Business Economics 

Section A

QUESTION
1    State and explain the Circular Flow of Income and Expenditure.

2    What is the Elasticity of Demand? Explain various types of Elasticity of Demand.

3    State and Explain Types of Cost.

4    Describe the Price and Output Determination under Monopoly.

5    Critically examine the Liquidity Preference Theory of Interest.

6    Describe Price and Output Determination under Monopolistic Competition.

7    State and explain the Law of Demand and explain determinants of Demand.

8    Write short notes: (any four)
(a) The Law of Supply

(b) Opportunity Cost

 
(c) Dynamic Theory of Profit

(d) Modern Theory of Rent

(e) Trade Unions and Collective Bargaining

Section B

CASE STUDY:

U.S. Economy: Is Recession A Panacea?                                                                        

Since the end of the Second World War in 1945, consumption propensity in the United States started to increase significantly. Domestic savings remained too low for the country compared to other industrialized and developed nations throughout the 20th century. The gap between the US and other developed nations in terms of personal savings rate has widened since the beginning of the 21st century. The astonishingly high consumption demand had a dual impact over the economy. While it contributed significantly to economic growth, at the same time it led to huge current account deficits. It was argued that high spending sprees and the low personal savings rate were hidden threats and the country might face difficulties in the long run. As past experiences proved that consumer spending reduced during recessions, a section of analysts advocated in favour of recession in order to eradicate the economic imbalance in the US. As another recession was looming large in the US, in 2008, economists were wondering whether the Federal Reserve should allow recession instead of preventing it.

QUESTION 1
To highlight the distinctive characteristics of United States consumerism.

    
QUESTION 2
To depict the United States economic scenario along with its high external borrowing.

    
QUESTION 3
To analyse the impact and role of recession on the US economy.

Section C

QUESTION 1

The kinked demand curve explains?
        
Price rigidity

Price flexibility

Demand rigidity

Demand flexibility

QUESTION 2

Imperfect competition was introduced by ____?
        
Marshall 

Chamberlin

Keynes

None

QUESTION 3

A situation in which the number of competing firms is relatively small is known as?
        
Incorrect

Perfect competition

Monopsony

Oligopoly

QUESTION 4

Demand is a function of?
        
Price

Firm

Product

Cost

QUESTION 5

The term group equilibrium is related to
        
Monopolistic competition

Oligopoly

Duopoly

Perfect competition

QUESTION 6

Price effect in indifference curve analysis arises?
        
When the consumer becomes either better off or worse off because price change is not compensated by income change.

When the consumer is betler off due to a change in income and price

When income and price change

None of the above

QUESTION 7

A situation where there is only one buyer is called
        
Monopoly 

Oligopoly

Monopsony 

Perfect competition

QUESTION 8

Elasticity of demand measures the
        
Sensitivity of sales to changes in a particular causal factor

Sensitivity of production to changes in a particular cost

Value of price and cost 

Volume of product

QUESTION 9

Factors responsible for creating conditions for emergence and growth of monopoly are
        
Control over strategic raw materials

Patents

Licensing

All of the above

QUESTION 10

"In the case of an inferior good, the income effect"
        
Partially offsets the substitution effect

Is equal to the substitution effect

Reinforces the substitution effect

More than offsets the substitution effect

QUESTION 11

A market in which only two firms exist is
        
Oligopoly

Duopoly

Duopsony

Oligopsony

QUESTION 12

Value maximization theory fails to address the problem of
        
self-serving management.

risk

uncertainty

sluggish growth. 

QUESTION 13

Selling costs have to be incurred in case of
        
Perfect competition

Monopolistic competition

Imperfect competition

None

QUESTION 14

Which type of competition leads to exploitation of consumer?
        
Oligopoly

Monopolistic competition

Monopoly

All of the above

QUESTION 15

The equilibrium is unstable and indeterminate under
        
Edgeworth model

Cournot Model

Sweezy Model

Pareto Model

QUESTION 16

Demand curve is related to?
        
MU curve

Marginal revenue 

Both a and b

None of these

QUESTION 17

Market with one buyer and one seller is called
        
Monopsony

Monopoly

Bilateral Monopoly

None of the above

QUESTION 18

The upper portion of the kinked demand curve is relatively
        
More inelastic

More elastic

Less elastic

Inelastic

QUESTION 19

Which of the following is an important dynamic variable?
        
Superior's style and behaviour

Organisational nature

The task structure

Cultural variables

QUESTION 20

How many sellers are present in duopoly?
        
One

two

Three

four

QUESTION 21

Efficient allocation of resources is achieved to greatest extent under?
        
Monopoly

Perfect competition

Oligopoly

Monopolistic competition

QUESTION 22

"For maximisation of profit in the short run, the condition is"
        
AR = AC 

MR = MC

MR = AR

MC = AC

QUESTION 23

Study of collusive agreement is
        
Collusive oligopoly

Non-Collusive oligopoly

Monopoly

All of the above

QUESTION 24

"Under perfect competition, price of the product"
        
Can be controlled

Cannot be controlled

Can be controlled within certain limit

None of the above

QUESTION 25

"If the demand curve confronting an individual firm is perfectly elastic, then firm is"
        
Price taker

Adjust output

Adjust price

All of these

QUESTION 26

Cartels is a form of
        
Collusive oligopoly

Monopoly

Non-Collusive oligopoly

None of these

QUESTION 27

Which one is not normally possible in case of monopoly?
        
MC = MR

AC = AR

MR = AR

MR = PR

QUESTION 28

A firm's marginal revenue?
        
is always negative 

can be positive

is always positive

is positive at point at which the total revenue is maximum

QUESTION 29

"In a monopoly market, an upward shift in the market demand results in a new equilibrium with"
        
A higher quantity and a lower price 

A higher quantity and the same price

A higher quantity and higher price 

All of the above

QUESTION 30

Demand Analysis includes:

Demand Forecasting

Demand Differentials

Demand Determinations

All of the above

QUESTION 31

In the case of monopolistic competition
        
MR curve cannot be defined

AR curve cannot be defined

The short run supply curve cannot be defined

None of the above

QUESTION 32

Which economist stated the positive impact of monopoly?
        
Marshall

Adam Smith

Joseph Schumpeter

Pigou

QUESTION 33

Average revenue is calculated by
        
TRn - TRn-1

P x Q

TR / MR

TR/Q

QUESTION 34

Cross elasticity of demand between two perfect substitutes will be
        
low

high 

zero

infinity

QUESTION 35

"At elasticity of one, marginal revenue is equal to"
        
one

zero 

infinity

none

QUESTION 36

Shifts in demand curve include
        
Increase in Demand (Upward shift)

Extention in demand 

Contraction in demand

None of the above

QUESTION 37

An indifference curve is always
        
A vertical straight line

Convex to the origin

Concave to the origin

A horizontal straight line

QUESTION 38

Price elasticity of demand provides?
        
"A measure of the responsiveness of the quantity demanded to changes in the price of the product, holding constant. The values of all other variables in the demand function."

A technical change in the goodwill of the firm

A technical change in the cost of product 

Technical change in the value

QUESTION 39

Given: Epx = Percentage change in Qy / Percentage change in Px. The above relationship is:
        
Arc Cross Price Elasticity

Cost Output

Cost Profit

Capital Budgeting

QUESTION 40

In the calculation of elasticity, there is error in case of
        
Arc elasticity

Point elasticity

Both (a) and (b) 

None