SET 1:

1. State whether economics is

a. A positive science only b. Neither a positive nor normative science

c. A science but not art

d. A science or an art depending on who uses economics and for what purpose.

2. The branch of economics wherein mathematics and statistics are used to measure and analyze
economics activities is called……………..

a. Applied Economics b. Econometrics

c. Statistics d. Macro Economics

3. The opportunity cost of a machine which can produce only one product is:

a. Low b. Infinite c. High d. Medium

4. It is defined as a state of knowledge in which one or more alternatives result in a set of specific
outcomes but where the probabilities of the outcomes are neither known nor meaningful.

a. Risk b. Uncertainty c. Peril d. All of the above

5. Opportunity cost is term which describes

a. A bargain for a factor of production b. Costs related to an optimum level of production

c. Average variable cost d. None of these

6. It is also known as prescriptive economics

a. Positive Economics b. Micro economics

c. Normative economics d. Economics

7. ……cost are also known as Imputed Costs

a. Opportunity b. Marginal c. Total d. Historical

8. There are ……branches of economics.

a. 2 b. 3 c. 4 d. 6

9. It is the study of economics actions of individuals and small groups of individuals.

a. Micro-Economics b. Macro-Economics
c. Managerial Economics d. Business Economics

10. An input should be so allocated that the value added by the last unit is the same in all cases.

a. Opportunity Cost Principle b. Equi-Marginal Principle

c. Incremental Principle d. Discounting Principle

SET 2:

1. The term `Economics‟ in English language has its origin in ------word.

a. Greek b. Italic c. Latin d. Indian

2. Economics includes the following economic activities:

a. Production b. Consumption c. Exchange d. All of the above

3. It refers to the determination of prices of all goods and services by the interaction of the forces of
demand and supply without any external interference.

a. Product-mechanism b. Price-mechanism c. Cost-mechanism d. None of these

4. 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

5. Income flow is also known as------.

a. Product Flow b. Money flow c. Profit flow d. Cash flow

6. Flows of the factor of production and the goods and services between the different sectors is - -----.

a.Real flow b. Money flow c. Cash flow d. Product flow

7. It is also called output flow or real flow

a. Profit flow b. Cash flow c. Product flow d. None of these

8. Accounting profit=------------Explicit Costs

a. Total Revenue b. Total Cost c. Implicit cost d. None of these

9. According to Professor S.E.Landsbury, “Firm is an organization that produces and sells goods with the
goal of------its profits”.

a. Minimizing b. Maximizing c. Optimizing d. All of the above

10. According to profit maximization theory of the firm, management.

a. Decides output level which maximizes revenue

b. Output level which minimizes cost.

c. Output level which maximizes difference between the two d. None of these

SET 3:

1. According to Simon if a firm fails to achieve its target initially results in:

a. A sense of helplessness b. Search behavior

c. Sacking of its managerial team d. Appropriate revision of the aspiration level

2. Managerial utility function is expressed as:

a. U = S (S,M,I) b. U = S (S,M)

c. U = f (S,M,I) d. U = F(S,M,I)

3. It is the difference between total revenue and total economic cost

a. Accounting Profit b. Economic Profit c. Gross Profit d. Net Profit

4. Invisible hand theory is given by----------

a. Lord Robbins b. Samuelson c. Marshall d. Adam Smith

5. Managers are Agent when:

a. Managers and workers. b. Shareholders and managers.

c. Managers and contractors.

6. Accounting cost include:

a. Owner`s land for company establishment. b. Depreciation

c. Management skill of a owner

7. If economic profit equal to zero then:

a. Owners receive a profit more than their opportunity cost.

b. Owners receive a profit less than their opportunity cost.

c. Owners receive a profit equal to their opportunity cost.

8. Trade-offs are required because wants are unlimited and resources are:

a. Economical. b. Unlimited c. Efficient d. Marginal e. Scarce

9. Economics is the study of:

a. how society manages its unlimited resources.

b. how to reduce our wants until we are satisfied.

c. how society manages its scarce resources.

d. how to fully satisfy our unlimited wants. e. how to avoid having to make trade-offs

10. Which of the following statements regarding the circular-flow diagram is true?

a. If Vijay works for XYZ Solutions Ltd. and receives a salary payment, the transaction takes place in the
market for goods and services.

b. If XYZ Solutions Ltd. sells a military aircraft, the transaction takes place in the market for factors of
production.

c. None of these answers.

d. The factors of production are owned by households. e. The factors of production are owned by firms.

SET 4:

1. Which of the following is not a Productive Resource?

a. Labour b. Land c. Money d. Capital

e. All of these answers are factors of production.

2. Which of the following issues is related to microeconomics?

a. The impact of oil prices on car production

b. The impact of money on inflation

c. The impact of technology on economic growth

d. The impact of the deficit on saving

3. The word economy comes from the Greek word for

a. "Environment." b. "One who participates in a market."

c. "One who manages a household." d. "Conservation.“

4. Economics deals primarily with the concept of

a. Poverty. b. Scarcity. c. Change. d. Power.

5. The opportunity cost of an item is

a. The number of hours needed to earn money to buy it.

b. What you give up to get that item.

c. Always less than the dollar value of the item.

d. Always equal to the dollar value of the item.

6. Factors of production are :

a. Inputs into the production process.

b. Weather, social, and political conditions that affect production.

c. The physical relationships between economic inputs and outputs.

d. The mathematical calculations firms make to determine production.

