CA Foundation Business Economics Study Material Chapter 1 Nature and Scope of Business Economics – MCQs

MULTIPLE CHOICE QUESTIONS

1. Economics is a science because
(a) Systematised study
(b) Scientific laws
(c) Has its own methodology
(d) All the above

2. Positive statements concern what is; normative statements concern—
(a) What was
(b) What is the normal situation
(c) What will be
(d) What ought to be

3. Which of the following statements are positive statements?
(i) India is overpopulated.
(ii) Agricultural income should be taxed.
(iii) Service-class people should be exempted from income tax
(vi) There is tremendous tax evasion in India.
(a) i and ii
(b) i and iii
(c) i and iv
(d) iii and iv

4. The central problems of an economy arises because of—
(a) Unlimited wants
(b) Scarce resources having alternative uses
(c) Limited wants and unlimited resources
(d) Both (a) and (b)

5. The central problems relating to allocation of resources are—
(a) What to produce?
(b) How to produce?
(c) For whom to produce?
(d) All the above.

6. The problem of ‘What to produce’ relates to—
(a) The distribution of produced goods and services
(b) The technique of production to produce good
(c) The distribution of income among factor owners
(d) None of these

7. Micro economics deals with—
(a) Inflation in the country
(b) The economic behaviour of an individual unit
(c) The per capita income
(d) The problems of poverty and unemployment in the country

8. The objective of macro-economics is to study about—
(a) Problems, principles and policies relating to full employment of available resources
(b) Problems, Principles and policies relating to optimum allocation of resources
(c) Growth of resources
(d) Both a and c

9. Micro economics covers the study of—
(i) Consumer’s behaviour
(ii) Producer’s equilibrium
(iii) Fiscal system of an economy
(iv) Factor pricing
(a) i and iii (b) ii and iv
(c) i, ii and iii (d) i, ii and iv

10. Macro-economics is also known as—
(i) Method of Lumping
(ii) Price Theory
(iii) General equilibrium analysis
(iv) Aggregative Economics
(a) i and ii only
(b) iii and iv only
(c) i, iii and iv only
(d) ii, iii and iv only

11. Which of the following is not correct?
(a) Micro and Macro economics are complementary to each other
(b) Every macro-economic problem requires micro-economic analysis for its proper understanding
(c) Micro-economic behaviour can be added-up to derive macro-economic behaviour.
(d) What is macro from the national angle is micro from world angle

12. A theory may contain all but one of the following—
(a) An unorganised collection of facts about the real world!
(b) A set of definitions of the terms used.
(c) A set of assumptions
(d) One or more hypotheses

13. Positive economics deals with—
(a) What is
(b) What ought to be
(c) Both ‘a’ ‘b’
(d) None of these

14. Micro economics does not cover—
(a) Consumer behaviour
(b) Factor Pricing
(c) General price level
(d) Product Pricing

15. Find the odd—
(a) Normative economics is concerned with welfare propositions.
(b) Normative economics is prescriptive in nature.
(c) Normative economics is regulatory in nature.
(d) Economic laws are hypothetical.

16. A mixed economy to solve its central problems relies on—
(a) Economic planning
(b) Price mechanism
(c) Price fixing
(d) Both ‘a’ and ‘b’

17. In a socialist economy, the basic force of economic activity is profit. This statement is—
(a) Correct
(b) Incorrect
(c) Partially correct
(d) None of these

18. The interference of the government is very limited in—
(a) Socialist economy
(b) Capitalist economy
(c) Mixed economy
(d) All the above.

19. Both private and public sectors exist side by side in—
(a) China
(b) U.S.A.
(c) India
(d) Russia

20. In a competitive economy, the uncrowned king is—
(a) Government
(b) Producer
(c) Consumer
(d) Seller

21. Wastes of competition are found in—
(a) Capitalist economy
(b) Socialist economy
(c) Mixed economy
(d) None of these

22. A dual system of pricing exists in—
(a) Capitalist economy
(b) Socialist economy
(c) Mixed economy
(d) None of these

23. One of the important features of capitalist economy is—
(a) Economic planning
(b) Price mechanism
(c) Economic equalities
(d) Social welfare

24. ‘A government deficit will reduce unemployment and cause an increase in prices.’ This statement is—
(a) Positive
(b) Normative
(c) Incomplete
(d) None of these

25. Positive economics remains strictly neutral towards ends. This means that—
(a) Positive economics study the facts as they are
(b) Positive economics is prescriptive in nature
(c) Positive economics is based on ethical, philosophical and religious beliefs
(d) Only (a) and (b)

26. “During the boom periods when aggregate demand, national income and prices are high, entrepreneurs tend to make high profits”. This statement shows—
(a) Effect of micro-economic variables on macro variables
(b) Effect of macro-economic variables on micro variables
(c) Inter-dependence of micro and macro-economics
(d) Both (b) and (c)

