Nature and Scope of Business Economics CA Foundation

MCQ Economics Chapter 1

Introduction:

1. The term ‘Economics’ owes its origin to the Greek word.

(a) Aikonomia
(b) Wikonornia
(c) Oikonomia
(d) None of the above
Answer:
(c) Oikonomia

2. Adam Smith published his master piece “An enquiry into the nature and causes of
wealth of nations” in the year __________.
(a) 1776
(b) 1786
(e) 1789
(d 1790
Answer:
(a) 1776

3. Oikonomia means __________.

(a) Industry
(b Management of household
(c Services
(d) None of these
Answer:
(b Management of household

4. Economists regard decision making as important because:

(a) The resources required to satisfy our unlimited wants and needs are finite or
scarce.
(b) It is crucial to understand how we can best allocate our scarce resources to satisfy
society’s unlimited wants and needs.
(c) Resources have alternative uses.
(d) All of the above.
Answer:
(d) All of the above.

5. ‘Economics is the science of choice making’. It implies:

(a) No choice is to be made
(b) Choice to be made between alternative uses
(c) Choice to be made between means and ends
(d) None of the above
Answer:
(b) Choice to be made between alternative uses

6. Which one is the feature of Marshall’s definition?

(a) Limited ends
(b) Scarce means
(c) Study of wealth as well as study of man
(d) Study of allocation of resources
Answer:
(c) Study of wealth as well as study of man

7. According to Robbins, ‘means’ are:

(a) Scarce
(b) Unlimited
(c) Undefined
(d) All of these
Answer:
(a) Scarce

8. Economics is the study of:

(a) How society manages its unlim-ited 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.
Answer:
(c) How society manages its scarce resources

9. In Economics, we use the term scarcity to mean:

(a) Absolute scarcity and lack of resources in less developed coun¬tries.
(b) Relative scarcity i.e. scarcity in relation to the wants of the society.
(c) Scarcity during times of business failure and natural calamities.
(d) Scarcity caused on account of excessive consumption by the rich.
Answer:
(b) Relative scarcity i.e. scarcity in relation to the wants of the society.

10. What implication(s) does resource scarcity have for the satisfaction of wants?
(a) Not all wants can be satisfied.
(b) We will never be faced with the need to make choices.
(c) We must develop ways to decrease our individual wants.
(d) The discovery of new natural resources is necessary to increase our ability to
satisfy wants.
Answer:
(a) Not all wants can be satisfied.
11. Adam Smith defined Economics in terms of:
(a) The Science of welfare
(b) The Science of scarcity
(c) The Science of wealth
(d) The Science of wealth and welfare
Answer:
(c) The Science of wealth

12. Who defines Economics in terms of Dynamic Growth and Development?

(a) Robbins
(b) Paul A Samuelson
(c) Adam Smith
(d) None of these
Answer:
(b) Paul A Samuelson

13. In every economic system, scarcity imposes limitations on __________.

(a) Households, business firms, governments and the nation as a whole.
(b) Households and business firms, but not the governments.
(c) Local and state governments, but not the federal government.
(d) Households and governments, but not business firms.
(e) Business firms, governments, and the nation as a whole.
Answer:
(a) Households, business firms, governments and the nation as a whole.

14. Economic goods are considered scarce resources because they __________.
(a) Cannot be increased in quantity.
(b) Do not exist in adequate quantity to satisfy the requirements of the society.
(c) Are of primary importance in satisfying social requirements.
(d) Are limited to man made goods.
Answer:
(b) Do not exist in adequate quantity to satisfy the requirements of the society.

15. ‘Economics is the study of mankind in the ordinary business of life’ was given by:
(a) Adam Smith
(b) Lord Robbins
(c) Alfred Marshall
(d) Samuelson
Answer:
(c) Alfred Marshall

16. Consider the following and decide which, if any, economy is without scarcity:
(a) The pre-independent Indian economy, where most people were farmers.
(b) A mythical economy where everybody is a billionaire.
(c) Any economy where income is distributed equally among its people.
(d) None of the above
Answer:
(d) None of the above

17. Human wants are in response to satisfy their wants?

(a) Unlimited
(b) Limited
(c) Scarce
(d) Multiple
Answer:
(a) Unlimited

18. Economic goods are considered as scarce resources because __________.

(a) Inadequate quantity to satisfy the needs of the society
(b) Not possible to increase in quantity
(c) Limited hands to make goods
(d) Primary importance in satisfying social requirements
Answer:
(a) Inadequate quantity to satisfy the needs of the society

19. The meaning of time element in Economics is:

(a) Calendar time
(b) Clock time
(c) Operational time in which supply adj usts with the market demand
(d) None of the above
Answer:
(c) Operational time in which supply adj usts with the market demand

20. All wants of an individual are not of:

(a) Equal importance
(b) Immediate importance
(c) Fixed importance
(d) All of the above
Answer:
(a) Equal importance

21. __________ refers to the process of selecting an appropriate alternative that will
provide the most efficient means of attaining a desired end, from two or more
alterative courses of action.
(a) Decision making
(b) Strategy
(c) Problem Solving
(d) Effectiveness
Answer:
(a) Decision making
22. Business Economics is __________.
(a) Abstract and applies the tools of Microeconomics.
(b) Involves practical application of economic theory in business decision making.
(c) Incorporates tools from multiple disciplines.
(d) (b) and (c) above.
Answer:
(d) (b) and (c) above.

