FYBCOM Business Economics MCQ with Answers: FYBCOM Sem 2 Mumbai University

FYBCOM Business Economics MCQ with Answers

_________accept price determined by the market.

  1. Monopoly market
  2. Perfect competition market
  3. Oligopoly market
  4. Duopoly market

______________market has the feature of the selling cost.

  1. Perfect competition.
  2. Monopoly
  3. Monopolistic competition
  4. Monopsony

A natural monopoly is attributed to_________.

  1. A large number of sellers
  2. Big market
  3. Control over the concerned raw materials
  4. Economics of scale

_________has the ability to set the price.

  1. Political power
  2. Monopoly Power
  3. Capital power
  4. Entrepreneurial efficiency

_________of the following is a feature of oligopoly.

  1. Single seller
  2. No substitute
  3. Differentiated Product
  4. The price of all product is identical

A new firm can easily enter a/an___________market.

  1. Oligopoly
  2. Monopoly
  3. Perfect competitive
  4. Monopsony

__________is expressed as a fixed percentage.

  1. downward
  2. upward
  3. horizontal
  4. vertical

_________of the following is not an example of a source of monopoly power.

  1. A key source is owned by a single firm
  2. Technology
  3. Legal protection
  4. Price taker 

Usually, in a natural monopoly, the only supplier of a good or service is the_________.

  1. Private sector
  2. Government
  3. Retailer
  4. Wholesaler

The slope of demand curve under monopolistic competition is__________.

  1. steeper
  2. Perfectly inelastic
  3. flatter
  4. Perfectly elastic

_________is an example of legal source monopoly.

  1. public utility services
  2. Copyright
  3. Economies of large scale
  4. Coal-mine

A monopolist can control__________.

  1. Demand and price
  2. Output or price
  3. The stock of goods or price
  4. Marketing or price

Goods sold in the perfect competition market are_________.

  1. homogeneous
  2. Differentiated
  3. Duplicate
  4. Original

Price × quantity = __________.

  1. Average revenue
  2. Marginal revenue
  3. Total revenue
  4. Equilibrium

If a profit-maximizing monopolist faces a downward-sloping market demand curve, its__________.

  1. AV < P
  2. AR < MR
  3. MR < p
  4. MR > p

A profit-maximizing monopolist will produce the level of output at which_______.

  1. AR = AC
  2. AR = MC
  3. MR = MC
  4. TR = OC

Entry in the monopoly market is__________.

  1. Highly restricted
  2. Easy
  3. Simple
  4. Less difficult

Airlines is an example of_________.

  1. Monopoly market
  2. Perfect competition
  3. Oligopoly market
  4. Monopolistic competition

The average cost in perfect competition operates under_________shaped curve.

  1. W shaped
  2. V shaped
  3. U shaped
  4. M shaped

Perfect competition has___________.

  1. No transport cost
  2. Perfectly inelastic
  3. selling cost
  4. Unitary elastic

___________prevails under perfect competition.

  1. AR < MR
  2. AR > MR
  3. AR + MR = 1
  4. AR = MR

Total Revenue – Total cost = _________.

  1. Profit
  2. loss
  3. shut down point
  4. sub normal loss

In perfect competition at any given time, the price for a commodity is_________.

  1. Same
  2. Different
  3. Discounted
  4. less

In a perfect competition market, in the long run, the firm is in equilibrium at the point where________.

  1. LMC>LMR
  2. LMC< LMR
  3. LMC= LMR
  4. LMC/LMR

Under perfect competition when the price is constant, AR is _______________.

  1. Increasing
  2. decreasing
  3. Constant
  4. negative

Under Perfect competition when AR is constant, MR is equal to______________.

  1. TC
  2. TR
  3. AC
  4. AR 

Under identical cost condition, in the long run, all firms under perfect competition make______________

  1. Normal profit
  2. Supernormal profit
  3. Incur losses
  4. Supernormal profit or incur losses

A firm in perfect competition produces its equilibrium output at a point where_________.

