Managerial Economics MCQ

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Managerial Economics MCQ

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MCQ Questions and Answers on Managerial Economics

1. The field of sustainable development can be conceptualised as
(A) environmental sustainability only.
(B) economic sustainability only.
(C) Socio-political sustainability only.
(D) environmental, economic and socio-political sustainability.

2. Environmental Audit is the procedure to
(A) analyse the use of natural resources by all.
(B) analyse the use of natural resources by industry.
(C) assess the impact of industrial operations.
(D) analyse the use of natural resources by industry and also assess the impact of industrial operations on environment.

3. In Ricardian theory the relation between Rent and Price can be expressed as
(A) higher rent is associated with higher price.
(B) price is determined by economic rent.
(C) higher the rent, lower is the market price.
(D) rent does not enter into price determination.

4. Based on Kuznets identification of four possible types of contribution of agriculture to economic growth, which one of the following is not considered within the four?
(A) Product contribution, i.e., making available food and raw materials.
(B) Market contribution, i.e. providing the market for producer goods and consumer goods produced in the non-agricultural sector.
(C) Foreign exchange contribution.
(D) Rural banking contribution.

5. Neo-Classical production function has which of the following characteristics?
(1) Constant returns to scale
(2) It is convex to the origin
(3) Positive and diminishing marginal productivity of factors
(4) It satisfies Inada condition
Choose the correct answer from the codes given below:
(A) 1 and 2
(B) 2 and 4
(C) 3 and 4
(D) 3 only

6. The New Agricultural Policy of the Indian
Government of the 1960s (Green Revolution) did not
lead to
(A) Increase in food production in the country
(B) Inequality in farmers’ income
(C) Commercialisation of agriculture
(D) More equality in foodgrain production
among different regions of the country

7. Which of the following does not come under land reform?
(A) Consolidation of land holding
(B) Providing security to tenure
(C) Drip irrigation
(D) Abolition of intermediaries

8. Which of the following are functions of NABARD?
(i) Monitoring flow of ground level credit to agriculture.
(ii) Credit planning and monitoring.
(iii) Formulation of operational guidelines for rural financial institutions.
(iv) Fixing repo rate
Codes:
(A) (i), (ii) and (iii)
(B) (i) and (iv)
(C) (ii), (iii) and (iv)
(D) (i), (ii) and (iv)

9. Growth rate of per capita income is equal to
(A) growth rate of population minus growth rate of income.
(B) growth rate of income minus growth rate of population.
(C) growth rate of income minus growth rate of capital.
(D) growth rate of income minus growth rate of labour force.

10. In the WTO, tariff escalation by developed countries refers to
(A) increase in average and peak tariff rates.
(B) increase in the number of tariff rate slabs across products.
(C) increase in the tariff rate with the level of processing of the product.
(D) increase in the tariff rate for raw materials as against the final products.

11. Which of the following is not matching correctly?
(A) W.A. Lewis — Dual Economy Model
(B) S. Kuzuets — Modern Economic Growth
(C) J.M. Keynes — Wealth of Nations
(D) Jagdish Bhagwati — In Defence of Globalization

12. Which of the following statements about ‘farm subsidies’ are correct .
1. The input subsidies in India such as on fertilisers fall under indirect farm subsidies.
2. Reduction in power and irrigation bills offered to farmers fall under direct farm subsidies.
3. The agricultural provisions of the WTO though allow direct farm subsidies, prohibits indirect subsidies.
4. All subsidies forwarded by the government of India fall under the indirect category.
Select the correct statements using the code given
(A) 1 and 2
(B) 2 and 3
(C) 3 and 4
(D) 1 and 4

13. In the currency market, to ensure that the same amount of foreign currency is transacted at a future specified date the buyer and seller of foreign currency can enter into the following alternate contracts:
(A) Spot exchange and futures contract
(B) Forward and futures contracts
(C) Forward contract and spot exchange
(D) Foreign exchange option

14. Which factor among the following creates obstacle in measuring correct estimate of national income?
(A) Existence of non-monetised sector
(B) Low rate of savings
(C) Under employment
(D) Inflation

15. Which of the following statements is correct about the term ‘bank run’?
(A) Bond holders and depositors both suffer due to increased inflation.
(B) A panic situation when deposit holders start withdrawing cash from the banks.
(C) The ratio maintained by commercial banks of bank’ s total deposits and its total liabilities.
(D) The period in which a bank creates the highest credit in the market.

