Understanding Economic Thought in Business Management

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1. 1

   What does the Law of Diminishing Returns imply?

   A Maximizing production constantly increases returns. B Adding more of one factor decreases its additional output. C Any increase in input leads to proportional increase in outputs.
2. 2

   Which of the following describes 'opportunity cost'?

   A The next best alternative foregone when making a decision. B The fixed cost involved in production planning. C The expense related to hiring new workers.
3. 3

   How does inflation impact business decision-making?

   A It decreases the value of products but increases the cost of labor. B Inflation has no significant effect on business operations. C It affects costs, pricing, and purchasing power.
4. 4

   What is a substitute good?

   A A product that enhances the value of another product. B A product consumers use in place of another. C A component necessary for production.
5. 5

   What characterizes a perfectly competitive market?

   A Many sellers offer identical products, with no control over the price. B Few firms dominate the market and set prices. C Each firm sells differentiated products with varied pricing.
6. 6

   In business economics, what is 'fixed cost'?

   A Costs that vary directly with production volume. B Unchanging expenses regardless of production levels. C Future costs considered in decision-making.
7. 7

   What does GDP measure?

   A A country's total exports minus imports. B The distribution of income among citizens. C The total market value of all goods and services produced.
8. 8

   What is 'market equilibrium'?

   A Where supply equals demand, setting the price point. B Excess supply over demand leading to price drops. C A market scenario with unpredictable shifts.
9. 9

   Which concept explains 'economies of scale'?

   A Increased costs as company size expands. B Cost advantages as a firm increases production. C Scaling down operations to minimize losses.
10. 10

    How can 'price elasticity of demand' be described?

    A The invariable change in demand despite price changes. B Demand directly proportional to income changes. C A measure of responsiveness of demand to price changes.