170+ Managerial Economics Solved MCQs

1.

Which of the following statements is NOT TRUE of indifference curves?

A. they could intersect
B. they are convex to origin
C. they are
D. they exhibit higher levels of utility d. as you move from the origin
Answer» B. they are convex to origin
2.

A consumer with a given income will maximise their utility when:

A. the marginal utility derived from each commodity is equal.
B. the marginal utility derived from each product consumed is zero.
C. the total utility derived from each commodity consumed is equal.
D. the marginal utilities derived from each commodity consumed are proportional
Answer» D. the marginal utilities derived from each commodity consumed are proportional
3.

The typical indifference curve ……..

A. shows that as a consumer has more of a good he/she is less willing to exchange it for one unit of another good.
B. shows all combinations of goods that give a consumer in same level of utility
C. shifts out if income increases
D. both b and c
Answer» B. shows all combinations of goods that give a consumer in same level of utility
4.

The rate at which a consumer is able to substitute one good for another is determined by the …….

A. consumers income
B. indifference map
C. ratio of the prices of the goods
D. marginal rate of substitution.
Answer» C. ratio of the prices of the goods
5.

A utility function shows the relation between …..

A. the amount of goods consumed and a consumer utility.
B. income and a consumer utility.
C. prices and consumers utility.
D. maximum utility and the price and income facing a consumer.
Answer» A. the amount of goods consumed and a consumer utility.
6.

Which of the following is the measure to control inflation.

A. granting credit on liberal terms
B. raising bank rate
C. demonetization
D. none of these
Answer» B. raising bank rate
7.

Which of the following is a measure to reduce inequality of income

A. promotion of industries
B. social securities
C. granting of credit to poor on concessional rate
D. none of these
Answer» B. social securities
8.

The most outstanding feature of capitalist economic system is …

A. unemployment
B. poverty
C. inequality of income
D. industrial backwardness
Answer» C. inequality of income
9.

Employment of people who take jobs below their capacity is known as

A. underemployment
B. disguised unemployment
C. cyclical unemployment
D. none of these
Answer» A. underemployment
10.

Which of the following is a social consequences of unemployment in india

A. burden on the government
B. loss of income and respect
C. wastages of resources
D. none of these
Answer» B. loss of income and respect
11.

Unemployment caused by a decline in demand for production in a particular industry is

A. seasonal unemployment
B. frictional unemployment
C. structural unemployment
D. none of these
Answer» C. structural unemployment
12.

Which of the following is not a development issue in india

A. unemployment
B. population pressure
C. inflation
D. decreasing trend of foreign capital
Answer» D. decreasing trend of foreign capital
13.

Indian economy growth is primarily driven by

A. industry
B. agriculture
C. service
D. none of these
Answer» C. service
14.

Law of equi-marginal utility was suggested by

A. marshal
B. robins
C. hh ghosen
D. none of these
Answer» B. robins
15.

The concept of consumer surplus was developed by

A. marshal
B. hh ghosen
C. bhentham
D. none of these
Answer» A. marshal
16.

Indifference curve analysis is based on the principles of

A. consumer surplus
B. diminishing marginal utility
C. diminishing marginal rate of substitution
D. none of these
Answer» C. diminishing marginal rate of substitution
17.

The author of the wealth of nation is

A. marshal
B. robins
C. adam smith
D. none of these
Answer» C. adam smith
18.

Macro economic theory is also known as

A. price theory
B. income theory
C. demand theory
D. none of these
Answer» A. price theory
19.

The study of entire economic system is called

A. macro economics
B. micro economics
C. economics
D. none of these
Answer» A. macro economics
20.

The author of “the wealth of nations” is

A. marshal
B. ricardo
C. robins
D. adam smith
Answer» D. adam smith
21.

The study of international trade and national income is part of

A. global economics
B. macro economics
C. positive economics
D. micro economics
Answer» B. macro economics
22.

If the income elasticity of demand is that one, the good is a

A. necessity
B. luxury
C. substitute
D. complement
Answer» B. luxury
23.

The income elasticity of demand is negative for a

A. positive good
B. normal good
C. elastic good
D. inferior good
Answer» D. inferior good
24.

If the price of DVRs fell and as a result the demand for VHS recorders fell we could conclude that VHS recorders DVRs are

A. normal goods
B. substitutes
C. elastic goods
D. unrelated
Answer» B. substitutes
25.

What effect is working when the price of a good falls and consumers tend to buy it instead of other goods

A. income effect
B. substitution effect
C. price effect
D. none of these
Answer» B. substitution effect
26.

The quantity demanded of a product increases when

A. the consumers suddenly want more of the goods
B. the consumers level of income falls
C. the price of the product falls
D. more buyers of the goods enter the market
Answer» C. the price of the product falls
27.

