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

Which of the following is a feature of Business Economics rather than of pure (theoretical) economics?

Business Economics is prescriptive: it advises what a firm should do to achieve its objectives, such as maximising profit or choosing between alternatives. Pure economics is more abstract and theoretical, whereas Business Economics is practical, recognises uncertainty and risk, and offers recommendations to managers.

  1. AIt is primarily concerned with building abstract models without practical use
  2. BIt is prescriptive and gives guidance on what a firm should do to achieve its objectivesCorrect
  3. CIt avoids making any value judgements or recommendations
  4. DIt ignores the uncertainty and risk that firms face

Explanation

Business Economics is normative or prescriptive in character, since it suggests courses of action for the firm to reach its goals. Pure economics is more abstract and theoretical. The other options describe things Business Economics does not do, as it deals with risk and offers recommendations.

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