Solved Economic Analysis for Business Decisions MCQs & Answers with FREE PDF with Explanation 2021

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1. Accounting profit=———— Explicit Costs

a. Total Revenue
b. Total Cost
c. Implicit cost
d. None of these

Answer: Total Revenue
Explanation: Accounting profit is the total revenues minus explicit costs, including depreciation. Economic profit is total revenues minus total costs—explicit plus implicit costs. Explicit costs are out-of-pocket costs for a firm—for example, payments for wages and salaries, rent, or materials.

2. Implicit Cost added in:

a. Accounting cost.
b. Economic cost
c. Both a & b
d. None of these

Answer: Economic cost
Explanation: Implicit Cost added in Economic cost. An implicit cost is any cost that has already occurred but not necessarily shown or reported as a separate expense. It represents an opportunity cost that arises when a company uses internal resources toward a project without any explicit compensation for the utilization of resources.

3. In economic activities which are the outflows:

a. Government spending.
b. Investment.
c. Savings
d. None of these

Answer: Savings
Explanation: All market economies are characterized by a circular flow of economic activity. This means that money and products (including the products businesses need to operate) move in a circular fashion between businesses and households. Businesses and households act as both buyers and sellers in the economy.

4. The interaction of individuals and firms in a market can be described as a——————- of money, goods and services and resources through product and factor markets.

a. Constant flow
b. Stable flow
c. Circular Flow
d. Regular Flow

Answer: Circular Flow
Explanation: The interaction of individuals and firms in a market can be described as a Circular Flow of money, goods and services and resources through product and factor markets.

5. The regulatory mechanism of the market system is:

a. Self-interest.
b. Private property.
c. Competition.
d. Specialization.

Answer: Competition
Explanation: The regulatory mechanism in the free market system is competition. Competition drives the acquisition and use of economic resources and the sale of goods and services to consumers. High competition is a natural factor for keeping production costs low to attract more consumers into buying a company’s products.

6. Which of the following is not an economic cost?

a. Wages.
b. Rents.
c. Economic profits
d. Payments made to the entrepreneur for organizing production

Answer: Economic profits
Explanation: Economic profit is not an economic cost. Economic profit is determined by economic principles, not by accounting principles. Economic profit uses implicit costs, which are typically the costs of a company’s resources. Economic profit is the profit from producing goods and services while factoring in the alternative uses of a company’s resources.

7. The invisible-hand concept suggests that:

a. Market failures imply the need for a national economic plan.
b. Big businesses are inherently more efficient than small businesses.
c. The competitiveness of a capitalistic market economy invariably diminishes over time.
d. Assuming competition, private and public interests will coincide.

Answer: Assuming competition, private and public interests will coincide.
Explanation: The invisible-hand concept suggests that assuming competition, private and public interests will coincide. The invisible hand describes the unintended social benefits of an individual’s self-interested actions, a concept that was first introduced by Adam Smith in The Theory of Moral Sentiments, written in 1759, invoking it in reference to income distribution.

8. In economics the central problem is:

a. Money.
b. Scarcity
c. Allocation.
d. Production.

Answer: Scarcity
Explanation: In economics the central problem is Scarcity. The central problem in economics is that what, how and for whom to produce and it is allocating scarce resources in such a manner that society’s unlimited needs or wants are satisfied as well as possible.

9. Opportunity cost is

a. A cost that cannot be avoided, regardless of what is done in the future.
b. The cost incurred in the past before we make a decision about what to do in the future.
c. That which we forgo, or give up, when we make a choice or a decision.
d. The additional benefit of buying an additional unit of a product.

Answer: That which we forgo, or give up, when we make a choice or a decision.
Explanation: Opportunity cost is That which we forgo, or give up, when we make a choice or a decision. Opportunity costs represent the potential benefits an individual, investor, or business misses out on when choosing one alternative over another. The idea of opportunity costs is a major concept in economics.

10. In a planned or command economy, all the economic decisions are taken by the:

a. Workers.
b. Consumers.
c. Voters.
d. Government.

Answer: Government
Explanation: In a planned or command economy, all the economic decisions are taken by the Government. In a centrally planned economy, major economic decisions are made by a central authority. Centrally planned economies stand in contrast to market economies where large numbers of individual consumers and profit-seeking private firms operate most or all of the economy.

11. Goods and Services bought and sold in:

a. Product Market
b. Factor Market
c. Capital Market
d. Money Market

Answer: Product Market
Explanation: Goods and Services bought and sold in Product Market. In economics, the product market is the marketplace where final goods or services are sold to businesses and the public sector. Focusing on the sale of finished goods, it does not include trading in raw or other intermediate materials. Related, but contrasting, terms are financial market and labour market.

