300+ Managerial Economics 1 Solved MCQs

1.

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.
2.

_______ is known as father of economics

A. marshal
B. robins
C. adam smith
D. a c pigou
Answer» C. adam smith
3.

The famous book on economics “An Enquiry into the Nature and Cause of Wealth of Nation” was written by

A. marshal
B. ricardo
C. robins
D. adam smith
Answer» D. adam smith
4.

Welfare (neo classical) definition of economics is given by

A. j b say
B. lionel robbins
C. adam smith
D. alfred marshall
Answer» D. alfred marshall
5.

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

A. necessity
B. luxury
C. substitute
D. complement
Answer» B. luxury
6.

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
7.

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

A. income effect
B. substitution effect
C. price effect
D. none of these
Answer» B. substitution effect
8.

“A rupee tomorrow is worth less than a rupee today” relates to

A. opportunity cost principle
B. discounting principle
C. equi‐marginal principle
D. none of these
Answer» B. discounting principle
9.

Basic economic tools of managerial economics does not include

A. principle of time perspective
B. equi‐marginal principle
C. incremental principle
D. none of these
Answer» D. none of these
10.

…….. principle is closely related to the marginal costs and marginal revenue of economic theory

A. principle of time perspective
B. equi‐marginal principle
C. incremental principle
D. none of these
Answer» C. incremental principle
11.

Analysis of long run and short run affects of decisions on revenue as well as costs is bas ed on

A. principle of time perspective
B. equi‐marginal principle
C. incremental principle
D. none of these
Answer» A. principle of time perspective
12.

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
13.

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
14.

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
15.

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
16.

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
17.

Which one is not a property of isoquant

A. downward sloping
B. convex
C. negative slope
D. positive slope
Answer» D. positive slope
18.

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
19.

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
20.

Which of the following is not a variable input

A. raw material
B. power
C. equipment
D. none of these
Answer» C. equipment
21.

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
22.

Which cost are recorded in books of accounts

A. opportunity cost
B. implicit cost
C. social cost
D. explicit cost
Answer» D. explicit cost
23.

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
24.

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
25.

Firms in an 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
26.

Product differentiation is an important feature of

A. perfect competition
B. monopolistic competition
C. monopoly
D. none of these
Answer» B. monopolistic competition
27.

……… refers to the quantity of a good or service that producers are willing and able to sell during a certain period under a given set of conditions

A. supply
B. demand
C. price
D. production
Answer» A. supply
28.

………. for a product is a statement of the relation between the quantity supplied and all factors affecting that quantity

A. market demand function
B. production function
C. market supply function
D. all of the above
Answer» C. market supply function
29.

Which is/are determinants of Supply…….

A. price of the commodity
B. state of technology
C. cost of production
D. all the above
Answer» C. cost of production
30.

…………a statement in the form of a table that shows the different quantities of a commodity that a firm or a producer offers for sale in the market at different prices.

A. supply schedule
B. production schedule
C. demand schedule
D. price schedule
Answer» A. supply schedule
31.

……….. a schedule that depicts the supply by an individual firm or producer of a commodity in relation to its price

A. market price schedule
B. market supply schedule
C. individual supply schedule
D. none of them
Answer» C. individual supply schedule
32.

…………… is the degree of responsiveness of supply to changes in the price of a good

A. elasticity of demand
B. elasticity of supply
C. both (a) & (b)
D. none of them
Answer» B. elasticity of supply
33.

Business Economics is also known as………….

A. managerial economics
B. economics for executives
C. economic analysis for business decisions
D. all the above
Answer» D. all the above
34.

An input should be so allocated that the value added by the last unit is the same in all cases.

A. opportunity cost principle
B. equi-marginal principle
C. incremental principle
D. discounting principle
Answer» B. equi-marginal principle
35.

The principle reasons behind economic problems

A. unlimited wants
B. limited or scarce of means
C. alternatives uses of means
D. all of the above
Answer» D. all of the above
36.

