Managerial Economics- MBA Semester I

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AMITY (Assignment) BBA Semester 1
Managerial Economics- MBA Semester I
1
Law of demand shows relation between:
Select one:
a. Quantity demanded and quantity supplied
b. Price and quantity of a commodity
c. Income and price of commodity
d. Income and quantity demand
Question 1. Supply surve
Select one:
a. Is same in long and short run
b. Is vertical in long run
c. Is flatter in long run
d. Is horizontal in both short and long run()
Clear my choice
Question 2. When cross elasticity of demand is a large positive number, one can conclude that:
Select one:
a. The good is normal
b. The good is inferior
c. The good is a substitute
d. The good is a complement
Clear my choice
Question 3. Other things equal, if a good has more substitutes, its price elasticity of demand is:
Select one:
a. Larger
b. Smaller
c. Zero
d. Unity
Clear my choice
Question 4. If quantity demanded is completely unresponsive to changes in price, demand is:
Select one:
a. Unit elastic
b. Perfectly inelastic
c. Elastic
d. Inelastic
Clear my choice
Question 5. Normally a demand curve will have the shape:
Select one:
a. Downward sloping
b. Horizontal
c. Upward sloping
d. Vertical
Clear my choice
Question 6. If elasticity of supply is greater than one. Supply curve will be:
Select one:
a. Touching y-axis
b. Vertical
c. Passing through origin()
d. Horizontal
Clear my choice
Question 7. The following are causes of shift in demand EXCEPT the one:
Select one:
a. Change in price
b. Change in fashion
c. Change in prices of substitutes
d. Change in income
Clear my choice
Question 8. When supply of a commodity increases without change in price it is called:
Select one:
a. Expansion in supply
b. Contraction in supply
c. Fall in supply
d. Rise in supply
Clear my choice
Question 9. Supply curve will shift when:
Select one:
a. Price falls
b. Demand shifts
c. Price rises
d. Technology change
Clear my choice
Question 10. This is an assumption of law of demand:
Select one:
a. Supply should not change
b. Price of the commodity should not change
c. Quantity should not change
d. Income of consumer should not change
Clear my choice

Law of demand shows relation between:
Select one:
a. Quantity demanded and quantity supplied
b. Income and price of commodity
c. Income and quantity demand
d. Price and quantity of a commodity
Question 11. Which of the following is a demand function?
Select one:
a. Q = 35 + 3P
b. Q + 4P = 20
c. Q – 2P – 15 = 0
d. 5P – Q = 4
Clear my choice
Question 12. Irrespective of price, Sofia always spends Rs. 100 a week on ice cream, we conclude that:
Select one:
a. Elasticity of demand is 1
b. The law of demand has been violated
c. Elasticity of demand is infinite
d. Elasticity of demand is 0
Clear my choice
Question 13. What best explains a shift in market supply curve to the right?
Select one:
a. An advertising campaign is successful in promoting the good
b. The price of raw materials increases
c. A new technique makes it cheaper to produce the good
d. The government introduces a tax on the good
Clear my choice
Question 14. If price changes by 1% and supply changes by 2% then supply is:
Select one:
a. Static
b. Inelastic
c. Indeterminate
d. Elastic
Clear my choice
In May 2013, firm was supplying 500kg of sugar of market price of Rs. 30/- per kg. During June 2013, firm’s supply of sugar had decreased to 450kg at price Rs. 20/- per kg. These changes show that supply of sugar is:
Select one:
a. Perfectly inelastic
b. Perfectly elastic
c. More elastic
d. Less elastic
Question 15. In November of 2010 the US Central Bank, the Federal Reserve, embarked on a policy of quantitative easing. Since this policy essentially represents an increase in the supply of money, it may create inflationary expectations. Let’s assume (and this is a strong assumption), that as a result of this policy, US households start to expect inflation (price increases) in the housing market. The effect on the housing market will be:
Select one:
a. None of the above
b. A rise in the supply, causing prices to decrease
c. A rise in the demand, causing prices to increase
d. A decline in the demand, causing prices to decrease
Clear my choice
Question 16. What best explains a shift in market supply curve to the right?
Select one:
a. The price of raw materials increases
b. The government introduces a tax on the good
c. An advertising campaign is successful in promoting the good
d. A new technique makes it cheaper to produce the good
Clear my choice
Question 17. During a particular year farmers experienced a dry weather, if all other factors remain constant, farmers supply curve for wheat will shift to:
Select one:
a. Rise in supply
b. Leftward
c. Downward
d. Rightward
Managerial Economics- MBA Semester I

