MCQs

i) Tea and coffee are​

• Answer: (a) substitute goods
• Explanation: Substitute goods are products that can satisfy similar consumer needs and can be used in place of one another. When the price of tea rises, consumers switch to coffee, increasing the demand for coffee.

ii) At the mid-point of a linear demand curve, price elasticity of demand is​

• Answer: (d) equal to one
• Explanation: Price elasticity of demand is calculated as the ratio of the lower segment to the upper segment of the demand curve. At the exact mid-point, both segments are equal, making the elasticity equal to 1.

iii) When income of consumer increases, the demand curve of a normal good​

• Answer: (b) shifts to the right
• Explanation: For normal goods, there is a direct relationship between income and demand. As consumer income increases, purchasing power rises, causing consumers to buy more of the good at every price level, which shifts the demand curve to the right.

iv) Indian Railway is an example of​

• Answer: (b) monopoly
• Explanation: A monopoly is a market structure dominated by a single seller with no close substitutes. Because the Indian Railway network is owned and operated exclusively by the government, it operates as a state monopoly.

v) The shape of short run Average Fixed Cost (AFC) is​

• Answer: (b) rectangular Hyperbola
• Explanation: Average Fixed Cost ($AFC = Total Fixed Cost / Quantity$) continuously falls as output increases because a constant total cost is being divided by a larger number of units. However, it never reaches zero, and the area under the curve ($AFC \times Q = TFC$) remains constant, giving it the mathematical shape of a rectangular hyperbola.

vi) Price ceiling is a feature of​

• Answer: (b) mixed economy
• Explanation: A price ceiling is a government-imposed maximum legal limit on the price of a good or service, designed to protect consumers. This type of regulatory state intervention in market mechanisms is a core feature of a mixed economy.

vii) When AP is maximum and constant,​

• Answer: (a) $MP=AP$
• Explanation: In production theory, the mathematical relationship dictates that the Marginal Product (MP) curve cuts the Average Product (AP) curve from above at the point where AP reaches its maximum value. Therefore, when AP is maximum, $MP = AP$.

viii) A firm under ___ acts as price taker.​

• Answer: (a) perfect competition
• Explanation: Under perfect competition, there are a large number of buyers and sellers dealing in identical products. Because no individual firm is large enough to influence the market price, they must accept the equilibrium price determined by market demand and supply forces.

ix) If the demand curve of a product is vertical to price axis, then the demand for that commodity is​

• Answer: (d) perfectly inelastic
• Explanation: A vertical demand curve means that the quantity demanded remains completely unchanged regardless of any changes in price. The price elasticity of demand in this case is zero ($\epsilon = 0$), which indicates perfectly inelastic demand.

x) ___ explains the short run production.​

• Answer: (b) law of variable proportion
• Explanation: The Law of Variable Proportions deals with the production function where one factor input is kept variable while all other factor inputs are held fixed, which is the defining condition of short-run production analysis.

xi) Amongst different phases of Project Life Cycle, physical work begins at ___ stage.​

• Answer: (c) execution
• Explanation: During the initiation and planning phases, the project is conceptualized, authorized, and mapped out on paper. The actual physical work, deployment, and creation of project deliverables happen during the execution stage.

xii) To calculate the number of years required for the cash flow to pay back the original investment outlay we should the technique known as.​

• Answer: (c) Pay Back method
• Explanation: The Payback Period method calculates the exact duration of time required for a project's cumulative cash inflows to equal its initial cash outflow, thereby recovering the initial capital investment.

xiii) Which of the following is NOT a feature of project?​

• Answer: (c) a project always has indefinite finish date
• Explanation: By definition, a project is a temporary endeavor with a unique objective. It must have a clearly defined start date and a definite end date. Having an indefinite finish date belongs to continuous operational workflows, not a project.

xiv) The graphical representation of scheduled work/tasks followed by any project manager is known as.​

• Answer: (b) The Gantt Chart
• Explanation: A Gantt Chart is a specialized horizontal bar chart used in project management to visually illustrate a project schedule, displaying start dates, task durations, dependencies, and end dates.

xv) The path which moves along the activities having total float zero in the network diagram is called​

• Answer: (c) Critical path
• Explanation: The critical path is the sequence of dependent network activities that determines the shortest possible time to complete the project. The activities on this path have zero total float, meaning any delay in these tasks will directly delay the final project delivery date.

