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

Which of the following problems of a firm would fall under the microeconomic part of the scope of Business Economics?

Deciding price and output to maximise a firm's profit using its demand and cost conditions is a microeconomic problem. It concerns a single decision unit. Effects on national savings, fiscal deficit or the balance of payments are aggregate, macroeconomic issues.

  1. ADetermining the effect of a rise in the general price level on national savings
  2. BDeciding the price and output of a product to maximise the firm's profit given its demand and cost conditionsCorrect
  3. CAssessing the impact of the Union Budget on the country's fiscal deficit
  4. DEvaluating the effect of a fall in the rupee value on India's balance of payments

Explanation

Microeconomics deals with individual decision units such as a firm, covering demand, production, cost and pricing. Fixing price and output to maximise profit is such a decision. The other options concern aggregate national variables such as price level, fiscal deficit and balance of payments, which are macroeconomic.

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