23. Business Economics is also known as?

(a) Applied Economics
(b) Managerial Economics
(c) Micro Economics
(d) All of the above
Answer:
(b) Managerial Economics

24. The question of choice arises because our productive resources __________.
(a) Are limited
(b) Can be employed in alternatives
(c) Both (a) & (b)
(d) None of the above
Answer:
(c) Both (a) & (b)

25. The management of a business unit generally needs to make __________.

(a) Strategic Decision
(b) Tactical Decision
(c) Operational Decision
(d) All of the above
Answer:
(d) All of the above

26. Concept of Business Economics was given by:

(a) Joel Dean
(b) Alfred Marshall
(c) Adam Smith
(d) L. Robbins
Answer:
(a) Joel Dean

27. Which one of the following is incorrect about Business Economics?

(a) It is applied economics that fills the gap between economic theory and business
practice.
(b) Business Economics integrates economic theory with business practice.
(c) Business Economics is also re-ferred to as Managerial Econom-ics.
(d) Business Economics is more concerned with Macro Economics.
Answer:
(d) Business Economics is more concerned with Macro Economics.

28. __________ defined Business Economics in terms of the use of eco-nomics

analysis in the formulation of business policies.
(a) Joel Dean
(b) Karl Marks
(c) Adam Smith
(d) Schumpeter
Answer:
(a) Joel Dean

29. Business Economics is essentially a component of __________ as it includes

application of selected quan-titative techniques.
(a) Pure Economics
(b) Applies Economics
(c) Statistical Economics
(d) None of the above
Answer:
(b) Applies Economics

30. Which of the following is not in-cluded in Economics?

(a) Family Structure
(b) Managerial Economics
(c) Micro Economics
(d) Macro Economics
Answer:
(a) Family Structure

31. The heart of Business Economics is __________.

(a) Micro Economic Theory of the behaviour of consumers and firms in competitive
markets.
(b) Macro-Economic Theory of the national income
(c) Income Economic analysis to analyze the industry.
(d) All of the above.
Answer:
(a) Micro Economic Theory of the behaviour of consumers and firms in competitive
markets.

32. Which one of the following is not a subject matter of Micro-Economics?

(a) Behaviour of Firms
(b) External Value of Currency
(c) Factor Pricing
(d) Location of Industry
Answer:
(b) External Value of Currency

33. Micro economics does not study __________.

(a) Consumer behaviour
(b) Factor pricing
(c) General price level
(d) Firms equilibrium
Answer:
(c) General price level

34. Micro Economics is the study of:

(a) Individual parts of the economy
(b) The economy as a whole
(c) Choice making
(d) Development of the economy
Answer:
(a) Individual parts of the economy

35. The branch of economic theory that deals with the problem of allocation of
resources is __________.
(a) Micro-Economic theory.
(b) Macro-Economic theory.
(c) Econometrics.
(d) None of the above
Answer:
(a) Micro-Economic theory.

36. Which of the following is not the subject matter of Business Economics?
(a) Should our firm be in this busi-ness?
(b) How much should be produced and at price should be kept?
(c) How will the product be placed in the market?
(d) How should we decrease unem-ployment in the economy?
Answer:
(d) How should we decrease unem-ployment in the economy?

37. The branch of economic theory that deals with the problem of allocation of
resources is:
(a) Micro Economics
(b) Macro Economics
(c) Econometrics
(d) None of these
Answer:
(a) Micro Economics
38. Micro Economics Covers:
(a) National Income and National Output
(b) External Value of Currency
(c) Overall level of Savings and Investment
(d) Location of Industry
Answer:
(d) Location of Industry

39. A study of how increase in the corporate income tax rate will affect the natural
unemployment rate is an example of:
(a) Micro Economics
(b) Descriptive Economics
(c) Micro Economics
(d) Normative Economics
Answer:
(a) Micro Economics

40. __________ examines how the individual units (Consumers or firms) make
decisions as to how to efficiently allocate their scare resources.
(a) Macro Economics
(b) Micro Economics
(c) Mathematical Economics
(d) Consumer Economics.
Answer:
(b) Micro Economics

41. Which of the following falls under micro economics?

(a) National Income
(b) General price level
(c) Factor pricing
(d) National saving and investment
Answer:
(c) Factor pricing

42. Which of these is a part of micro economics?

(a) Factor pricing
(b) National Income
(c) Balance of payment
(d) None of the above
Answer:
(a) Factor pricing

43. Micro economics is also known as __________.

(a) Public economics
(b) Price theory
(c) Income theory
(d) Demand theory
Answer:
(b) Price theory

44. Micro Economics is concerned with:

(a) Consumer Behaviour
(b) Product pricing
(c) Factor Pricing
(d) All of the above
Answer:
(d) All of the above

45. Macro Economics is also called __________ economics.

(a) Applied
(b) Aggregate
(c) Experimental
(d) None of the above
Answer:
(b) Aggregate

46. Which of the following does not suggest a macro approach for India?
(a) Determining the GNP of India.
(b) Finding the causes of failure of ABC Ltd.
(c) Identifying the causes of inflation in India.
(d) Analyse the causes of failure of industry in providing large scale employment
Answer:
(b) Finding the causes of failure of ABC Ltd.