2nd Module Assessment

If a firm’s revenues just cover all its opportunity costs, then:
Select one:
a. economic profit is zero
b. normal profit is zero.
c. total revenues equal its implicit costs
d. total revenues equal its explicit costs

Question 1. The marginal product curve is above the average product curve when the average product is:
Select one:
a. Decreasing
b. Constant
c. None
d. Increasing
Clear my choice
Question 2. An isoquant is _ to an iso cost line at equilibrium point: Select one: a. Perpendicular b. Concave c. Convex d. Tangent Clear my choice Question 3. Increasing returns to scale can be explained in terms of: Select one: a. All of these b. External and internal diseconomies c. External economics and internal diseconomies d. External and internal economies Clear my choice Question 4. Isoquants are equal to: Select one: a. Revenue lines b. Total utility lines c. Product Lines d. Cost lines Clear my choice Question 5. MRP stands for Select one: a. Marginal Revenue process b. Both (a) and (b) c. Marginal Revenue Product d. None of these Clear my choice Question 6. _ shows the overall output generated at a given level of input:
Select one:
a. Marginal rate of technical substitution
b. Production function
c. Iso cost
d. Cost function
Clear my choice
Question 7. The production function incorporates the technically efficient method of ………….
Select one:
a. production
b. All of these
c. process
d. function
Clear my choice
Question 8. Which of the following is not a feature of land?
Select one:
a. Mobile factor
b. Limited in quantity
c. Free gift
d. Indestructible
Clear my choice
Question 9. Law of variable proportion is valid when:
Select one:
a. Only one input is fixed and all other inputs are kept variable
b. None of these
c. All inputs are varied in the same proportion
d. All factors are kept constant
Clear my choice
Question 10. When a firm doubles its inputs and finds that its output has more than doubled, this is known as:
Select one:
a. a violation of the law of diminishing returns
b. economies of scale
c. diseconomies of scale
d. constant returns to scale
Clear my choice
Suppose that a firm produces 200,000 units a year and sells them all for $10 each. The explicit costs of production are $1,500,000 and the implicit costs of production are $300,000. The firm has an accounting profit of:
Select one:
a. $300,000 and an economic profit of $400,000.
b. $500,000 and an economic profit of $200,000
c. $400,000 and an economic profit of $200,000.
d. $200,000 and an economic profit of $500,000.
Question 11. If all resources used in the production of a product are increased by 20 percent and output increases by 20 percent, then there must be:
Select one:
a. constant returns to scale.
b. increasing average total costs
c. diseconomies of scale.
d. economies of scale.
Clear my choice
Question 12. With fixed costs of $400, a firm has average total costs of $3 and average variable costs of $2.50. Its output is:
Select one:
a. 400 units
b. 1,600 units
c. 800 units
d. 200 units
Clear my choice
Question 13. If you know that with 8 units of output, average fixed cost is $12.50 and average variable cost is $81.25, then total cost at this output level is:
Select one:
a. $880
b. $97.78
c. $750
d. $93.75
Clear my choice
Question 14. Which is not a fixed cost?
Select one:
a. a worker’s wage of $15 per hour
b. an insurance premium of $50 per year, paid last month
c. monthly rent of $1,000 contractually specified in a one-year lease
d. an attorney’s retainer of $50,000 per year
Clear my choice
Question 15. Electricity charges are increased for the commercial use from Rs. 3 per unit to Rs. 5 per unit. This woulf affect –
Select one:
a. Both Fixed and Variable Cost
b. Neither Fixed Cost no Variable Cost
c. Variable Cost
d. Fixed Cost
Clear my choice
Question 16. When a bus with a seating capacity of 50 passengers is carrying on 40 passengers. The cost of passenger ticket is Rs. 100. What would be the Marginal Cost of carrying one additional passenger?
Select one:
a. Rs. 4,000
b. Zero
c. Rs. 100
d. Rs. 4,100
Clear my choice
Question 17. A farm must decide whether or not to purchase a new tractor. The tractor will reduce costs by $2,000 in the first year, $2,500 in the second and $3,000 in the third and final year of usefulness. The tractor costs $9,000 today, while the above cost savings will be realized at the end of each year. If the interest rate is seven percent, what is the net present value of purchasing the tractor?
Select one:
a. $9,362
b. None of the statements associated with this question are correct
c. $18,362
d. $6,764
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3rd Module Assessment
Which of the following is the best example of a perfectly competitive market?
Select one:
a. athletic shoes
b. farming
c. soft drinks
d. diamonds
Question 1. Which of the following would create a natural monopoly?
Select one:
a. requirement of a government license before the firm can sell the good or service
b. technology enabling a single firm to produce at a lower average cost than two or more firms
c. ownership of all the available units of a necessary input
d. an exclusive right granted to supply a good or service
Clear my choice
Question 2. What is the difference between perfect competition and monopolistic competition?
Select one:
a. Perfect competition has a large number of small firms while monopolistic competition does not.
b. Perfect competition has barriers to entry while monopolistic competition does not.
c. Perfect competition has no barriers to entry, while monopolistic competition does.
d. In perfect competition, firms produce identical goods, while in monopolistic competition, firms produce slightly different goods.
Clear my choice
Question 3. The market type known as perfect competition is
Select one:
a. dominated by fierce advertising campaigns
b. marked by firms continuously trying to change their products so that consumers prefer their product to their competitors’ products
c. highly competitive and firms find it impossible to earn an economic profit in the long run.
d. almost free from competition and firms earn large profits.
Clear my choice
Question 4. Ownership of a necessary input creates what type of barrier to entry?
Select one:
a. a government license
b. natural barrier to entry
c. a public franchise
d. legal barrier to entry
Clear my choice
Question 5. As the degree of product differentiation increases among the products sold in a monopolistically competitive industry, which of the following occurs?
Select one:
a. The cost of production falls.
b. The demand curve for each seller’s product becomes more horizontal
c. The amount of marketing expenditures decreases for each firm
d. Each seller’s demand becomes more inelastic
Clear my choice
Question 6. Which of the following market types has the fewest number of firms?
Select one:
a. monopoly
b. perfect competition
c. monopolistic competition
d. oligopoly
Clear my choice
Question 7. Perfectly competitive firms are price takers because
Select one:
a. many other firms produce identical products
b. each firm is very large
c. their demand curves are downward sloping
d. there are no good substitutes for their goods
Clear my choice
Question 8. Perfect competition is characterized by all of the following EXCEPT
Select one:
a. considerable advertising by individual firms
b. no restrictions on entry into or exit from the industry
c. well-informed buyers and sellers with respect to prices.
d. a large number of buyers and sellers.
Clear my choice
Question 9. Which of the following market types has all firms selling products so identical that buyers do not care from which firm they buy?
Select one:
a. oligopoly
b. monopoly
c. monopolistic competition
d. perfect competition
Clear my choice
Question 10. A monopoly is a market with
Select one:
a. one supplier
b. many suppliers
c. no barriers to entry
d. many substitutes
Clear my choice

