Q.1 Which of the following best describes a business model?
A plan to reduce costs only
A framework for how a business creates, delivers, and captures value
A financial report of the company
A government policy document
Explanation - A business model explains how a company operates, makes money, and sustains itself by delivering value to customers.
Correct answer is: A framework for how a business creates, delivers, and captures value
Q.2 The 'demand function' in economics usually expresses demand as a function of:
Price only
Price and income
Cost of production
Government regulations
Explanation - The demand function shows the relationship between demand and determinants like price and income.
Correct answer is: Price and income
Q.3 Which of the following is an example of an economic model?
SWOT Analysis
Linear Demand Function
PEST Analysis
Employee Training Program
Explanation - An economic model simplifies reality and explains relationships such as demand depending on price in a linear demand function.
Correct answer is: Linear Demand Function
Q.4 In the Cobb-Douglas production function Q = A L^α K^β, what do L and K represent?
Labour and Capital
Loss and Knowledge
Logistics and Capital
Labour and Knowledge
Explanation - In the Cobb-Douglas function, L = Labour, K = Capital, A = efficiency, and α, β are output elasticities.
Correct answer is: Labour and Capital
Q.5 Which economic model is used to study consumer choice under constraints?
Supply Function
Production Function
Utility Maximization Model
Break-even Model
Explanation - The utility maximization model studies how consumers allocate limited resources to maximize satisfaction.
Correct answer is: Utility Maximization Model
Q.6 A break-even model helps businesses determine:
Maximum profit level
Point where revenue equals cost
Minimum demand required
Long-term growth rate
Explanation - Break-even analysis identifies the point where total revenue equals total cost, i.e., no profit, no loss.
Correct answer is: Point where revenue equals cost
Q.7 Which of the following is NOT an assumption of economic models?
Simplified reality
Rational decision-making
Infinite resources
Ceteris paribus
Explanation - Economic models assume scarcity, not infinite resources, and work under conditions like rationality and ceteris paribus.
Correct answer is: Infinite resources
Q.8 In linear cost models, total cost (TC) is generally expressed as:
TC = Fixed Cost + Variable Cost
TC = Revenue - Profit
TC = Price × Quantity
TC = Demand + Supply
Explanation - Total cost is the sum of fixed costs (constant) and variable costs (change with output).
Correct answer is: TC = Fixed Cost + Variable Cost
Q.9 The IS-LM model in economics represents equilibrium in:
Labour and demand
Goods and money markets
Imports and exports
Taxes and subsidies
Explanation - The IS-LM model shows simultaneous equilibrium in the goods (IS) and money (LM) markets.
Correct answer is: Goods and money markets
Q.10 Which curve represents all combinations of goods that provide the same level of utility to a consumer?
Supply curve
Indifference curve
Demand curve
Cost curve
Explanation - An indifference curve shows bundles of goods that give equal satisfaction to a consumer.
Correct answer is: Indifference curve
Q.11 Game theory in business is mainly used to analyze:
Monopoly pricing
Strategic decision-making among competitors
Production planning
Demand forecasting
Explanation - Game theory models competition and cooperation among firms to make optimal decisions.
Correct answer is: Strategic decision-making among competitors
Q.12 Which of the following is a limitation of economic models?
They help in decision-making
They simplify reality
They rely on assumptions
They forecast trends
Explanation - Economic models are limited because they rely heavily on assumptions which may not always hold true.
Correct answer is: They rely on assumptions
Q.13 The supply function generally relates supply with:
Price of good
Consumer income
Advertising cost
Production technology
Explanation - Supply functions usually show supply as a function of price, though other factors can shift supply.
Correct answer is: Price of good
Q.14 In the linear demand function Q = a - bP, the coefficient 'b' represents:
Demand at zero price
Slope of demand curve
Total revenue
Elasticity
Explanation - In Q = a - bP, 'b' measures the rate at which demand falls as price increases, i.e., slope.
Correct answer is: Slope of demand curve
Q.15 Which of the following best describes an economic model?
A real-world system
A simplified representation of reality
A government regulation
An accounting report
Explanation - Economic models simplify complex economic processes to make analysis easier.
Correct answer is: A simplified representation of reality
Q.16 In the production possibility frontier (PPF) model, a point inside the curve represents:
Efficient use of resources
Unattainable output
Underutilization of resources
Optimal growth
Explanation - A point inside PPF shows resources are not fully utilized, while on the curve indicates efficiency.
Correct answer is: Underutilization of resources
Q.17 Which business model is based on providing free basic services and charging for premium features?
Franchise model
Freemium model
Subscription model
Licensing model
Explanation - The freemium model offers free basic services while charging for premium upgrades.
Correct answer is: Freemium model
Q.18 In cost-volume-profit (CVP) analysis, contribution margin is calculated as:
Sales - Variable Cost
Sales - Fixed Cost
Sales - Total Cost
Sales - Profit
Explanation - Contribution margin is the amount remaining from sales after covering variable costs, used to cover fixed costs.
Correct answer is: Sales - Variable Cost
Q.19 The Cournot model in economics explains competition among firms producing:
Differentiated products
Homogeneous products
Luxury goods
Substitute goods only
Explanation - Cournot competition assumes firms produce identical goods and decide output quantities strategically.
Correct answer is: Homogeneous products
Q.20 In the supply-demand model, equilibrium price occurs where:
Supply > Demand
Demand > Supply
Supply = Demand
Costs = Revenues
Explanation - Equilibrium occurs where the demand curve intersects the supply curve, meaning no surplus or shortage.
Correct answer is: Supply = Demand
Q.21 Which model helps in analyzing risk and uncertainty in decision-making?
Break-even model
Game theory
Decision tree model
Linear regression
Explanation - Decision tree models visualize choices and outcomes under risk and uncertainty.
Correct answer is: Decision tree model
Q.22 In economic order quantity (EOQ) model, the main objective is to minimize:
Total profit
Inventory costs
Production costs
Labour costs
Explanation - EOQ helps minimize total inventory costs by balancing ordering and holding costs.
Correct answer is: Inventory costs
Q.23 Which business model is typically used by Netflix and Spotify?
Freemium
Subscription
Franchise
Auction
Explanation - Netflix and Spotify follow a subscription model where users pay regularly for services.
Correct answer is: Subscription
Q.24 In monopolistic competition, firms differentiate their products mainly through:
Price cuts
Branding and features
Government policies
Technology patents
Explanation - Monopolistic competition involves product differentiation to attract consumers despite many sellers.
Correct answer is: Branding and features
Q.25 Which of the following is an example of a two-sided market model?
Uber
Manufacturing unit
Retail grocery store
Car dealership
Explanation - Two-sided platforms like Uber connect drivers and riders, facilitating interactions between two groups.
Correct answer is: Uber