47. Macro Economics is the study of __________.

(a) All aspects of scarcity.
(b) The national economy and the global economy as a whole.
(c) Big businesses.
(d) The decisions of individual businesses and people.
Answer:
(b) The national economy and the global economy as a whole.

48. A study of how increases in the corporate income tax rate will affect the national
unemployment rate is an example of __________.
(a) Macro-Economics.
(b) Descriptive Economics.
(c) Micro-economics.
(d) Normative economics.
Answer:
(a) Macro-Economics.
49. Which of these is an example of macro economics:
(a) Problem of unemployment in India
(b) Rising price level in the country
(c) Increase in disparities of income
(d) All of the above
Answer:
(d) All of the above

50. Macro economics include __________.

(a) Product pricing
(b) Consumer behaviour
(c) External value of money
(d) Location of industry
Answer:
(c) External value of money

51. Which of the following is not a subject matter of Micro-economies?

(a) The price of mangoes.
(b) The cost of producing a fire truck for the fire department of Delhi, India.
(c) The quantity of mangoes pro-duced for the mangoes market.
(d) The national economy’s annual rate of growth.
Answer:
(d) The national economy’s annual rate of growth.

52. Which of the following would be considered a topic of study in Macro-

economics?
(a) The effect of increase in wages on the profitability of cotton industry
(b) The effect on steel prices when more steel is imported
(c) The effect of an increasing infla¬tion rate on living standards of people in India
(d) The effect of an increase in the price of coffee on the quantity of tea consumed
Answer:
(c) The effect of an increasing infla¬tion rate on living standards of people in India

53. Which of the following is a part of the subject matter of macro economics?
(a) Study of firms
(b) Aggregate profits of a firm
(c) Market demand for a product
(d) Net national product
Answer:
(d) Net national product

54. The Macro Economics does not cover the area of __________.
(a) General price level and interest rates
(b) Level of employment and rate of economic growth
(c) Balance of trade & Balance of payments
(d) Product Pricing.
Answer:
(d) Product Pricing.

55. Shyam : This year due to heavy rainfall my option crop was damaged
Krishna: Climates affects crop yields. Some years are bad, other are good
Hari: Don’t worry – Price increase will compensate for the fall in quantity supplied
Radhe: The Government ought to guarantee that our income will not fall.
In this conversation, the normative statement is made by
(a) Shyam
(b) Krishna
(c) Hari
(d) Radhe
Answer:
(d) Radhe

56. Business Economics enables appli-cation of economic logic and analytical tools to
__________.
(a) Bridge the gap between theory and practice.
(b) Increase the implementation sci-ence.
(c) Increase the effectiveness.
(d) Apply tools of macro economics.
Answer:
(a) Bridge the gap between theory and practice.

57. Business Economics relies heavily on the techniques of __________.

(a) Micro Economics
(b) Macro Economics
(c) Normative Science only
(d) Economics discipline only.
Answer:
(a) Micro Economics

58. Which of the following is a norma-tive statement?

(a) Planned economies allocate re-sources via government depart-ments.
(b) Most transitional economies have experienced problems of falling output and
rising prices over the past decade.
(c) There is a greater degree of consumer sovereignty in market economies than
planned econo-mies.
(d) Reducing inequality should be a major priority for mixed econo-mies
Answer:
(d) Reducing inequality should be a major priority for mixed econo-mies

59. An example of ‘positive’ economic analysis would be:

(a) An analysis of the relationship between the price of food and the quantity
purchased.
(b) Determining how much income each person should be guaran-teed.
(c) Determining the ‘fair’ price for food.
(d) Deciding how to distribute the output of the economy.
Answer:
(a) An analysis of the relationship between the price of food and the quantity
purchased.

60. Business Economics is __________ in its approach as it tackles practical problems

which the firm faces in the real world.
(a) Scientific
(b) Programmatic
(c) Theoretical
(d) Mathematical
Answer:
(b) Programmatic

61. The difference between positive and normative Economics is:

(a) Positive Economics explains the performance of the economy while normative
Economics finds out the reasons for poor perfor¬mance.
(b) Positive Economics describes the facts of the economy while normative
Economics involves evaluating whether some of these are good or bad for the welfare
of the people.
(c) Normative Economics describes the facts of the economy while positive
Economics involves evaluating whether some of these are good or bad for the welfare
of the people.
(d) Positive Economics prescribes while normative Economics de-scribes.
Answer:
(b) Positive Economics describes the facts of the economy while normative
Economics involves evaluating whether some of these are good or bad for the welfare
of the people.