16. The Regional Rural Banks (RRBs) in India are being restructured by the Gol under the recommendations of the
(A) Kelkar Expert Committee
(B) Vyas Committee
(C) Nair Committee
(D) Chaturvedi Committee

17. Consider the following statements:
1. RBI takes recourse to Open Market Operations (OMOs) to manage liquidity in the system.
2. MCLR has been introduced to improve transmission of policy rates into the lending rates of banks.
3. MSF functions as the last resort for banks to borrow short-term funds.
4. Non-monetary liabilities of the RBI form India’s ‘Reserve Money’.
Which of the above statements are correct?
(A) Only 1 and 3
(B) Only 1, 2 and 3
(C) Only 1 and 2
(D) All four are correct

18. Based on Narasimhan Committee-I in 1991, the RBI has been given autonomy in
(A) Open Market Operations (OMO).
(B) Issuing fresh currency notes.
(C) Regulating All India Financial Institutions.
(D) Working autonomy in announcing the Credit and Monetary Policy.

19. Among the following what causes market failure:
1. Externality
2. Asymmetry of information
3. Perfect competition
Choose the correct answer from the codes given
(A) 1, 2 and 3 are correct
(B) 1 and 2 are correct
(C) Only 1 is correct
(D) 2 and 3 are correct

20. The Village and Small Industries Committee (Karve Committee) reported in the year
(A) 1965
(B) 1975
(C) 1955
(D) 1985

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21. The NITI Aayog replacing the Planning Commission will follow a
(A) top down approach
(B) a bottom up approach
(C) a state level approach
(D) a mixture of all the above

22. Pradhanmantri Bharat Jodo Pariyojona is related to
(A) Tele-Communication
(B) Social Integration
(C) Linking of Rivers
(D) Development of Highways

23. Reference Period for the Neonatal Mortality Rate in India is
(A) three months after birth
(B) one month after birth
(C) 28 days after birth
(D) 15 days after birth

24. With which country India is exploring shale gas reserves?
(A) France
(B) Germany
(C) United Kingdom
(D) USA

25. Gender development index does not address
(A) Education
(B) life expectancy
(C) incomes
(D) nutrition level

26. Which statement of the following is true for IMF?
(A) It is not an agency of UNO.
(B) It can grant loan to any country of the World.
(C) It can grant loan to state government of a country.
(D) It grants loan to member nations only.

27. Arabari experiment in joint forest management was launched in the year
(A) 1975
(B) 1972
(C) 1980
(D) 1988

28. Marginal product of CES production function is always
(A) Negative
(B) Cubic
(C) Positive
(D) square

29. Horizontal merger
(A) is a merger across firms that produces same type of products.
(B) is a merger across firms that produces intermediate and final products.
(C) is a merger across firms that produces both homogenous and non-homogenous products.
(D) is a merger across firms that produces only intermediate products.

30. In the uneconomic region of production
(A) marginal productivity of one factor is negative.
(B) marginal productivities of both factors are positive.
(C) marginal productivities of both factors are zero.
(D) marginal productivities of both factors are negative.

31. The spirit of Engel’s Law is that with an increase in family income:
(A) Proportion of income spent on luxuries decline.
(B) The savings rate increases.
(C) The proportion of income spent on food declines.
(D) Expenditure on food declines.

32. If the CD production function is homogeneous of degree one, then the marginal product of labour
(A) will depend only on input ratio.
(B) will be homogenous of degree (-1).
(C) will depend on absolute quantity of labour only.
(D) will be a rectangular hyperbola.