  1. MC = MR & MC is declining
  2. MC = MR & MC is rising
  3. MC = MR & MC is constant
  4. MC = MR

Total amount of money received through sales composes____________.

  1. Total cost
  2. Total revenue
  3. Marginal revenue
  4. Average product

When TR > TC, there is_____________.

  1. sub normal loss
  2. Normal Profit
  3. loss
  4. Super normal Profit

Under Perfect competition there are______________number of buyers

  1. Large
  2. limited
  3. small
  4. few

_____________ have U shape.

  1. Supply
  2. AFC
  3. demand
  4. MC

If the consumers are ignorant of the price difference, they will pay_____________.

  1. Lower price
  2. Same price
  3. Higher price
  4. Very less price

If a firm in a perfectly competitive market doubles the number of units of output sold, then total revenue will_____________.

  1. More than triple
  2. Halve
  3. double
  4. Remain constant

35 If firm sale 50 units at Rs 5 per unit, What will be its AR=?

  1. 35
  2. 45
  3. 55
  4. 10

All of the following are determinants of demand except _____________.

  1. Consumer income
  2. Price of related goods
  3. Size of population
  4. Quantity Supplied

A monopolist usually produce______________.

  1. Less than optimum output
  2. More than optimum output
  3. Optimum output
  4. Diminishing level of output

For a monopoly firm_____________.

  1. AR = MR
  2. AR > MR
  3. AR < MR
  4. AR = MR < AR

The total cost of production consist of____________.

  1. Marginal cost
  2. Fixed cost+Variable cost
  3. Sunk cost
  4. Incremental cost

Variable cost is also referred as_________.

  1. direct cost
  2. indirect cost
  3. Fixed cost
  4. Total cost

The steeper demand curve in monopoly market explains that a change in price effect will affect sale____________

  1. Drastically
  2. Marginally
  3. Substantially
  4. Slowly

If the monopolist has to incur more profit he has to___________.

  1. Reduce the price
  2. Increase the price
  3. Keep the same price
  4. waste the resources

The word Mono means___________.

  1. few
  2. large
  3. single
  4. many

The Total Revenue of the 5th units is 100 and the 6th units are Rs.150, the Marginal revenue of producing the 6th unit is Rs.__________.

  1. 165
  2. 25
  3. 50
  4. 20

Under _____________ market, firm and industry is one and the same thing.

  1. Monopolistic competition
  2. Monopoly
  3. Perfect competition
  4. Oligopoly

In monopoly market, marginal cost curve intersect marginal revenue curve from___________.

  1. Below
  2. Above
  3. Side
  4. Up

If at Rs.5 firm sold 50 units in the market then what will be its total revenue?

  1. 200
  2. 225
  3. 10
  4. 250

The total cost of the 5th units is 300 and the 6th units are Rs 380, Marginal cost of producing 6th unit is Rs.__________.

  1. 300
  2. 680
  3. 80
  4. 200

The point at which quantity demanded is equaled to quantity supplied is the________ point

  1. total supply
  2. total demand
  3. equilibrium
  4. Aggregate supply

__________ is the addition made to the total cost by producing an additional unit of output.

  1. Average cost
  2. Total product
  3. Marginal cost
  4. Incremental cost

In monopolistic competition there are___________,

  1. Few sellers
  2. Many sellers
  3. Two- sellers
  4. Ten sellers

Product sold in monopolistic competition is ____________.

  1. Homogeneous
  2. Differentiated
  3. Inferior
  4. Superior

Monopolistic competition is a blending of______________.

  1. competition and monopoly
  2. oligopoly and competition
  3. duopoly and oligopoly
  4. monopoly and monopsony

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The objective of selling cost is to________.

  1. Promote the labour
  2. Promote the company
  3. Promote sales
  4. Promote cost

In the long run Monopolistic firm cannot continue with_______________.

  1. covering full cost
  2. Supernormal profit
  3. Profit
  4. Loss

________ of the following is not a characteristic of monopolistic competition.

  1. Many sellers
  2. Price taker
  3. Free entry into the market
  4. Product differentiation

Monopolistic competition differs from perfect competition because in monopolistically competitive markets_______.

  1. Free entry and free exit
  2. All firms can earn normal profit in the long run
  3. Each of the sellers offers a somewhat different product
  4. Government intervention

A firm in monopolistic competition faces a demand curve that is_________.

  1. Negatively sloping & relatively elastic
  2. Negatively sloping & relatively inelastic
  3. Negatively sloping & unitary elastic
  4. Negatively sloping & perfectly elastic

The total cost of the 5th units is Rs.100 and the 6th units are Rs.115, the Marginal cost of producing the 6th unit is Rs.__________

  1. 225
  2. 85
  3. 15
  4. 20

Due to product differentiation, in monopolistic market, a firm’s demand curve is__________.

  1. Horizontal
  2. Vertical
  3. Downward sloping
  4. Upward sloping

___________ is example of an Oligopoly market.

  1. Soap
  2. Automobile
  3. Fruit
  4. Vegetables

________ of the following is not the pattern of oligopolistic behaviour.

  1. Price war
  2. Price leadership
  3. Collusion
  4. Price control

In the monopolistic competition the more relevant concept is_______________.

  1. Firm
  2. Retail
  3. Industry
  4. Individual

A similarity between monopoly & monopolistic competition is that____________.

  1. Firms are interdependent
  2. Few sellers
  3. Sellers are price makers & not price takers
  4. Product differentiation is done

Word ‘Poly’ means_________.

  1. Seller
  2. Buyer
  3. Single
  4. Large

The kinked demand curve in non-collusive oligopoly is_________.

  1. Price flexibility
  2. Price rigidity
  3. Same price for all levels of output
  4. Price regulation by the government

The kinked demand curve model was given by the famous economist _________.

  1. Giffen
  2. J.M. Keynes
  3. Karl Marks
  4. Paul Sweezy

Sellers under oligopoly market behave like a ___________.

  1. Group
  2. Firm
  3. Industry
  4. Trader

There is cut-throat competition in__________competition.

  1. Monopoly
  2. Perfect competition
  3. Monopolistic competition
  4. Oligopoly market

Under monopolistic competition there is _______of production capacity.

  1. Underutilization
  2. Over Utilization
  3. Optimum utilization
  4. Market derived demand

________ type of oligopoly occurs when the firm combine together instead of competing and follow common
policy.

  1. Collusive
  2. Non-collusive
  3. Open
  4. Closed

Firms under ___________ jointly fix price and output through agreements.

  1. leadership
  2. Cartel
  3. Monopoly
  4. Monopolistic competition

73 Monopolistic competition has been introduced by___________.

  1. Marshall
  2. Keynes
  3. Edward Chamberlin
  4. Adam Smith

________will boost up the monopolistic competition market.

  1. Efficiency
  2. Global chain
  3. Product differentiation
  4. Publicity

75 In the oligopoly market the decision of the firm is _____________.

  1. Certain
  2. Uncertain
  3. Totally depends on others
  4. Take expert’s decision

A kinked demand curve indicates______________.

  1. Price flexibility in non-collusive oligopoly
  2. Price flexibility in collusive oligopoly
  3. Price rigidity in collusive oligopoly
  4. Price rigidity in non-collusive oligopoly

________refers to the expenditure incurred by a firm to promote sales of its product.

  1. Input cost
  2. Fixed cost
  3. Implicit cost
  4. Selling cost

Greater degree of product differentiation implies under monopolistic competition _______.

  1. Smaller profits
  2. High costs
  3. The less elastic demand curve
  4. Highly interest competition

Secret price concession given in an oligopoly is an example of________competition.

  1. Price competition
  2. Non- price competition
  3. Consumer welfare
  4. The policy of the firm

In __________oligopoly, the commodity sold is homogeneous.

  1. Pure
  2. Mixed
  3. Impure
  4. differentiated

_____is not the feature of Oligopoly.

  1. Price rigidity
  2. Selling cost
  3. Group behaviour L
  4. a large number of seller

Collusion implies the convention of an oligopoly in ____________.

  1. Duopoly
  2. Monopoly
  3. Duopsony
  4. Monopsony

Interdependence of firms in oligopoly is the result of______________.

  1. Existence of a large number of firms
  2. Government regulations
  3. Existence of a few firms
  4. Easy entry of new firms

Interdependence of firms in oligopoly is the results in_______________

  1. Uncertainty reaction of rivals
  2. Certainty reaction of rivals
  3. Determinate demand curve
  4. Price flexibility

Production cost incurred for_________.

  1. Promotional activities
  2. Branding
  3. Business registration
  4. Production

Oligopoly is defined as

  1. Competition among the few
  2. Competition among rids
  3. Markets with cross elasticities
  4. Competition among large

___________of the following is a feature of collusive oligopoly.

  1. Not co-operate each other
  2. Co-operate each other
  3. Price competition
  4. Beneficial to buyers

__________of the following is a feature of non-collusive oligopoly.

  1. Co-operate each other
  2. Beneficial to buyers
  3. Cartel formation
  4. A price war is possible

___________________varieties and alternatives are offered by a rival firm.

  1. Monopsony
  2. Duopoly
  3. Monopoly
  4. Monopolistic competition 

_______________ is form of communication.

  1. Marginal cost pricing
  2. Advertising
  3. Production cost
  4. Cost of raw material

Governments discourage & prevent cartel formation by firms in order to____________.

  1. Protect the interest of the sellers
  2. Earn revenue
  3. Protect the interest of the buyers
  4. Promote exports

In a ________cartel, each member gets the exclusive right to operate in a particular geographical areas.

  1. Decentralization
  2. Centralized
  3. Competitive
  4. Standard

Interdependence is the feature of___________market.

  1. Monopoly
  2. Perfect competition market
  3. Oligopoly
  4. Monopolistic competition

Oligopolists usually encounter:

  1. A high degree of cross-price elasticities of demand
  2. Low degree of cross elasticities of demand
  3. Negative price elasticities
  4. Positive price elasticities

_________law in India specifically prevents the formation of cartels.

  1. Indian Bankruptcy & Insolvency Code 2016
  2. Companies Act 2013
  3. Competition Act 2002
  4. Patent Act 1970

Price discrimination is generally practiced under___________.

  1. Monopoly
  2. Perfect competition
  3. Oligopoly
  4. Monopolistic competition

Selling costs has become an integral part of monopolistic competition, because of _______.

  1. Stiff competition
  2. Product different
  3. A large number of firms
  4. Globalization

________________is feature of Monopolistic competition.

  1. single buyer
  2. two buyer
  3. Many buyers
  4. Single seller

As per the Greek word Oligo means____________

  1. large
  2. small
  3. giant
  4. few

Production cost + selling cost=_______________.

  1. Total cost
  2. Total revenue
  3. Average product
  4. Average revenue

____________refers to the share of the company in the total sales of the product in the market.

  1. Profit index
  2. total cost
  3. marginal loss
  4. market shares

______________enable the businesses to increase competitiveness and increase sales.

  1. Average cost method
  2. skimming pricing
  3. pricing strategies
  4. Payback period

In multi-product pricing strategy, the firms considers that_____________

  1. the demands for various products are inter-related
  2. look into inelasticity of demand
  3. they have to manipulate market demand in their favour
  4. maximise the loss

_________of the following are not the objectives of price policy.

  1. Survival
  2. Market share
  3. Money making
  4. Transformation

_____________ is more useful for pricing over the life cycle of the product.

  1. cost-plus pricing
  2. high rate pricing
  3. Marginal cost pricing
  4. premium price

A transfer price can also be termed as________.

  1. variable cost
  2. fixed cost
  3. transfer cost
  4. average cost

When a monopolist charges different prices in the different market located at different places are called________________.

  1. Age discrimination
  2. Use discrimination
  3. Geographical discrimination
  4. Time discrimination

__________implies high price in the domestic and low price in foreign markets.

  1. Dumping
  2. Cost-plus pricing
  3. marginal cost pricing,
  4. multiple products pricing

_______________ is also known as negotiated pricing.

  1. variable pricing
  2. Monopoly pricing
  3. Geographical pricing
  4. price lining

There are ___________ degree of price discrimination.

  1. one
  2. two
  3. three
  4. fourth

Pricing of a variety of goods produced by a single firm is called____________.

  1. Dumping
  2. Marginal cost pricing
  3. Multi-product pricing
  4. Cost-plus pricing

_____________ is not advantage of cost-plus pricing.

  1. Ensure profit to the firm
  2. Simple to calculate
  3. Recognizes the importance of fixed cost
  4. Reduction of the tax burden

Cost-plus pricing is also known as_________.

  1. Mark up pricing
  2. Marginal Cost Pricing
  3. Transfer pricing
  4. Dumping

________________ is expressed as a fixed percentage.

  1. Marginal Cost Pricing
  2. Transfer pricing
  3. Dumping
  4. Mark up Pricing

In order to control monopoly pricing, the government may impose price restriction based on _________.

  1. average cost
  2. full cost
  3. total cost
  4. marginal cost

Marginal cost pricing charged for________

  1. to Maximize profits
  2. To control private monopoly
  3. To Prevent shut down of the firm
  4. To Minimising losses

__________ of the following statements are true about first degree price discrimination.

  1. Each market segment is charged a different price
  2. Cannot be practiced in the case of personalized services
  3. Each consumer is charged a different price for the same good or service sold
  4. It is possible to be practiced in perfect competition

___________ pricing is a pricing a strategy that uses various product class distinctions.

  1. Marginal cost
  2. full cost
  3. Multi-product pricing
  4. transfer

Price discrimination to be profitable if____________.

  1. the elasticity of demand should differ in different market
  2. the elasticity of demand should same in different market
  3. the elasticity of demand should same in the same market
  4. the elasticity of demand should be the same

__________takes place when different prices are charged in different markets which are located geographically at a distance.

  1. first-degree price discrimination
  2. second-degree price discrimination
  3. third-degree price discrimination
  4. fourth-degree price discrimination

While determine full cost price, the firm uses__________.

  1. fully allocated average cost
  2. only average variable cost
  3. only overhead costs
  4. marginal costs

When public undertakings produce and sell goods and services purchased by higher income groups, then_______.

  1. the price will be equal to MC
  2. the price will be equal to or higher than AC
  3. the price will be equal to MR
  4. the price will be below MC and AC

A discriminating monopolist distributes total output market segments till the point_____________.

  1. where MR in each market segment is different
  2. where the TR in each market segment is the same
  3. where AR in each market segment is different
  4. where MR in all the markets is the same

_________ of the following is not a feature of equilibrium under price discriminating monopoly.

  1. ΣMR> ΣMC
  2. ΣMR< ΣMC
  3. ΣMR ≠ ΣMC
  4. ΣMR= ΣMC

__________ ignores the demand.

  1. Cost-plus pricing
  2. Marginal cost pricing
  3. Dumping
  4. Transfer pricing

___________refers to companies charging lower prices for higher quantities.

  1. First-degree price discrimination
  2. Second-degree price discrimination
  3. Third-degree price discrimination
  4. fourth-degree price discrimination

The primary objective of sporadic dumping is to_______.

  1. drive out international competitors
  2. gain monopoly power in the home market
  3. unload excess stock of unsold goods
  4. create an international cartel

In case of dumping, the demand curve faced by a seller in a foreign market is_____.

  1. Perfectly elastic
  2. Relatively elastic
  3. Perfectly inelastic
  4. Relatively inelastic

Transfer pricing _______________

  1. Inter-firm pricing
  2. reduce tax burden
  3. Determined by government
  4. A fiscal phenomenon

using the following information calculate the full cost price. Average fixed cost Rs.500 and Average Variable
cost Rs.200, Expected profit margin 12%.