62. Normative aspect of Economics is given by:

(a) Marshall
(b) Robbins
(c) Adam Smith
(d) Samuelson
Answer:
(a) Marshall

63. Normative Economics is based on:

(a) Ethical Considerations
(b) Facts and Generalization
(c) What is?
(d) All of the above
Answer:
(a) Ethical Considerations

64. Deductive and Inductive methods are complimentary to each other. It is:
(a) Absolutely correct
(b) Absolutely incorrect
(c) Partially incorrect
(d) None of the above
Answer:
(a) Absolutely correct

65. In inductive method, logic proceeds from:

(a) General to Particular
(b) Particular to General
(c) Both (a) and (b)
(d) None of these
Answer:
(b) Particular to General

66. Which of the following is a norma-tive economic statement?

(a) Unemployment rate decreases with industrialization
(b) Economics is a social science that studies human behaviour.
(c) The minimum wage should be raised to ₹ 200 per day
(d) India spends a huge amount of money on national defence.
Answer:
(c) The minimum wage should be raised to ₹ 200 per day

67. Ram: My corn harvest this year is poor.

Krishan: Don’t worry. Price increases will compensate for the fall in quantity
supplied.
Vinod: Climate affects crop yields. Some years are bad, others are good.
Madhu: The Government ought to guarantee that our income will not fall.
In this conversation, the normative statement is made by
(a) Ram
(b) Krishan
(c) Vinod
(d) Madhu
Answer:
(d) Madhu

68. Positive science only explains __________

(a) What is?
(b) What ought to be?
(c) What is right or wrong
(d) None of the above
Answer:
(a) What is?

69. Under Inductive method logic proceeds from:

(a) General to particular
(b) Positive to normative
(c) Normative to positive
(d) Particular to general
Answer:
(d) Particular to general

70. __________ analyses causes and effect relationship between variables in an

objective and scientific manner.
(a) Positive Science
(b) Normative Science
(c) Negative Science
(d) Analytical Science
Answer:
(a) Positive Science

71. Business Economics is generally in nature.

(a) Normative
(b) Prescriptive
(c) Normative or Prescriptive
(d) Theoretical
Answer:
(c) Normative or Prescriptive

72. Which of the following statements is incorrect?

(a) Business economics is normative in nature.
(b) Business Economics has a close connection with statistics.
(c) Business Economist need not worry about macro variables.
(d) Business Economics is also called Managerial Economics.
Answer:
(c) Business Economist need not worry about macro variables.

73. Under Inductive method, the logic proceeds from:

(a) General to particulars
(b) Particular to general
(c) Both (a) and (b)
(d) None
Answer:
(b) Particular to general
73A. Who gave the positive aspect of science?
(a) Alfred Marshall
(b) A.C. Pigou
(c) Adam Smith
(d) Robbins
Answer:
(d) Robbins

74. Although business economics combines the essentials of normative and positive
economic theory but the emphasis is on :
(a) Positive
(b) Normative
(c) Both Positive and Normative
(d) Neither Positive nor Normative.
Answer:
(b) Normative

75. Business Economics is __________.

(a) Normative in nature
(b) Interdisciplinary in nature
(c) Both
(d) None
Answer:
(C) Both

76. Find out the correct statement __________

(a) Higher the prices, lower the quality demanded of a product are a normative
statement
(b) Micro and macro-economics are interdependent
(c) In a capitalist economy, the eco-nomic problems are solved by planning
commission
(d) In deductive method logic pro-ceeds from particular to the general
Answer:
(b) Micro and macro-economics are interdependent

77. “Economics is neutral between ends”. The statement is given by:

(a) L. Robbins
(b) Mrs. Joan
(c) Alfred Marshall
(d) A.C. Pigou
Answer:
(a) L. Robbins

78. Economics which is concerned with welfare propositions is called __________.

(a) Socialistic economics
(b) Capitalistic economics
(c) Positive economics
(d) Normative economics
Answer:
(d) Normative economics

79. The Business Economics incorpo-rates tools from other disciplines such as
Mathematics, operations Research, Management theory, Accounting, etc. Therefore,
Business Economics is
(a) Intra-disciplinary
(b) Inter-disciplinary
(c) Multi-disciplinary
(d) Flexi-disciplinary
Answer:
(b) Inter-disciplinary

80. Under inductive method logic proceeds from:

(a) General to particular
(b) Positive to narrative
(c) Normative to positive
(d) Particular to general
Answer:
(d) Particular to general

81. Business Economics involves the elements of __________.

(a) Micro Environment
(b) Macro Environment
(c) Both (a) and (b)
(d) None of the above.
Answer:
(c) Both (a) and (b)

82. In which of the following methods conclusions are drawn on the basis of
collection and analysis of facts?
(a) Deductive method
(b) Scientific method
(c) Inductive method
(d) Experimental method
Answer:
(c) Inductive method

83. Business economy involves theory of Business economics with __________.

(a) Normative Economics
(b) Business practices
(c) Micro Economics
(d) Macro Economics
Answer:
(b) Business practices