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i) According to the Law of Demand, when the price of a commodity increases, its quantity demand​

• Answer: (b) decreases
• Explanation: The Law of Demand states that there is an inverse relationship between price and quantity demanded, assuming all other factors remain constant (ceteris paribus). Therefore, when price goes up, quantity demanded goes down.

ii) The shape of a perfectly inelastic demand curve is​

• Answer: (b) vertical straight line parallel to quantity-axis
• Explanation: Perfectly inelastic demand means that the quantity demanded remains completely unchanged regardless of any fluctuations in price. This creates a vertical demand curve where elasticity ($\epsilon$) is zero.

iii) When the value of Own Price Elasticity of a good is one, it is called​

• Answer: (c) unitary elastic
• Explanation: Price elasticity of demand measures the responsiveness of quantity demanded to a change in price. When the percentage change in quantity demanded is exactly equal to the percentage change in price, the elasticity value is 1, which is termed unitary elastic.

iv) When only one factor of production is variable and all other factors are fixed, then it is called​

• Answer: (c) short-run production
• Explanation: In economic theory, the short run is a time horizon during which at least one factor of production (typically capital or land) is fixed, and output can only be changed by altering variable inputs (like labor).

v) Change in total product due to one unit change in labour input, keeping other inputs fixed, is called​

• Answer: (c) marginal product of labour
• Explanation: Marginal Product of Labor ($MP_L$) is defined as the additional output produced by employing one extra unit of labor while keeping all other production factors constant ($MP_L = \Delta TP / \Delta L$).

vi) In the long-run production, when output is doubled by doubling all inputs, it is called​

• Answer: (a) constant returns to scale
• Explanation: Returns to scale apply exclusively to long-run production where all inputs are variable. If output increases by the exact same proportion as the increase in all inputs (e.g., doubling inputs results in exactly doubling output), it exhibits Constant Returns to Scale (CRS).

vii) As output level increases, Short-run Average Fixed Cost (AFC)​

• Answer: (a) falls
• Explanation: Average Fixed Cost is calculated as Total Fixed Cost divided by output ($AFC = TFC / Q$). Because TFC remains constant in the short run, dividing it by an increasing quantity ($Q$) means AFC will continuously decline as output expands.

viii) The Indian economy is an example of​

• Answer: (b) Mixed economy
• Explanation: A mixed economy combines characteristics of both market (capitalist) and planned (socialist) economic systems. India features a co-existence of a private sector operating under market mechanisms alongside public sector enterprises and state planning.

ix) The detailed scheme of activity, finance and resources of a project is developed in the​

• Answer: (c) planning phase
• Explanation: While the conceptualization phase identifies the project idea, it is during the planning phase that project managers build out the explicit roadmaps, resource allocations, budgeting, scheduling, and risk management strategies.

x) Under the Net Present Value (NPV) method, a project is considered financially viable only if-​

• Answer: (b) $NPV\ge0$
• Explanation: A project is financially viable when its present value of cash inflows is greater than or equal to the present value of cash outflows. An $NPV \ge 0$ ensures that the project recovers its initial investment and meets or exceeds the required rate of return.

xi) PERT is most suitable for​

• Answer: (b) Research and Development Projects
• Explanation: Program Evaluation and Review Technique (PERT) is a probabilistic model designed for unique, non-repetitive, and highly uncertain environments like R&D projects, where task durations cannot be accurately predicted in advance.

xii) Working capital refers to the funds that are not invested in​

• Answer: (d) land
• Explanation: Working capital measures a firm's operational liquidity and is calculated as Current Assets minus Current Liabilities. It funds short-term assets like raw materials, finished inventory, and cash. Land is a fixed, non-current asset funded by long-term capital.

xiii) In a capitalist economy, basic problems are solved by​

• Answer: (a) through price system
• Explanation: A capitalist or free-market economy relies on decentralized market mechanisms. The interaction of demand and supply forms a "price system" (the invisible hand) that automatically dictates what to produce, how to produce, and for whom to produce.

xiv) All the following curves are U-shaped except​

• Answer: (d) the AFC curve
• Explanation: The Marginal Cost (MC), Average Variable Cost (AVC), and Average Cost (AC) curves are all U-shaped due to the Law of Variable Proportions. The Average Fixed Cost (AFC) curve continuously slopes downward without ever rising, taking the shape of a rectangular hyperbola.

xv) In a monopoly market the number of sellers is/are​

• Answer: (a) one
• Explanation: The word "Monopoly" is derived from Greek words where 'Mono' means single and 'Poly' means seller. It represents a market structure containing exactly one seller controlling the entire supply of a commodity that has no close substitutes.