  1. 487
  2. 874
  3. 784
  4. 476

Cost-plus pricing is equaled to______________.

  1. cost + fair profit
  2. TR/MR
  3. Profit/cost
  4. AC/MC

Assuming a desired mark-up of 14%, if the average variable cost is Rs.65 and the Average Fixed cost is Rs.25, calculate the full cost price of the product.

  1. 110
  2. 201.6
  3. 102.6
  4. 220

using the following information calculate the full cost price. Average fixed cost Rs.700 and Average Variable cost Rs.400, Expected profit margin 20%.

  1. 325
  2. 1230
  3. 2310
  4. 1320

using the following information calculate the full cost price. Average fixed cost Rs.100 and Average Variable cost Rs.300, Expected profit margin 12%

  1. 112
  2. 448
  3. 412
  4. 388

If a multinational company wants to determine the price of its product. If the markup is targeted at 25% average variable cost is Rs.50 and the average fixed cost is Rs.40.Calculate the cost price of the product.

  1. 125.5
  2. 152.5
  3. 112.5
  4. 211.5

Political boundaries _________ the movement of people from one market to other markets.

  1. enable
  2. permit
  3. prevent
  4. allow

_______________ doesn’t consider competition.

  1. penetration pricing
  2. skimming pricing
  3. Transfer pricing
  4. Cost-plus pricing

Under ______________price is worked out assuming sufficient demand.

  1. cost-plus pricing
  2. Marginal cost pricing
  3. Transfer pricing
  4. Seasonal pricing

______________is useful to monitor the flow of goods among the department.

  1. Mark up pricing
  2. cost plus pricing
  3. full cost pricing
  4. Transfer pricing

_____________ harm the domestic industry and producers.

  1. transfer pricing
  2. dumping
  3. marginal cost pricing
  4. multiple products pricing

Discounts are given on goods______________demand.

  1. decrease
  2. doesn’t change
  3. Increase
  4. zero effect

ΣMR is the________________

  1. combined MR
  2. deducted MR
  3. Minimum MR
  4. Combined  revenue

_____________ is the price at which the intermediate products are sold by one department to another of the same firm.

  1. marginal cost pricing
  2. Transfer pricing
  3. cost-plus pricing
  4. multiple product pricing

Dumping is called___________ when there is the temporary sale of a commodity at a lower price abroad.

  1. sliding scale duty
  2. sporadic
  3. persistent
  4. predatory

______________ is example of Monopolistic market.

  1. Soap
  2. Automobile
  3. BMC
  4. Railway

Government charge _______________price for necessary goods.

  1. high
  2. Low
  3. premium
  4. skimming

When the elasticity of demand differs in two markets, the monopolist will charge a _____________ in the more elastic market.

  1. high price
  2. lower price
  3. moderate price
  4. premium price

___________ is one where prices are determined by what a firm believes customer will be prepared to pay.

  1. cost-plus pricing
  2. transfer pricing
  3. multiple products pricing
  4. customer based pricing

______________ is illegal under competition law.

  1. Competitor based pricing
  2. Predatory pricing
  3. Psychological pricing
  4. cost-plus pricing

_________ of the following is not a feature of equilibrium under price discriminating monopoly.

  1. ΣMR> ΣMC
  2. ΣMR< ΣMC
  3. ΣMR ≠ ΣMC
  4. ΣMR= ΣMC

____________ of the following is true about Payback period.

  1. it considers the cost of capital
  2. it considers the discounted value of cash flow
  3. it prefers short term project
  4. it helps to avoid tax

If a project costs Rs.2,00,000 yields an annual cash inflow of Rs.50,000.What will be its payback period?

  1. 3 years
  2. 2 years
  3. 4 years
  4. 7 years

Under Net present value criterion, a project is approved if_______________.

  1. Its net present value is positive
  2. its net present value is negative
  3. NPV less than POP
  4. NPV less than PBP

If the original cost of investment is Rs 5,00,000 and the annual cash inflow is 50,000. What will be the Payback period?