Managerial utility function is expressed as:

A. u = s (s, m, i)
B. u = s (s, m)
C. u = f (s, m, i)
D. u = f (s, m, i)
Answer» C. u = f (s, m, i)
37.

The value of an entrepreneur’s resources that she uses in production are known as:

A. explicit costs.
B. sunk costs.
C. operating expenses.
D. implicit costs.
Answer» D. implicit costs.
38.

Inflation is:

A. a decrease in the overall level of economic activity.
B. an increase in the overall level of economic activity.
C. an increase in the overall price level.
D. a decrease in the overall price level.
Answer» C. an increase in the overall price level.
39.

A recession is:

A. a period of declining unemployment.
B. a period of declining prices
C. a period during which aggregate output declines
D. a period of very rapidly declining prices.
Answer» C. a period during which aggregate output declines
40.

Opportunity cost means

A. the accounting cost minus the marginal benefit.
B. the highest-valued alternative forgone.
C. the monetary costs of an activity.
D. the accounting cost minus the marginal cost
Answer» B. the highest-valued alternative forgone.
41.

______ is economic theory used in business whereas ______ is economics theory used in business and non-business organization

A. micro economics, macro economics
B. business economics, managerial economics
C. positive economics and normative economics
D. none of these
Answer» B. business economics, managerial economics
42.

Managerial economics is also called

A. micro economics
B. theory of the firm
C. economics of the firm
D. all of the above.
Answer» D. all of the above.
43.

Want satisfying power of commodity is called

A. demand
B. utility
C. satisfaction
D. consumption
Answer» B. utility
44.

In economics, desire backed by purchasing power is known as

A. utility
B. demand
C. consumption
D. scarcity
Answer» B. demand
45.

The demand has three essentials ‐ Desire, Purchasing power and ………..

A. quantity
B. cash
C. supply
D. willingness to purchase
Answer» D. willingness to purchase
46.

.………… means an attempt to determine the factors affecting the demand of a commodity or service and to measure such factors and their influences

A. demand planning
B. demand forecasting
C. demand analysis
D. demand estimation
Answer» C. demand analysis
47.

.………… is known as the ‘first law in market”

A. law of supply
B. law of consumption
C. law of demand
D. law of production
Answer» C. law of demand
48.

Demand = Desires + …………… + Willingness to pay

A. supply
B. utility
C. want
D. purchasing power
Answer» D. purchasing power
49.

Law of demand shows the functional relationship between _______ and quantity demanded

A. supply
B. cost
C. price
D. requirements
Answer» C. price
50.

Basic assumptions of law of demand include

A. prices of other goods should change.
B. there should be substitute for the commodity.
C. the commodity should not confer any distinction.
D. the demand for the commodity should not be continuous
Answer» C. the commodity should not confer any distinction.
51.

Generally demand curve have …………

A. negative slope
B. positive slope
C. horizontal line
D. vertical line
Answer» A. negative slope
52.

The change in demand due to change in price only, where other factors remaining constant, it is called……….

A. shift in demand
B. extension of demand
C. contraction of demand
D. both extension and contraction
Answer» D. both extension and contraction
53.

When the quantity demanded of a commodity rises due to a fall in price, it is called

A. extension
B. upward shift
C. downward shift
D. contraction
Answer» A. extension
54.

When the quantity demanded falls due to a rise in price, it is called

A. extension
B. upward shift
C. downward shift
D. contraction
Answer» D. contraction
55.

The Giffen goods are ………. Goods

A. inferior goods
B. superior goods
C. related goods
D. same goods
Answer» A. inferior goods
56.

Higher the price of certain luxurious articles, higher will be the demand, this concept is called

A. giffen effects
B. veblen effects
C. demonstration effects
D. both b & c above
Answer» B. veblen effects
57.

Demand for milk, sugar, tea for making tea, is an example of

A. composite demand
B. derivative demand
C. joint demand
D. direct demand
Answer» C. joint demand
58.

Perfect elasticity is known as

A. finite elastic
B. infinite elastic
C. unitary elastic
D. zero elastic
Answer» B. infinite elastic
59.

In the case of perfect elasticity, the demand curve is

A. vertical
B. horizontal
C. flat
D. steep
Answer» B. horizontal
60.

In a perfectly competitive market, individual firm

A. cannot influence the price of its product
B. can influence the price of its product
C. can fix the price of its product
D. can influence the market force
Answer» A. cannot influence the price of its product
61.

Perfect competition is characterized by

A. large number of buyers and sellers
B. homogeneous product
C. free entry and exit of firms
D. all the above
Answer» D. all the above
62.

The market with a single producer

A. perfect competition
B. monopolistic competition
C. oligopoly
D. monopoly
Answer» D. monopoly
63.

Selling cost is the feature of the market form

A. monopoly
B. monopolistic competition
C. oligopoly
D. none of these
Answer» B. monopolistic competition
64.

The product under monopolistic competition are

A. differentiated with close substitute
B. perfect substitute
C. differentiated without close substitute
D. homogeneous
Answer» A. differentiated with close substitute
65.

In business cycle concept, the period of “long wave” is of;

A. 25 years
B. 50 years
C. 100 years
D. 200 years
Answer» B. 50 years
66.

In economics …….. means ‘a state of rest ‘or ‘stability’

A. depression
B. equilibrium
C. maturity
D. growth
Answer» B. equilibrium
67.

Selling at a lower price in export market and at a higher price at home market is called

A. export subsidy
B. dumping
C. price cut
D. all the above
Answer» B. dumping
68.

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
69.

An exceptional demand curve is one that slopes

A. upward to the left
B. downward to the right
C. horizontally
D. upward to the right
Answer» D. upward to the right
70.

Which one is not an exception to the Law of Demand?

A. normal good
B. articles of distinction
C. ignorance
D. inferior good
Answer» A. normal good
71.

Demand for a commodity is elastic when it has:

A. only one use
B. uses which cannot be postponed
C. many uses
D. uses very essential for the consumer
Answer» C. many uses
72.

When the demand curve is a rectangular hyperbola, it represents:

A. perfectly elastic demand
B. unitary elastic demand
C. perfectly inelastic demand
D. relatively elastic demand
Answer» B. unitary elastic demand
73.

The horizontal demand curve for a commodity shows that its demand is:

A. perfectly elastic
B. highly elastic
C. perfectly inelastic
D. moderately elastic
Answer» A. perfectly elastic
74.

When an individual’s income falls (while everything else remains the same), his demand for an inferior good:

A. increases
B. decrease
C. remains unchanged
D. we cannot say without additional information
Answer» B. decrease
75.

A fall in the price of a commodity whose demand curve is a rectangular hyperbola causes total expenditure on the commodity to:

A. increases
B. decrease
C. remains unchanged
D. any of the above
Answer» C. remains unchanged
76.

The utility may be defined as:

A. the desire for a commodity
B. the usefulness of a commodity
C. the necessity of a commodity
D. the power of a commodity to satisfy wants
Answer» D. the power of a commodity to satisfy wants
77.

The utility of a commodity is:

A. its expected social value
B. the extent of its practical use
C. its relative scarcity
D. the degree of its fashion
Answer» C. its relative scarcity
78.

Marginal utility curve of a given consumer is also his:

A. indifference curve
B. total utility curve
C. demand curve
D. supply curve
Answer» C. demand curve
79.

The relationship between demand for a commodity and price, ceteris paribus, is:

A. negative
B. positive
C. non-negative
D. non-positive
Answer» A. negative
80.

A demand curve which takes the form of horizontal line parallel to quantity axis illustrates elasticity which is:

A. zero
B. infinite
C. greater than one
D. less than one
Answer» D. less than one
81.

Consider a demand curve which takes the form of a straight line cutting both axes. Elasticity at the mid-point of the line would be:

A. zero
B. one infinite
C. infinite
D. cannot be calculated
Answer» B. one infinite
82.

The elasticity of demand for a product will be higher:

A. the more available are substitutes for that product
B. the more its buyers demand loyalty
C. the more the product is considered a necessity by its buyers
D. all of the above
Answer» A. the more available are substitutes for that product
83.