84. The operational or interval issues to which economic theories can be directly
applied are related with.
(a) Micro Economics
(b) Macro Economics
(c) Business Economics
(d) Environmental Economics
Answer:
(a) Micro Economics

85. Which factor is included in business Economics?

(a) Business Economics is an art
(b) Inter-disciplinary in nature
(c) Normative in nature
(d) All of the above
Answer:
(d) All of the above

86. Applied economics includes __________.

(a) Regression analysis and math-ematical linear programming
(b) Capital budgeting
(c) Both (a) and (b)
(d) None
Answer:
(c) Both (a) and (b)

87. Which of the following is not within the scope of Business Economics?
(a) Capital Budgeting
(b) Risk Analysis
(c) Business Cycles
(d) Accounting Standards
Answer:
(d) Accounting Standards

88. __________ explains the rela-tionship between inputs and output.

(a) Production Theory
(b) Demand Analysis
(c) Inventory Management
(d) None of the above
Answer:
(a) Production Theory
89. Business Economics with the help of advanced tools like __________ enables the
firm to arrive at the best course of action for optimum utilisation of available
resources.
(a) Accounting
(b) Finance
(c) Linear Programming
(d) Marketing Mix
Answer:
(c) Linear Programming

90. Business Economists use method(s) __________ to maintain optimum stock of

inventories.
(a) ABC Analysis
(b) Simple simulation exercises
(c) Mathematical models
(d) All of the above
Answer:
(d) All of the above

91. Which of the following Macro-Economic Factor is considered in Business

Economics?
(a) Business Cycles
(b) Employment, Prices
(c) Saving & investment
(d) All of the above.
Answer:
(d) All of the above.

92. Which of the following statement is false?

(a) The Resources are limited.
(b) The Resources have alternative uses.
(c) If resources are unlimited, people would be able to satisfy all their wants.
(d) The economics problem arises because resource has only a single use.
Answer:
(d) The economics problem arises because resource has only a single use.

93. Which of the following economic system has to deal with the control problem of
scarcity of resources?
(a) Capitalist
(b) Socialist
(c) Mixed
(d) All of the above
Answer:
(d) All of the above
94. The Central problem in every eco-nomic society is:
(a) To ensure a minimum level of income for every individual.
(b) To allocate scarce resources in such a manner that societies unlimited wants are
satisfied in the best possible manner.
(c) To ensure that production occurs in the most efficient manner.
(d) Toprovidejobtoeveryjobseeker.
Answer:
(b) To allocate scarce resources in such a manner that societies unlimited wants are
satisfied in the best possible manner.

95. A developed economy uses technique in production.

(a) Labour intensive.
(b) Capital intensive
(c) Home-based
(d) Traditional
Answer:
(b) Capital intensive

96. The central problem in economics is that of __________.

(a) Comparing the success of com-mand versus market economies.
(b) Guaranteeing that production oc¬curs in the most efficient manner.
(c) Guaranteeing a minimum level of income for every citizen.
(d) Allocating scarce resources in such a manner that society’s un-limited needs or
wants are satis-fied in the best possible manner.
Answer:
(d) Allocating scarce resources in such a manner that society’s un-limited needs or
wants are satis-fied in the best possible manner.

97. Capital intensive technique would get chosen in a __________.

(a) Labour surplus economy where the relative price of capital is lower.
(b) Capital surplus economy where the relative price of capital is lower.
(c) Developed economy where technology is better.
(d) Developing economy where technology is poor.
Answer:
(b) Capital surplus economy where the relative price of capital is lower.

98. Which of the following is not a part of central economic Problem?

(a) What to Produce?
(b) How to Produce?
(c) For whom to Produce?
(d) Price fixation of Production.
Answer:
(d) Price fixation of Production.
99. refers to the sum total of arrangements for the production and distribution of goods
and services in a Society.
(a) Economic System
(b) Social System
(c) Business system
(d) Comprehensive System
Answer:
(a) Economic System

100. Economic Problem arises when:

(a) Wants are unlimited
(b) Resources are limited
(c) Alternative uses of resources
(d) All of the above
Answer:
(d) All of the above

101. Which of the following is not one of the four central questions that the study of
economics is supposed to answer?
(a) Who produces what ?
(b) When are goods produced?
(c) Who consumes what?
(d) How are goods produced?
Answer:
(b) When are goods produced?

102. The classification of economies into Capitalist, Socialist and Mixed is based on
their:
(a) Mode of Production, exchange and distribution
(b) Government’s role in economic activity.
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer:
(c) Both (a) and (b)

103. The choice between labour and Capital intensive techniques is related with.
(a) What to Produce?
(b) How to Produce?
(c) For whom to Produce
(d) All of the above.
Answer:
(b) How to Produce?