12. In a free-market economy the allocation of resources is determined by:

a. Votes taken by consumers
b. A central planning authority
c. By consumer preferences
d. The level of profits of firms

Answer: By consumer preferences
Explanation: In a free-market economy the allocation of resources is determined by By consumer preferences. In a free market economy, resources are allocated through the interaction of free and self-directed market forces. This means that what to produce is determined consumers, how to produce is determined by producers, and who gets the products depends upon the purchasing power of consumers.

13. Economics is a—— science which deals with human wants and their satisfaction.

a. Social 
b. Political
c. Natural
d. Physical

Answer: Social
Explanation: Economics is a social science which deals with human wants and their satisfaction. All the desires and aspirations and motives of humans are known as human wants in economics. And the wants that can be satisfied with goods and services of any kind are economic wants. Like for example food, shelter, clothing, etc are economic human wants.

14. Economic profit refers to————- minus all relevant costs , both explicit and implicit.

a. Profit  
b. Cost    
c. Expenses   
d. Revenues

Answer: Revenues
Explanation: Economic profit refers to revenues minus all relevant costs , both explicit and implicit. Accounting profit is the total revenues minus explicit costs, including depreciation. Economic profit is total revenues minus total costs—explicit plus implicit costs. Explicit costs are out-of-pocket costs for a firm—for example, payments for wages and salaries, rent, or materials.

15. The two basic markets shown by the simple circular flow model are:

a. Capital goods and consumer goods.
b. Free and controlled.
c. Product and resource.
d. Household and business.

Answer: Product and resource
Explanation: The two basic markets shown by the simple circular flow model are Product and resource. The most common form of this model shows the circular flow of income between the household sector and the business sector. Between the two are the product market and the resource market. Households purchase goods and services, which businesses provide through the product market.

16. The total demand for goods and services in an economy is known as:

a. Aggregate demand.
b. Gross national product.
c. Economy-wide demand.
d. National demand.

Answer: Aggregate demand
Explanation: The total demand for goods and services in an economy is known as Aggregate demand. Aggregate demand is an economic measure of the total amount of demand for all finished goods and services produced in an economy. Aggregate demand is expressed as the total amount of money spent on those goods and services at a specific price level and point in time.

17. The opportunity cost of a machine which can produce only one product is:

a. Low
b. Infinite
c. High
d. Medium

Answer: Low
Explanation: The opportunity cost of a machine which can produce only one product is Low. Opportunity cost of a particular product is the value of the foregone alternative products that resources used in its production, could have produced. Opportunity cost is not what you choose when you make a choice —it is what you did not choose in making a choice.

18. …….is also known as prescriptive economics.

a. Positive Economics
b. Micro economics
c. Normative economics
d. Economics

Answer: Normative economics
Explanation: Normative economics is also known as prescriptive economics. Normative economics is a perspective on economics that reflects normative, or ideologically prescriptive judgments toward economic development, investment projects, statements, and scenarios.

19. It is the study of economics actions of individuals and small groups of individuals.

a. Micro-Economics
b. Macro-Economics  
c. Managerial Economics  
d. Business Economics

Answer: Micro-Economics
Explanation:

20. Macroeconomics deals with:

a. The behavior of firms.
b. Economic aggregates
c. The behavior of the electronics industry.
d. The activities of individual units.

Answer: Economic aggregates
Explanation:

21. Microeconomics is not concerned with the behavior of:

a. Consumers.
b. Aggregate demand.
c. Firms.
d. Industries.

Answer: Aggregate demand
Explanation:

22. The total demand for goods and services in an economy is known as:

a. Aggregate demand.
b. Gross national product.
c. Economy-wide demand.
d. National demand.

Answer: Aggregate demand
Explanation:

23. Unemployment means that:

a. People are not willing to work at the going wage rate.
b. At the going wage rate, there are people who want to work but cannot find work.
c. There are some people who will not work at the going wage rate.
d. There is excess demand in the labour market.

Answer: At the going wage rate, there are people who want to work but cannot find work.
Explanation:

24. The circular flow of goods and incomes shows the relationship between:

a.Firms and households.
b. Goods and services.
c. Income and money. 
d. Wages and salaries.

Answer: Firms and households.
Explanation:

25. Which one of the following is a normative statement?

a. The richest 10 per cent of the population has had a bigger percentage increase in incomes over the past 10 years than the poorest 10 per cent.
b. The proportion of people’s income paid in taxes is higher under this government than under the previous one.
c. Inflation is rising.
d. Inequality in the distribution of income is a more serious problem than unemployment.

Answer: Inequality in the distribution of income is a more serious problem than unemployment.
Explanation:

26. Continues consumption of homogeneous product is a assumption for:

a. Law of Demand.
b. Law of Supply.
c. Law of Diminishing Marginal Utility.
d. None of these

Answer: Law of Diminishing Marginal Utility.
Explanation:

27. Goods and Services bought and sold in:

a. Product Market.
b. Factor Market.
c. Capital Market.
d. Money Market.

