UGC NET COMMERCE -Most Important question of Business economics

                                               UGC NET COMMERCE

Most Important question of Business economics 

business economics questions

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


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


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.


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


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



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


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 :


(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


d) Unrelated relationship                                      IV. Changes direction after a certain


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


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.


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


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.


 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.

 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



 2. Assertion (A): Indifference curve will be downward sloping linear curve when the consumer consumes a good and a bad commodity.

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.


3. Match List-I with 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.

 Choose the correct code:

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


4.Match List-I with 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


5.Match List-I with List-II

List -I


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


 6. Which of the following are assumptions of Marshallian Cardinal Utility Analysis?

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




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




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.


 9. Who amongst the following is related to the ordinal utility or indifference curve approach?

I)  Hicks

II)  R.G.D Allen

III)  Pareto

IV)  Edgeworth

 choose the correct option from those below:

A.  Only I

B.  I and II

C.  I, II and III

D.   I, II, III and IV


10.Match List-I with List-II.

What happens to the equilibrium price and quantity when




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.

  Choose the correct code:

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



 11.  When market demand is linear, the TR will initially:

A.  Slopes upward

B.  Parallel to Y-axis

C.  Horizontal

D.  Decreasing


 12.  Assertion (A): In certain situations more of a commodity is purchased with rise in prices and less of it with fall in prices.

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.


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


A. Only 2

B. 1 & 4

C. 2 & 3

D. 2 & 4



15.  Match List-I (Type of income elasticity) with List-II (Type of goods)








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