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MCQ on Business Economics
1. In the Bertrand two good model with homogenous
(A) p1 = p2 = c at equilibrium
(B) p1 = p2 ≠ c at equilibrium
(C) p1 = p2 > c at equilibrium
(D) p1 ≠ p2 at equilibrium
2. External economies are witnessed in
(A) a rising supply curve
(B) a rising demand curve
(C) a falling supply curve
(D) a falling demand curve
3. Marginal Cost (MC) is given by
(A) the slope of the TFC curve.
(B) the slope of the TVC curve but not by the slope of the TC curve.
(C) the slope of the TC curve but not by the slope of the TVC curve.
(D) either the slope of TC or the slope of the TVC.
4. At equilibrium under monopoly
(A) total expenditure and price are inversely related.
(B) total expenditure and price are directly related.
(C) total expenditure and price are independent.
(D) price elasticity of demand is positive.
5. In case of price consumption curve parallel to the horizontal axis
(A) the price elasticity of demand of the concerned good is one.
(B) the price elasticity of demand of the concerned good is greater than one.
(C) the concerned good has income elasticity equal to one.
(D) the demand for the concerned good changes directly proportional to price.
6. When an enterprise owner is the sole purchaser in input market and seller in a perfectly competitive market, we have the case of
(A) Monopolistic exploitation
(B) Monopolistic as well as monopsonistic exploitation
(C) Oligopolistic exploitation
(D) Monopsonistic exploitation
7. Consider the following Assertion (A) and Reason (R)
Assertion (A) : If the monopolist faces identical demand curve for his commodity in two separate markets, by practising third degree price discrimination he cannot increase his total revenue and profits.
Reason (R) : As the marginal revenue curves are identical in two markets when the demand curves are same, the monopolist will not charge different prices in each market to maximise profits.
(A) Both (A) and (R) are true and (R) is the correct explanation of (A).
(B) Both (A) and (R) are true and (R) is not the correct explanation of (A).
(C) (A) is true but (R) is false.
(D) (A) is false but (R) is true.
8. In Friedman’s Permanent Income Hypothesis, transitory income can be positive or negative, which occurs on account of
(A) long-term changes in income.
(B) temporary and unanticipated changes in current income.
(C) income remaining unchanged.
(D) long-term changes in relative prices.
9. In an open economy, international capital mobility and a fixed exchange rate will imply
(A) coordinated fiscal policies with rest of the world.
(B) inflation targetting.
(C) no monetary policy autonomy.
(D) exchange rate devaluation.
10. In IS-LM model, effectiveness of expansionary fiscal policy is maximum when the LM curve is
(A) downward sloping and steep
(C) upward rising and backward bending
11. The Keynesian view of an increase in government spending results in an increase in interest rate and income. However, the money stock remains unchanged, with velocity of money
(C) remaining unchanged
(D) increasing in the first phase and decreasing thereafter
12. In Real Business Cycle Models, real, not monetary, factors are responsible for fluctuations in output and employment. If at all monetary policy is considered, it focuses on
(A) lowering employment when the economy is above full employment.
(B) increasing employment when the economy is at less than full employment.
(C) controlling inflation and maintaining stability.
(D) increasing domestic credit to increase output.
13. The distinctive feature of the New Classical Model is that the aggregate supply and labour supply schedules depend on
(A) backward-looking nature of expectations of monetary and fiscal policy variables along with oil prices and other supply side factors.
(B) contemporaneous monetary and fiscal policy variables along with oil prices and other supply side factors.
(C) rational expectations of monetary and fiscal policy variables along with oil prices and other supply side factors.
(D) rigidities in the output and money market.
14. The New Keynesian models explain involuntary unemployment through real rigidities arising out of
(A) money and credit market
(B) capital market
(C) foreign exchange market
(D) wage- and price-setting process
15. In the labour demand-supply framework, at the employment level below the equililbrium employment, there is incentive for the firm/employer to put more workers to work as
(A) marginal product of labour exceeds the real wage.
(B) marginal product of labour is lower than the real wage.
(C) marginal product of labour is equal to real wage.
(D) marginal product of labour is not related to real wage.
