120+ Economics for Engineers Solved MCQs

Chapters

Chapter: Inflation and Price Change
1.

Inflation is the state in which ..............................

A. The value of money decreases
B. The value of money increases
C. The value of the money increases first and then decreases
D. The value of money decreases first and increases later
Answer» A. The value of money decreases
2.

How inflation affects the price of the commodities?

A. Price of the commodities decreases
B. Price of the commodities increases
C. No effect
D. First the price decreases later on increases
Answer» B. Price of the commodities increases
3.

When there is high inflation in the economy, how will it affect the supply of money in the economy?

A. No effect on the money supply
B. Supply of money decreases
C. Supply of money increases
D. None of the above
Answer» C. Supply of money increases
4.

Which of the following class will not be negatively affected by the higher inflation?

A. The consumer class
B. The debtor class
C. Pensioner class
D. Business class
Answer» D. Business class
5.

What is a stagflation?

A. A situation in which the economy experiences recession.
B. A situation in which the economy have inflation and recession altogether
C. An economy where unemployment is high
D. Both b and c
Answer» B. A situation in which the economy have inflation and recession altogether
6.

Which of the following concept is just opposite to deflation?

A. Stagflation
B. Inflation
C. Recession
D. Disinflation
Answer» D. Disinflation
7.

Which of the following measure is adopted to reduce inflation?

A. Reduction in bank rate
B. Reduction in Repo rate
C. Increase in government expenditure
D. Cuts in government spending
Answer» C. Increase in government expenditure
Chapter: Value Analysis
8.

The cost reduction technique in comparison to the worth of a product is known as

A. Reverse engineering
B. Value engineering
C. Material engineering
D. Quality engineering
Answer» B. Value engineering
9.

Value analysis examines the

A. Design of every component
B. Method of manufacturing
C. Material used
D. All of the above
Answer» D. All of the above
10.

Value analysis is normally applied to

A. New products
B. Old products
C. Future products
D. Both (A) and (B)
Answer» B. Old products
11.

Value can be defined as the combination of _______ which ensures the ultimate economy and satisfaction of the customer.

A. Efficiency, quality, service and price
B. Efficiency, quality, service and size
C. Economy, quality, service and price
D. Efficiency, material, service and price
Answer» A. Efficiency, quality, service and price
12.

Value is the cost directly proportionate to

A. Price
B. Function
C. Product Material
D. All of the above
Answer» B. Function
13.

The price paid by the buyer is

A. Cost value
B. Use value
C. Esteem value
D. Exchange value
Answer» B. Use value
14.

The cost incurred by the manufacturer beyond use value is called

A. Cost value
B. Esteem value
C. Exchange value
D. None of the above
Answer» B. Esteem value
15.

Value analysis is a ____ process

A. Remedial
B. Preventive
C. Continuous
D. None of the above
Answer» A. Remedial
16.

Value analysis should be applied when the following symptom(s) is (are) present

A. Rate of return on investment is reducing
B. Reduction in sales of the product
C. Firm is unable to meet delivery promises
D. All of the above
Answer» D. All of the above
17.

Who is named as Father of Value Analysis?

A. Lawrence D. Miles
B. George Terborgh
C. Michael Jucius
D. Edwin B. Flippo
Answer» A. Lawrence D. Miles
18.

Important reason(s) for arising unnecessary costs are

A. Poor design of product
B. Too tight specifications
C. Lack of standardization
D. All of the above
Answer» D. All of the above
19.

The costs those which neither contributes to function nor the appearance of the product is called

A. Extra cost
B. Unnecessary cost
C. Esteem cost
D. Exchange cost
Answer» B. Unnecessary cost
Chapter: Cash Flow
20.

As per Accounting Standard-3, Cash Flow is classified into

A. Operating activities and investing activities
B. Investing activities and financing activities
C. Operating activities and financing activities
D. Operating activities, financing activities and investing activities
Answer» D. Operating activities, financing activities and investing activities
21.

Cash Flow Statement is also known as

A. Statement of Changes in Financial Position on Cash basis
B. Statement accounting for variation in cash
C. Both a and b
D. None of the above.
Answer» C. Both a and b
22.

The objectives of Cash Flow Statement are

A. Analysis of cash position
B. Short-term cash planning
C. Evaluation of liquidity
D. Comparison of operating Performance
Answer» D. Comparison of operating Performance
23.