7. In the circular-flow diagram,

a. Firms are sellers in the resource market and the product market.

b. Households are sellers in the resource market.

c. Firms are buyers in the product market.

d. Spending on goods and services flow from firms to households.

8. In the circular-flow diagram,

a. Spending on goods and services flow from firms to households.

b. Goods and services flow from households to firms.

c. Factors of production flow from firms to households.

d. Income from factors of production flows from firms to households.

9. Scarcity is a condition that exists when

a. There is a fixed supply of resources. b. There is a large demand for a product.

c. Resources are not able to meet the entire demand for a product.
d. All of the above.

10. Company goals that are concerned with creating employee and customer satisfaction and
maintaining a high degree of social responsibility are called ___________ objectives.

a. Social b. Noneconomic c. Welfare d. Public Relations

CHAPTER 2:

1. Which of the following is not a determinant of a consumer's demand for a commodity?

a. Income b. Population

c. Prices of related goods d. Tastes

2. The law of demand refers to the
a. inverse relationship between the price of a commodity and the quantity demanded of the
commodity per time period.
b. direct relationship between the desire a consumer has for a commodity and the amount of the
commodity that the consumer demands.
c. inverse relationship between a consumer's income and the amount of a commodity that the
consumer demands.
d. direct relationship between population and the market demand for a commodity.
3. If the price of a good increases, then
a. the demand for complementary goods will increase.
b. the demand for the good will increase.
c. the demand for substitute goods will increase.
d. the demand for the good will decrease.
4. If consumer income declines, then the demand for
a. normal goods will increase.
b. inferior goods will increase.
c. substitute goods will increase.
d. complementary goods will increase.
5. Which of the following will cause a decrease in quantity demanded while leaving demand
unchanged?
a. An increase in the price of a complementary good.
b. An increase in income when the good is inferior.
c. A decrease in the price of a substitute good.
d. An increase in the price of the good.
6. Which of the following will not decrease the demand for a commodity?
 a. The price of a substitute decreases
b. Income falls and the good is normal
c. The price of a complement increases
d. The commodity's price increases
7. Demand curves have a negative slope because
a. firms tend to produce less of a good that is more costly to produce.
b. the substitution effect always leads consumers to substitute higher quality goods for lower
quality goods.
c. the substitution effect always causes consumers try to substitute away from the
consumption of a commodity when the commodity's price rises.
d. an increase in price reduces real income and the income effect always causes consumers to
reduce consumption of a commodity when income falls.
8. If a good is normal, then a decrease in price will cause a substitution effect that is
a. positive and an income effect that is positive.
b. positive and an income effect that is negative.
c. negative and an income effect that is positive.
d. negative and an income effect that is negative.
9. If the consumption decisions of individual consumers are independent, then
a. the market demand curve will be flatter because of the bandwagon effect.
b. the market demand curve will be steeper because of the snob effect.
c. the market demand curve will not be equal to the horizontal summation of the demand
curves of individual consumers.
d. none of the above is correct.
10. If the demand curve for a firm's output is perfectly elastic, then the firm is
a. a monopolist.
b. perfectly competitive.
c. an oligopolist.
d. monopolistically competitive.
11.Firms in an industry that produces a differentiated product
a. are either monopolists or oligopolists.
b. are either monopolistically competitive or perfectly competitive.
c. are either monopolistically competitive or oligopolists.
d. are either perfectly competitive or oligopolists.
12. The type of industry organization that is characterized by recognized interdependence and
non-price competition among firms is called
a. monopoly.
b. perfect competition.
c. oligopoly.
 d. monopolistic competition.
13. The demand by a firm for inputs used in the production of a commodity that the firm offers
for sale
a. is called a derived demand.
b. is directly related to the demand for the commodity.
c. is negatively sloped.
d. is all of the above.
14. If the price elasticity of demand for a firm's output is elastic, then the firm's marginal revenue
is
a. positive, and an increase in price will cause total revenue to increase.
b. positive, and an increase in price will cause total revenue to decrease.
c. negative, and an increase in price will cause total revenue to increase.
d. negative, and an increase in price will cause total revenue to decrease.
15. If a firm that produces carrots operates in a perfectly competitive industry, then
a. the demand for the firm's carrots must be horizontal.
b. the demand by individual consumers for carrots must be horizontal.
c. the market demand for carrots must be horizontal.
d. all of the above must be true.
16. If a firm raises its price by 10% and total revenue remains constant, then
a. the price elasticity of demand for its output is unitary.
b. marginal revenue is equal to zero.
c. quantity demanded has decreased by 10%.
d. all of the above are correct.
17. The price elasticity of demand for a good will tend to be more elastic if
a. the good is broadly defined (e.g., the demand for food as opposed to the demand for
carrots).
b. the good has relatively few substitutes.
c. a long period of time is required to fully adjust to a price change in the good.
d. none of the above are true.
18. If a good is inferior, then
a. the income elasticity of demand will be negative.
b. the income elasticity of demand will be zero.
c. the income elasticity of demand will be positive.
d. a decrease in income will cause demand to decrease.
19. If two goods are complements, then
 a. the cross-price elasticity of demand will be negative.
b. the cross-price elasticity of demand will be zero.
c. the cross-price elasticity of demand will be positive.
d. an increase in the price of one good will increase demand for the other.
20. The cross-price elasticity of demand between two differentiated goods produced by firms in
the same industry will be
a. negative and large.
b. negative and small.
c. positive and large.
d. positive and small.
CHAPTER 3: