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PCETs
S. B. Patil Institute of Management, Nigdi, Pune
Economic Analysis for Business Decisions (EABD) - 102
Multiple Choice Questions (Unit-2)
Complied by Padma Lochana Bisoyi, Assistant Professor, SBPIM, Pune
________________________________________________________________________
Tick which best suits / or most appropriate answer
1. Demand for a product refers to
a. Various quantities that are demanded by consumers.
b. Various amounts desired by consumers.
c. Total quantity of a product demanded during a given period of time.
d. Total quantity of a product demanded at a particular price in the market during a
given period of time.
2. Market demand is aggregation of individual demand
a. Vertically
b. Horizontally
c. Parallel
d. Diagonally
3. Graphical presentation of demand schedule
a. Demand schedule
b. Demand curve
c. Demand law
d. Law of demand
4. Generally demand curve has
a. A slop downward from left to right
b. A negative slope
c. Positive slop
d. A slop downwards from right to left
5. The demand curve for diamond
a. Positive slop
b. Downward slop
c. Upward and downward both
d. Negative slope
6. A single point on the demand curve shows
a. Demand and supply relationship
b. Price and supply relationship
c. Price and demand relationship
d. Only demand relationship
7. Demand curve slopes downward from left write
a. Due to law of diminishing marginal utility
b. Law of supply
c. Law of production
d. Law of technology
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8. Law of demand establishes
a. Inverse relationship between price and quantity
b. Positive relationship between price and quantity
c. Sometimes positive
d. Sometimes negative
9. In law of demand, which is dependent and which is independent variable?
a. Price is dependent demand is independent
b. Price is independent demand is dependent variable
c. Price and demand both dependent
d. Price and demand both independent
10. The relationship between price and demand is
a. Direct.
b. Inverse.
c. Proportionate.
d. Positive.
11. Assumptions on which the demand is based
a. Production Costs.
b. Technology.
c. Prices of Inputs.
d. Prices of other related goods and tastes and preferences.
12. In case of increase in demand, the demand curve
a. Shifts backwards.
b. Shifts forward.
c. Will have upward slope.
d. Will be horizontal.
13. Contraction in demand is shown by,
a. Movement along the same demand curve
b. Shift of the demand curve
c. The highest point on the demand curse
d. Lowest point on the demand Curse
14. Demand forecasting is made for the
a. For the existing products only.
b. New products only.
c. For both the existing products & for the new products.
d. For the substitutes only.
15. Historical data is used in estimating future demand under
a. Survey method.
b. Expert opinion method.
c. Statistical method.
d. Complete Enumeration method.
16. Which method of demand forecasting, firms takes all households into consideration?
a. Complete enumeration survey method
b. Sales force opening method
c. Delphic method
d. Sample survey method
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17. Which among are not the trend projection method of demand forecasting?
a. Least square
b. Time series method
c. Moving average method
d. Delphic method
18. Demand forecasting is important for
a. Price Control
b. Business Planning
c. Competitive Strategy
d. All of Above
19. An increase in supply, demand remaining constant will change the equilibrium
a. Causing a fall in price.
b. Causing a backward shift in supply curve.
c. Causing no change in price.
d. Causing a rise in price.
20. The sensitivity of the change in quantity demanded to a change in price is called
a. Income elasticity.
b. Cross-elasticity.
c. Price elasticity of demand.
d. Coefficient of elasticity.
21. Change in demand due to change in income
a. Price elasticity
b. Income elasticity
c. Cross elasticity
d. Advertisement elasticity
22. If the proportionate change in demand is exactly equal and proportionate to the change in
price than elasticity of demand is
a. Equal to zero.
b. Greater than one.
c. Less than one.
d. Equal to one.
23. If the proportionate change in demand is more than proportionate change in price, than
elasticity of demand is
a. Equal to zero.
b. Greater than one.
c. Less than one.
d. Equal to one.
24. If the proportionate change in demand is less than proportionate change in price, than
elasticity of demand is
a. Equal to zero.
b. Greater than one.
c. Less than one.
d. Equal to one.
25. If there is small change in price causes , an infinite change in demand, than elasticity of
demand is
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a. Equal to zero.
b. Greater than one.
c. Less than one.
d. Equal to infinite
26. The elasticity of demand for salt and medicine
a. More elastic
b. Less elastic
c. Inelastic
d. Perfectly elastic
27. What is the nature of perfectly elastic demand curve?
a. Horizontal line
b. Vertical line
c. Rectangular hyperbola
d. Flatter demand curve
28. What is the nature of perfectly inelastic demand curve?
a. Horizontal line
b. Vertical line
c. Rectangular hyperbola
d. Flatter demand curve
29. What is the nature of unitary elastic demand curve?
a. Horizontal line
b. Vertical line
c. Rectangular hyperbola
d. Flatter demand curve
30. Total revenue will increase with the reduction in price when the price elasticity of
demand for the product is
a. Relatively elastic.
b. Relatively inelastic.
c. Unitary elastic.
d. Perfectly elastic.
