Test: Introduction to Business Economics- 1 - CA Foundation MCQ

The correct answer is option B 'Incorrect'

• In socialist economy, the basic force of economic activity is profit. This statement is incorrect.
• The motive is the welfare of the people.
• In this system, the means of production and distribution is controlled by the government.
• The economy is centrally planned by the government so that the useful goods are produced with the objective to look after the needs of the poor section of the society as well.

The correct answer is option C 'Oikonomia'

• The term Economics is derived from the Greek word Oikonomia, which means household management or management of the household.
• It combines oikos (house) and nomos (law or management).

The correct answer is option B ' Capitalist economy'

• The interference of the government is very limited in capitalist economy. There is no central planning authority. In fact, there is little or no government or central authority that takes market decisions.
• The prices are determined by the free interaction of the forces of demand and supply. It is an automatic self-regulating mechanism which runs with the motive of profit.

The correct answer is option d 'what ought to be'

• Normative economics deals with what ought to be or how the economic problems should be solved.
• It discusses what the desirable things are and how they should be realized.
• Thus it is suggestive in nature.

The correct answer is option C 'Micro-economic behaviour can be added-up to derive macro-economic behaviour.'

• Microeconomic behaviour cannot be added-up to drive macroeconomic behaviour.
• The phenomenon in Microeconomics cannot be generalized for all the units in the economy on an aggregate level.
• For example, the theory of an individual firm cannot be universally applied to the whole industrial sector in an economy.
• The theory of individual consumer behaviour is different from the behaviour of the whole economy’s behaviour at the aggregate level.
• The demand of a single person may not always match with the economy’s aggregate demand.

The correct answer is option A ' What is'

• Positive economics is a stream of economics that focuses on the description, quantification, and explanation of economic developments, expectations, and associated phenomena.
• It relies on objective data analysis, relevant facts, and associated figures.

The correct answer is Option d 'None of the above'

• Scarcity exists because resources are limited while human desires are unlimited.
• In the pre-independent Indian economy, though many were farmers, resources like land and tools were still limited.
• In a mythical economy where everyone is a billionaire, scarcity persists as not all goods and services can be endlessly produced.
• Even with equal income distribution, the demand for goods may exceed supply, causing scarcity.
• Thus, none of these economies are without scarcity.

The correct answer is option d 'All of the Above'

• Economics as a science: Like science, economics is also based on the systematic knowledge which is based on facts and data.
• Like any other science, it has its own scientific laws and theories which can be measured and verified and proved. Also, it has its own methodology. 

The correct answer is option B 'The economic behaviour of an individual unit'

• Microeconomics deals with prices and production in single markets.
• The economic behaviour of an individual unit and the interaction between different markets, but leaves the study of economy-wide aggregates to macroeconomics.

The correct answer is option C ' General price level'

• Micro economics deals with the study of economics from an individual point of view.
• General price level is a subject matter of macro economics.

The correct answer is option d ' All of the above.'

The problem of choice or the problem relating to allocation of resources deals with 3 aspects:
1) What to produce -  Resources are to be used for producing what goods and services.
2) How to produce - What methods are to be used for the production.
3) For whom to produce - Who will utilize the goods and services.

The correct answer is option d 'Economic laws are hypothetical.'

• Economic laws are not hypothetical in nature, while many microeconomic models may involve many assumptions and tend to over simplify situations, the broad theories are still valid in the real world, it has been proven time and again with empirical data.
• Normative economics deals with subjective economics, and are grounded in personal opinions rather than empirical facts. They tend to be prescriptive and regulatory in nature (ie, they contain advice on what should be done to solve a particular problem).

The correct answer is option A 'An unorganized collection of facts about the real world.'

When a written piece is termed as a theory it should have many specifications like:

• facts
• assumptions
• definitions

But the foremost important as well as necessary input is of fact based on the real world because theories cannot be developed on fantasies but it should be backed by some legitimate facts.

The correct answer is option A 'The production of goods'

• The problem of what to produce deals with the production of necessary goods that have demand in the economy.
• These goods need to be evenly distributed so that social as well as economic stability is maintained in the economy.

The correct answer is option C ' Consumer'

In a competitive economy, the most influential player is the consumer. Here's why:

• Consumers drive demand and influence the types of goods and services produced.
• Producers and sellers must adapt to consumer preferences to stay relevant.
• Ultimately, consumer choices determine the success or failure of businesses.

The correct answer is option D 'Both a and c'

• Macro economics is a field of economics which deals with the economy as a whole.
• The objective of the macro economics is to maximize the welfare of an economy.
• It includes principles and policies relating to full employment of available resources as well as the growth of resources.

The correct answer is option d 'Both (a) and (b)'

• The central problems like what to produce, how to produce etc. rises due to the relationship between wants and resources.
• As it is very well known that human wants are unlimited and if scarce resources have alternative uses, then many questions related to production can be put forward which will act as a problems in the economy.

The correct answer is option C 'India'

• India is a mixed economy.
• Means of production are owned by both private and public sector.
• Thus, both private and public sectors exist side by side.

The correct answer is option d 'Both ‘a’ and ‘b’'

• In a mixed type economy (like India), in order to determine the equilibrium price and quantity in the market, free play of demand and supply forces takes place.
• Together with this, the government also intervenes in order to keep a check on inflationary and deflationary gaps in an economy through certain fiscal and monetary policies.

The correct answer is option B ' Do not exist in adequate quantity to satisfy the requirements of the society.'

• Economic goods are considered scarce because their availability is limited compared to the unlimited wants of society.
• This scarcity is the fundamental reason why choices and trade-offs are necessary in economics.