological economics 10. External economics are realized by the monopolist firms since there is no competition. 11. Internal economics enjoyed by an individual firm. 42. Division of labour leads to labour economy: 13. Using superior technology leads to external economy of scale. 14. The jso-quants are concave to the origin. 15. Two jso-quants can intersect each other. t of tangency. between jso-cost line and iso-quant is the point of ion in cost of production. ies and marketing economies. 16. The point 0 5 equilibrium. je lead to reduction in i nom ing curve. roducer of scal 17. Economies 18. A large firm can @! | 19. Increasing return to SC rve is U [Ans. true: 1 3,71 1, , 16, 17, 1 ; False : 4” 5, 6,84 13, 14, 15] wr?> N G1 Ww ma OBJECTIVE QUESTIONS Give meaning of the following concepts or define Explicit cost 2. Implicit cost Accounting cost 4. Economic cost Fixed cost 6. Variable cost Marginal cost 8. Total fixed costAnalysis 9. 11. B. i Vos ™ farming cy Avene a a on 10. Total variable cost Filintne ance 12. Average variable cost ' : . Cost ce is the firm. COMSIsts of only those Payments which are actually made by 'n long-run all costs are Under Constant costs Conditio; Minimum point of the LAC ¢ — plant size. ———_ are direct co, ns Inca market transactions, ®Ual_ monetary payments. incurred through —— Femain fixed at any level of BT Cues regarded as the lon is the total expenditure inci level of Output. ms LAC and LMC curves tend to___. urve implies ORWN ‘oe Output in the short run. ig-tun planning device. ‘urred by the firm in producing a given eerie to the total expenditure made by the firm on the variable in short run. 10. Fixed costs are cost. 11. Variable costs are cost. 12. Private cost is included in a 13. is the total cost per unit of output. 14. Marginal cost is an cost. 15. is the summation of TFC and Tvc. 16. A short-run average cost curve is known as 17. In long-run all costs are 18. The MC curve intersects AC curve at its 19. Learning cuve was developed by __. f 20. The ___ is measured by the shift in the LAC with respect to cumulative output change. | . oe [Ans. (1) Accounting; (2) variable; (3) coinside; (4) Optimum; (5) Explicit costs; (6) Fixed cost; (7) LAC; (8) total cost; (9) total variable cost; (10) Supplementary; (11) Prime; (12) Price; (13) Average cost; (14) Additional; (15) Total cost; (16) Plant curve; (17) variable; (18) minimum; (19) K. J. Arrow; (20) Learning effect] point from below. i i tions : c | ame el difference between economic cost and accounting cost . The is: iti b), Pyschological a eae d) Implicity and Explicity ° cade 2. Fixed costs refer to: cour Sk a) — Contractual payments c) Out of pocket expenses d) Business payments130 10. iis 12, 13, SP” Ss?" sz" At zero level of output, total cost of a) equal to zero b) equal to variable costs ©) equal to total contractual/Obli d) equal to marginal cost e) none of the above When average cost is maximum a) Marginal cost is minimum b) Marginal cost is equal to average ©) Marginal cost is also maximum d) Total cost is minimum The short-run AVC curve moves u a) Increasing returns to scale ©) Diseconomies Increasing long-run Musiness Leonomtey a firm is: gatory payment cost pward owing to : b) Rising overhead costs d) Diminishing returns average cost is attributed to : a) the firm's experience of increasing returns b) the firm's experience of economies of scale ©) — decreasing returns to the scale . d) increasing average variable cost curve When LAC curve intersect the a) the point of increasing returns b) the optimum plant size ©) _ the end of economies of scale d) none of the above Division of labour results into ; a) Rising costs b) Diminishing returns ©) Labour economy d) Economies of scale In long-run : LMC curve it implies : a) all costs are variable