UGC NET COMMERCE
Most Important question of Business economics
1. Which one of the following sets is incorrect to show the inter-relationships
among price elasticity coefficient, change in price and change in total
revenue?
Price elasticity Change Change in Total
coefficient in price Revenue
A. Zero Increase Increase
Decrease Decrease
B. Less than 1 Increase Decrease
Decrease Increase
C. Equal to1 Increase No change
Decrease No change
D. More than 1 Increase Decrease
Decrease Increase
A. (a)
B. (b)
C. (c)
D. (d)
Ans. B
2. Which one of the following is not the basic property of
indifference curves?
A. Indifference curves have a negative slope.
B. Indifference curves of imperfect substitutes are concave to the
origin.
C. Indifference curves do not intersect nor are they tangent to
one another.
D. Upper indifference curves indicate higher levels of satisfaction.
Ans. B
3. The following are the two statements regarding the concept of profit. Indicate
the correct code of the statements being correct or incorrect.
Statement (1): Accounting profit is a surplus of total revenue over and above all
paid-out costs, including both manufacturing and overhead expenses.
Statement (II): Economic or pure profit is a residual left after all contractual costs
have been met, including the transfer costs of management, insurable risks, ,
depreciation and payments to shareholders sufficient to maintain investment at
its current level. .
A. Both the statements are correct.
B. Both the statements are incorrect.
Statement (1) is correct while Statement (11) is incorrect.
D. Statement (1) is incorrect while Statement (11) is correct.
Ans-a
4. Excess capacity is NOT noticed in which of the
following market conditions?
A. Monopoly
B. Monopolistic competition
C. Oligopoly
D. Perfect competition
Ans. D
5. Match List-I (Type of income elasticity) with List-II (Type of goods)
List-I (Type of income elasticity) | List-II (Type of goods)
a)Ey=1 i. Comfort goods
b)Ey>1 ü. Necessity goods
c)Ey<1 lii. Luxury goods
Choose the correct option from the following:
A.a-I, b-II, C-III
B.a-II, b-I, C-III
C.a-1, b-III, C-II
D.a-III, b-II, C-I
Ans. C
6. On which of the following assumptions, the theory of
consumer behavior on the cardinal utility approach is
NOT based? ?
A. Consumer is rational
B. Limited money income of the consumer
C. Maximization of total satisfaction
D. Diminishing marginal utility of money
Ans. D
7 Statement - T: Pricing at par with the market price of the existing brands is
considered to be the most reasonable pricing strategy for a product which is
being sold in a strongly competitive market
statement - II: Pricing below the market price has been found to be more
successful when a seller intends to achieve a prestigious position among the
sellers in the locality for selling prestigious goods of much superior quality.
Choose the correct option from the following:
A. Statement is correct, Statement II is incorrect.
B. Statement is incorrect, Statement Il is correct.
C. Both Statement and Statement il are correct.
D. Both Statement and Statement ll are incorrect.
Ans. C
8. Assertion (A): No-firm can earn above the normal profit in the long
run, I.e. firms earn zero abnormal profit in perfect competition.
Reason (R): Because of the perfect knowledge in perfect competition,
buyers and sellers have full knowledge about the prices and the costs
prevailing in the different parts of the market.
A. Both (A) and (R) are correct, and (R) is the correct explanation of (A).
8. Both (A) and (R) are correct, but (R) is not the correct explanation of
(A).
C.(A) is correct., but (R) is not correct.
D. (A) is wrong, and (R) is correct.
Ans. B
9. Match List-I with List-11
List-1
List-II
a) TPP (Total Physical Product) MPP (Marginal Physical Product)
rises an increasing rate falls but remains positive.
b) TPP rises at a diminishing rate MPP becomes negative.
c) TPP starts declining MPP (Marginal Physical Product)
rises and reaches its maximum.
d) TPP at its maximum MPP reaches zero.
Choose the correct code:
A.a-iv, b-i,c-ii,d-iii
B.a-i, b-iii, c-lv,d-ii
C.a-iii, b-1,c-iv,d-ii
D.a-iii, b-i,c-ii,d-iv
Ans.
10. Assertion (A): In Oligopoly form of the market, the demand curve
is indeterminate (not definite).
