FYBA Sem II (2019-2020 Syllabus) Macro Economics

1. Perfect competition occurs in a market where there are many firm/s selling a/ an:
a) identical product.
b) competitive product.
c) unique product.
d) Complementary product.
2. Firms in perfect competition face:
a) perfectly elastic demand curve
b) perfectly inelastic demand curve
c) perfectly inelastic supply curve
d) all options are correct
3. Which is distinguishing feature of the natural monopoly?
a) Only supplier in the given market
b) nationalised producer
c) loss making supplier
d) Competitors reduces profit level of natural monopolist
4. Profit maximisation is achieved by perfectly competitive firm where:
a) MR= MC
b) MR < MC
c) MR > MC
d) MR and MC are not used in calculating maximum level of profit
5. What type of demand curve is faced by producers functioning in imperfect competition?
a) downward sloping
b) horizontal
c) vertical
d) wavy
6. Marginal cartel, member firms may be given a fixed amount to produce, is known as:
a) Quota
b) Quotient
c) Part
d) All options are incorrect
7. The market for automobiles is an example of
a) differentiated oligopoly
b) duopoly
c) pure oligopoly
d) political oligopoly
8. If few large firms dominate the industry the market is known as
a) Oligopoly
b) Monopolistic
c) Monopoly
d) Duopoly
9. Transfer pricing has gained importance with the growth of
a) MNCs
b) EMEs
c) M & A
d) Nationalised banks
10. In which market structure barriers to entry is found?
a) Monopoly
b) monopolistic competition
c) perfect competition
d) Share market
11. Price making capacity is found in
a) Monopoly
b) Perfect Competition
c) Monopolistic competition
d) All options are incorrect
12. Under oligopoly market price is
a) sticky
b) flexible
c) uncertain
d) unpredictable
13. If total cost of 110 units is Rs. 65000 and those of 111 units is Rs. 65200 then increase of Rs.
200 in total cost is
a) marginal cost
b) average cost
c) sunk cost
d) variable cost
14. The market for telecommunication services is an example of
a) Oligopoly
b) Duopoly
c) Monopoly
d) Perfect competition
15. Monopolist is price
a) Maker
b) Taker
c) Follower
d) All options are correct
16. In the short run to stay in the business, the firm must cover
a) variable cost
b) total cost
c) marginal cost
d) sunk cost
17. In a monopolistically competitive market, the number of firms is
a) Large
b) Few
c) Two
d) One
18. If monopolist switches from profit maximisation to sales maximisation it will plan to
a) reduce price
b) raise price
c) reduce output
d) reduce input purchase
19. Which economies of scale given below is not a type of internal economies of scale?
a) Localization
b) Production
c) transport & storage
d) All options are correct
20. With every increase in the labour input, the output rises but less than proportionately,
implies a firm is going through the:
a) diminishing return
b) division of labour
c) diminishing marginal utility
d) All options are incorrect
21. Implicit cost is that cost which is incurred by a producer on uses of
a) resources owned by him
b) total fixed cost
c) variable cost
d) marginal cost
22. Slope of the total cost curve equals to
a) MC
b) AVC
c) AC
d) Money cost
23. Incremental and marginal principle states that an investment decision is profitable if:
a) increase in TR is more than TC
b) decrease in TR is less than TC
c) TR an TC plays no role in the profitability of a firm
d) All options are incorrect
24. Short run production function includes factors which are:
a) fixed as well as variable
b) only fixed
c) only variable
d) marginal variable
25. The narrowing distance between successive isoquants impliesreturn to scale is of:
a) Increasing
b) Decreasing
c) Constant
d) All options are correct
26. Which is/ are example of internal economies of scale?
a) Information
b) Technical
c) Resource and development
d) Specialisation
27. In the short run slope of total cost curve is same as slope of
a) TVC
b) TFC
c) AVC
d) Real cost
28. What causes difference between private and social costs?
a) Externalities
b) opportunity cost
c) accounting error
d) Protection
29. Which from the following cost refers to unavoidable cost that cannot be recovered?
a) Sunk
b) Explicit
c) Variable
d) Fixed
30. An example of variable cost:
a) wage bill
b) rent
c) machinery cost
d) Building
31. An example of fixed cost.
a) Rent
b) utilities cost
c) raw material cost
d) daily labour charges
32. A cost or benefit which arises from production or consumption and falls on somebody else
other than producer or consumer is term as a / an:
a) Externality
b) public provision
c) property right
d) Taxes
33. From the following which function shows the overall output generated at a given level of
input.
a) Production
b) Consumption
c) Cost
d) Revenue
34. If LAC curve is falling as output expands, it mainly due to
a) economies of scale
b) law of variable proportion
c) law of diminishing returns
d) law of demand
35. Isoquants are equal to
a) product line
b) cost line
c) revenue line
d) supply line
36. An isoquant is tangent to which line at equilibrium point?
a) Iso-cost
b) Supply
c) Demand
d) Revenue
37. Which market firm has no control over the price of its product?
a) perfect competition
b) monopoly
c) oligopoly
d) Duopoly
38. MR of nth unit is given by:
a) TRn- TRn-1
b) TRn+ TRn-1
c) TRn* TRn-1
d) All options are correct
39. As output increases, total fixed cost:
a) start falling
b) start rising
c) remains constant
d) becomes uncertain
40. Which principle is integral to short-run decisions about profit maximisation?
a) Equi- marginal
b) Marginal
c) Efficiency
d) Transitivity

