FUNDAMENTALS OF COMMERCE UNIT-2

Contents

#1. What does GNP stand for?

Global Net Profits

Gross National Product

Gross Nominal Profit

General National Production

#2. In the calculation of GDP using the expenditure approach, what does "X - M" represent?

Government spending on infrastructure projects

Household consumption expenditure

Exports minus imports

Gross profit margin

#3. In the expenditure approach to calculating GDP, which component represents spending by businesses on capital goods like machinery and equipment?

Net exports (X - M)

Government spending (G)

Consumption (C.)

Investment (I)

#4. If the income elasticity of demand for a good is negative, it suggests that the good is:

A normal good

A Giffen good

A luxury good

An inferior good

#5. If the price of insulin (a necessary medication) increases by 10%, and the quantity demanded decreases by 5%, what type of elasticity does this represent?

Unitary elastic demand

Inelastic demand

Elastic demand

Perfectly elastic demand

#6. What is a supply curve?

A table listing the factors that affect supply

A graphical representation of the quantity of goods supplied at different prices

A measure of consumer preferences for a product

A graphical representation of the quantity of goods demanded at different prices

#7. In perfect competition, what type of information is available to both buyers and sellers?

Imperfect information

Asymmetric information

Limited information

Perfect information

#8. What is the primary goal of calculating GNP?

To assess consumer preferences

To measure economic growth

To determine the distribution of wealth

To track inflation rates

#9. In a perfectly competitive market, which of the following is true?

Products are differentiated.

Many small firms compete, selling identical products.

Firms can influence market price through their actions.

There is only one seller in the market.

#10. In the long run, a perfectly competitive firm will earn:

Economic profits

Supernormal profits

Economic losses

Normal profits

#11. When supply is perfectly elastic, the price elasticity of supply is:

Less than 1

Greater than 1

Equal to 1

Infinite

#12. In which market structure do firms engage in non-price competition, such as advertising and product differentiation?

Monopolistic competition

Oligopoly

Monopoly

Perfect competition

#13. Which type of relationship exists between the prices of complementary goods and their demand?

Positive relationship

Inverse relationship

No relationship

Negative relationship

#14. Which of the following represents the total income earned by all factors of production in an economy?

National income

GDP

GNP

Disposable income

#15. Nominal GDP is:

GDP measured in constant prices.

GDP adjusted for inflation.

GDP measured in current market prices.

GDP adjusted for changes in population.

#16. What does microeconomics study?

The overall economy and its fluctuations

Government fiscal policy

The behavior of individual consumers and firms

International trade and finance

#17. What does GDP stand for?

Global Demand for Products

Gross Domestic Product

General Distribution of Profits

Gross Development Process

#18. What is the price elasticity of demand for a perfectly elastic demand curve?

-1

Infinity

#19. Which of the following types of elasticity represents a situation where a percentage change in price leads to a larger percentage change in quantity demanded?

Perfectly inelastic demand

Unitary elastic demand

Elastic demand

Inelastic demand

#20. Macroeconomics often studies the relationships between:

Individual supply and demand curves.

National income and household income.

Consumer preferences and utility.

Aggregate variables like GDP, inflation, and unemployment.

#21. The study of fiscal policy, monetary policy, and international trade policy is part of:

Behavioral economics

Macroeconomics

Industrial organization

Microeconomics

#22. Which approach to measuring GDP focuses on the value-added by each firm in the production process?

The expenditure approach

The production approach

The income approach

The value-added approach

#23. Who is often referred to as the "father of national income accounting"?

Adam Smith

Alfred Marshall

John Maynard Keynes

Simon Kuznets

#24. In which market structure do firms engage in strategic pricing and are interdependent in their decision-making?

Monopoly

Oligopoly

Monopolistic competition

Perfect competition

#25. Marginal utility tends to:

Increase as more of a good is consumed.

Remain constant regardless of the quantity consumed.

Decrease as more of a good is consumed.

Fluctuate randomly.

#26. If the cross-price elasticity of demand for two goods is positive, it indicates that these goods are:

Complementary

Normal

Substitutes

Inferior

#27. Which of the following is NOT a characteristic of perfect competition?