16. In case of inflation tax, government’s real seignorage revenue is the product of inflation tax and the tax base. While the tax rate is the rate of inflation, the tax base is the
(A) real output
(B) nominal output
(C) real money supply
(D) capital stock
17. In the presence of repercussion effect, a shift in the pattern of expenditure towards more of imports will result in
(A) higher import and higher domestic output.
(B) lower import and higher domestic output.
(C) improved balance of trade and lower domestic output.
(D) deteriorating balance of trade and lower domestic output.
18. In the Heckscher-Ohlin framework, at the free-trade world equilibrium price
(A) quantity of the good that the Home exports is less than the quantity of that good the Foreign imports.
(B) quantity of the good that the Home exports and the quantity of the same good that the Foreign imports move in opposite direction.
(C) quantity of the good that the Home exports is greater than the quantity of that good the Foreign imports.
(D) quantity of the good that the Home exports is same as the quantity of that good the Foreign imports.
19. Stolper-Samuelson Theorem states that, under free-trade, the real income
(A) rises for the factor used relatively intensively in the exporting industry as well as the import-competing industry.
(B) rises for the factor used relatively intensively in exporting industry and falls for the factor used relatively intensively in the import competing industry.
(C) falls for the factor used relatively intensively in both exporting as well as import competing industries.
(D) falls for the factor used relatively intensively in exporting industry and rises for the factor used relatively intensively in the import competing industry.
20. In the presence of increasing returns, if both countries participating in international trade specialize same commodity, then the in the
(A) volume of trade will be higher for both the countries and overall welfare for each country will be higher.
(B) volume of trade will be same for both the participating countries and overall welfare for each of them will remain unchanged.
(C) there will be no trade among the participating countries and overall welfare for each country will remain unchanged.
(D) there will be no trade among the two participating countries and overall Welfare for each country will fall.
21. As a measure of protection, voluntary export restraint (VER) is equivalent to import quota, except that
(A) the quota rent is non-existent in this case.
(B) the quota rent is effectively ceded to the foreign exporter.
(C) the quota rent is partly taken by the importing country and partly by the exporting country.
(D) the quota rent is higher in this case.
22. If standard deviation of a variable x is 10, the value of standard deviation of 50 + 5x would be
23. In moving average method we cannot find trend values of
(A) Starting periods only
(B) End periods only
(C) Both Starting and End periods
24. If a card is chosen from a standard pack of cards, periods what is the probability of getting a five or a seven?
25. When both population mean and variance are not known, for the comparison of two sample means, which of the following test is applied?
(A) Chiz test
(B) Student t test
(C) F test
(D) Z test
26. If one regression coefficient is greater than one, the other must be
(A) Greater than one
(B) equal to Zero
(C) less than one
(D) inverse of it
27. Let the coefficient of determination computed be 0-39 in a problem involving one independent variable and one dependent variable. This result means that
(A) the relationship between two variables is negative.
(B) the correlation coefficient is 0-39.
(C) 39% of total variation in dependent variable is explained by the independent variable.
(D) 39% of the total variation is explained by the dependent variable.
28. Which of the following is not used for the solution of multi-collinearity?
(A) Ridge regression analysis
(B) Dropping variable technique
(C) Principal component analysis
(D) Indirect least square method
29. Choose the correct statement:
In a simultaneous equation system
(A) if an equation is exactly identified then ILS and ZSLS would give same result.
(B) if an equation is over identified then ILS and ZSLS technique would give same result.
(C) if an equation is under identified then OLS technique can be applied.
(D) if an equation is exactly identified then only ILS technique can be applied.
30. Omission of relevant variables or ‘underfitting’ a model has several consequences. Select the correct statements using codes given below:
1. If omitted variables are correlated with the variables, the coefficients of the estimated model are biased.
2. The disturbance variance 02 is incorrectly estimated.
3. Even when excluded variables are not correlated with the variables included in the model. the intercept of the estimated model is unbiased.
4. Forecasts will be reliable.
(A) 1 and 2
(B) 1 and 3
(C) 1 and 4
(D) 3 and 4
31. Characteristic roots of A = -11) are
32. If the Marginal Propensity to consume is 0-8, then the value of Investment Multiplier will be
33. VAT is imposed
(A) directly on consumers.