In case of Giffen goods, demand curve will slope:

A. vertical
B. horizontal
C. upward
D. downward
Answer» C. upward
84.

Cross elasticity of demand between tea and sugar is:

A. positive
B. zero
C. infinity
D. negative
Answer» D. negative
85.

If the percentage increase in quantity of a commodity demanded is its price, the coefficient of price elasticity of demand is:

A. greater than 1
B. equal to 1
C. less than 1
D. zero
Answer» C. less than 1
86.

If the quantity of a commodity demanded remains unchanged as its price changes, the coefficient of price elasticity of demand is

A. greater than 1
B. equal to 1
C. less than 1
D. zero
Answer» D. zero
87.

Unitary elasticity of demand is:

A. zero
B. equal to one
C. greater than 1
D. less than 1
Answer» B. equal to one
88.

The real business cycle theory is most closely related to

A. keynesian theory
B. monetarist theory
C. the classical theory
D. the new keynesian theory
Answer» C. the classical theory
89.

In the real business cycle model, business cycles are

A. efficient and do not represent lost output
B. driven by technology shocks
C. occur when markets clear
D. all of the above
Answer» D. all of the above
90.

Real business cycle proponents argue that

A. recessions are caused by movements of output away from the natural rate of output
B. prices and wages are sticky
C. macroeconomics should be based on the same assumptions as microeconomics
D. monetary policy is important in determining recessions
Answer» C. macroeconomics should be based on the same assumptions as microeconomics
91.

Implicit costs are:

A. equal to total fixed costs.
B. comprised entirely of variable costs.
C. "payments" for self-employed resources.
D. always greater in the short run than in the long run.
Answer» C. "payments" for self-employed resources.
92.

The law of diminishing returns only applies in cases where:

A. there is increasing scarcity of factors of production.
B. the price of extra units of a factor is increasing.
C. there is at least one fixed factor of production.
D. capital is a variable input.
Answer» C. there is at least one fixed factor of production.
93.

When the total product curve is falling, the:

A. marginal product of labour is zero.
B. marginal product of labour is negative.
C. average product of labour is increasing.
D. average product of labour must be negative.
Answer» B. marginal product of labour is negative.
94.

When marginal product reaches its maximum, what can be said of total product?

A. total product must be at its maximum
B. total product starts to decline even if marginal product is positive
C. total product is increasing if marginal product is still positive
D. total product levels off
Answer» C. total product is increasing if marginal product is still positive
95.

Variable costs are:

A. sunk costs.
B. multiplied by fixed costs.
C. costs that change with the level of production.
D. defined as the change in total cost resulting from the production of an additional
Answer» C. costs that change with the level of production.
96.

The reason the marginal cost curve eventually increases as output increases for the typical firm is because:

A. of diseconomies of scale.
B. of minimum efficient scale.
C. of the law of diminishing returns.
D. normal profit exceeds economic profit.
Answer» C. of the law of diminishing returns.
97.

If the short-run average variable costs of production for a firm are rising, then this indicates that:

A. average total costs are at a maximum.
B. average fixed costs are constant.
C. marginal costs are above average variable costs.
D. average variable costs are below average fixed costs.
Answer» C. marginal costs are above average variable costs.
98.

If a more efficient technology was discovered by a firm, there would be:

A. an upward shift in the avc curve.
B. an upward shift in the afc curve.
C. a downward shift in the afc curve.
D. a downward shift in the mc curve.
Answer» D. a downward shift in the mc curve.
99.

The firm's short-run marginal-cost curve is increasing when:

A. marginal product is increasing.
B. marginal product is decreasing.
C. total fixed cost is increasing.
D. average fixed cost is decreasing.
Answer» B. marginal product is decreasing.
100.

A firm encountering economies of scale over some range of output will have a:

A. rising long-run average cost curve.
B. falling long-run average cost curve.
C. constant long-run average cost curve.
D. rising, then falling, then rising long-run average cost curve.
Answer» B. falling long-run average cost curve.
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