Monopolistically competitive firms most frequently do which of the following?
Select one:
a. Enjoy monopoly pricing power
b. Merge and consolidate into oligopolistic groupings
c. Compete in pricing wars with other firms in the industry
d. Advertise the traits that make their product identifiable
Question 11. Profits of the firm will be more at:
Select one:
a. Both of above
b. Additional revenue from extra unit equals its additional cost
c. None
d. MR = MC
Clear my choice
Question 12. When the government grants an exclusive patent to one firm, that firm enjoys
Select one:
a. monopoly powers
b. productive efficiency
c. collusive prices
d. antitrust regulation
Clear my choice
Question 13. If a monopolistically competitive seller can convince buyers that its product is of better quality and value than products sold by rival firms,
Select one:
a. demand becomes more inelastic.
b. all of the above occur
c. demand increases.
d. the firm gains more control over its price
Clear my choice
Question 14. Which of the following would most likely be a monopoly?
Select one:
a. An electricity provider
b. A supermarket
c. An appliance store
d. A dentist’s office
Clear my choice
Question 15. Which of the following statements is true for both monopolistically competitive and oligopolistic industries?
Select one:
a. It is impossible for new firms to enter the industries
b. Firms have some degree of control over prices
c. Producers cannot benefit from knowing other firms’ plans.
d. Collusion and the creation of cartels is common.
Clear my choice
Question 16. Which of the following is most likely to be observed in a monopolistically competitive market?
Select one:
a. Standardized, homogenous products
b. Non-price competition, such as advertising
c. Collusion and price-fixing between firms
d. Government antitrust oversight
Clear my choice
Question 17. Recently in a small city, building contractors lobbied the city council to pass a law requiring all people working on residential dwellings be licensed by the city. Why would the contractors lobby for this requirement?
Select one:
a. to reduce the cost of building dwellings
b. There is no good explanation for this type of lobbying.
c. to guarantee that work on dwellings is of high quality
d. to create a legal barrier to entry

