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Business Economics MCQs for CA Foundation
Chapter-wise Business Economics MCQs with answers and explanations. Try the sample questions below, then practise a set of 10 with instant right/wrong.
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Q1 · Nature & Scope of Business Economics
Business Economics is primarily concerned with which of the following?
- (a) Application of economic theory and analytical tools to business decision-making
- (b) Only the study of national income accounting
- (c) Preparation of financial statements of companies
- (d) Framing of laws governing companies
Show answer ↓
Answer: (a) Application of economic theory and analytical tools to business decision-making
(a) is correct: Business Economics applies economic theory and tools to business decision-making. (b) covers only a part of macroeconomics, and (c) belongs to accounting, not economics.
Q2 · Nature & Scope of Business Economics
Which of the following best describes Business Economics?
- (a) The study of the economic behaviour of individuals and firms in making decisions about the allocation of scarce resources, applying economic theory to business decision-making
- (b) The study of accounting principles used to record business transactions
- (c) The study of only national income and government budgets
- (d) The study of legal rules governing contracts between businesses
Show answer ↓
Answer: (a) The study of the economic behaviour of individuals and firms in making decisions about the allocation of scarce resources, applying economic theory to business decision-making
(a) is correct: Business Economics applies economic theory and tools to business decision-making on scarce resources. (b) is accounting, (c) is only macroeconomics/public finance, and (d) is business law, so they are wrong.
Q3 · Nature & Scope of Business Economics
Business Economics is also known as:
- (a) Managerial Economics
- (b) Welfare Economics
- (c) Development Economics
- (d) Institutional Economics
Show answer ↓
Answer: (a) Managerial Economics
(a) is correct: Business Economics is also called Managerial Economics. Welfare, development and institutional economics are separate branches and do not refer to this subject.
Q4 · Theory of Demand and Supply
A rise in the price of a good leads to a fall in the quantity demanded, with all other factors held constant. Which law of demand does this illustrate?
- (a) Law of diminishing marginal utility
- (b) Law of demand
- (c) Law of supply
- (d) Law of equi-marginal utility
Show answer ↓
Answer: (b) Law of demand
(b) is correct: the Law of Demand states that, other things being equal, price and quantity demanded are inversely related. (a) explains consumer satisfaction from additional units, not the price-quantity relation, and (c) describes the direct price-quantity relation of supply.
Q5 · Theory of Demand and Supply
If the price of tea rises from Rs. 40 to Rs. 50 per kg and the quantity demanded falls from 100 kg to 80 kg, what is the price elasticity of demand using the percentage method?
- (a) 0.4
- (b) 1.0
- (c) 2.0
- (d) 0.8
Show answer ↓
Answer: (d) 0.8
(d) is correct: the percentage change in quantity is -20/100 = -20% and in price is 10/40 = 25%, so elasticity = 20/25 = 0.8 in absolute terms. (c) would result from using the wrong base, and (a) and (b) do not match the calculation.
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