In cash flow statement, the item of interest is shown in A) Operating Activities B) Financing Activities C) Investing Activities

A. Both A and B
B. Both A and C
C. Both B and C
D. A, B, C
Answer» C. Both B and C
24.

Cash Flow Statement is based upon

A. Cash basis of accounting
B. Accrual basis of accounting
C. Credit basis of accounting
D. None of the above
Answer» A. Cash basis of accounting
25.

Which of the following statements are false? A) Cash Flow Statement is helpful in the formation of policies. B) Cash Flow Statement is useful for external analysis C) Cash Flow Statement is helpful in estimating future cash flow

A. Both A and B
B. Both A and C
C. Both B and C
D. None of the above
Answer» D. None of the above
26.

Which of the following statements are true?

A. Cash flow reveals only the inflow of cash
B. Cash flow reveals only the outflow of cash
C. Cash flow is a substitute for income statement
D. Cash flow statement is not a replacement of funds flow statement.
Answer» D. Cash flow statement is not a replacement of funds flow statement.
27.

Cash flow statement is based upon _________ while Funds Flow Statement recognizes _______.

A. Cash basis of accounting, accrual basis of accounting
B. Accrual basis of accounting, cash basis of accounting
C. Both are based on cash basis of accounting
D. None of the above
Answer» A. Cash basis of accounting, accrual basis of accounting
28.

Statement of changes in working capital is prepared separately in

A. Cash Flow Statement
B. Funds Flow Statement
C. Both a and b
D. None of the above
Answer» B. Funds Flow Statement
29.

Cash Flow Statement studies causes of change in working capital.

A. True
B. False
C. none
D. all
Answer» B. False
30.

_________ reconciles the opening cash balance with the closing cash balance of a given period on the basis of net decrease or increase in cash during that period.

A. Cash Flow Statement
B. Funds Flow Statement
C. Both a and b
D. None of the above
Answer» A. Cash Flow Statement
31.

Which of the following statements are true? A) Cash flow statement is more useful for short term cash planning. B) Funds Flow statement is more useful in planning medium term and long term financing. C) Cash Flow statement discloses the position of liquidity in a better way

A. Only A
B. Only B
C. Only C
D. A, B and C
Answer» D. A, B and C
32.

_____ has/have accepted cash flow statement is more useful than funds flow statement, particularly from view of analysis of liquidity of a firm.

A. Institute Of Chartered Accountants of India
B. FASB, America
C. SEBI
D. All of the above
Answer» D. All of the above
33.

Time value of money indicates that

A. A unit of money obtained today is worth more than a unit of money obtained in future
B. A unit of money obtained today is worth less than a unit of money obtained in future
C. There is no difference in the value of money obtained today and tomorrow
D. None of the above
Answer» A. A unit of money obtained today is worth more than a unit of money obtained in future
34.

Time value of money supports the comparison of cash flows recorded at different time period by

A. Discounting all cash flows to a common point of time
B. Compounding all cash flows to a common point of time
C. Using either a or b
D. None of the above.
Answer» C. Using either a or b
35.

If the nominal rate of interest is 10% per annum and there is quarterly compounding, the effective rate of interest will be:

A. 10% per annum
B. 10.10 per annum
C. 10.25%per annum
D. 10.38% per annum
Answer» D. 10.38% per annum
36.

Relationship between annual nominal rate of interest and annual effective rate of interest, if frequency of compounding is greater than one:

A. Effective rate > Nominal rate
B. Effective rate < Nominal rate
C. Effective rate = Nominal rate
D. None of the above
Answer» A. Effective rate > Nominal rate
37.

Mr. X takes a loan of Rs 50,000 from HDFC Bank. The rate of interest is 10% per annum. The first installment will be paid at the end of year 5. Determine the amount of equal annual installments if Mr. X wishes to repay the amount in five installments.

A. Rs 19500
B. Rs 19400
C. Rs 19310
D. None of the above
Answer» C. Rs 19310
38.

If nominal rate of return is 10% per annum and annual effective rate of interest is 10.25% per annum, determine the frequency of compounding:

A. 1
B. 2
C. 3
D. None of the above
Answer» B. 2
39.

Present value tables for annuity cannot be straight away applied to varied stream of cash flows.

A. True
B. False
C. none
D. all
Answer» A. True
40.

Heterogeneous cash flows can be made comparable by

A. Discounting technique
B. Compounding technique
C. Either a or b
D. None of the above
Answer» C. Either a or b
41.

The term marginal cost can be used as a substitute of variable cost while measuring Contribution.