4th Module Assessment

4th Module Assessment
In a closed economy, aggregate demand is the sum of
Select one:
a. consumer expenditure, planned investment spending, government spending, and net exports.
b. consumer expenditure, actual investment spending, government spending, and net exports.
c. consumer expenditure, actual investment spending, and government spending.
d. consumer expenditure, planned investment spending, and government spending.

Question 2
If aggregate demand falls short of current output,
Select one:
a. business firms will cut production to build up inventories.
b. business firms will expand production to keep from accumulating inventories.
c. business firms will expand production to build up inventories.
d. business firms will cut production to keep from accumulating inventories.

Question 3
Investment Multiplier is a
Select one:
a. ratio between consumption and investment
b. ratio between income and investment.
c. None of the above
d. ratio between investment and savings

Question 4
If the demand for money is interest-elastic, an increase in interest rates:
Select one:
a. Would have no impact on the rest of the economy
b. Would have a powerful impact on the rest of the economy
c. Would have little impact on the rest of the economy
d. Would increase the liquidity of financial assets other than money

Question 5
In the Keynesian model of income determination, consumer expenditure includes spending by
Select one:
a. consumers on personal computers.
b. businesses on personal computers.
c. all of the above since computers are consumer durables
d. governments on personal computers.

Question 6
If aggregate expenditure exceeds aggregate output, there will be unplanned inventory _ causing output to _
Select one:
a. depletion; increase
b. accumulation; increase
c. depletion; decrease
d. accumulation; decrease

Question 7
Keynes’s motivation in developing the aggregate output determination model stemmed from his concern with explaining
Select one:
a. why the Great Depression occurred.
b. the high unemployment in Great Britain after World War II.
c. the high unemployment in Great Britain before World War I.
d. the hyperinflations of the 1920s.

Question 8
Actual investment spending is comprised of two components:
Select one:
a. planned investment and fixed investment.
b. fixed investment and actual inventory investment.
c. fixed business investment and fixed housing investment.
d. unplanned investment and inventory investment.

Question 9
An increase in (i) the price level and (ii) the rate of inflation:
Select one:
a. Cause the demand for money (i) to rise; (ii) to fall
b. Cause the demand for money (i) to fall; (ii) to rise
c. Both cause the demand for money to rise
d. Both cause the demand for money to fall

Question 10
All demand for money functions that are tested are macroeconomic relationships between the aggregate demand for money and other economic variables because:
Select one:
a. Microeconomic relationships are unpredictable
b. Macroeconomic relationships are always more stable than microeconomic relationships
c. The purpose of studying the demand for money is to help in understanding the effect of monetary policy
d. Microeconomic relationships are less interesting
Extra Question

As the level of interest rates in the economy falls, the demand for money, ceteris paribus:
Select one:
a. Increase
b. Could move in either direction depending on other factors
c. Will fall more or less in line with the change in interest rates
d. Will remain unchanged

Question 11
The multiplier concept is important in the Keynesian model because
Select one:
a. it explains why a large change in autonomous spending has such a small impact on equilibrium output.
b. it explains why a small change in autonomous spending can have a large impact on equilibrium output.
c. it is crucial to understanding why changes in investment spending are viewed as the root cause of business cycles fluctuations.
d. of both (b) and (c) of the above.