33. A given total outlay on factor inputs at given factor prices is reflected by
(A) Iso-revenue curve.
(B) Iso-cost curve.
(C) Isoquant.
(D) Production possibility curve.

34. What describes the graphical relationship between average product (AP) and marginal product (MP)?
(A) AP cuts MP from above, at the maximum point of MP.
(B) AP cuts MP from below, at the maximum point of MP.
(C) MP cuts AP from above, at the maximum point of AP.
(D) MP cuts AP from below, at the maximum point of AP.

35. For Giffen good
(A) income elasticity of demand is positive and price effect is positive.
(B) income elasticity of demand is negative and price effect is negative.
(C) income elasticity of demand is negative and price effect is positive.
(D) income elasticity of demand is positive and price effect is negative.

36. Limit Pricing is also termed as
(A) entry preventive pricing.
(B) entry encouraging pricing.
(C) competition enhancing pricing.
(D) maximum profit generating pricing.

37. Social welfare is
(i) equal to dead weight loss.
(ii) maximum under perfect competition.
(iii) what the consumer is willing to pay minus the cost of production.
(iv) equal to consumer’s surplus plus producer’s surplus.
(A) Only (i) is true
(B) Only (i) and (ii) are true
(C) (ii), (iii) and (iv) are true
(D) Only (iii) is true

38. In case income elasticity of demand for good Y be Zero, the income-consumption curve for good X will be
(A) parallel to horizontal axis.
(B) parallel to vertical axis.
(C) positively sloped straight line.
(D) negatively sloped straight line.

39. A risk-return trade-off function
(A) slopes upward for a risk averse decision maker.
(B) slopes downwards for a risk averse decision maker.
(C) slopes upward for a risk lover.
(D) slopes upward for a plunger.

40. Information asymmetry exists when
(A) both parties are equally informed.
(B) both parties are equally knowledgeable.
(C) one party has more information than the other.
(D) one party does not take interest in the subject.

41. The purchase or sale of a commodity at the present price with the objective of sale or purchase at some future date at a favourable price is known as
(A) Hedging
(B) Speculation
(C) Market intelligence
(D) Retailing

42. In a market economy, the market mechanism can achieve all the following except
(A) signaling changes in consumer tastes.
(B) causing supply to respond to changes in demand.
(C) eliminating excess supply and demand.
(D) ensuring a fair distribution of all types of goods.

43. Interaction of the multiplier and accelerator is known as
(A) investment multiplier
(B) employment multiplier
(C) super multiplier
(D) dynamic multiplier

44. According to Friedman, a key determinant of money is not
(A) aggregate wealth.
(B) precautionary motive.
(C) relative rates of return obtainable on different forms of assets.
(D) physical non-human capital goods and human capital.

45. Augmented Phillips Curve makes allowance for the
(A) effects of price expectations on money wage reductions.
(B) effects of price expectations on real wage increases.
(C) effects of price expectations on money wage increases.
(D) effects of price expectations on real wage reductions.

46. 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 poor countries grows faster than in rich countries.
(C) income per capita in rich countries grows faster than in poor countries.
(D) income per capita in poor countries grows conditional upon foreign aid.

47. Which one of the following is not a behavioural ratio in the H-theory of money supply?
(A) Reserve-deposit ratio
(B) Interest-deposit ratio
(C) Time-deposit ratio
(D) Currency-deposit ratio

48. ‘Crowding out effect’ implies
(A) too much private spending and investment is not desirable.
(B) too much public spending leads to recession.
(C) increased public sector spending encourages private sector spending.
(D) increased public sector spending replaces, or drives down, private sector spending.

49. Need for a stronger banking system for which mergers of the PSBs and the financial institutions were suggested, were recommended by
(A) Narasimham Committee II
(B) Chelliah Committee
(C) Sarkaria Commission
(D) Narasimham Committee I

50. Tobin Tax is a tax on
(A) transactions in the share market.
(B) transactions in the commodity market.
(C) transactions in the money market.
(D) transactions in the foreign exchange market.