  1. 4 years
  2. 10 years
  3. 3 years
  4. 6 years

_____________ is comparatively difficult to understand and use.

  1. Net present value
  2. Internal Rate of Return
  3. Payback period
  4. Pay off period

Capital budgeting is also known as___________

  1. borrowing of funds
  2. Investment decision making
  3. pricing of product
  4. short term investment

If the project cost of Rs.5,000 generates a Cash flow of Rs.5000 in the first year,250 in the second year, Rs,.250 in 3rd year find out NPV if the cost of capital is 10%

  1. 60
  2. 50
  3. -60
  4. 80

If the project cost of Rs.5,000 generates a Cash flow of Rs.2500 in the first year,2500 in the second year, Rs,.2500 in the third year find out NPV if the cost of capital is 10%

  1. Rs.3212
  2. Rs.1,722
  3. Rs.1,712
  4. Rs.1,217

IRR stands for_____________.

  1. International rate of return
  2. Internal rate of return
  3. Initial rate of return
  4. Immediate rate of return

Payback period is measured in terms of_______.

  1. negative value
  2. Percentage (%)
  3. Rupees
  4. years

Project A involves an initial cash outlay of Rs.5000 each. The cash inflow generated by project A is Rs.1000,2000,2000,3000 in the subsequent year, find out PBP?

  1. 4 years
  2. 7 years
  3. 3rd years
  4. 5 years

Project B involve initial cash outlay of Rs.5,00,000 each. The cash inflow generated by the project A are Rs.1,00,000, 2,00,000,2,00,000, 1,00,000, 3,00,000in subsequent year, find out PBP?

  1. 3 years
  2. 8 years
  3. 12 years
  4. 9 years

Capital budgeting is part of____________.

  1. Investment decision
  2. working capital management
  3. Marketing management
  4. Capital structure

In capital budgeting, the positive net value results in ________.

  1. negative economic value added
  2. positive economic value added
  3. zero economic value-added
  4. constant economic value added

Capital Budgeting Decisions are based on:__________________.

  1. Incremental Profit
  2. Incremental Cash Flows
  3. Incremental loss
  4. Incremental liability

Rate of return refers to rate of return on _____________.

  1. quarterly cash inflow
  2. Capital invested
  3. capital is withdrawn from the market
  4. replaced capital

_______________ is similar to the Keynesian concept of marginal efficiency of capital.

  1. Payback period
  2. Net Present Value
  3. Internal rate of return
  4. Pay off period

If a project cost Rs.2,00,000 yield annual cash inflow of Rs.50,000 then PBP =______________.

  1. 3 years
  2. 2 years
  3. 4 years
  4. 7 years

Payback period method is also called________________.

  1. Internal rate of return
  2. pay off period
  3. Net Present value
  4. Payroll period

Evaluation of capital budgeting proposal is based on cash flow because_____.

  1. Cashflows are easy to calculate
  2. Cash flows are suggested by SEBI
  3. Cash is important than profit
  4. it doesn’t provide

IRR does not take into consideration____________.

  1. the cost of capital
  2. Rate of return
  3. Present value
  4. Discount rate

Capital budgeting is concerned with planning and control of_____________.

  1. Revenue expenditure
  2. working capital
  3. small funds
  4. Capital expenditure

IRR refers to the______

  1. Rate of return that will make the present value of all future net cash flows equal to the original investment
  2. Rate of interest
  3. The rate at which capital depreciates
  4. years required to cover the initial cost

The values of the future net incomes discounted by the cost of capital are called___________.

  1. The average capital cost
  2. Discounted capital cost
  3. Net capital cost
  4. Net present values

Capital budgeting pertains to investment decision______.

  1. to select a high risky project
  2. Balancing balance sheet
  3. to help choose between alternatives
  4. to take NPV with a negative value

Investment to replace working but obsolete equipment with more efficient ones are generally done for___________.

  1. increasing cost
  2. reducing cost
  3. Constant cost
  4. increasing risk

Long term investment decision involves__________.

  1. low-risk
  2. huge capital
  3. minimum risk
  4. only minimum profit

The payback period method of capital budgeting primarily focuses on_______.