41. An accountant’s concept of profit is the what kind of profit?

a) Business
b) Economic
c) Maximum
d) Minimum
42. Market failure takes place due to:
a) Perfect information
b) Merit goods
c) Private goods
d) Externalities
43. Market economy suffers from which aspect given below which are responsible for problems
like inflation, unemployment, etc.
a) Imperfections
b) Lack of resources
c) Inefficiency
d) Perfection
44. During short run which of the following statement describes the diminishing returns?
a) The Marginal Product of a factor is positive and rising
b) The Marginal Product of a factor is positive and falling
c) The Marginal Product of a factor is negative and falling
d) The Marginal Product of a factor is constant
45. Isoquant shows
a) All the combinations of two inputs yield the same total product
b) All the combinations of two inputs yield the different total product
c) All the combinations of two products yield the same total profit
d) All the combinations of two inputs yield the same total cost
46. An iso-cost line implies:
a) The relative income from the output sold
b) The relative level of the profit
c) The relative prices of the inputs
d) All options are correct
47. If the factor prices changes, given the sources of money:
a) The slope of the iso cost line will not change
b) The slope of the iso cost line will change
c) No impact on iso cost line
d) All options are incorrect
48. In case of decreasing returns to scale, the distance between subsequent isoquants:
a) Remain constant
b) Increases
c) Decreases
d) All options are incorrect

49. An important cause of internal diseconomies of scale is

a) Rising factor costs
b) Diminishing returns to management
c) Transport congestions
d) Pollution and health hazards

50. Which of the following is not due to external economies of scale?

a) Growth of technical know-how
b) Growth of subsidiary industries
c) Managerial division of functions
d) Development of information services

51. Which of the following is not an example of internal economies of scale?

a) Cheaper materials and equipment
b) Division of labour and specialisation
c) Smaller percentage of inventories to total output held
d) Use of specialised capital equipment

52. Accounting cost does not include

a) Payment made to the accountants
b) Rent paid to the landlord
c) Interest of own money invested by the entrepreneur
d) Taxes paid

53. Excess profit is earned when

a) AR > AC
b) AR = AC
c) AR < AC
d) AR and AC has no role to play

54. Demand for a monopoly firm’s product

a) Perfectly elastic
b) Less elastic
c) Perfectly inelastic
d) Unit elastic
55. A fundamental source of monopoly market power arises from
a) Perfectly elastic demand
b) Perfectly inelastic demand
c) Barriers to entry of new firms
d) All options are correct

56. Price discrimination is possible when

a) A commodity is non-transferable
b) When customers do not meet each other
c) When customers are ignorant about price differentials
d) All options are correct

57. Under dumping a monopolist’s demand curve in the world market is

a) Downward sloping and less elastic
b) Perfectly elastic
c) A kinky demand curve
d) All options are correct

58. Monopoly power depends on the difference between

a) Price and AC
b) Price and MC
c) Price and variable cost
d) Price and sunk cost

59. The negative slope of the isoquant shows:

a) When the amount of the one factor is increased the quantity of another factor must
reduce.
b) Declining MRTS
c) Factors of productions are perfect substitutes
d) Declining cost of production

60. What does expansion path reflect?

a) Least cost combination of inputs required to produce various levels of output
b) Demand curve of a firm for inputs
c) Least cost combination of output sold
d) All options are correct

61. Which of the following would be an implicit cost for a firm?

a) Payment of wages and salaries of workers
b) Payment to the supplier of raw materials
c) Salary that the business owner would have earned by working elsewhere
d) Interest to the bank for borrowed funds
62. Price discrimination is possible when
a) A commodity is non-transferable
b) When customers do not meet each other
c) When customers are ignorant about price differentials
d) All options are correct
63. To be a successful manager the knowledge of which economics is very essential along with
macroeconomics?
a) Political Economics
b) Microeconomics
c) International trade
d) Monetary economics
64. In order to maximise profits a firm endeavour to
a) Increase its revenue
b) Lower its cost
c) Both a) and b)
d) Neither a) nor b)
65. Which are defined as the change in overall costs that result from particular decisions being
made?
a) Incremental costs
b) Accounting costs
c) Sunk cost
d) All options are incorrect

66. Cost advantages may follow from variety of output–product diversification within the given
scale of plant, is the concept of
a) Economies of Scale
b) Economies of Scope
c) both a) and b)
d) All options are incorrect
67. A larger plant will lead to lower per unit cost in the long run, is the concept of
a) Economies of Scale
b) Economies of Scope
c) both a) and b)
d) Neither a) nor b)
68.
69. Long run average cost (LAC) is the least when(where LMC = Long run marginal cost)
a) LMC ˃ LAC
b) LMC ˂ LAC
c) LMC = LAC
d) LMC plays no role in lowering LAC
70. The laws governing costs are the same as the laws governing
a) Consumption
b) Productivity
c) Quality
d) Profitability
71. Following is (are) advantage(s) of Marginal Cost:
a) break-even analysis profit of firm
b) calculating per unit profit of a firm
c) to decide whether a firm needs to expand or not
d) All options are correct
72. The average total cost (ATC) =
a) Total Fixed Cost (TFC) / Number of outputs produced (Q)
b) Total Variable Cost (TVC) / Number of outputs produced (Q)
c) Total Cost (TC) / Number of outputs produced (Q)
d) Total Cost (TC) X Number of outputs produced (Q)
73. Average Variable Cost (AVC) =
a) Total Fixed Cost (TFC) / Number of outputs produced (Q)
b) Total Variable Cost (TVC) / Number of outputs produced (Q)
c) Total Fixed Cost (TFC) X Number of outputs produced (Q)
d) Total Variable Cost (TVC) X Number of outputs produced (Q)
74. Average Fixed Cost (AFC) =
a) Total Fixed Cost (TFC) / Number of outputs produced (Q)
b) Total Variable Cost (TVC) / Number of outputs produced (Q)
c) Total Fixed Cost (TFC) X Number of outputs produced (Q)
d) Total Variable Cost (TVC) X Number of outputs produced (Q)
75. The output can be increased in short run by increasing
a) fixed cost
b) variable cost
c) sunk cost
d) taxes
76. Which of the following is (are) variable cost(s)?
a) wages of labour
b) price of raw material
c) cost on fuel and power used
d) All options are correct
77. Which of the following is (are) fixed cost(s)?
a) Contractual rent
b) Insurance fee
c) Interest on capital investment
d) All options are correct
78. The following costs relate to functioning of a firm as a production unit
a) micro-level economic cost
b) macro-level economic cost
c) both a) and b)
d) neither a) nor b)
79. The cost of plant, equipment and materials at the price paid originally for them
a) Replacement Cost
b) Historical cost
c) Sunk cost
d) Total cost
80. The following cost will remain same whatever the level of activity
a) Incremental cost
b) Sunk cost
c) Marginal cost
d) Avoidable cost