(B) on final stage of production.
(C) on first stage of production.
(D) on all stages between production and final stages.
34. Income tax in India is a
(A) progressive tax.
(B) proportional tax.
(C) value added tax.
(D) part of goods and services tax.
35. The following was constituted to examine the centre state relation:
(A) Chelliah Committee
(B) Sarkaria Commission
(C) Narsimham Committee
(D) Wanchoo Committee
36. The concentration effect explained in Peacock Wiseman hypothesis implies
(A) Public expenditure does not increase in smooth and continuous manner.
(B) Public expenditure increases the necessity of increased revenue.
(C) Central Government’s economic activity to grow faster than that of subnational Governments.
(D) Absolute level of public expenditure increases.
37. Which of the following is not a source of state revenue?
(A) Taxes on agriculture
(B) Taxes on road vehicles
(C) Taxes on advertisement and sale of goods
(D) Taxes on income
38. Which one of the following statement is correct?
(A) The marginal cost of providing a private good to an additional individual is always positive, while that of public good is zero.
(B) The marginal cost of providing a public good to an additional individual is always negative, while that of private good is positive.
(C) The marginal cost of providing a public good to an additional individual is always zero, while that of private good is negative.
(D) The marginal costs of providing both, a public good and a private good to an additional individual are always Zero.
39. Which one of the following is not a property of a public good?
(A) Non excludability
(B) Non rivalry in consumption
(C) Demand curve is derivable
(D) Marginal cost of supplying the commodity is zero
40. As economic development proceeds, income inequality tends to follow curve.
(B) inverted Unshaped
41. Fei-Ranis’s theory of development is not based on
(A) dualistic approach of development.
(B) presence of disguised unemployment.
(C) importance attached to agricultural development.
(D) no plough back of industrial surplus for capital formation.
42. In Kaldor’s growth model it is assumed that
(A) capital output ratio is constant.
(B) share of factor is determined by the respective marginal productivities.
(C) saving ratio is assumed to be variable depending on per capita capital.
(D) natural rate of growth is variable.
Which of the above assumptions is incorrect?
43. Identify the incorrect assumption of the Solow Model (Long-mn growth model):
(A) One composite commodity is produced.
(B) Output is measured is net terms.
(C) Variable returns to scale.
(D) The two factors-labour and capital are paid according to their marginal physical productiveness.
44. State the correct code based on the following
Concept of disembodied technical change is associated with
(i) A.C. Pigou
(iii) J.W. Kendrick
(iv) R.M. Solow
(A) (i) and (ii)
(B) (i), (ii) and (m)
(C) (i), (ii) and (iv)
(D) (ii), (iii) and (iv)
45. Capital deepening is a process in which
(A) output remains constant
(B) capital intensity remains constant
(C) technology changes with an increase in output per worker
(D) capital output ratio falls
46. The proponent of the Doctrine of Unbalanced Growth is
(A) R. Nurkse
(B) H. Leibenstein
(C) Albert O. Hirschman
(D) J. Robinson
47. Based on Mankiw, Romer and Weil (1992), with conditional convergence, holding fertility rates, education and government spending as a share of GDP constant
(A) income per capita is the same regardless of poor or rich countries.
(B) income per capita in rich countries grows faster than in poor countries.
(C) income per capita in poor countries grows faster than in rich countries.
(D) income per capita in poor countries grows conditional upon foreign aid.
48. Kendrick measure is used to calculate
(1) Partial productivity
(2) Single factor productivity
(3) Total factor productivity
(4) Multifactor productivity
State which one is correct?
(A) Only 3 is true
(B) Both 3 and 4 are true
(C) Only 1 is true
(D) Only 2 is true
49. Industrial location theory has been developed by
50. The industrial sector in India consists of the following sub sectors:
(A) Manufacturing, Mining and Communication
(B) Manufacturing, Electricity and Transport
(C) Manufacturing, Communication and Transport
(D) Manufacturing, Electricity, Gas and Water supply