  1. The current rate of interest
  2. The rate of profitability of assets
  3. The time period required to recover original investment
  4. The cost of acquiring capital assets

A project is profitable if NPV is______________.

  1. Zero
  2. Negative
  3. One
  4. Positive

_________ does not consider the cash inflows over the entire life of projects

  1. NPV
  2. IRR
  3. PBP
  4. MEC

______________ yield on investment.

  1. payback period method
  2. Discounted present value method
  3. Internal rate of return
  4. cost of capital

Following is not a characteristic of capital expenditure.

  1. It is the current outlay of funds with future expectation
  2. It may be sourced through borrowed funds
  3. It is scarce
  4. It is incurred only by the private sector

_____________is also called as” Time Adjusted Rate of Return Method.

  1. Average capital
  2. Net Present Value
  3. Payback period
  4. Internal rate of return

If the original cost of investment is Rs 5,00,000 and the annual cash inflow is Rs.1,00,000 then Pay Back Period =_________.

  1. 2.5 years
  2. 2 years
  3. 6 years
  4. 5 years

NPV is an ideal measure to_____________.

  1. Evaluate the projects
  2. Discriminate the projects on the basis of the Payback period
  3. accept the project on the basis of IRR
  4. to calculate the original cost of investment

In Capital budgeting, the project refers to_____________.

  1. A scheme for investing resources
  2. An assignment
  3. replacement of stationary
  4. time value of raw materials

Capital Budgeting helps to reduce___________.

  1. risk and uncertainties
  2. Profit
  3. return on investment
  4. utilisation of resources

_____________ is one of the biggest drawback of Payback Period.

  1. simple and easy to calculate
  2. favour less risky project
  3. it eases the problem of liquidity
  4. does not pay attention to cash inflow after the payback period

The cost of capital indicate the amount of ______________ required by the firm.

  1. profit
  2. returns
  3. Internal rate of return
  4. capital

The expected value against the investment revenue is referred to as_________.

  1. Incremental rate of return
  2. Profitability indices
  3. Net present value
  4. Return on capital

NPV can be calculated by using________ formula.

  1. P-C
  2. Rn/( 1+r)n
  3. original investment/annual cash inflow
  4. inflow/outflow

___________the following statements is true about mutually exclusive projects.

  1. They are not in direct competition with each other.
  2. They are in direct competition with each other.
  3. They are not evaluated based on shareholder wealth.
  4. They are never evaluated.

Formula to Calculate Payback Period = ______________.

  1. uniform cash inflow/ Annual cash inflow
  2. Annual cash inflow/Annual cash outflow
  3. Annual cash inflow/Original Investment
  4. Original Investment/Annual cash inflow

____________ defined as the rate at which the present values of all the net cash inflows are equal to the initial cost of the project.

  1. PBP
  2. POP
  3. IRR
  4. NPV

The internal Rate of Return (IRR) criterion for project acceptance, under theoretically infinite funds, are: accept all projects which have___________.

  1. IRR equal to the cost of capital
  2. IRR greater than the cost of capital
  3. IRR less than the cost of capital
  4. IRR less than the Payback period

___________ the following is not a capital budgeting.

  1. Expansion programme
  2. Acquisition of long term Assets
  3. Replacement of an existing Assets
  4. Current Assets

Capital budgeting pertains to investment decision______.

  1. to select a high risky project
  2. Balancing balance sheet
  3. which gives maximum return
  4. to take NPV with a negative value

The values of the future net incomes discounted by the cost of capital are called____________.

  1. The average capital cost
  2. Discounted capital cost
  3. Net capital cost
  4. Net present values

An increase in the discount rate will_______________.

  1. reduce the present value of future cash flows.
  2. increase the present value of future cash flows.
  3. have no effect on net present value.
  4. compensate for reduced risk.

A rational choice for capital budgeting would be to select_____________investment.

  1. most Profitable
  2. high cost of capital
  3. higher expected loss
  4. high payback period

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