Two goods that are used jointly to provide satisfaction are called

A. inferior goods
B. normal goods
C. complementary goods
D. substitute goods
Answer» C. complementary goods
28.

Demand curve slopes downwards because of

A. the law of diminishing marginal utility
B. the income effect
C. substitution effect
D. all of the above
Answer» D. all of the above
29.

If the income and substitution effect of a price increase works in the same direction the good whose price has changed is a

A. giffen goods
B. inferior goods
C. normal goods
D. superior
Answer» C. normal goods
30.

Which of the following is not a survey method of demand forecasting

A. consumers interview method
B. expert opinion method
C. barometric method
D. collective opinion method
Answer» C. barometric method
31.

Which of the following is not a method of demand forecasting

A. trend projection method
B. substitute approach
C. sales experience approach
D. evolutionary approach
Answer» A. trend projection method
32.

Which one is not a property of isoquant

A. downward sloping
B. convex
C. negative slope
D. positive slope
Answer» D. positive slope
33.

In which production function, the degree of homogeneity is always one

A. cobb doubglas production fuction
B. homogeneous production function
C. linear homogeneous production function
D. none of these
Answer» C. linear homogeneous production function
34.

Which of the following is a short run law

A. law of diminishing returns
B. law of constant returns to scale
C. law increasing returns to scale
D. none of these
Answer» A. law of diminishing returns
35.

Which of the following is not a variable input

A. raw material
B. power
C. equipment
D. none of these
Answer» C. equipment
36.

Which cost is more useful for decision making

A. opportunity cost
B. sunk cost
C. historical cost
D. none of these
Answer» A. opportunity cost
37.

Which cost are recorded in books of accounts

A. opportunity cost
B. implicit cost
C. social cost
D. explicit cost
Answer» D. explicit cost
38.

Fixed cost per unit increases when

A. volume of production decreases
B. volume of production increases
C. variable cost per unit decreases
D. none of these
Answer» A. volume of production decreases
39.

Variable cost per unit

A. remains fixed
B. varies with the volume of production
C. varies with sales
D. none of these
Answer» B. varies with the volume of production
40.

Firms in a oligopoly

A. are independent of each other’s action
B. can each influence the market price
C. charge a price equal to marginal revenue
D. all of these
Answer» B. can each influence the market price
41.

Duopoly is

A. another name for monopoly
B. special type of monopolistic competition
C. two firm oligopoly
D. none of these
Answer» C. two firm oligopoly
42.

Product differentiation is an important feature of

A. perfect competition
B. monopolistic competiton
C. monopoly
D. none of these
Answer» B. monopolistic competiton
43.

Globalisation has created new opportunities of

A. establishing rules of domestic trade
B. restricting trade practices
C. liberalizing international trade
D. none of these
Answer» D. none of these
44.

Removing barriers or restrictions set by the government is called

A. liberalization
B. investment
C. favourable trade
D. free trade
Answer» A. liberalization
45.

WTO aims at

A. establishing rules for domestic trade
B. restricting trade practices
C. liberalizing international trade
D. none of these
Answer» C. liberalizing international trade
46.

What are “hawala transaction”

A. foreign trade in goods that are banned by the government.
B. transfer of money without actually moving it
C. illegal drug trade at the international level
D. conversion of black money into white money
Answer» B. transfer of money without actually moving it
47.

Which of the following is a measure to control inflation.

A. granting of credit on liberal terms
B. raising bank rate
C. demonetization
D. none of these
Answer» B. raising bank rate
48.

Which of the following is a measure to reduce inequality of income

A. promotion of industries
B. social securities
C. granting of credit to poor on concessional rates
D. none of these
Answer» B. social securities
49.