Question 12
In the Keynesian two sector economy, ADI
d. S<I

Question 13
There are two types of investment: _ investment–the spending by business firms on equipment and structures, and planned spending on residential houses–and _ investment–spending by business firms on additional holdings of raw materials, parts, and finished goods.
Select one:
a. fixed; inventory
b. fixed; gross
c. planned; inventory
d. planned; gross

Question 14
Which of the following statements concerning Keynesian analysis are true?
Select one:
a. Keynes’s analysis started with the recognition that the total quantity demanded of an economy’s output was the sum of four types of spending: consumer expenditure, planned investment spending, government spending, and net exports.
b. All of the above are true.
c. Keynes recognized that equilibrium would occur in the economy when total quantity of output supplied (aggregate output produced, Y) equals quantity of output demanded (Yad), that is, when Y = Yad.
d. Keynes’s analysis involves explaining why aggregate output is at a certain level by understanding what factors affect each component of aggregate demand and how the sum of these components could add up to an output smaller than the economy is capable of producing, resulting in less than full employment.
Extra Question
An increase in planned investment spending causes aggregate output to
Select one:
a. increase by an amount less than the change in investment spending.
b. increase by an amount greater than the change in investment spending
c. increase by an amount equal to the change in investment spending.
d. decrease by an amount less than the change in investment spending

Question 15
Which of the following is NOT a leakage from the circular flow of income and expenditure?
Select one:
a. Taxes net of government transfers
b. Saving
c. Government purchases
d. Imports

Question 16
The difference between real and nominal GDP is
Select one:
a. nominal GDP only accounts for citizens.
b. nominal GDP uses actual price-levels
c. nominal GDP uses price-levels of some base year
d. real GDP also includes services, whereas nominal GDP only takes goods into account

Question 17
What of the following does NOT enter GDP?
Select one:
a. public education
b. public service
c. national defense
d. life expectancy
29/30*
5th Module Assessment
Question 1
The variable that connect the market of money and the market of goods via investment spending is:
Select one:
a. The MPS
b. The interest rate
c. The MPC
d. The CPI

Question 2
As higher is the MPS
Select one:
a. All the answers are right
b. Lower is the multiplier.
c. Higher is the equilibrium income.
d. Higher is the investment spending

Question 3
To increase the money supply, the bank central could:
Select one:
a. Purchase bonds in the open-market
b. Encourage people to held more cash (currency in circulation)
c. Increase the government spending
d. Cut taxes

Question 4
An increase in the interest rate….
Select one:
a. Shifts the aggregate demand curve to the right
b. Shifts the aggregate demand curve to the left
c. Moves the economy along the aggregate demand curve
d. Has no effect

Question 5
Point out which of the following is not an instrument of fiscal policy:
Select one:
a. A cut in the marginal rates of IRPF
b. An increase in the interest rate
c. A cut in unemployment compensation
d. An increase in tobacco taxes

Question 6
The government spending multiplier is as higher as:
Select one:
a. Higher is the MPC
b. Lower is the MPC
c. Lower is the tax revenue
d. Higher is the government spending

Question 7
If you are a classical economist, which statement would you support?
Select one:
a. The government is the key to economic success
b. Let the economy work out its own problems
c. The more the government spends to improve the economy, the better
d. The government should be involved to help during recessions

Question 8
Point out the monetary policy instrument:
Select one:
a. A cut in government purchase of goods and services
b. Freezing pensions
c. An increase in direct taxes
d. Open-market operations

Question 9
A decrease in the MPC may cause:
Select one:
a. A fall in the equilibrium income
b. An increase in the equilibrium income.
c. It does not affect the equilibrium income
d. The government spending multiplier rise