104. Which one of the following is not an example of capitalist economy?

(a) Japan
(b) Mexico
(c) Germany
(d) Cuba
Answer:
(d) Cuba

105. Freedom of choice is the advan-tage of __________.

(a) Socialism
(b) Capitalist
(c) Mixed economy
(d) None of the above
Answer:
(b) Capitalist

106. A capitalist economy consists of __________.

(a) Central planning authority
(b) A mechanism to decide as what, how and for whom to produce
(c) Both (a) and (h)
(d) None of the above
Answer:
(b) A mechanism to decide as what, how and for whom to produce

107. In a free market economy the al-location of resources is determined by

__________.
(a) Voting done by consumers
(b) A central planning authority.
(c) Consumer preferences.
(d) The level of profits of firms.
Answer:
(c) Consumer preferences.

108. A capitalist economy uses __________ as the principal means of allocating

resources.
(a) Demand
(b) Supply
(c) Efficiency
(d) Prices
Answer:
(d) Prices

109. Price Mechanism is the main feature of which economy __________.

(a) Capitalistic Economy
(b) Mixed Economy
(c) Socialist Economy
(d) All of the above
Answer:
(a) Capitalistic Economy

110. Which out of these are the feature of capitalism?

(i) Profit motive
(ii) Human welfare
(iii) Work through price mechanism
(a) (i) and (ii)
(b) (ii) and (iii)
(c) (i) and (iii)
(d) All of these
Answer:
(c) (i) and (iii)

111. __________ is an economic system in which all means of production are owned
and controlled by private individuals for profit.
(a) Capitalist
(b) Socialist
(c) Mixed
(d) None of the above
Answer:
(a) Capitalist

112. Which of the following is consid-ered as a disadvantage of allocating resources

using the market system?
(a) Income will tend to be unevenly distributed.
(b) People do not get goods of their choice.
(c) Men of Initiative and enterprise are not rewarded.
(d) Profits will tend to be low.
Answer:
(a) Income will tend to be unevenly distributed.

113. Exploitation and inequality will be more in __________.

(a) Socialism
(b) Capitalism
(c) Mixed
(d) All of the above
Answer:
(b) Capitalism

114. __________ means that buyers ultimately determine which goods and services
will be produced and in what quantities.
(a) Capitalist Economic
(b) Socialist Economy
(c) Mixed Economy
(d) Consumer Sovereignty
Answer:
(d) Consumer Sovereignty

115. In which type of economy do consumers and producers make their choices based
on the market forces of demand and supply?
(a) Open Economy
(b) Controlled Economy
(c) Command Economy
(d) Market Economy
Answer:
(d) Market Economy

116. The economic system in which all the means of production are owned and
controlled by private individuals for profit.
(a) Socialism
(b) Capitalism
(c) Mixed economy
(d) Communism
Answer:
(b) Capitalism

117. In a free market economy, when consumers increase their purchase of a goods
and the level of exceeds then prices tend to rise:
(a) Demand, supply
(b) Supply, demand
(c) Prices, demand
(d) Profits, supply
Answer:
(a) Demand, supply

118. Capitalistic Economy uses as principal means of allocating resources.

(a) Demand
(b) Supply
(c) Price
(d) All of the above
Answer:
(c) Price

119. In a capitalist economy, allocation of resources is done by:

(a) Producers
(b) Government
(c) Planners
(d) Price mechanism
Answer:
(d) Price mechanism

120. A Free Market economy solves its Central Problems through __________.
(a) Planning authority
(b) Market mechanism
(c) Both
(d) None
Answer:
(b) Market mechanism

121. A capitalist economy is by and large __________.

(a) A closed economy
(b) A free market economy
(c) A centrally controlled economy
(d) An economy in which a govern-ment neither collects any taxes nor incurs any
expenditure.
Answer:
(b) A free market economy

122. Which one is not the characteristic of capitalistic economy?

(a) Profit motive
(b) Income inequality
(c) Free employment
(d) Collective ownership
Answer:
(d) Collective ownership

123. Capitalistic Economy uses as principal means of allocating resources.

(a) Demand
(b) Supply
(c) Price
(d) All of the above
Answer:
(c) Price

124. Which one of the following is not true about capitalist economy?
(a) There is freedom of economic choice.
(b) Profit motive is the driving force.
(c) It is also called as free market economy or laissez Faire economy.
(d) Producer is the king under capitalism
Answer:
(d) Producer is the king under capitalism
125. The merits of Capitalist economy do not include:
(a) Faster process of economic growth
(b) Efficient economic decisions and their implementation
(c) Incentives for innovation and technological progress
(d) Welfare of labour
Answer:
(d) Welfare of labour

126. A free market economy’s driving force is:

(a) Profit motive
(b) Welfare of the people
(c) Rising income and levels of living
(d) None of the above.
Answer:
(a) Profit motive

127. An economic system in which all means of production are owned and controlled
by private individuals for profit is called:
(a) Mixed Economy
(b) Socialist Economy
(c) Capitalist Economy
(d) Developed Economy
Answer:
(c) Capitalist Economy

128. Where does price mechanism exists?

(a) Capitalist Economy
(b) Socialist Economy
(c) Both type of economies
(d) None of the above.
Answer:
(a) Capitalist Economy

129. In which among the following systems the ‘right to property’ exists __________.
(a) Mixed economy
(b) Capitalist economy
(c) Socialist economy
(d) Traditional economy
Answer:
(b) Capitalist economy