81. Incremental costs are also known as

a) Avoidable cost
b) Escapable cost
c) Differential cost
d) All options are correct
82. Economic cost includes explicit cost and
a) implicit cost
b) social cost
c) fixed cost
d) money cost
83. When firms have an incentive to exit a competitive market, their exit will
a) Drive down market prices
b) Drive down profits of existing firms in the market
c) Decrease the quantity of goods supplied in the market
d) All options are correct
84. When a perfectly competitive firm makes a decision to shut down, it is mostlikely that
a) Price is below the minimum of average variable cost
b) Fixed costs exceed variable costs
c) Average fixed costs are rising
d) Marginal cost is above average variable cost
85. In the long run, a profit-maximizing firm will choose to exit a market when
a) Fixed costs exceed sunk costs
b) Average fixed cost is rising
c) Revenue from production is less than total costs
d) marginal cost exceeds marginal revenue at the current level of production
86. In a perfectly competitive market, the process of entry or exit ends when
a) Firms are operating with excess capacity
b) Firms are making zero economic profit
c) Firms experience decreasing marginal revenue. d. Price is equal to marginal cost
d) All options are incorrect
87. Equilibrium quantities in markets characterized by oligopoly is
a) Lower than in monopoly markets and higher than in perfectly competitive markets
b) Lower than in monopoly markets and lower than in perfectly competitive markets
c) Higher than in monopoly markets and higher than in perfectly competitive markets
d) Higher than in monopoly markets and lower than in perfectly competitive markets
88. Select from following options which is/ are factor of production/s
a) Land
b) Labour
c) Capital
d) All options are correct
89. Which of the following function is not a core function of an organization?
a) The product/service development function
b) The operations function
c) The accounting and finance function
d) The marketing (including sales) function
90. The production function incorporates the technically efficient method of
a) Production
b) Selection
c) Market
d) All options are correct
91. Name the Law which states that as the quantity of one factor is increased,keeping the other
factors fixed, the marginal product of that factor will eventuallydecline.
a) The law of variable proportions
b) Utility theory
c) Law of Demand
d) Law of Supply
92. A cost that does not affect a decision is called an
a) opportunity cost
b) incremental cost
c) avoidable cost
d) irrelevant cost
93. Costs that change between alternatives are called
a) fixed costs
b) opportunity costs
c) relevant costs
d) sunk costs
94. Economists typically assume that the owners of firms wish to
a) produce efficiently
b) maximize sales revenues
c) maximize profits
d) All options are correct
95. Efficient productions occur if a firm
a) cannot produce its current level of output with fewer inputs
b) given the quantity of inputs, cannot produce more output
c) maximizes profit
d) All options are correct
96. Which of the following statements best describes a production function?
a) the maximum profit generated from given levels of inputs
b) the maximum level of output generated from given levels of inputs
c) all levels of output that can be generated from given levels of inputs
d) all levels of inputs that could produce a given level of output
97. With respect to production, the short run is best defined as a time period
a) lasting about six months
b) lasting about two years
c) in which all inputs are fixed
d) in which at least one input is fixed
98. In the long run, all factors of production are
a) Variable
b) Fixed
c) Uncertain
d) Rented
99. If the average productivity of labour equals the marginal productivity of labour, then
a) the average productivity of labour is at a maximum
b) the marginal productivity of labour is at a maximum
c) Both a) and b)
d) Total productivity of labour is lowest
100.
101. If Marginal productivity of a factor of production, Say Labour,is greater thanits
Average Productivityit implies Average Productivity is rising and Total Productivity of the
factor of production is:
a) Increasing
b) Decreasing
c) Constant
d) Fluctuating very rapidly
102. When does total product curve start falling during short run?
a) Average Product curve is rising
b) Average product curve is constant
c) Marginal Product curve is negative
d) Marginal product curve is still in the positive zone
103. What is the initial supply price of land?
a) 0
b) > 1
c) < 1
d) = 1
104. From Labourer what cannot be separated?
a) Land
b) Capital
c) Labour
d) Entrepreneur
105. What reward is paid to capital?
a) Rent
b) Interest
c) Wages
d) Profit
106. A successful entrepreneur is ready to accept:
a) Risk
b) Government Policies
c) Innovations introduced by rivals
d) All options are incorrect
107. MRTS stands for
a) Marginal Rate of Technical Standard
b) Market Rate of Technical Software
c) Marginal Rate of Technical Substitution
d) Market Rate of Telephone Suppliers
108. An implicit cost is:
a) The cost of the selected alternative
b) The cost of the foregone opportunity
c) The calculated cost
d) The accounting cost
109. During the short run, cost is classified as variable and:
a) Sunk cost
b) Fixed Cost
c) Historical cost
d) Monetary cost
110. Marginal cost is the change in the total cost due to unit change in the:
a) Input
b) Instructions
c) Output
d) Policy Measures
111. In a perfectly competitive industry:
a) There are many buyers and sellers
b) There are many buyers but sellers are only two
c) There are many buyers but sellers are ten in number
d) There are many sellers but buyers are few
112. In perfect competition, the product of a single firm:
a) Is sold to different buyers are different rates
b) Has many complementary products produced by rival firms
c) Has many substitute products produced by rival firms
d) Is sold with differential quality
113. Under monopolistic competition price of a product sold is equal to
a) Equal to MR
b) Greater than MR
c) Less than MR
d) Less than TC
114. In the long run, monopolistically competitive firms tend to experience
a) high economic profits
b) zero economic profits
c) negative economic profits
d) substantial economic losses
115. supply price of entrepreneur:
a) rent of ability
b) normal profit
c) Salaries of managers
d) Dividends
116. Who said that “Profit is result of dynamic changes in the economy”?
a) Prof. J. B. Clark
b) Alfred Marshall
c) J.M. Keynes
d) Samuelson
117. Select the correct option/s given below leading to profit due to dynamic changes
a) Change in the population
b) Multiplication of wants
c) Capital Formation and Technical advancement
d) All options are correct
118. Profit is the return on risk, according to:
a) Alfred Marshall
b) F. B. Hawley
c) J. B. Clark
d) Prof. Knight
119. Quasi rent is:
a) Temporary phenomenon
b) Permanent feature of returns earned by suppliers
c) Long Term Phenomenon
d) All options are incorrect
120. who gave the time preference theory of interest?
a) Pareto
b) J. M. Keynes
c) Irvin Fischer
d) Marshall
121. According to classical theory interest is reward for
a) Saving
b) Parting with liquidity
c) Inconvenience
d) Opportunity lost
122. Loanable funds theory of interest is also known as:
a) Classical theory of interest
b) Classical theory of rent
c) Neo- classical theory of interest
d) Modern theory of rent
123. According to Ricardian theory of rent, rent:
a) Is equal to the opportunity cost of the different factors of production
b) arise from the operation of the Law of Diminishing Returns
c) rent is a temporary aspect
d) all options are correct
124. in the production process, production is the function of:
a) factors of production
b) price of the product
c) total cost
d) government policies
125. What is/are the basic reason of operating the Law of Diminishing Returns?
a) Supply of factors of production is scarce
b) There is imperfect substitution between factors
c) Neither a) nor b)
d) Both a) and b)
126. Short run production function is explained by:
a) Law of variable proportion
b) Law of supply and demand
c) Law of Economies of scale
d) Law of Returns to scale
127. Long run production function is related with:
a) Law of supply and demand
b) Law of Returns to scale
c) Law of Economies of scale
d) All options are correct
128. A rational producer likes to operate in which stage of production during shot-
run?