A. True
B. False
C. none
D. all
Answer» A. True
42.

Determine total as well as per unit contribution if Sales is Rs 40,000, Sales in units is 4,000 and variable cost is Rs 30,000.

A. Rs 10,000 and Rs 2.5
B. Rs 70,000 and Rs 3.5
C. Rs 36,000 and Rs 3.6
D. None of the above
Answer» A. Rs 10,000 and Rs 2.5
43.

Determine Contribution if Sales is Rs 1,50,000 and P/V ratio is 40%.

A. Rs 60,000
B. Rs 70,000
C. Rs 30,000
D. None of the above
Answer» A. Rs 60,000
44.

Determine Contribution if Fixed cost is Rs 40,000 and profit is Rs 30,000.

A. Rs 60,000
B. Rs 70,000
C. Rs 30,000
D. None of the above
Answer» B. Rs 70,000
45.

Determine Contribution if Fixed cost is Rs 50,000 and loss is Rs 20,000.

A. Rs 60,000
B. Rs 70,000
C. Rs 30,000
D. None of the above
Answer» C. Rs 30,000
46.

Contribution and profit both are same concepts.

A. True
B. False
C. none
D. all
Answer» B. False
47.

Which of the following statements are true?

A. Contribution doesn’t include fixed cost whereas profit includes fixed cost.
B. Contribution is not based on the concept of marginal cost.
C. Contribution above breakeven point becomes profit.
D. All of the above
Answer» C. Contribution above breakeven point becomes profit.
48.

Profit-Volume ratio is also known as

A. Contribution ratio
B. Contribution/Sales ratio
C. Marginal Income percentage
D. All of the above
Answer» D. All of the above
49.

Which of the following statements are true?

A. P/V Ratio can never be used to measure break-even point
B. Higher the P/V ratio less will be the profit and vice versa
C. Concept of P/V ratio is also used to determine profit at a given volume of sales
D. All of the above
Answer» C. Concept of P/V ratio is also used to determine profit at a given volume of sales
50.

The P/V ratio can be improved by

A. Decreasing the selling price per unit
B. Increasing variable cost
C. Changing the sales mix
D. None of the above
Answer» C. Changing the sales mix
51.

The Break-even Point of a company is that level of sales income which will equal the sum of its fixed cost.

A. True
B. False
C. none
D. all
Answer» A. True
52.

Which of the following are characteristics of B.E.P?

A. There is no loss and no profit to the firm.
B. Total revenue is equal to total cost.
C. Contribution is equal to fixed cost.
D. All of the above.
Answer» D. All of the above.
53.

Which of the following are assumptions for break-even analysis?

A. Elements of cost cannot be divided in different groups.
B. Fixed cost remains certain from zero production to full capacity.
C. Behavior of different costs is linear
D. Selling per price unit remains constant.
Answer» B. Fixed cost remains certain from zero production to full capacity.
54.

While measuring break-even analysis, it is considered that during a specific period there will be no change in general price level, i.e., labor, cost of material and other overheads.

A. True
B. False
C. none
D. all
Answer» A. True
55.

Which of the following are limitations of break-even analysis?

A. Static concept
B. Capital employed is taken into account.
C. Limitation of non-linear behavior of costs
D. Limitation of presence of perfect competition
Answer» A. Static concept
56.

Break-even analysis is used in “Make or Buy” decision.

A. True
B. False
C. none
D. all
Answer» A. True
57.

Using equation method, Break-even point is calculated as

A. Sales = Variable expenses + Fixed expenses + Profit
B. Sales = Variable expenses + Fixed expenses - Profit
C. Sales = Variable expenses - Fixed expenses + Profit
D. None of the above
Answer» A. Sales = Variable expenses + Fixed expenses + Profit
58.

Given selling price is Rs 10 per unit, variable cost is Rs 6 per unit and fixed cost is Rs 5,000. What is break-even point?

A. 500 units
B. 1,000 units
C. 1,250 units
D. None of the above
Answer» C. 1,250 units
59.

Contribution is also known as

A. Contribution margin
B. Net Margin
C. Both a and b
D. None of the above
Answer» A. Contribution margin
60.

Given selling price is Rs 20 per unit, variable cost is Rs 16 per unit contribution is

A. Rs 1.25 per unit
B. Rs 4 per unit
C. Rs 0.8 per unit
D. None of the above
Answer» B. Rs 4 per unit
61.

Risk of two securities with different expected return can be compared with:

A. Coefficient of variation
B. Standard deviation of securities
C. Variance of Securities
D. None of the above
Answer» A. Coefficient of variation
62.