b) costs are divided into fixed ©) Costs tends to constant d) shape of LAC is always ‘L’. ——~ is the cost that has already been incurred and which cannot be recovered and variable costs a) Fixed cost b) Sunk cost ©) Private cost d) Social cost Fixed cost is regarded as cost a) unavoidable b) variable ©) avoidable d) none of the above Electricity charges, sales tax etc. are examples of ____ cost: a) Fixed b) Variable ©) Private d) Social fe level of output i. b) Total variable cost d) average cost —— is not related to th a) Total cost © Total fixed costpe ae . ~ a1 ost Analysis: SP° SP" 2" pe. 14. is obtained by dividing TC by the level of output produced a) Average fixed cost b) Average variable ) Total fixed cost d) Average total cost 15. A firm’s __ is the sum of total fixed costs and total variable cost at each level of output a) Average fixed cost ©) Total cost 16. The LAC curve is also referred as a) envelope curve ©) both (a)'and (by 17. The reduction in cost due to increase in a) income effect ©) Learning curve effect 18. The Learning curve sl unit of output. a) increase ©) both (a) and (b) b) Average variable cost d) None of these b) planning curve @) None of the above efficiency is referred as b) price effect d) all of the above lopes downward showing a in the cost per b) decline d) None of these } fAns. (1 —d), (2-a), (3-—, (4—b), (5 —d, 6 -d), (7—b), (8-c), (17 -¢), (18 —b)] (9 - a), (10 ~ b), (11 ~ a), (12 — b), (13 - 9), (14 — d), (15 - c), (16 - ©), D. Match the following : Group ‘A’ Group ‘B’ 1.__ Fixed cost a)__ Explicit + Implicit cost 2. Variable cost b) Explicit cost 3. _ Economic cost co) Insurance fees 4. Accounting cost d)__ Learning by doing 5.__KJ. Arrows e) Excise duty lAns. (1 —c), (2 -e), (3a), (4—b), G—d)] Group ‘A’ Group ‘B’ 1. Total Cost a) TVC/Q 2. Average Fixed Cost b) TCyh-TCy-4 3. Average Variable Cost ©) TFC+TVC 4. Average Cost d) _TFC/Q 5. Marginal Cost 2) TQ lAns. (19), 2d), @ a), @>@), © State whether the following statements are true or false : 'xed costs refer to Labour costs. 7 Atzero level of output, total cost of a firm is equal to fixed costs. | ae26. [Ans. True : 2, 4,7, 8, 9, 10, Business Economies ~1(E.Y.) (Seyn, 1) tt Economic cost is equal to explicit cost minus implicit cost. Money cost is the payment made for the factors in terms of money. Variable cost remain fixed at any level of output in the short run. When MC is more than AC, if exerts a downward pull on the AC curve. The LAC curve is referred as the envelope curve. The LAC curve is less U-shaped. Marginal cost is a U-shape curve. . AFC never becomes zero. AVC curve is a ‘U’ shape curve. When MC and AC are falling, MC curve lies above the AC curve. Fixed cost are overhead cost. . Implicit cost are also called as indirect cost: - Explicit costs are called as the accounting costs. Total cost is summation of AVC and AFC. TFC is parallel to X-axis. . Long-run is a period in which all the inputs become fixed, . LAC curve is regarded as the long-run planning device. Fixed cost include cost of raw materials. LAC curve is called a planning curve. In a short run period, all costs are variable. - TVC is inverse — $ shaped curve. - Learning effect is different from the sc: . The increase in cost du ale of economy effect. fe to increase in efficiency is called learning curve effect, Learning curve indicate increase in cost of production to the decrease in output. 11, 13, 14, 15, 17, 19, 21, 23, 24; False: 1, 3, 5, 6, 12, 16,.18, 20, 22, 25, 26] SP° SP° $2”148 peopl | 9" Business Economics -18.Y,) (Sym, OBJECTIVE QUESTIONS Give ‘Precise meaning of the following concepts or define Break-even analysis Safety margin 2. Break-even point 4. Break-even chart Fill in the blanks : NOBRENS 8. 