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CA Foundation · Business Economics · Nature and Scope of Business Economics

Which of the following business decisions is mainly a matter of Business Economics, because it applies economic reasoning to a firm's choice among alternatives with scarce resources?

Dividing limited capital among competing projects by comparing expected returns and opportunity costs is a Business Economics decision. It involves choice under scarcity, which is the heart of economic reasoning. Trial balances, articles of association and annual filings are accounting or legal compliance tasks.

  1. AA firm preparing its trial balance at the year end
  2. BA firm drafting the articles of association for a new company
  3. CA firm deciding how to divide limited capital among three competing investment projects after comparing expected returns and opportunity costsCorrect
  4. DA firm filing its annual return with the registrar

Explanation

Allocating scarce capital among alternative uses by comparing returns and opportunity costs is core economic decision-making. Preparing a trial balance is accounting, while drafting articles and filing returns are legal and compliance tasks, not economic choice analysis.

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