31. The sensitivity of the change in quantity consumed of one product to a change in the
price of a related product is called
a. Cross-elasticity.
b. Substitute elasticity.
c. Complementary elasticity.
d. Price elasticity of demand.
32. A product that is similar to another, and can be consumed in place of it, is called
a. A normal good.
b. An inferior good.
c. A complementary good.
d. A substitute good.
33. Two goods are _____________ if the quantity consumed of one increases when the price
of the other decreases.
a. Normal
b. Superior
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c. Complementary
d. Substitute
34. The government unit that wants to achieve "revenue enhancement" will find it
considerably more favorable to enact an excise tax on products whose demand is
a. Highly elastic.
b. Relatively elastic.
c. Highly inelastic.
d. Unitary elastic.
35. A product consumed in conjunction with another is called
a. Inferior good.
b. Complementary good.
c. Normal good.
d. Substitute good.
36. In case of inferior goods, price effect is
a. 0
b. Positive
c. Negative
d. None
37. Cross elasticity of demand between tea & sugar
a. Positive
b. Negative
c. Zero
d. Infinity
38. The initial supply of land is
a. Zero
b. Greater than 1
c. Less than 1
d. One
39. Which of the following pairs of goods is an example of substitutes?
a. Tea & Sugar
b. Tea & Coffee
c. Pen & Ink
d. Shirt & Trousers
40. The degree of response to demand to change in price is
a. Income elasticity of demand
b. Cross elasticity of demand
c. Price elasticity of demand
d. All the above
41. Of the following commodities which has the lowest elasticity of demand
a. Car
b. Salt
c. Tea
d. House
42. The exception to law of demand are
a. Veblen goods
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b. Giffen goods
c. Both (a) &(b)
d. None
43. The fall in price of one commodity leads to fall in demand for other commodity & vice-
versa for
a. Substitutes
b. Complimentary goods
c. Giffen goods
d. Veblen goods
44. Unitary elasticity of demand is
a. Equal to one
b. Greater than one
c. Equal to zero
d. Less than one
45. Factors determining supply are
a. Production Technology
b. Prices of factors of production
c. Taxes & Subsidies
d. All of the above
46. The supply of a good refers to
a. Actual production of the good
b. Total existing stock of the good
c. Stock available for the sale
d. Amount of the good offered for sale at a particular price per unit of time
47. An increase in the supply of a good is caused by
a. Improvement in its technology
b. Fall in the price of other goods
c. Fall in the prices of factors of production
d. All of the above
48. The supply curve for perishable commodity is
a. Relatively inelastic
b. Relatively elastic
c. Perfectly inelastic
d. Perfectly elastic
49. Elasticity of supply means change in supply due to change in
a. Price of the commodity
b. Conditions of supply
c. Taste of consumer
d. Alternate use of commodity
50. Law of supply states
a. Inverse relation between price and demand
b. Inverse relation between price and supply
c. Direct relation between price and demand
d. Direct relation between price and supply
51. What is the nature of supply curve?
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a. Positive slope
b. Negative slope
c. Natural slope
d. Downward slope
52. Which of the followings not related to market?
a. Price
b. Place
c. Product
d. Buyers and sellers
53. Large number of buyers and sellers, buying and selling homogeneous product with
identical price of the product, and there is a perfect knowledge about the market
a. Monopoly
b. Monopolistic
c. Perfect competition
d. Oligopoly
54. Homogeneity of a product is a characteristic of
a. Perfect Competition
b. Monopoly
c. Imperfect Competition
d. All of the above
55. In perfect competitive firms are
a. Price taker
b. Price maker
c. Price determinates
d. Price regulator
56. In perfect competitive industries are
a. Price taker
b. Price maker
c. Price determinates
d. Price regulator
57. A single producing units are known as
a. Firm
b. Industry
c. Marker
d. Consumer
58. Which market both AR = MR?
a. Competitive
b. Monopoly
c. Monopolistic
d. Oligopoly
59. How prices are determined in the free market?
a. With the help of demand and supply
b. Price and supply
c. Supply and price
d. Managers
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60. Perfect competitive market firm achieves equilibrium when
a. Demand = Supply
b. AR= MR
c. MR=MC
d. AR=MC
61. What is the nature of AR and MR in competitive market?
a. AR =MR, parallel to X axis
b. AR =MR, parallel to Y axis
c. AR >MR, parallel to X axis
d. AR <MR, parallel to X axis
62. What is the nature of AR and MR in monopoly market?
a. AR =MR, parallel to X axis
b. AR =MR, parallel to Y axis
c. AR >MR
d. AR <MR
63. Which among the following are known as the features of monopoly?
a. Large number of buyers
b. Large number of sellers
c. Single seller
d. Price taker
64. Perfect competition, in long run firms earn
a. Normal profit
b. Abnormal profit
c. Normal loss
d. Abnormal loss
65. Monopoly firm , in long run earn
a. Normal profit
b. Abnormal profit
c. Normal loss
d. Abnormal loss
66. Product differentiation is the feature of
a. Perfect competition
b. Monopoly
c. Monopolistic competition
d. Oligopoly
67. Interdependencies the feature of
a. Perfect competition
b. Monopoly
c. Monopolistic competition
d. Oligopoly
68. Kinked demand curve is related to
a. Perfect competition
b. Monopoly
c. Monopolistic competition
d. Oligopoly
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69. A firm operating under conditions of perfect competitions can
a. Determine the price of its product.
b. Determine only the size of its output.
c. Promote the sales through effective advertisement.
d. Capture the market by cutting down the price.