9. [Ans. (1) Break-even point; (2) Break-even chart; (3) Profit; ( Total cost; (6) Cost-volume-profit analysis; (7) safety margin; is the point where total revenue is equal to total cost. The graphically depicts the profit-output relationship. When TR > TC, it indicates zone of a firm Break-even point of a chart indicates Break-even analysis compare total revenue with Break-even analysis is also referred to as refers to the extent to which the firm can permit a decline in sales before it starts incurring losses. BEA help the firm to determine BEA at break-even point indicate profit. for a given level of output. (4) Zero profit; (5) (8) minimum cost; (9) zero] Multiple choice questions : LE Break-even analysis compares total revenue with : a) Total profit b) Total cost ©) Average cost d) Price Break-even analysis is used to determine how much quantity of its product it must sale to : a) Make profit b) Break-even ©) Maximise profit d) None of the above Break-even point of a chart indicates : a) Zero profit b) Heavy loss ©) Large profit d) All of the above Assuming, QB = Break-even quantity, TFC = total cost, P = price and AVC = average variable cost, algebraically, break-even_analysis formula is given as: a) QB=TFC/(P + AVC) b) QB = TFC/CP —- AVC) c) . QB=TFC/P d) QB = PATFC — AVC) Break-even analysis is also referred to as : a) — Cost-volume-profit analysis b) Managerial decision technique ©) Profit maximizing device d) None of the above is known as no profit no loss poi a) point of origin ae ©) Break-even point b) Marginal point d) none of the aboveY an eyes o's 149 fs safely Margin is the difference between Rand TC b) TR and TEC 3 AC and MC d) sales and BEP g, The difference between the actual sales and BEP is term as a) Safety margin b) profit margin c) _ loss margin d) none of the above 9, When total revenue is less than total cost (TR < TC) the firm incur a) profit b) loss ©) No profit no loss d) none of the above tans. (1 ~b), (2 ~ b), (3 - a), (4 ~b), (5 ~ a), (6 ~ 0), (7 — d), (8 - a), (9 - BI) D. Match the following : BE Group ‘A’ Group ‘B’ 1. Break Even Analysis a) TR=TC 2. Safety Margin ice P-AVC 3. Break Even Point c) _Cost-volume-profit analysis 4. Zero profit d) Sales—BEP «100 fAns.: (1-c), (2=d), (3b), (4-a)) State whether the following statements are true or false : 1. At break-even point, the company makes loss. 2. The break-even-chart graphically shows cost and revenue relation. 3. In Linear Break-even analysis, total fixed cost is a vertical straight line parallel to Y-axis. 4. When TC > TR it indicate profit zone. 5. BEA helps in determining the optimum level of output. 6. Total cost curve starts from above the origin. 7. The total revenue curve starts from the origin. 8. At break-even point TR > TC. 9. Break-even analysis has great importance to managerial economists, 10. The profit zone in a break-even chart shows TR = TC. 11. There are no limitations to BEA. (Ans. True:2,5,6,7,9 ; False: 1,3, 4,8, 10,11] SP” 52° 2°“Normal profit b) oa fi ©) Losses Super normal profit d) _Shut-down point OBJECTIVE QUESTIONS Give meaning of the following concepts or Define Perfect competition 2. Normal profit Supernormal profit 4. Loss Shut down point Fill in the blanks ; 1. Under perfect Competition there are number of seller. 2. Under perfect Competition, the products are . Government follow the policy of under perfect competition. When P = AR = MR + MC =AC, the firm get profit. When AR < AC, the firm is making f ‘ In long-run, all factors of production are The demand curve for the firm under perfect competition is___. When the price is above the average total cost, the firm makes __ Pres Bw PNA profit.Business Economics ~ I(r.) “Ys, "em. 1) we / Marginal firms are those which are managed by entrepreney firms are those which are managed by most aie : ent 164 10. Sepreneuss nae : (1) large, ¢ homogenous, (@) non-government _interventig, (4) normal, (5) loss, (6) variable, (7) horizontal, (8) excess, (9) less efficigy (10) Intra-marginal] . L Cc Multiple choice questions : _ 1, Which of the following is not the feature of perfect competition? * g«Price’taker b). Homogeneous product c) Free entry and exit d) Government intervention 2. Project competition assume commodities. a) homogeneous b) both a and b ©) heterogeneous d) none of these 3, When price is lower than average total cost there will be a) shut down point b) equilibrium point c) loss point d) profit point i 4, The demand curve for a firm under perfect competition is i a) vertical b) horizontal d) upward sloping c) downward sloping 5. Under perfect competition, the firm is in equilibrium when a) MR=MC b) MC curve should cut MR curve from below c) bothaandb ~ d) none of these In the long-run, the cost conditions of the firm are 6. a) fixed b) variable ©) avoidable d) none of these 7. When AR=MR=MC=AC the firm will get profit. a) normal c) both aandb b) supernormal d) none of these’ 8. In the long run, the firm is in equilibrium of the point where the a) LMC>LMR b) LMC < LMR 5 ©) us =LMR + d) All of the above . Under perfect competition, equilibrium in an industry is established when LMC = a) LMC LMR b) Price = LAR = LAC cc) Long-run industry demand and supply are equal - @) Allof the above tAns. (1d), (2 ~a), (3 ~a), (4 -b), (5 - ©), (6 ~b), (7 ~a), (8c), (9-d (7 a), (8c), (9- AI]P compton SPSS" ao of watch the following : D. Group ‘A’ Group ‘B’ perect competition a) AR>AC \ Normal profit b) Horizontal Straight line + super Normal Profit ¢) Alfred Marshall » emand Curve d) “ AR'=AC tans. : (1) - (©), (2) — (d), (3) — (a), (4) - (b)] State whether following statements are True or False : 1, Under perfect competition there are large number of buyers and single seller. 2. In perfect competition, the price of commodity is decided by the seller. 3. The marginal cost curve should cut marginal revenue curve from above. 4, In the short-run under perfect competition a firm earns only normal profit. . 5. Marginal firms are those firm which manage to get normal profit only. 6. Under perfect competition, when the price is equal to average cost, the firm gets super-normal profit. 7. Under differential cost condition, the cost curve of all the firms will be same. 8. Under perfect competition there is uniform price in the market. 9. When AR = AC, the firm is making normal profit. 10. When the price is less than AVC the firm will cease to produce. 11. Under perfect competition, the demand curve of a firm is flatter. 12. A firm under perfect competition is price taker. 13. When’AR is less than AC and more than AVC, the firm close down its business. 14. When price is less than AVC, it is called shut down point (Ans, : True : 5, 8, 9, 10, 12, 14 False: 1, 2, 3,4, 6, 7, 11, 13] SP°s7's?°Supernormal Profit » Fillin the blanks : 1. The sole seller in the market is called 2. The Monopolist being the only seller 1 2 oF B —. Of a product is a176 E 2 gy? SP : If average revenue is mn profit. earn __— | Marginal cost curve in When total revenue |: ly is opposite to ____._ Ment olies ability to set the price. PN XHR 9. greater than average cost, the Monopoh Public utilities services give rise to A rainenorsic (2) price maker, (3) Super-normal, (4) below ns. Business Economics _ MRy) 'Y firy tersect marginal revenue curve from is equal to total cost, the firm is making he long-run, the monopoly firm usually earn In the a monopoly. (5) normal profit, (6) excess profit, (7) Perfect competition, (8) Monopoly Power, (9) natural] Multiple choice questions : 1, Under monopoly there is seller. a) single b) few ©). large d) none of these 2. The demand curve of a monopolist is___. a) horizontal b) downward sloping ©) upward sloping d) vertical 3. ____has the ability to set the price. a) political power b) monopoly power c) bothaandb d) none of these 4. is termed as monopoly power. a) normal profit b) super normal profit ©) loss d) none of these 5. Under firm and industry refers to one and the same thing. a) Perfect competition b) Dligopoly ©) Monopolistic competition d) Monopoly 6. following are the conditions which give rise to monopoly power to a irm a) Natural monopolies b) Legal Sources ia ©) Technical knowledge d) All of these ns, Match the following ; (1~a), (2~b), 3 — 5), 4-b), 6-d), 6 — d)) 1, Group ‘A’ Gre , ‘oup ‘B 1. Losses a) AR=AC mo 2. Monopoly b) ARS AC 7 Supernormal profit ©) AR wnuwna a b) c) d) e) Price leadership by a low cost tirm Price leadership by the dominant firm Barometric price leadership kinked demand curve OBJECTIVE QUESTIONS Give mening of the following concepts or define Oligopoly Non-collusive oligopoly 2. Collusive oligopoly 4. Cartel Price leadership Fill in the Blanks : Ae Di 3. 4. Oligopoly means sellers. : Seller under oligopoly market behave like a : If the firms combine together and follow a common price policy is known as oligopoly. Under oligopoly the firm faces a demand curve.ee _ oligopoly ss? ° 195 5. A —__ is a group of firms in an industry who jointly fix a’price an output through agreement. 6. Price leadership is a feature of The firm who sets the price is called 7. —— [Ans. (1) few; (2) group; (3) Collusive; (4) kinked; (5) Cartel; (6) Oligopoly; (7) price leader] market. C. Multiple choice questions : 1: Oligopoly is characterized by___. a) Single seller _b) Few seller c) Too many sellers d) Single buyer Sellers under oligopoly market behave like a. a) Group b) Firm ©) Industry d) None of these 3. Which of the following is not the feature of oligopoly. N a) Price rigidity b) Selling cost ©) Group behaviour d) Large number of seller 4. Firm in an oligopolistic market have a ___ demand curve for their product. a) ‘Horizontal b) Vertical ©) Indeterminate d) None of these 5. The various form of price leadership are___. a) Price leadership by a low cost firm b) Price leadership by dominant firm ©) Barometric price leadership d) All of these 6. The aim of the cartel is maximizing __ profit. a) Accounting b) Joint c) Government d) Individual ze oligopoly occurs when the firms combine together instead of competing and follow common policy a) Collusive b) —Non-collusive ~ © Open @) Closed © 8. In___firms jointly fix price and output through agreements a) Price leadership ©) bothaandb (Ans. (1 —b), (2a), 3 —d), (4-0), b) Cartel d) None of these (6 -d), (6-b), (7 —a), (8 -b)] Mateh the following : Group A Group B 1. Oligopoly a) Maximise joint profit 2. Price leadership b) Few seller ; Cartel c) Kinked demand curve Oligopoly demand curve d) Dominant firm Ans. (1) ~ (by; (2) ~ (a); (3) — (a); (4) -(©)State whether the lp 2. Darnw 2 Oo 11, [Ans. : sP° SP" ” o | SP Business Economics ~ I (F.Y.) (Sem following statements are True or False : ” | | idespread than cartel. Price leadership is more wi II firms sets the price and the dominant firm Under price leadership sma accept it. A barometric firm is a low cost firm. A firm who is a good forecaster is ac Selling cost is an unique feature of oligopoly. In cartel, the joint profit is distributed in proportion to its share in the | market. The firm who fix the price is known Demand for a poly is unce! Dominant firm becomes leader in oligopoly The discountinuity in the marginal revenue curve depends upon the elasticity of demand curve- : : oleate the difference bet f kinked demand narrow will be the discountinuity int True: 1, 4, 5, 8, 9, 10 False : 2, 3, & 7 111 "69° FS? cepted as barometric firm. as followers. firm in oligo rtain curve ween elasticities © he MR curve.