The most outstanding feature of the capitalist economic system is

A. unemployment
B. poverty
C. nequality of income
D. industrial backwardness
Answer» C. nequality of income
50.

Which of the following is a social consequence of unemployment in india

A. burden on the government
B. loss of income and respect
C. wastage of resources
D. none of these
Answer» B. loss of income and respect
51.

The unemployment caused by a decline in demand for production in a particular industry is

A. seasonal unemployment
B. frictional unemployment
C. structural unemployment
D. none of these
Answer» C. structural unemployment
52.

Which of the following is not a development issue in india.

A. unemployment
B. population pressure
C. inflation
D. decreasing trend of foreign capital
Answer» D. decreasing trend of foreign capital
53.

India’s economy growth is primarily driven by

A. industry
B. agriculture
C. service
D. none of these
Answer» C. service
54.

In which exchange rate system, exchange rate is fixed by the monetary authority

A. flexible exchange rate system
B. fixed exchange rate system
C. managed floating exchange rate system
D. none of these
Answer» B. fixed exchange rate system
55.

Direct foreign investment is part of

A. current account
B. fixed account
C. long term account
D. financial account
Answer» D. financial account
56.

MNC

A. always produce primary goods
B. always produce manufactured goods
C. always produce service,
D. may produce primary or manufactured goods
Answer» D. may produce primary or manufactured goods
57.

One major initiative to attract foreign companies to invest in india is

A. raise the standard of education
B. to promote unemployment in the public sector
C. to build up special economic zones
D. both a & b
Answer» C. to build up special economic zones
58.

The portfolio investment by foreign institutional investor is

A. fdi
B. fii
C. bop
D. sdr
Answer» A. fdi
59.

Under the new trade policy, import licensing was abolished except in case of

A. textile industry
B. consumer goods industry
C. it industry
D. hazardous and environmentally sensitive industry
Answer» D. hazardous and environmentally sensitive industry
60.

Where do MNCs choose to set up production?

A. cheap goods,
B. cheap labour resources
C. economic sustainability
D. none of these.
Answer» B. cheap labour resources
61.

Cargil foods, an MNC has bought over which indigenous Indian company?

A. amul
B. britannia
C. parakh foods
D. dabur
Answer» C. parakh foods
62.

For motors entered the Indian automobile business in collaboration with which Indian manufacturer?

A. mahindra and mahindra
B. tata motors
C. maruthi suzuki
D. hindustan motors
Answer» A. mahindra and mahindra
63.

Trade between countries

A. determines prices of products in different countries
B. decreases competition between countries
C. makes a country dependent on the other
D. none of these
Answer» A. determines prices of products in different countries
64.

Globalization by connecting countries leads to

A. lesser competition among producers
B. greater competition among producers
C. no competition between producers
D. none of these
Answer» B. greater competition among producers
65.

If tax is imposed on Chinese toys, what will happen?

A. chinese toy makers will benefit
B. indian toy makers will proposer
C. chinese toys will remain cheap,
D. indian consumers will buy more chinese toys
Answer» B. indian toy makers will proposer
66.

Which of the following is an example of a trade barrier?

A. foreign investment
B. delay or damage of goods
C. tax on imports
D. none of these
Answer» C. tax on imports
67.

Which out of the following industries has a large number of well off buyers in urban areas?

A. footwear
B. automobile
C. jewellery
D. clothing and accessories
Answer» B. automobile
68.

Automatic fiscal stabilizers

A. Keep the federal budget balanced
B. Keep the federal high employment budget balanced
C. Help to reduce the severity of recessions and inflationary boom periods
D. Increases structural deficits over the business cycle
Answer» C. Help to reduce the severity of recessions and inflationary boom periods
69.

The higher the marginal income tax rate, the

A. Higher the MPC out of disposable income
B. Lower the MPC out of disposable income
C. Highest the autonomous expenditure multiplier
D. lower the autonomous expenditure multiplier
Answer» D. lower the autonomous expenditure multiplier
70.