A portfolio having two risky securities can be turned risk less if

A. The securities are completely positively correlated
B. If the correlation ranges between zero and one
C. The securities are completely negatively correlated
D. None of the above.
Answer» C. The securities are completely negatively correlated
63.

Efficient frontier comprises of

A. Portfolios that have negatively correlated securities
B. Portfolios that have positively correlated securities
C. Inefficient portfolios
D. Efficient portfolios
Answer» D. Efficient portfolios
64.

Efficient portfolios can be defined as those portfolios which for a given level of risk provides

A. Maximum return
B. Average return
C. Minimum return
D. None of the above
Answer» A. Maximum return
65.

Capital market line is:

A. Capital allocation line of a market portfolio
B. Capital allocation line of a risk free asset
C. Both a and b
D. None of the above
Answer» C. Both a and b
66.

CAPM accounts for:

A. Unsystematic risk
B. Systematic risk
C. Both a and b
D. None of the above
Answer» B. Systematic risk
67.

The point of tangency between risk return indifferences curves and efficient frontier highlights:

A. Optimal portfolio
B. Efficient portfolio
C. Sub-optimal portfolio
D. None of the above
Answer» C. Sub-optimal portfolio
68.

Return on any financial asset consists of capital yield and current yield.

A. True
B. False
C. none
D. all
Answer» A. True
69.

There is no difference between the capital market line and security market line as both the terms are same.

A. True
B. False
C. none
D. all
Answer» B. False
70.

Risk in Capital budgeting implies that the decision-maker knows___________of the cash flows.

A. Variability,
B. Probability,
C. Certainty,
D. None of the above
Answer» B. Probability,
71.

In Certainty-equivalent approach, adjusted cash flows are discounted at:

A. Accounting Rate of Return,
B. Internal Rate of Return,
C. Hurdle Rate,
D. Risk-free Rate
Answer» D. Risk-free Rate
72.

Risk in Capital budgeting is same as:

A. Uncertainty of Cash flows,
B. Probability of Cash flows,
C. Certainty of Cash flows,
D. Variability of Cash flows
Answer» D. Variability of Cash flows
73.

Which of the following is a risk factor in capital budgeting?

A. Industry specific risk factors,
B. Competition risk factors,
C. Project specific risk factors,
D. All of the above
Answer» D. All of the above
74.

In Risk-Adjusted Discount Rate method, the normal rate of discount is:

A. Increased,
B. Decreased,
C. Unchanged,
D. None of the above
Answer» A. Increased,
75.

In Risk-Adjusted Discount Rate method, which one is adjusted?

A. Cash flows,
B. Life of the proposal,
C. Rate of discount,
D. Salvage value
Answer» C. Rate of discount,
76.

NPV of a proposal, as calculated by RADR real CE Approach will be:

A. Same,
B. Unequal,
C. Both (a) and (b),
D. None of (a) and (b)
Answer» B. Unequal,
77.

Risk of a Capital budgeting can be incorporated

A. Adjusting the Cash flows,
B. Adjusting the Discount Rate,
C. Adjusting the life,
D. All of the above
Answer» D. All of the above
78.

Which element of the basic NPV equation is adjusted by the RADR?

A. Denominator,
B. Numerator,
C. Both,
D. None
Answer» A. Denominator,
79.

In CE Approach, the CE Factors for different years are:

A. Generally increasing,
B. Generally decreasing,
C. Generally same,
D. None of the above
Answer» B. Generally decreasing,
80.

Which of the following is correct for RADR?

A. Accept a project if NPV at RADR is negative,
B. Accept a project if IRR is more than RADR
C. RADR is overall cost of capital plus risk-premium ,
D. All of the above.
Answer» C. RADR is overall cost of capital plus risk-premium ,
81.

In Playback Period approach to risk the target payback period is

A. Not adjusted,
B. Adjusted upward,
C. Adjusted downward ,
D. (b) or c
Answer» C. Adjusted downward ,
82.

In Sensitivity Analysis, the emphasis is on assessment of sensitivity of

A. Net Economic Life,
B. Net Present Value,
C. Both (a) and (b),
D. None of (a) and (b)
Answer» B. Net Present Value,
83.