Answer: Product Market
Explanation:

28. In Product market money flows from:

a. Individual to firm.
b. Business to households.
c. Government to household.
d. None of these

Answer: Individual to firm
Explanation:

29. In factor market suppliers are:

a. Firms.
b. Households.
c. Government
d. None of these

Answer: Households
Explanation:

30. Indian economy is:

a. Capitalist Economy  
b. Socialist Economy   
c. Mixed Economy
d. None of these

Answer: Mixed Economy
Explanation:

31. Father of Economics:

a. Lionel Robbins.
b. Adam Smith.
c. Alfred Marshal.
d. None of these

Answer: Lionel Robbins
Explanation:

32. Business Economics is also known as………….

a. Managerial Economics
b. Economics for Executives
c. Economic analysis for business decisions
d. All the above

Answer: All the above
Explanation:

33. State whether economics is

a. A positive science only
b. Neither a positive nor normative science
c. A science but not art
d. A science or an art depending on who uses economics and for what purpose.

Answer: A science or an art depending on who uses economics and for what purpose.
Explanation:

34. The branch of economics wherein mathematics and statistics are used to measure and analyze economics activities is called……………..

a. Applied Economics
b. Econometrics
c. Statistics
d. Macro Economics

Answer: Econometrics
Explanation:

35. It is defined as a state of knowledge in which one or more alternatives result in a set of specific outcomes but where the probabilities of the outcomes are neither known nor meaningful.

a. Risk 
b. Uncertainty
c. Peril
d. All of the above

Answer: Uncertainty
Explanation:

36. Opportunity cost is term which describes

a. A bargain for a factor of production
b. Costs related to an optimum level of production
c. Average variable cost   
d. None of these

Answer: None of these
Explanation:

37. It is also known as prescriptive economics

a. Positive Economics
b. Micro economics
c. Normative economics
d. Economics

Answer: Normative economics
Explanation:

38. ……cost are also known as Imputed Costs.

a. Opportunity  
b. Marginal    
c. Total   
d. Historical

Answer: Opportunity  
Explanation:

39. There are …… branches of economics.

a. 2 
b. 3  
c. 4  
d. 6

Answer: 2 
Explanation:

40. It is the study of economics actions of individuals and small groups of individuals.

a. Micro-Economics  
b. Macro-Economics  
c. Managerial Economics  
d. Business Economics

Answer: Micro-Economics
Explanation:

41. Which of the following factor is important for demand along other factors?

a. Selling Power      
b. Ability to Buy     
c. Product Development       
d. New product Launch

Answer: Ability to Buy
Explanation:

42. PV in Unit number one stands for ………

a. Postal Volume         
b. Past Value    
c. Programmable Value           
d. Present Value

Answer: Present Value
Explanation:

43. Invisible Hand theory was described by …….

a. Robert Anthony       
b. Adam Smith   
c. Amartya Sen        
d. C.K. Pralhad

Answer: Adam Smith
Explanation:

44. Principal Agent Problem is related to…….

a. Managers and Owners   
b. Suppliers and Buyers
c. Producers and Sellers  
d. LIC Agents

Answer: Managers and Owners
Explanation:

45. Entrepreneurs do all of the following EXCEPT

a. Bear risk from business decisions.
b.  Own all the other resources.
c. Come up with new ideas about what, how, when and where to produce.
d. Organize labor, land, and capital.

Answer: Own all the other resources
Explanation:

46. Microeconomics focuses on all of the following EXCEPT

a.  The effect of increasing the money supply on inflation.
b. The purchasing decisions that an individual consumer makes.
c. The effect of an increase in the tax on cigarettes on cigarette sales.
d. The hiring decisions that a business makes.

Answer: The effect of increasing the money supply on inflation.
Explanation:

47. Scarcity requires that people must

a. Trade.   
b. Compete.  
c. Cooperate.  
d. Make choices

Answer: Make choices
Explanation:

48. Economics is best defined as the study of how people, businesses, governments, and societies

a. Make choices to cope with scarcity.
b. Attain wealth.
c. Choose abundance over scarcity. 
d. Use their infinite resources.

Answer: Make choices to cope with scarcity.
Explanation:

49. Opportunity cost means

a. The accounting cost minus the marginal benefit.
b. The highest-valued alternative forgone.
c. The monetary costs of an activity.
d. The accounting cost minus the marginal cost

Answer: The highest-valued alternative forgone.
Explanation:

50. Ceteris paribus is the Latin expression for

a. A statement about the way the economic world ought to be.
b. An expression that means “other things being equal.”
c. The (false) statement that what is true of the parts is true of the whole or what is true of the whole is true of the parts.
d. The error of reasoning that a first event causes a second event because the first event occurred before the second event.

Answer: An expression that means “other things being equal.”
Explanation:

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