IGCSE Economics Paper-2: Specimen Questions with Answers 21 - 22 of 100

Passage

Total of credit side of the balance of payment should always equal the debit side.

Question 21 (5 of 5 Based on Passage)

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Short Answer▾

Explain the merits of MNC to the host country.

Explanation

According to ILO The essential nature of multinational enterprises lies in the fact that its managerial headquarters are in one country referred to as home country while the enterprise carries out operations in a number of other countries as well (host countries)

The Benefits of MNC to the Host Country Are

  • MNCs help increase the investment level and thereby income and employment in host country.
  • The transnational corporations have become vehicles of or the transfer technology, especially to the developing countries.
  • They also kindle a managerial revolution in the host countries through professional management and the employment of highly sophisticated management techniques.
  • The MNCs enable the host countries to increase their exports and decrease their imports requirements.
  • They work to equalize the cost of factors of production around the world.

Passage

Managerial Economics deals with practical business-problems relating to production, pricing, and sales.

Question 22 (1 of 5 Based on Passage)

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How decision regarding resource allocation is made?

Explanation

The basic business problems where managerial decision making is based on economic understanding

  • What to produce
  • How much to produce
  • How to produce
  • Where to produce

All these problems in gist involve allocation and utilization of productive resources such as land, labor, and capital, enterprise, including finance or money in a modern economy. Five MS: Men, Machines, Materials, Management, and money are important elements of input production decision making and these are scarce means need to be economized in use. Optimal utilization of these resources is taught by economics.

Decision About Allocation of Resources is Made in Three Stages

  • Allocate decision: What types of goods and services to be produced from the available productive resources which are scarce
  • Productive decision: How much to be produced and how to combine these resources for desired quantity and pattern of goods and services.
  • Distributive decision: To whom these products and services are to be distributed/marketed or supplied.
The Basic Economic Problem

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