Business Economics Mock Test - 2


100 Questions MCQ Test Mock Tests & Past Year Papers for CA Foundation | Business Economics Mock Test - 2


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This mock test of Business Economics Mock Test - 2 for CA Foundation helps you for every CA Foundation entrance exam. This contains 100 Multiple Choice Questions for CA Foundation Business Economics Mock Test - 2 (mcq) to study with solutions a complete question bank. The solved questions answers in this Business Economics Mock Test - 2 quiz give you a good mix of easy questions and tough questions. CA Foundation students definitely take this Business Economics Mock Test - 2 exercise for a better result in the exam. You can find other Business Economics Mock Test - 2 extra questions, long questions & short questions for CA Foundation on EduRev as well by searching above.
QUESTION: 1

The slope of the TFC curve is equal to

Solution:

Slope of TFC curve = 0 since TFC is a constant. TFC curve is a straight line parallel to the x-axis. 

QUESTION: 2

Which of the following rules should be followed by a supplier for profit maximization?

Solution:

If the price is greater than the marginal cost of the next unit, the firm should continue production as there is a profit on producing the additional unit.

QUESTION: 3

Which one leads to Factor Cost?

Solution:

Market price - Net Indirect tax = Factor Cost.

QUESTION: 4

At equilibrium, which of the following are true?

Solution:

At equilibrium, buyers' willingness to pay is equal to sellers' willingness to accept. The quantity demanded is equal to the quantity supplied. Hence there is no excess demand or supply.

QUESTION: 5

The basic difference between macroeconomics and microeconomics is:

Solution:

Microeconomics concentrates on the behavior of individual consumers and firms while macroeconomics focuses on the performance of the entire economy.

QUESTION: 6

The slope of the TC curve gives

Solution:

The slope of the TC curve = ΔTC/Δq= MC

QUESTION: 7

Which of the following are examples of legal market power?

Solution:

Legal market power arises because of barriers to entry created by the government. This is achieved through patents, copyrights and sometimes even government monopolies like Indian railways.

QUESTION: 8

Introduction of money has:

Solution:

Money has both separated the acts of purchase and sale, and expanded their scope. 

QUESTION: 9

___ is an increase in the quantity of money in circulation without any corresponding increase in goods thus leading to an abnormal rise in price levels.

Solution:

Inflation refers to the increase in the quantity of money in circulation without any corresponding increase in goods thus leading to an abnormal rise in price levels.

QUESTION: 10

Demand for which of the following goods does not change with a change in income of the consumer?

Solution:

Demand for necessary goods is inelastic.

QUESTION: 11

The numbers of units produced by a firm and the corresponding costs are tabulated below.

Assuming constant variable cost per unit, calculate the AFC for 100 units.

Solution:

Let the fixed cost be F and the variable cost per unit be v.
F +100 v = Rs 2000
F + 250 v = Rs 3500
On solving, we get F = 1000 =TFC and v = 10 = AVC
Now, AFC = TFC / 10 = 1000/100 = Rs 10

QUESTION: 12

The phenomenon of increased differences in wealth between the rich and poor countries which started around 1800 is called ___

Solution:

The phenomenon of increased differences in wealth between the rich and poor countries which started around 1800 is called the great divergence. 

QUESTION: 13

Which of the following would be strictly a microeconomic topic?

Solution:

Microeconomics studies economic problems relating to individual economic units like a consumer, or a producer. An increase in the price of TATA Nano is related to an individual unit, which makes it a microeconomics topic.

QUESTION: 14

A commercial bank is a bank that:

Solution:

A commercial bank provides long-term and short-term loans and creates credit. 

QUESTION: 15

What is the relationship between supply of foreign exchange and exchange rate?

Solution:

The supply of foreign exchange varies positively and directly with the exchange rate. 

QUESTION: 16

Which one of the following is the most accurate definition of economics?

Solution:

Economics is the study of how society chooses to allocate its scarce resources in order to satisfy unlimited wants.

QUESTION: 17

Suppose at the beginning of the year, company ABC had 5 units in its inventory. At the end of the year, it had 50 units in its inventory. The change in stock here is:

Solution:

Change in stock = Closing stock - Opening stock = 50 - 5 = 45

QUESTION: 18

Which of the following is NOT an input

Solution:

Production is a process, not an input. 

QUESTION: 19

If entire additional income is converted into additional consumption, the value of multiplier will be

Solution:

Multiplier = 1/(1−MPC)
If entire additional income is converted into additional consumption, MPC = 1.
Therefore, the value of multiplier will be infinity.

QUESTION: 20

___ goods have positive income effect.

Solution:

The demand for normal goods increases as income increases.

QUESTION: 21

 Land

Solution:

Land is a free gift of nature and alcks geographical mobility.

QUESTION: 22

A car running between Delhi and Agra at a speed of 120 km/h includes: 

Solution:

Velocity is a flow variable. 