Question 10
The function of investment spending shifts to the left if:
Select one:
a. Business expectations get worse
b. The interest rate rises
c. The interest rate falls
d. Business expectations improve
Extra Question
A cut in direct taxes on households’ income
Select one:
a. Shifts the aggregate demand curve to the left
b. Shifts the aggregate demand curve to the right
c. Moves the economy along the aggregate demand curve
d. Has no effect

Question 11
If the economy is in a recession, the Fed could do all of the following EXCEPT
Select one:
a. Buy securities
b. Lower the Discount rate
c. Lower the Federal Funds rate
d. Lower taxes

Question 12
If Fiscal Policy is trying to promote stability and economic growth through tax cuts, what type of policy is Fiscal policy using?
Select one:
a. Easy Money Policy
b. Restrictive Fiscal Policy
c. Tight Money Policy
d. Expansionary Fiscal Policy

Question 13
How are Fiscal Policy and the Federal Reserve similar?
Select one:
a. They always must have Congressional approval before passing
b. They both use the same tools to fix economic problems
c. They both try to promote economic stability
d. They both have a Board of Governors

Question 14
If a nation currently has a budget deficit, their income is not covering the cost of running their country. If this budget is not revised, what could be a possible result of this situation?
Select one:
a. A mounting debt
b. Discretionary fiscal policy
c. A balanced budget
d. A budget surplus
Other Question
Which of the following best describes the goal of Monetary Policy?
Select one:
a. Controlling the national debt
b. Stopping inflation
c. Controlling the money supply
d. Controlling taxes
Question 15
Which of the following policies would not be used by a government which wished to increase the output per labour hour?
Select one:
a. Make government departments more efficient.
b. Promoting competition.
c. Discouraging firms from investing in new capital.
d. Increase the school leaving age

Question 16
Suppose the government of a country has a high level of debt. Which of the following statements about this debt is false?
Select one:
a. A high debt would make it difficult for the government to respond to any future downturns in its economy with expansionary fiscal policy.
b. If all the debt was in the form of bonds owned by the country’s own citizens, then the debt would not be a burden to the country’s citizens.
c. A high debt might make lenders worry if the government could repay its loans and so raise the interest rate people wanted when they lent to it
d. If all the debt was in the form of bonds owned by the country’s own citizens, then the debt would not be a burden to the country’s taxpayers.

Question 17
Which of the following policies would not be used by a government which wished to increase the quantity of labour that will be hired?
Select one:
a. A reduction in the benefits paid to unemployed people.
b. An increase in help for unemployed people to retrain.
c. An increase in firms’ non-labour costs.
d. A reduction in income tax rates.
29/30
Assignment 2
Case Study
Business Management and Managerial Economics have always been closely related; in fact, most schools of business have their origins in departments of economics. Yet, the viewpoints of the economist and the manager have, until recently, been different. The economist has been concerned chiefly with the functioning of the economy as a whole and social issues such as monopoly and competition, tax policy, the pricing system, and the distribution of income. The manager has been concerned primarily with maximization of profits, from the viewpoint of the individual firm, and with such company policies as pricing, wage payments, market share and employment of resources. Both the economist and manager, nevertheless, face similar problems of using scarce resources in the satisfaction of human wants. Both concentrate on the analysis of demand characteristics and supply factors, but the manager must orient his thoughts to making decisions in business operations. Managerial Economics, therefore, may be defined as the management’s application of economic principles in the decision-making process.

Question 1 : Demand is determined by
Select one:
a. All of the above
b. Price of the product
c. Relative prices of other goods
d. Tastes and habits

Question 2
When a firm’s average revenue is equal to its average cost, it gets __.
Select one:
a. Super profit
b. Sub normal profit
c. Normal profit
d. None of the above

Question 3
Managerial economics generally refers to the integration of economic theory with business
Select one:
a. Ethics
b. Practice
c. Management
d. All of the above

Question 4
The cost recorded in the books of accounts are considered as
Select one:
a. Total cost
b. Average cost
c. Explicit cost
d. Marginal cost

Question 5
Given the price, if the cost of production increases because of higher price of raw materials, the supply
Select one:
a. Any of the above
b. Decreases
c. Increases
d. Remains same
15/15
Managerial Economics- MBA Semester I

Managerial Economics- MBA Semester I

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