Significant market power for individual firms

Price-taking behavior by firms

Low barriers to entry

Identical products

#28. Who formulated the Law of Demand, which states that all else being equal, as the price of a good or service decreases, the quantity demanded increases, and vice versa?

Alfred Marshall

John Maynard Keynes

Adam Smith

Karl Marx

#29. In the long run, what happens to the number of firms in a perfectly competitive industry if firms are incurring economic losses?

The number of firms remains constant

Firms lower their prices

New firms enter the industry

Existing firms exit the industry

#30. Which of the following is an example of a transfer payment that is not included in GDP calculations?

Corporate profits

Rental income

Wages and salaries

Social Security payments

#31. The law of supply states that, all else being equal:

As the price of a good increases, the quantity supplied decreases

As the price of a good decreases, the quantity supplied increases

As the price of a good decreases, the quantity supplied decreases

As the price of a good increases, the quantity supplied increases

#32. National income accounting measures the value of:

Only market transactions within a country.

Only government spending within a country.

All economic activities within a country's borders.

All economic activities worldwide.

#33. If the price of a good falls and the quantity consumed increases, what is happening to the consumer's marginal utility and marginal cost?

Marginal utility and marginal cost move in opposite directions.

Marginal utility and marginal cost remain unchanged.

Marginal utility increases, marginal cost decreases.

Marginal utility decreases, marginal cost increases.

#34. What is Net Domestic Product (NDP)?

GDP minus exports

GDP minus imports

GDP minus depreciation

GDP minus government spending

#35. In which type of market structure do a few large firms dominate the industry, and there are significant barriers to entry?

Oligopoly

Monopoly

Monopolistic competition

Perfect competition

#36. What role do barriers to entry play in a perfectly competitive market?

Barriers to entry are high, preventing new firms from entering the market.

Barriers to entry are irrelevant in perfect competition.

Barriers to entry are set by the government.

Barriers to entry are low, allowing new firms to enter easily.

#37. In the short run, if a perfectly competitive firm's marginal cost is greater than its marginal revenue, the firm should:

Reduce production

Exit the market

Increase production

Shut down

#38. If a good is considered a superior good, what happens to its demand when consumer incomes increase?

Demand remains unchanged

Demand becomes elastic

Demand decreases

Demand increases

#39. What is the profit-maximizing level of output for a firm in perfect competition?

The output where price is highest

The output where price equals average total cost

The output where marginal cost equals marginal revenue

The output where total revenue is maximized

#40. Which component of GDP includes spending by households on goods and services?

Consumption (C.)

Government spending (G)

Net exports (X - M)

Investment (I)

#41. What is the difference between GDP and GNP?

GNP includes the income earned by foreign residents, while GDP does not.

There is no difference; GDP and GNP are the same concept.

GNP includes the value of imports, while GDP does not.

GDP includes net exports, while GNP does not.

#42. Which of the following is NOT a component of the income approach to calculating GDP?

Consumer spending

Corporate profits

Rent and interest

Wages and salaries

#43. If the supply of a good is perfectly elastic, what does it mean?

There is no demand for the good

Producers are willing to supply any quantity of the good at a specific price

The supply curve is vertical

Producers are not willing to supply any quantity of the good

#44. If the price of one complementary good increases, what is likely to happen to the demand for the other complementary good?

There will be no change in demand

The demand will increase

It depends on the specific goods involved

The demand will decrease

#45. Who is known for defining macroeconomics as the study of the economy as a whole, including factors like inflation, unemployment, and economic growth?

Karl Marx

Alfred Marshall

John Maynard Keynes

Milton Friedman

#46. Who is known for the concept of the "invisible hand" in supply and demand?

John Maynard Keynes

Milton Friedman

Paul Samuelson

Adam Smith

#47. In perfect competition, what determines the price of the product?

Market supply and demand forces

Government regulations

The individual firm's production costs

The highest price a consumer is willing to pay

#48. In economics, luxury cars, high-end fashion, and fine dining are often classified as:

Giffen goods

Normal goods

Superior goods

An Inferior goods

#49. In a monopolistic competition market, products are:

Perfect substitutes

Identical

Highly differentiated

Slightly differentiated

#50. What is disposable income?

Total savings in an economy

Total government spending

Total income after taxes and deductions

Total income before taxes and deductions

Finish

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