Suppose that the MPC out of disposable income was 0.8 and the marginal tax rate was 0.25 for a given economy. In this case, the value of the tax multiplier in the simple Keynesian model would be

A. 1
B. -2.
C. 2.5
D. 2
Answer» B. -2.
71.

Suppose that the MPC out of disposable income was 0.8 and the tax function for a given economy was T= -30+0.25Y. an increase in the intercept of the tax function of 10 units(from -30 to -20 would cause equilibrium income in the simple Keynesian model to fall by

A. -20 units
B. 10 units
C. 20 units
D. 40 units
Answer» C. 20 units
72.

If the tax function is given by T= -20+0.1 Y the average tax rate would

A. Be 0.1
B. Fall as income falls
C. Vary negatively with income
D. Be -20 _0.1
Answer» B. Fall as income falls
73.

The role of the progressive tax system as an autonomous fiscal stabilizer requires that the budget

A. Should require actual deficits be equal to zero on average
B. Should go into a surplus at appropriate points in the business cycle.
C. Cannot have a structural deficit component
D. Both a & b
Answer» B. Should go into a surplus at appropriate points in the business cycle.
74.

If the tax function is T= t0+t1y where t1 equals 1/3,and if the marginal propensity to consume out of disposable income is 3/4 , then the change in GDP oer unit change into t0 (∆Y/∆ t0) will be

A. -1
B. +1
C. -1.5
D. -2
Answer» C. -1.5
75.

In the simple Keynesian model, if the tax function is given by T=0.15Y and the consumption function is C= 50 + 0.7 YD then a 10-unit ncrease in government spending would increase equilibrium income by

A. 10 units
B. 11.2 units
C. 22.4 units
D. 30 units
Answer» B. 11.2 units
76.

Advocates of the public-choice view argue that voting behaviour is influenced by the

A. Rate of inflation prior to an election.
B. Level of economic activity.
C. “Favourite son syndrome.
D. Campaign issues
Answer» B. Level of economic activity.
77.

According to the partisan theory,

A. Politicians are viewed as working only for their own welfare.
B. There are two parties with flexible goals
C. Moderates and liberals often switch political goals
D. Macroeconomic policy is not a key focus of most politicians
Answer» A. Politicians are viewed as working only for their own welfare.
78.

Which of the following statements is(are) correct?

A. Even the earliest political business cycle and partisan models assume that expectations were rational
B. The partisan model of fiscal policy cannot be modified to be consistent with rational expectations
C. The myopic, or short-sighted behaviour of voters is inconsistent with rational expectations
D. The earliest political business cycle models assumed that expectations were always rational, whereas the partisan model assumed that expectations were sometimes irrational.
Answer» C. The myopic, or short-sighted behaviour of voters is inconsistent with rational expectations
79.

When automatic fiscal stabilizers are in place, a shock that causes a fall in the kevel of economic activity automatically

A. Results in a decline in the federal budget deficit that lessens the fall in income
B. Results in a rise in the federal deficit that lessens the fall in income
C. Requires the federal government to balance the budget
D. Will lead to a permanent increase in the budget deficit
Answer» B. Results in a rise in the federal deficit that lessens the fall in income
80.

According to the Keynesian model, the optimal fiscal policy is to

A. Increase cyclical but not structural deficits during a recession
B. Reduce cyclical and structural deficits during a recession
C. Increase structural deficits during a recession
D. Maintain a balanced budget in case of national emergency
Answer» A. Increase cyclical but not structural deficits during a recession
81.

Which of the following are the most frequently utilized tools of fiscal policy in the United States?

A. Indirect business taxes
B. Corporate income taxes
C. Inheritance taxes
D. Personal income taxes
Answer» D. Personal income taxes
82.

Assume that the actual deficit is $150 billion with the economy well below potential output and that the level of economic activity rose to its potential level while tax revenues increased by $50 billion and transfer payments fell by $20 billion. Then, what is the structural deficit?

A. $180 billion
B. $120 billion
C. $220 billion
D. $80 billion
Answer» D. $80 billion
83.

The structural deficit is

A. Directly attributable to the long-run behaviour of the economy
B. Not directly attributable to the cyclical behaviour of the economy
C. The result of permanent decisions policymakers have made about tax rates, the level of government spending, and benefit levels for transfer programs.
D. Both b and c
Answer» D. Both b and c
84.

According to the Keynesians,

A. An easy-fiscal tight-monetary policy reduces the trade deficit, such as what occurred during the 1980s
B. An easy-fiscal tight-monetary policy mix affects the composition of output by encouraging imports of foreign goods and discouraging U.S. exports, as was experienced during the 1980s
C. There was not a link between the rising government budgetary deficit and the rising trade deficit during the mid-1980s
D. Budget deficits and trade deficits should not be a source of concern
Answer» B. An easy-fiscal tight-monetary policy mix affects the composition of output by encouraging imports of foreign goods and discouraging U.S. exports, as was experienced during the 1980s
85.