130. A system of economy in which all the means of production are owned and
controlled by the private individuals for the purpose of profit, is called:
(a) Socialist Economy
(b) Capitalist Economy
(c) Mixed Economy
(d) All of the above
Answer:
(b) Capitalist Economy

131. Capitalistic Economy user __________ as principal means of allocating

resources:
(a) Demand
(b) Supply
(c) Price
(d) All of the above
Answer:
(c) Price

132. Which of the following is not demerit of Capitalism?

(a) Precedence of property rights over human rights.
(b) Misallocation of resources.
(c) Punishment for inefficient & imprudent men.
(d) Environmental degradation due to excessive materialism.
Answer:
(c) Punishment for inefficient & imprudent men.

133. Freedom of choice is the advan-tage of __________.

(a) Socialism
(b) Capitalism
(c) Mixed Economy
(d) Communism
Answer:
(b) Capitalism

134. Under a free economy, prices are:

(a) Regulated
(b) Determined through free inter-play of demand and supply
(c) Partly regulated
(d) None of these
Answer:
(b) Determined through free inter-play of demand and supply

135. Which of the following statements does not apply to a market economy?
(a) Firms decide whom to hire and what to produce.
(b) Firms aim at maximizing profits.
(c) Households decide which firms to work for and what to buy with their incomes.
(d) Government policies are the pri-mary forces that guide the deci-sions of firms and
households.
Answer:
(d) Government policies are the pri-mary forces that guide the deci-sions of firms and
households.

136. Which of the following is not a feature of a capitalist economy?

(a) Right to private property
(b) Restrictions on consumers Right to choose
(c) Profit motive
(d) Freedom of enterprise
Answer:
(b) Restrictions on consumers Right to choose

137. Freedom of choice is the advan-tage of __________.

(a) Socialism
(b) Capitalism
(c) Communism
(d) None of the above
Answer:
(b) Capitalism

138. A Capitalist Economy follows the policy of:

(a) Laissez faire
(b) Regulated markets
(c) Promoting public sector
(d) None of the above
Answer:
(a) Laissez faire

139. In a capitalist economy the allocation of resources is performed by:

(a) Producers
(b) Government
(c) Planners
(d) Price mechanism
Answer:
(d) Price mechanism

140. The Concept of socialist economy was propounded by __________.

(a) Karl Mark
(b) Frederic Engels
(c) Adam Smith
(d) Both (a) & (b)
Answer:
(d) Both (a) & (b)
141. Socialist economy is __________.
(a) Self regulation
(b) Profit Oriented
(c) Command economy
(d) Allocation of resources as per market requirements
Answer:
(c) Command economy

142. Exploitation and inequality are minimal under:

(a) Socialism
(b) Capitalism
(c) Mixed economy
(d) None of the above
Answer:
(a) Socialism

143. Socialist Economy was pro-pounded by:

(a) Karl Marx
(b) Samuelson
(c) A.C. Pigou
(d) Adam Smith
Answer:
(a) Karl Marx

144. Socialist economy is also called as __________.

(a) Command Economy
(b) Centrally Planned Economy
(c) Free market Economy
(d) Both (a) & (b)
Answer:
(d) Both (a) & (b)

145. Although Price mechanism exists in __________, but it has only a secondary
role.
(a) Capitalist economy
(b) Socialist economy
(c) Mixed Economy
(d) Price Economy.
Answer:
(b) Socialist economy

146. Inequalities of income do not perpetuate in __________.

(a) Socialism
(b) Mixed economy
(c) Capitalism
(d) None
Answer:
(a) Socialism

147. Administered prices refer to:

(a) Prices determined by forces of demand and supply
(b) Prices determined by sellers in the market
(c) Prices determined by an external authority which is usually the government
(d) None of the above
Answer:
(c) Prices determined by an external authority which is usually the government

148. Socialism ensures __________.

(a) Rapid growth and balanced development
(b) Right to work
(c) Incentives for efficient economic decisions
(d) Both (a) and (b)
Answer:
(d) Both (a) and (b)

149. The erstwhile U.S.S.R. is an example of __________ economy.

(a) Capitalist
(b) Socialist
(c) Mixed
(d) Price
Answer:
(b) Socialist

150. Which one of the following is Not a feature of socialist economy?

(a) Collective ownership
(b) Absence of consumer choice
(c) Minimum role of Price Mechanism
(d) High Competition
Answer:
(d) High Competition

151. Which of the following is an example of Socialist economy?

(a) Erstwhile U.S.S.R.
(b) North Korea
(c) China and Cuba
(d) All of the above
Answer:
(d) All of the above
152. The demerits of Socialism do not include:
(a) Predominance of bureaucracy
(b) Red tapism & favoritism
(c) Corruption
(d) Consumer Sovereignty
Answer:
(d) Consumer Sovereignty

153. Under __________, the Consumers have no freedom of choice.

(a) Capitalist
(b) Socialist
(c) Mixed
(d) None of the above
Answer:
(b) Socialist