27. Social insurance, sickness benefits, old age pension, etc are some social benefits provided by—
(a) State in capitalist economy
(b) State in socialist economy
(c) State in mixed economy
(d) Both (b) and (c)

28. In a capitalistic economy what to produce depends on—
(a) governments is policy
(b) consumer’s preference
(c) profits of firm
(d) none of these

29. The economy in which the government allows freedom of action of all economic units is essentially—
(a) a socialist economy
(b) a mixed economy
(c) a capitalistic
(d) none of the these

30. Which of the following is not correct about capitalistic system—
(a) Too much of waste due to cut throat competition
(b) There is right of private property.
(c) Conditions are not favourable for equitable distribution of wealth.
(d) There is central planning authority.

31. Which of the following is not the feature of socialist economy ?
(a) Economic planning
(b) Social welfare
(c) Private ownership of productive resources
(d) Economic equalities

32. Micro economics is also known as—
(a) Price theory
(b) Slicing method
(c) Product theory
(d) Both (a) and (b)

33. Economics is an art as—
(a) it teaches us to do
(b) it provides practical solutions to various economic problems.
(c) it is practice of knowledge
(d) all the above

34. Study of the problem of poverty denotes that economics is—
(a) a science
(b) an art
(c) both a science and an art
(d) neither a science nor an art

35. Framing suitable policies to solve inequalities of income denotes that economics is—
(a) a science
(b) an art
(c) both a science and an art
(d) neither science nor an art

36. Study of unemployment problem and then framing suitable policies to reduce the extent of unemployment shows that economics is—
(i) Both a science and an art
(ii) Neither a science nor an art
(iii) Positive science
(iv) Normative science
(a) i and iii only
(b) ii and iv only
(c) i, iii and iv
(d) ii, iii and iv

37. _____ economics explains cause and effect relationship between economic phenomena
(a) Positive
(b) Normative
(c) Empirical
(d) Applied

38. Positive economics concerns .
(a) what should be
(b) what is
(c) both (a) and (b)
(d) what ought to be

39. Normative economics is in nature
(a) modern
(b) descriptive
(c) prescriptive
(d) none of the above

Q. 40 to Q. 43 are based on the following conversation
Ram : “Rise in prices of goods have made it difficult to make two ends meet”
Shy am : “Yes, the cost of cultivation too has increased very much”.
Raghu : “Government should take steps to curb the price rise and provide relief to common man”.
Bhola : “Yes, he government should deal strictly on hoarders and black marketers”.

40. In the above conversation whose statements shows positive aspect of Economics?
(a) Ram
(b) Shyam
(c) Both (a) and (b)
(d) Bhola

41. In the above conversation whose statements shows normative side of economics
(a) Shyam
(b) Raghu
(c) Bhola
(d) Both (b) and (c)

42. Shyam’s statement in the above conversation shows—
(a) What is
(b) What can be
(c) What ought to be
(d) What will be

43. Bhola’s statement in the above conversation shows—
(a) What is
(b) What should be the things
(c) What was
(d) None of the above

44. As compared to other economic systems, inequalities of incomes is relatively less in economic system
(a) Capitalist
(b) Socialist
(c) Mixed
(d) None of the above

45. Price-mechanism is an important feature of –
(i) Market economy
(ii) Regulated economy
(iii) Mixed economy
(iv) Capitalist economy
(a) i and ii only
(b) iii and iv only
(c) i and iii only
(d) i and iv only

46. Consumers and produces make their choices based on the market forces of demand and supply in—
(a) Socialist (Command) Economy
(b) Mixed Economy
(c) Capitalist Economy
(d) Closed Economy

47. The problem of what goods and services are produced and how much, is covered by the general term—
(a) resource allocation
(b) choice of technique of production
(c) distribution
(d) macro-economics

48. Business Economics is generally in nature.
(a) normative
(b) positive
(c) neutral
(d) descriptive

49. Capital intensive technique would be chosen in a
(a) labour surplus economy where the relative price of capital is lower
(b) capital surplus economy where the relative price of capital is lower
(c) developed economy where technology is better
(d) developing economy where technology is poor

50. Which of the following statement is incorrect?
(a) Business economics is a normative in nature
(b) Business economics is closely related with statistics
(c) Business economics only considers micro variables
(d) Business economics is also called Managerial economics

51. All of the following are within the scope of Business Economics except
(a) Capital Budgeting
(b) Risk Analysis
(c) Business Cycles
(d) Accounting Standards

52. Which of the following is considered as a disadvantage of allocating resources in a capitalist economy?
(a) Income will tend to be unevenly distributed
(b) People do not get goods of their choice
(c) Men of initiative and enterprise are not rewarded
(d) Profits will tend to be low

ANSWERS

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