During the recession of 2001,

A. There were a number of proposals for tax increases or spending cuts to stir the economy, but the failed due to worries about their effects on the already largedeficit
B. A series of tax cuts were passed, though the only occurred in late 2001
C. All the proposed tax and spending cuts were approved in order to motivate the economy and reduce the large deficit
D. The cyclical deficit increased but the structural deficit remained unchanged
Answer» B. A series of tax cuts were passed, though the only occurred in late 2001
86.

Advocates of the public-choice view argue that elected officials

A. Will always respond to inflation with expansionary policies but will respond to unemployment with restrictive policies
B. Will actively respond to inflation with restrictive policies but are reluctant to respond to unemployment with expansionary policies
C. Will always respond to both inflation and unemployment with expansionary policies
D. None of the above
Answer» D. None of the above
87.

Which of the following statements are(is) correct?

A. Expansionary monetary policy and expansionary fiscal that leads to budget deficits create low interest rates
B. High interest rates in the first half of the 1980s resulted from falls in the budget deficit under the Reagan administration
C. The best monetary-fiscal policy mix to keep interest rates low would be to raise taxes and raise the money supply
D. The answer depends upon the school of thought used to evaluate the effects of deficit policies
Answer» D. The answer depends upon the school of thought used to evaluate the effects of deficit policies
88.

Assuming a simultaneous deduction in income taxes and transfer payments of $50 billion, then aggregate disposable income will

A. be higher than before
B. be lower than before
C. remain constant
D. none of the above
Answer» C. remain constant
89.

From the net tax function: T=t0+t1Y,where t0<0 and t1>0, it follows that, as income rises

A. average taxes falls and the surplus declines
B. average taxes rises and the deficit increases
C. average taxes falls and the deficit declines
D. average taxes and the deficit do not change
Answer» C. average taxes falls and the deficit declines
90.

The structural deficit is the deficit that

A. Is composed by of non discretionary spending by the federal government
B. Results from the economy being below is natural rate of output
C. Exists when output is at its natural rate of output
D. Results from temporary tax cuts
Answer» C. Exists when output is at its natural rate of output
91.

In the IS-LM model, an easy monetary in conjunction with a tight fiscal policy

A. Increases exports and decreases imports
B. Decreases exports and increases imports
C. Encourages foreign capital inflows to the U.S.
D. Both b and c
Answer» D. Both b and c
92.

The cyclical deficit is that portion of the deficit

A. That results form the economy being below the natural rate of output
B. That would exist even if the economy were at its natural rate of output
C. Is a function of the level of automatic stabilizers
D. Both a & c
Answer» D. Both a & c
93.

Automatic stabilizers drive changes in

A. The total deficit
B. The cyclical deficit
C. The structural deficit
D. Monetary policy
Answer» B. The cyclical deficit
94.

According to the concept of rational expectations

A. Budget deficits are irrelevant to output in the short-run
B. Higher deficits should increase output in the short run if they are expected
C. Lower deficits can be used to stabilize output during expansions
D. None of these
Answer» A. Budget deficits are irrelevant to output in the short-run
95.

The book ‘Asian Drama’ was written by

A. A.C Pigou
B. D. Ricardo
C. Gunnar Myrdal
D. Lionel Robbins
Answer» C. Gunnar Myrdal
96.

The Historical school was based on

A. Deductive method
B. Inductive method
C. Both of above
D. None of these
Answer» B. Inductive method
97.

Physiocrats give utmost importance to

A. Services
B. Industry
C. Agriculture
D. None of these
Answer» C. Agriculture
98.

Feudalistic economy is dominated by

A. Entrepreneur
B. Worker
C. Landlord
D. None of these
Answer» C. Landlord
99.

Adam Smith advocated

A. Laissez Faire
B. Division of Labour
C. Both of these
D. None of these
Answer» C. Both of these
100.

A fall in the price of a commodity leads to

A. A shift in demand
B. A fall in demand
C. A rise in the consumer’s real income
D. A fall in the consumer’s real income
Answer» C. A rise in the consumer’s real income
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