70. Average revenue curve of the firm is the same as the demand curve of the consumer
except in the context of
a. Perfect competition.
b. Monopolistic competition.
c. Monopoly.
d. Discriminatory monopoly.
71. What is MR?
a. MR=TRn-TRn-1.
b. MR=TR/TQ.
c. MR=TR/TC.
d. MR=TR/AC.
72. A market situation where there are only a few large buyers for the product is called
a. Oligopoly.
b. Pure competition.
c. Oligopoly.
d. Duopoly.
73. Suppose a firm is selling 5 units of the output at the price of Rs.15 per unit. Now if it
wants to sell 6 units instead of 5 units and there by the price of the product falls to Rs.14
then the marginal revenue will be
a. Rs.14.
b. Rs.10.
c. Rs.15.
d. Rs.9.
74. In perfect competition , D= 20-3p-p
2
and the supply curve is S= p-1, where P is price, D
is demand and S is Supply, find the equilibrium price and quantity exchanged
a. 4 and 5
b. 3 and 2
c. 6 and 7
d. 5 and 4
75. Which of the following is not a non-price determinant of demand?
a. Tastes and preferences
b. Income
c. technology
d. Future expectations
76. Which of the following is not a non-price determinant of supply?
a. Costs
b. Technology
c. Income
d. Future expectations
77. Which of the following statements is not true?
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a. An increase in demand causes equilibrium price and quantity to rise.
b. A decrease in demand causes equilibrium price and quantity to fall.
c. An increase in supply causes equilibrium price to fall and quantity to rise.
d. A decrease in supply causes equilibrium price to rise and quantity to rise.
78. Which of the following would cause a decrease in the demand for fish?
a. The price of red meat increases.
b. The price of fish increases.
c. The price of chicken decreases.
d. The number of fishing boats decreases.
79. Which of the following will not cause a short run shift in the supply curve?
a. A change in the number of sellers
b. A change in the cost of resources
c. A change in the price of the product
d. A change in future expectations
80. In the short run, a change in the equilibrium price will
a. Always lead to inflation.
b. Cause a shift in the demand curve.
c. Cause a shift in the supply curve.
d. Cause a change in the quantity demanded or supplied.
81. The switch to the use of HFCS from sugar in soft drinks was prompted in large part by its
relatively lower price. Assuming a competitive market, what effect would this change
have on the equilibrium price and output for soft drinks?
a. price rises, output falls
b. price falls, output rises
c. price rises, output rises
d. price falls, output falls
82. Suppose demand is expressed as QD = 300 - 50P. If we want to make this equation
consistent with the typical supply and demand diagram, this equation must be stated as;
a. P = 300 - 50Q
b. P = 6 - .02Q
c. P = 50 - 300Q
d. Q = 6 - .02P
83. Which of the following refers to a shift in the demand curve?
a. "This new advertising campaign should really increase our demand."
b. "Let's drop our price to increase our demand."
c. "We dare not raise our price because our demand will drop."
d. "If new sellers enter the market, the demand for the product is bound to increase."
84. A decrease in the price of personal computers can result from
a. A decrease in the price of chips.
b. Improvements in methods of assembling computers.
c. An increase in the gross national product.
d. Both a. and b.
85. Which of the following is a key determinant of both supply and demand?
a. Income
b. Future expectations
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c. Tastes and preferences
d. Sales tax
86. A market is in equilibrium when
a. Supply is equal to demand.
b. The price is adjusting upward.
c. The quantity supplied is equal to the quantity demanded.
d. Tastes and preference remain constant.
87. Which of the following indicates that there is a shortage in the market?
a. Demand is rising
b. Demand is falling
c. Price is rising
d. Price is falling
88. Horizontal marginal revenue curve is the characteristics of
a. Perfect market
b. Imperfect
c. Duopoly
d. Oligopoly
89. In long run which market gets supernormal profit
a. Perfect
b. Imperfect Market
c. Monopoly
d. Oligopoly
90. If there are two sellers in the market, it is
a. Monopoly
b. Duopoly
c. Oligopoly
d. None
91. In imperfect market.
a. MR=AR
b. AR>MR
c. AC>MC
d. None of above
92. _______________________ refers to the stock of raw material or finished goods which
a firm keeps.
a. Inventory
b. Production
c. Demand
d. Revenue