QUESTION: 23

If MPC = 0.9, then value of multiplier will be :

Solution:

QUESTION: 24

When RBI wants to reduce liquidity in the banking system,

Solution:

When RBI wants to reduce liquidity in the banking system, it increases the CRR as it reduces the money supply in the economy.

QUESTION: 25

Casual workers are covered under?

Solution:

Chronic poverty is a phenomenon whereby an individual or group is in a state of poverty over extended period of time. Casual workers are covered under chronic poor, because they are employed for brief periods, and are generally unemployed.

QUESTION: 26

In which of these systems does the ownership of the facility lie with the private enterprise?

Solution:

In the BOO (Build. Own. Operate) system, the ownership of the facility lies with the private enterprise.

QUESTION: 27

If the economy is producing a combination of goods inside its production possibilities frontier, then

Solution:

Any point inside the PPC indicates inefficient utilization of resources.

QUESTION: 28

A quantity measured per unit of time period is known as :

Solution:

Flow variables are measured per unit time. 

QUESTION: 29

In India, the balance of payments has

Solution:

India’s BOP has seen a deficit during most years, as India is a net importer.

QUESTION: 30

Which of the following is a feature of the Informal sector?

Solution:

Workers in the informal sector are paid unfairly low wages.

QUESTION: 31

Suppose that the following headlines appeared in a newspaper. Which would most clearly represent a macroeconomic issue?

Solution:

Macroeconomics is that branch of Economics, which studies economic problems (or economic issues) relating to economy as a whole. Since Central bank is at the center of the entire banking system, this is an example of Macroeconomic variable.

QUESTION: 32

Demand for a product should have the following pre-requisite

Solution:

All of them are pre-requisites of demand for a product. 

QUESTION: 33

Money that is issued by the authority of the government is called:

Solution:

Fiat money refers to money whose value has been decreed by the government. 

QUESTION: 34

What is the value of the government spending multiplier if marginal propensity to consume is 0.6?

Solution:

QUESTION: 35

Marginal Utility curve always

Solution:

The negative slope of the marginal utility curve reflects the law of diminishing marginal utility. The marginal utility curve also can be used to derived the demand curve. 

QUESTION: 36

As a result of rise in consumer's income, demand curve for coarse grain (inferior good):

Solution:

As a result of rise in consumer's income, demand curve for coarse grain (inferior good) shifts to the left. 

QUESTION: 37

Economic development of a country requires:

Solution:

Economic development of a country requires skilled labour and abundant natural resources.

QUESTION: 38

Which of the following is correct with respect to resources:

Solution:

Human skills are a labour input.

QUESTION: 39

The minimum point of a firm's LRAC is Rs 8, at which it produces a quantity of 500. Which of the following price-quantity pairs (p,q) can lie on the supply curve?

Solution:

The supply curve is the portion of the MC curve above the LRAC. It starts from the minimum point of the LRAC. Since the supply curve is upward sloping, for any point on the supply curve, the price will be greater than Rs 8 and quantity greater than 500 units. Only option D satisfies this condition.

QUESTION: 40

At which of the following points is the quantity demanded and quantity supplied equal?

Solution:

At equilibrium, quantity demanded is equal to the quantity supplied.

QUESTION: 41

Which one includes depreciation?

Solution:

GNP at market price - Depreciation = NNP at market price

QUESTION: 42

Money that is issued by the authority of the government is called:

Solution:

Fiat money refers to money whose value has been decreed by the government. 

QUESTION: 43

The ability of money to be moved easily is called:

Solution:

Portability is a key characteristic of money describing that money can be easily carried around.

QUESTION: 44

The rate at which RBI lends money to commercial banks is called:

Solution:

The rate at which the RBI lends money to commercial banks is called Repo rate.

QUESTION: 45

The opportunity cost of watching television is:

Solution:

The opportunity cost here is the time foregone by watching the television.

QUESTION: 46

For a good, price increases by 25% and quantity supplied increases by 50%. What is the supply elasticity?

Solution:

QUESTION: 47

According to a recent forecast, the government is about to face a high future loan burden and heavy interest payments. This is due to:

Solution:

A high revenue deficit implies a high future loan burden and heavy interest payments.

QUESTION: 48

Credit cards issued by the banks:

Solution:

Credit cards boost aggregate demand and encourage spending. 

QUESTION: 49

Human capital increases:

Solution:

Human capital increases labour productivity.

QUESTION: 50

According to marginal analysis, you should spend more time studying economics if the extra benefit from an additional hour of study:

Solution:

You should spend more time if the additional hour offers an increase in satisfaction.

QUESTION: 51

Introduction of money has:

Solution:

Money has both separated the acts of purchase and sale, and expanded their scope.

QUESTION: 52

A consumer gets maximum satisfaction where the ___ are same.

Solution:

A consumer gets maximum satisfaction from his limited income when the marginal utility per rupee spent is equal for all goods.

QUESTION: 53

In which of the following economies is central control more?

