Business Economics Mock Test - 1 - CA Foundation MCQ

The percentage change in demand is +20%; the percentage change in income is +10%. This means the product is normal because demand rises with more income and has an income elasticity of +2.

Cost of hiring one additional unit of labour = Rs 3
Revenue from hiring an additional unit of labour = MP of labour x price = Rs 3
Cost of renting one additional unit of capital = Rs 6
Revenue from renting an additional unit of capital = MP of capital x price = Rs 6
Hence, there is no benefit in increasing labour or capital.

On taking any economic decisions, only the marginal quantities are important. In this case, the relevant decision variable is the marginal quantity of the 251st samosa.

When goods whose uses less will have less price elastic because the products can be used for a specific purpose i.e it has no substitutes. The products which have more substitutes will have high elastic demand.

For an inferior good demand falls as income increases. The quantity demanded falls as price increases; this means the income elasticity and the price elasticity will both be negative.

For a firm operating in a perfectly competitive market, the slope of the TR curve is equal to the price and is constant.

HDI is a measure of well-being that includes health (measured with life expectancy), wealth (measured with GDP per capita), and education (measured with an education index), that can be used to compare countries' social and economic development, as well as track this development over time.

Credit money has a face value which is much higher than the commodity value. Credit money consists of credit cards, demand deposits, among others. 

MC_CDs/P_CDs=MU_tape/P_tape. Reeta is already maximizing her utility.

This means that the percentage change in quantity demanded is less than the percentage change in price; this means a price increase will increase revenue.

The direct tax is collected directly from the income earners.

Convexity means slope is decreasing as the marginal rate of substitution goes on diminishing.

If the marginal propensity to save decreases, the value of the multiplier will increase.

Service tax which is applied to the sales of services is an indirect tax.

When demand does not respond to the given change in price it is known as Perfectly Inelastic demand where elasticity of demand is zero & demand curve is parallel to Y axis i.e. it is vertical.

Since the firms are identical, we can assume that their supply curves are identical. Hence, each firm would supply 25 units.
∴Qs=20×25=500

Because more milk is consumed, the MU from milk is lower than the MU from rubies.

The other names for capital formation is investments

MRS is always related to the choice and preferences of the consumer.

In the short run, fixed costs are treated as sunk costs. Hence, a firm should shut down temporarily if P<AVC. If AVC<P<SAC, the firm should remain operational.

Let q be the market supply.
p<2⇒q=0
2≤p<5⇒q=q1=6p−1
p≥5⇒q=q1+q2=9p−6
Hence, p=6⇒q=9×6−6=48
p=4⇒q=6×4−1=23

Banks accept deposits as chequeable deposits and non-chequeable deposits. 

Forward market deals with foreign exchange transactions that are meant for future delivery.

Increase in total expenditure will have two effect on price. if the price rises than the demand is inelastic and if the price falls than the demand is elastic. Thus in the given example we observe that total expenditure increases then the demand will inelastic with rise in price because there is a direct relationship between the price and total expenditure.

TR=P×Q=300×10
=Rs  3000

A progressive tax is a tax in which the average tax rate (taxes paid ÷ personal income) increases as the taxable amount increases. The term "progressive" refers to the way the tax rate progresses from low to high, with the result that a taxpayer's average tax rate is less than the person's marginal tax rate.

In the Zamindari system the rent was fixed and a revenue collector was appointed by the government who was responsible for rent collection.

Luxary goods elastic demand as a small change in price of it can lead to large change in quantity demanded.