Reason (R): Any change in the price by one firm, may result in a
change in prices by rival firms.
A. Both (A) and (R) are correct, and (R) is the correct explanation of A.
B. Both (A) and (R) are correct, but (R) is not the correct explanation of A.
C. (A) is correct., but (R) is not correct.
D. (A) is wrong, and (R) is correct.
Ans. A
11. Match List I with List II :
List-11
(Movement of curve)List - (Relationship of variables in an economic model)
a) Direct relationship I. Slopes downwards
b) Inverse relationship II. Either a vertical straight line or a
horizontal straight line
c) Maximum or minimum III. Slopes upwards
relationship
d) Unrelated relationship IV. Changes direction after a certain
point
Choose the correct code:
A. a-i, b-ii, c-iv, d-iii
B. a-iv, b-iii, c-ii, d-i
C. a-ii, b-iii , c-iv, d-i
D. a-iii, b-i, c-iv, d-ii
Ans.D
12. Assertion (A): Price skimming is the process of charging high prices
for good who have easily available substitutes
Reason (R): Price skimming strategy is aimed to generate high profits in
less time before the entry of other competitors.
A. Both (A) and (R) are correct, and (R) is the correct explanation of A.
B. Both (A) and (R) are correct, but (R) is not the correct explanation of A.
C.(A) correct, but (R) is not correct.
D.(A) wrong, and (R) is correct.
Ans.D
13. Consider the following statements;
i Business economics is a special branch of economics applied
in business decision making.
ii. The nature of business economics is applied, not theoretical.
ii.The nature of business economics based microeconomy.
A. i only
B. ii and i only
C. ii only
D. i, ii, and iji
Ans. D
14. Change in quantity demanded of a commodity due to
change in its own price, other things remaining constant,
is called:
A. cross-price effect
B. price effect
C. income effect
D. substitution effect
Ans. B
15. The cross-price elasticity of demand is used to determine
whether
A. a product is an inferior or normal good
B. a product is a necessity or a luxury
C. two products are substitutes or complement
D. price and total revenue are directly or inversely related.
Ans.C
Most important Question
Business economics part-2
1. Match List I with List II :
List-I (Models of consumer behavior) | List II |
a)Pavlovian Model | Based on the relationship between the firm and its potential customers. |
b)Howard sheth Model | Based on stimulus and response. |
c)Economic Model | Based on the impact of social ,psychological and marketing factors on buying behavior. |
d)Nicosia Model | Based on the law of diminishing marginal utility. |
A. a-i, b-ii, c-iv, d-iii
B. a-iv, b-iii, c-ii, d-i
C. a-ii, b-iii, c-iv, d-i
D. a-iii, b-i, c-iv, d-ii
Ans.C
Reason (R): As the MRS is always constant and negative, the IC slopes linearly downward for this consumer.