154. Socialist Economy is also known as __________.

(a) Mixed Economy
(b) Planned Economy
(c) Capitalist Economy
(d) None of the above
Answer:
(d) None of the above

155. In which economy market and government both play on important role?
(a) Mixed economy
(b) Socialistic economy
(c) Capitalistic economy
(d) Business economy
Answer:
(a) Mixed economy

156. Which economic system is de-scribed by Schumpeter as capitalism in the oxygen

tent?
(a) Laissez-faire Economy
(b) Command Economy
(c) Mixed Economy
(d) Agrarian Economy
Answer:
(c) Mixed Economy

157. The Government itself must run important and selected industries and eliminate
the free play of profit motive and self-interest. It is applicable in case of economy.
(a) Capitalist
(b) Socialist
(c) Mixed
(d) Price
Answer:
(c) Mixed

158. The term “Mixed Economy” denotes:

(a) Co-existence of both consumers and producers goods’ industries in the economy.
(b) Co-existence of both private and public sectors in the economy.
(c) Co-existence of both rural and urban sectors in the economy.
(d) Co-existence of both large and small industries in the economy
Answer:
(b) Co-existence of both private and public sectors in the economy.

159. Mixed economy means __________.

(a) All economic decisions are taken by Central Authority
(b) All economic decisions are taken by private entrepreneurs
(c) Economic decisions are partly taken by the state and partly by private
entrepreneurs
(d) None of these
Answer:
(c) Economic decisions are partly taken by the state and partly by private
entrepreneurs

160. Which of the following are the features of a mixed economy?

(a) Planned economy
(b) Dual system of pricing exists
(c) Balance regional development
(d) All of the above
Answer:
(d) All of the above

161. In a mixed economy __________.

(a) All economic decisions are taken by the central authority.
(b) All economic decisions are taken by private entrepreneurs.
(c) Economic decisions are partly taken by the state and partly by the private
entrepreneurs.
(d) None of the above.
Answer:
(c) Economic decisions are partly taken by the state and partly by the private
entrepreneurs.

162. Dual system of pricing exist in:

(a) Free market economy
(b) Socialistic economy
(c) Mixed economy
(d) None of the above
Answer:
(c) Mixed economy

163. Which Economic System is de-scribed by Schumpeter as ‘capitalism in the

oxygen tent’?
(a) Laissez- Faire Economy
(b) Command Economy
(c) Mixed Economy
(d) Agrarian Economy
Answer:
(c) Mixed Economy

164. The existence of three sectors of industries (Private, Public and Combine sector)
is one of the futures of __________.
(a) Capitalist
(b) Socialist
(c) Mixed
(d) Price
Answer:
(c) Mixed

165. Mixed economy means:

(a) Coexistence of both private and public sector
(b) Coexistence of poor and rich people
(c) Both (a) and (b)
(d) None
Answer:
(a) Coexistence of both private and public sector

166. Mixed economy means:

(a) Co-existence of small and large industries
(b) Promoting both agriculture and industries in the economy
(c) Co-existence of rich and poor
(d) Co-existence of public and private sectors
Answer:
(d) Co-existence of public and private sectors

167. __________ is a sector in which both the government and the private enterprises
have equal access and join hands to produce commodities and services, leading to the
establishment of joint sector.
(a) Private Sector
(b) Public Sector
(c) Combined sector
(d) Price
Answer:
(c) Combined sector

168. In India Mixed Economy exists due to:

(a) Coexistence of public sector and private sector.
(b) Individual forces of demand and supply.
(c) Orders by government.
(d) None of these.
Answer:
(a) Coexistence of public sector and private sector.

169. Larger production of __________ goods would lead to higher production in

future.
(a) Consumer goods
(b) Capital goods
(c) Agricultural goods
(d) Public goods
Answer:
(b) Capital goods

170. __________ refers to the work area where surplus manpower is employed out of
which some individuals have zero or almost zero marginal productivity, such that if
they are removed the total level of output remains unchanged.
(a) Voluntary
(b) Disguised
(c) Structural
(d) Technological
Answer:
(b) Disguised

171. Which of the following statements is incorrect?

(a) Alfred marshall propagated the wealth definition of Economics
(b) L. Robbins introduces the “Scarcity” definition of Economics
(c) Samuelson emphasized upon the “growth” aspect of Economics
(d) A.C. Pigou believed in “welfare” aspect of Economics
Answer:
(a) Alfred marshall propagated the wealth definition of Economics

172. Who has defined economics as “Science which deals with wealth”?
(a) Adam Smith
(b) Canon
(c) J.B. Say
(d) A.C. Pigou
Answer:
(c) J.B. Say
173. Who is the author of “The Nature and causes of wealth of Nation”?
(a) Karl Marx
(b) Adam Smith
(c) JB Say
(d) AC Pigou
Answer:
(b) Adam Smith

174. “Features of the book wealth of __________.

(a) It was the first book user on economics
(b) It was created in 1776.
(c) It was also known as ‘wealth of nations” nations’.
(d) All of the above.
Answer:
(d) All of the above.