CA Foundation · Paper 4 · Business Economics

Chapter 1 · Unit 1 · Introduction

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Question 01

The term Economics mainly deals with the use of scarce resources to satisfy ________.

limited wants unlimited wants only business wants government wants only

Economics studies how relatively scarce resources are allocated to satisfy competing unlimited wants.

Question 02

The Greek word from which Economics is derived is:

Polis Nomos Oikonomia Agora

Economics comes from the Greek word Oikonomia, meaning household.

Question 03

Before the nineteenth century, Economics was generally known as:

Political Economy Social Science Business Science Commerce Theory

Till the 19th century, Economics was commonly known as Political Economy.

Question 04

Which of the following best describes Business Economics?

Study of taxation only Study of international trade only Study of national income only Use of economic analysis in business decision-making

Business Economics means applying economic logic and analysis to business decisions involving scarce resources.

Question 05

Another name for Business Economics is:

Welfare Economics Managerial Economics Political Economy Public Economics

Business Economics is also known as Managerial Economics.

Question 06

Which branch of economics studies individual units such as consumers and firms?

Micro Economics Macro Economics Public Finance Economic History

Micro Economics studies behaviour of individual consumers, firms and specific markets.

Question 07

Macro Economics studies:

pricing of a single product behaviour of one consumer overall economic aggregates such as output and employment only profits of firms

Macro Economics studies the economy as a whole: output, employment, saving, investment, trade and growth.

Question 08

Which of the following is a subject matter of Micro Economics?

National income Balance of payments General price level Consumer behaviour

Micro Economics covers product pricing, consumer behaviour, factor pricing, firm behaviour and location of industry.

Question 09

Which of the following is an area of Macro Economics?

Factor pricing National income and national output Behaviour of firms Location of industry

National income, general price level, trade balance, employment and economic growth are macro areas.

Question 10

Business Economics is based largely on:

Micro Economics Macro Economics only Economic history Mathematical statistics only

Business Economics mainly relies on Micro Economics, though macro factors also matter in business environment.

Question 11

Which statement about the nature of Business Economics is correct?

It is purely theoretical and never practical It ignores real world business problems It is only descriptive and never prescriptive It bridges the gap between theory and practice

Business Economics applies economic logic to real business decisions and bridges theory with practice.

Question 12

Business Economics is generally regarded as:

only positive science purely abstract science normative or prescriptive in nature unrelated to policy formulation

Business Economics is mostly normative or prescriptive because it helps in policy formulation, decision-making and planning.

Question 13

Which one is a practical decision problem in Business Economics?

How much should be the optimum output and at what price should the firm sell? How many continents are there in the world? What is the national anthem? How to classify stars in astronomy?

Business Economics addresses business choices such as output, pricing, input procurement, production method and market strategy.

Question 14

The interdisciplinary nature of Business Economics means it draws from:

Economics alone Economics along with other disciplines like mathematics, statistics, accounting and finance Literature and poetry only Biology alone

Business Economics is interdisciplinary because it uses ideas and tools from economics and other related disciplines.

Question 15

The scope of Business Economics includes two broad categories of issues:

short-run and long-run issues domestic and foreign issues private and public issues internal operational issues and external environmental issues

The scope of Business Economics covers microeconomics applied to internal issues and macroeconomics applied to external or environmental issues.

Question 16

Which of the following is an example of an internal operational issue?

Choice of production technique Stage of business cycle General price level Type of economic system

Production technique, pricing, output, make-or-buy and procurement decisions are internal operational issues.

Question 17

Which of the following is an external environmental issue for business?

How much output to produce Whether to make or buy a component Stage of business cycle Which customer segment to focus on

Macro factors like economic system, stage of business cycle and government policy shape the external business environment.

Question 18

Scarcity in Economics means:

resources do not exist at all resources are limited relative to wants people do not want goods goods have no utility

Scarcity means resources are limited while human wants are unlimited, so choices have to be made.

Question 19

Decision-making in business refers to:

choosing any option randomly avoiding all alternatives accepting every alternative selecting the most suitable alternative from available options

Decision-making means evaluating feasible alternatives and choosing the one that best helps attain the objective.

Question 20

Which statement is most correct about Business Economics?

It combines economic theory with business practice for rational decision-making It is useful only for government departments It ignores scarce resources It deals only with accounting entries

Business Economics applies economic theory, logic and analytical tools to business practice and decision-making.

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