A. Both (A) and (R) are correct, and (R) is the correct explanation of (A).
B. Both (A) and (R) are correct, but (R) is not the correct explanation of (A).
C. (A) is correct., but (R) is not correct.
D. (A) is wrong, and (R) is correct.
Ans.C
3. Match List-I with List-II
List-I | List-II |
a) Growth of resource. | i)Full employment and efficient use of resource |
b) Point of PPC(Production possibility curve) | ii)Indicate the maximum limit of commodities that can be produced. |
c) Indifference curve | iii)Development oif new techniques of production. |
d) Production possibility curve | iv)MRS of two goods continuously fall. |
A. a)-iii, b)-i, c)-iv, d)-ii
B. a)-ii, b)-i, c)-iv, d)-iii
C. a)-ii, b)-iv, c)-i, d)-iii
D. a)-iii, b)-i, c)-ii d)-iv
Ans.A
4.Match List-I with List-II
List-I | List-II |
a)Slope of indifference curve | i)Consumer income rises but price of the two goods remain unchanged |
b)Slope of budget line | ii)higher level opf satisfaction. |
c) Higher indifference curve | iii)Rate at which consumer is willing to substitute one good for the other good. |
d)Higher budget line | iv)Ratio between Px and Py |
Choose the correct code:
A. a-iii, b-iv, c-i, d-ii
B. a-iii, b-iv, c-ii, d-i
C. a-iv, b-iii, c-ii, d-i
D. a-iv, b-iii, c-i, d-ii
Ans.-B
5.Match List-I with List-II
List -I | List-II |
a)Cardinal Utility | i)Derived from consumption of addition units of a a commodity. |
b) Ordinal Utility | ii)Expressed in exact unit. |
c)Marginal Utility | iii)Derived from consumption of all units of a particular commodity. |
d)Total Utility | iv)Expressed in ranks |
Choose the correct code:
A. a)-iii b)-i c)-ii d)-iv
B. a)-ii b)-i c)-iv d)-iii
C. a)-ii b)-iv c)-i d)-iii
D. a)-iii b)-i c)-iv d)-ii
I. The utility is cardinally measurable
II. Marginal Utility of commodities are interdependent
III. The constancy of marginal utility of money
IV. Consumer is rational Codes:
A. I, II, III
B. I, III, IV
C. I, II, III, IV
D. II, III, IV
Ans-B
7. Which of the following is/are not the properties of IC (Indifference Curve).
i) A higher IC speaks to a higher level of satisfaction than a lower IC.
ii) IC will never touch either axis.
iii) Two ICs can never intersect with each other.
iv) IC is always concave to the origin.
v) IC slopes upward to the left.
Choose the correct option from the following:
A. i, ii and iv
B. iv and v
C. i, iii and v
D. i, ii, iii, and iv
Ans.B
8. Which of the following is not an assumption of Marginal Utility Analysis?
A. Cardinal measurability of utility.
B. Constancy of the marginal utility of money.
C. The hypothesis of independent utility.
D. All are the assumptions of Marginal Utility Analysis.
I) Hicks
II) R.G.D Allen
III) Pareto
IV) Edgeworth
A. Only I
B. I and II
C. I, II and III
D. I, II, III and IV
Ans-D
10.Match List-I with List-II.
What happens to the equilibrium price and quantity when
List-I | List-II |
a)Increase in demand is equal to an increase in supply. | i) No change in equilibrium quimntity but equilibrium price will fall. |
b) Decrease in demand is equal to an increase in supply. | ii)Both equilibrium quantity and price will rise. |
c)When increase in supply is less than increase in demand | iii)Equlibrim price will fall and equilibrium quantity will rise. |
d)When increase in supply is more than increase in demand. | iii) equlibrium price will not change But equilibrium quantity will increase in same ratio. |
A. a-iv, b-iii, c-ii, d-i
B. a-i, b-iii, c-ii, d-iv
C. a-iv, b-i, c-ii, d-iii
D. a-iv, b-ii, c-i, d-iii
Ans-C
A. Slopes upward
B. Parallel to Y-axis
C. Horizontal
D. Decreasing
Ans.A
Reason (R): Exception to law of demand occurs in case of status symbol goods, inferior or giffen goods etc.
A. Both (A) and (R) are correct, and (R) is the correct explanation of (A).
B. Both (A) and (R) are correct, but (R) is not the correct explanation of (A).
C. (A) is correct., but (R) is not correct.
D. (A) is wrong, and (R) is correct.
Ans-A
13. Statement I: Complement goods will have positive cross-price elasticity. Statement II: Substitute goods will have negative cross-price elasticity.
Choose the correct option from the following:
A. Statement I is correct, Statement II is incorrect.
B. Statement I is incorrect, Statement II is correct.
C. Both Statement I and Statement II are correct.
D. Both Statement I and Statement II are incorrect.
14. The traditional theory of demand deals with
1) Investment goods
2) Consumption goods
3) Intermediary goods
4) Complementary and substitute goods
Codes:
A. Only 2
B. 1 & 4
C. 2 & 3
D. 2 & 4
Ans-D
15. Match List-I (Type of income elasticity) with List-II (Type of goods)
List-II | List-II |
EY=1 | Comfort |
EY>1 | Necessary |
EY<1 | Luxury goods |
Choose the correct option from the following:
A. a-I, b-II, c-III
B. a-II, b-I, c-III
C. a-I, b-III, c-II
D. a-III, b-II, c-I
Ans-C
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