Test: Introduction to Business Economics- 3 - CA Foundation MCQ

In the given conversation:

• Ram mentions the difficulty caused by rising prices.
• Shyam agrees and points out that the cost of cultivation has also increased significantly.
• Raghu suggests that the government should take steps to curb price rise.
• Bhola adds that the government should act strictly against hoarders and black marketers.

Shyam's statement is providing information about the current situation — that the cost of cultivation has increased. This describes "what is" currently happening.

Therefore, the correct answer is: What is

As compared to other economic systems, inequalities of incomes is relatively less in the socialist economic system. 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. This system also ensures that the disparities in income distribution become lesser.

Price-mechanism is an important feature of the capitalist economy, also called the market economy. In this, 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. 

Consumers and producers make their choices based on the market forces of demand and supply in Capitalist economy. Capitalist economy is also called the market economy in which 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. 

Business economic seeks to establish rules which help business firms attain their goals, which indeed is also the essence of the word normative. However, if the firms are to establish valid decision rules, they must thoroughly understand their environment.

A capital-intensive technique, which relies more on machinery and equipment than on human labor, is typically chosen under specific economic conditions. Let's analyze the options:

1. Labour surplus economy where the relative price of capital is lower: In a labor surplus economy, there's an abundance of labor, which usually means labor is cheaper. While lower capital costs might make capital-intensive techniques more appealing, the abundance and low cost of labor could make labor-intensive techniques more economically viable instead.

2. Capital surplus economy where the relative price of capital is lower: In this scenario, there's an abundance of capital, and its relative price is lower, making capital-intensive techniques more attractive. Businesses can afford to invest in machinery and equipment, which can be more efficient and productive in the long run.

3. Developed economy where technology is better: Developed economies often have access to advanced technology, making capital-intensive techniques more feasible and attractive. These economies can afford and are inclined to invest in technology that increases productivity, even if the initial investment is high.

4. Developing economy where technology is poor: Developing economies, characterized by poorer technology, might not have the infrastructure or capital to support capital-intensive techniques. In such economies, labor-intensive techniques are often more prevalent due to lower technology levels and the need to employ a large labor force.

Given these considerations, a capital-intensive technique would most likely be chosen in a scenario where the economy can support and benefit from such an investment, which is typically:

2. Capital surplus economy where the relative price of capital is lower.

The incorrect statement is: Business economics only considers micro variables

Business economics, also known as managerial economics, incorporates both microeconomic and macroeconomic variables. It uses concepts from both branches to help managers make decisions and solve problems in business. While it does focus heavily on microeconomic factors such as individual markets, firms, and consumer behavior, it also considers macroeconomic factors like inflation, interest rates, and economic growth that can impact business environments.