a) I stage
b) II stage
c) III stage
d) IV stage
129. The first stage of Law of variable proportion states that:
a) AP is increasing
b) MP is increasing
c) AP and MP are increasing
d) AP and MP are decreasing
130. Select from the below, Not a fixed cost of production:
a) Insurance Premium
b) Interest
c) Cost of raw material
d) Rent of the business office
131. As the production increases the difference between total cost and total fixed
cost:
a) Decreases
b) Increases
c) Remains same
d) Anything can happen
132. When the company closes down its operation:
a) Fixed cost increases dramatically
b) Variable cost reduces but always remain in positive zone
c) Variable cost becomes zero
d) Fixed cost of production decreases
133. What does economies and diseconomies of scale explain?
a) As output increases short run AFC curve declines
b) Long run ATC curve has U shape
c) Short run AVC curve is upward slopping
d) All options are correct
134. If all the inputs used in the production increases by 30 per cent and output
increases by 30 per cent then:
a) Economies of scale is operating
b) Constant return to scale is operating
c) ATC is increasing
d) MC is falling
135. When the AVC of a firm is rising it indicates:
a) ATC is maximum
b) AFC is constant
c) MC is above the AVC
d) MC is below the AVC
136. Why does MC increase sooner or later when output is expanded? Answer is
with:
a) Diseconomies of scale
b) Economies of scale
c) Law of diminishing return
d) Accounting profit exceeds economic profit
137. Find out the total output of a firm if this firm has following cost structure:
TFC = Rs. 400, ATC = Rs. 3, AVC= Rs. 2.50
a) 100 Units
b) 800 Units
c) 1200 Units
d) 2000 Units
138. Variable costs are:
a) Historical cost
b) That costs which change with the level of production
c) Additional cost born by the firm while producing additional level of the output
d) No such cost is defined by the economics
139. When total product is maximum the marginal product of labour is:
a) Zero
b) One
c) Negative
d) Greater than zero but less than one
140. Law of diminishing returns to factors of production during short run operates
in:
a) The condition of increasing scarcity of the factor of production
b) The condition where there is at least one fixed factor of production
c) The condition of increase in the price of one of the factors
d) All options are correct
141. Schumpeter assigned the role of innovator to
a) Capitalist
b) Entrepreneur
c) Land lords
d) Workers
142. The innovation theory of profit implies that entrepreneur gain the profit
when:
a) His innovation is successful in reducing the cost of production
b) He succussed in increasing demand for his products
c) He is not capable enough to cover his Variable cost of production
d) Option a) and b) are correct
143. Normal profit is called normal mainly because:
a) It is maximum level of profit which is allowed by the government
b) It is that minimum level of profit which is acceptable to the producer
c) It is that maximum level of profit which is expected by the producer
d) It is that level of loss which producers can bear
144. Wage-Fund Doctrine is given by:
a) John Stuart Mill
b) Joan Robinson
c) J. M. Keynes
d) Walras
145. If company is shutting down its activities temporarily, its loss equals to
a) ATC
b) TFC
c) TVA
d) MC
146. Which factor of production is gift of nature?
a) Labour
b) Capital
c) Innovator
d) Land
147. What means transforming physical input into output?
a) Capital
b) Finance
c) Money
d) Production
148. Backward bending range of labour supply curve indicates:
a) The substitution effect is dominated by income effect
b) The income effect is dominated by the substitution effect
c) Substitution effect is not operating at all
d) Income effect is not operational
149. When MR is zero:
a) TR is maximum
b) TR is Minimum
c) TR is falling
d) TR is rising
150. If TR s increasing by constant rate then MR should be:
a) Zero
b) Increasing
c) Decreasing
d) Constant
151. Under imperfect market competition AR can be
a) Negative
b) Cannot be negative
c) Zero when TR is zero
d) Both b) and c)
152. How to calculate TR?
a) Price × Output
b) Price ÷ Output
c) Price + Output
d) Price – Output
153. TFC= TC – ?
a) MC
b) TVC
c) AVC
d) AFC