Most Sensitive variable as given by the Sensitivity Analysis should be:

A. Ignored,
B. Given Least important,
C. Given the maximum importance,
D. None of the above
Answer» C. Given the maximum importance,
84.

Expected Value of Cashflow, EVCF, is:

A. Certain to occur,
B. Most likely Cashflows,
C. Arithmetic Average Cashflow,
D. Geometric Average Cashflow
Answer» B. Most likely Cashflows,
85.

Concept of joint probability is used in case of:

A. Independent Cashflows,
B. Uncertain Cashflows,
C. Dependent Cashflows,
D. Certain Cashflows
Answer» C. Dependent Cashflows,
86.

Decision-tree approach is used in:

A. Proposals with longer life,
B. Sequential decisions,
C. Independent Cashflows,
D. Accept-Reject Proposal
Answer» B. Sequential decisions,
87.

In a cash flow series:

A. Uniform gradient signifies that an income or disbursement changes by the same amount in each interest period
B. Either an increase or decrease in the amount of a cash flow is called the gradient
C. The gradient in the cash flow may be positive or negative
D. All of these
Answer» D. All of these
88.

In a cash-flow diagram:

A. Time 0 is considered to be the present
B. Time 1 is considered to be the end of time period 1
C. A vertical arrow pointing up indicates a positive cash flow
D. All of these
Answer» D. All of these
89.

Which method is adopted to develop an approximate or conceptual estimate for perimeter works for buildings from the following?

A. Base unit method
B. Cost per function method
C. Cost per square metre method
D. Cost per linear metre method
Answer» D. Cost per linear metre method
90.

Pick up the correct statement from the following:

A. The ratio of current assets, loans and advances, and the current liquidity is called current ratio
B. Larger the current ratio, larger is the margin of safety
C. The operating profit is the difference between gross profit and operating expenses
D. All of these
Answer» D. All of these
91.

The ratio of current assets to current liabilities is known as

A. Liquidity ratio
B. Current ratio
C. Acid-Test (or Quick) ratio
D. Debts ratio
Answer» B. Current ratio
92.

In the cash-flow diagram shown in the given figure

A. Equal deposits of Rs 3000 per year (A) are made, starting now
B. The rate of interest is 10% per year account
C. The amount accumulated after the seventh deposit is to be computed
D. All of these
Answer» D. All of these
93.

The more critical (or severe) test of the firm's liquidity can be judged by:

A. Liquidity ratio
B. Current ratio
C. Acid-Test (or Quick) ratio
D. Debts ratio
Answer» C. Acid-Test (or Quick) ratio
94.

If interest is paid more than once in a year, ‘i’ is the rate of interest per year, ‘n’ is the number of periods in years and ‘m’ is a number of periods per years, compound amount factor (CAF) is:

A. (1 + i/m)n
B. (1 + i/n)m
C. (1 + i/n)1/m
D. (1 + i/m)1/n
Answer» A. (1 + i/m)n
95.

Pick up the correct reason for making conceptual (or preliminary) estimate from the following:

A. To have a check on a definitive cost estimate
B. To check quotations from contractors and/or sub-contractors
C. To compute target estimate for the owner while drawing and specifications are in initial stage
D. All of these
Answer» D. All of these
96.

Pick up the correct method adopted for developing the approximate or conceptual estimates from the following:

A. Base unit method
B. Cost per function method
C. Cost per square metre
D. All of these
Answer» D. All of these
97.

Ratio analysis of a construction firm is used for analysis by:

A. Share holders
B. Firm's management
C. Banks of the firm
D. Financial analysts
Answer» D. Financial analysts
98.

Current assets less inventories divided by current liabilities is known as

A. Liquidity ratio
B. Current ratio
C. Acid-Test (or Quick) ratio
D. Debts ratio
Answer» C. Acid-Test (or Quick) ratio
99.

Refer to the cash flow diagram of uniform gradient in a cash flow (in the given figure), the gradient is:

A. Rs. 10000 per year
B. Rs. 15000 per year
C. Rs. 20000 per year
D. Rs. 25000 per year
Answer» D. Rs. 25000 per year
100.

Pick up the correct statement from the following:

A. The change in the amount of money over a given time period is called 'time value' of money, a most important concept in engineering economy
B. The manifestation of the time value of money is termed as interest
C. Interest on borrowing = present amount owed - original loan
D. All of these
Answer» D. All of these
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