Solution:

Commuism is an examlple of a centrally planned economy.

QUESTION: 54

If aggregate demand increases, aggregate supply will increase only when there is(are)

Solution:

If aggregate demand increases, aggregate supply will increase only when there are an excess capacity and under-utilisation of the existing resources.

QUESTION: 55

Development of Human resource can be done by

Solution:

Development of Human resource can be done by improving literacy skills, skill development, and training. 

QUESTION: 56

In which mode of production are market forces of supply and demand the key players?

Solution:

In capitalist economy, market is the main determinant of the economy.

QUESTION: 57

A professional basketball players' union negotiates a contract that dramatically increases all players' salaries. How would this influence the opportunity cost for a player who was considering giving up basketball to pursue a career in broadcasting?

Solution:

Opportunity cost is the value of a factor in its next best use. With an increase in salary for playing basketball, if a player is considering giving up basketball to pursue a career in broadcasting, his opportunity cost of becoming a broadcaster will increase.

QUESTION: 58

Which of the following input factor takes risk, innovates, and coordinates:

Solution:

Entrepreneur takes risk, innovates, and coordinates.

QUESTION: 59

Which of the following assumptions about a perfectly competitive market structure is/are not valid in the case of a monopoly?

Solution:

In a perfectively competitive market structure, firms are price takers. For this, there should be a large number of sellers as well as free entry and exit.

QUESTION: 60

Which was a more important component of revenue expenditure?

Solution:

Non-Plan Expenditure was the more important component of revenue expenditure.

QUESTION: 61

What kind of retail business acts as a universal supplier of a wide variety of product?

Solution:

Departmental stores act as the universal supplier of a wide variety of products.

QUESTION: 62

Pravan is working as a Production Manager in DTPL Ltd engaged in manufacturing of DTPL bulbs. There is no class-conflict between the management and workers. The working conditions are very good. The company is earning huge profits. As a policy matter, management is sharing the gains with the workers because they believe that the prosperity of the company cannot exist for a long time without the prosperity of the employees. State the principles of management?

Solution:

In the above-mentioned paragraph, the principle is 'harmony, not discord'. 

QUESTION: 63

Planning is an empty exercise without ___ because the implementation of plans and monitoring of a plan depends on it.

Solution:

Planning is an empty exercise without controlling because the implementation of plans and monitoring of a plan depends on it.

QUESTION: 64

'Use of alcoholic beverages is banned during office timings'. Identify which type of plan is it. 

Solution:

'Use of alcoholic beverages is banned during office timings'. The type of plan is rule. 

QUESTION: 65

Mrs. Rita has her own beauty parlour at the Cross Street road. Which form of business organisation is most suitable for her?

Solution:

Sole proprietorship is the best option for her, as it requires personal touch for the business to grow. 

QUESTION: 66

Pravan is working as a Production Manager in DTPL Ltd engaged in manufacturing of DTPL bulbs. There is no class-conflict between the management and workers. The working conditions are very good. The company is earning huge profits. As a policy matter, management is sharing the gains with the workers because they believe that the prosperity of the company cannot exist for a long time without the prosperity of the employees. State the principles of management?

Solution:

In the above-mentioned paragraph, the principle is 'harmony, not discord'. 

QUESTION: 67

How is informal organisation created?

Solution:

Informal organisation is created due to friendly and social interactions of employees.

QUESTION: 68

Samsung decides to release a new version in Samsung Galaxy note series after studying the scope of its profitability in the long run. Name the study taken by Samsung.

Solution:

Samsung did an economic feasibility study to understand the profitability of the new release in the long run.

QUESTION: 69

Which principle of scientific management suggests the introduction of scientific investigation and analysis of management practice?

Solution:

Science, not rule of thumb. It suggests the introduction of scientific investigation and analysis of management practice. 

QUESTION: 70

Which partner allows to use his /her name by a firm. 

Solution:

A nominal partner is one who allows the use of his/her name by a firm. 

QUESTION: 71

Identify the activities that are undertaken to earn a living?

Solution:

The activities that are undertaken are economic activities.

QUESTION: 72

Which of the following steps in the process of controlling are concerned with compelling events to confirm a plan? 

Solution:

Comparing actual performance with standards and taking corrective action are both steps in the process of controlling.

QUESTION: 73

As a part of incentives provided by the Government to the small businesses, power is supplied at a concessional rate of ___ %.

Solution:

As a part of incentives provided by the Government to the small businesses, power is supplied at a concessional rate of 50%. In some states, no charges are made for the initial years.

QUESTION: 74

A decision to acquire a new and modern plant to upgrade an old one is a:

Solution:

The Investment decision refers to the decision of investing funds in different assets. It can be long term or short term. A Long term Investment decision is also called 'Capital Budgeting Decision' . It involves investing the finance in capital assets like making investment in a new machine to replace an existing one, etc.

QUESTION: 75

Which is not a reason a business engages in business ethics?

Solution:

To enhance the global relationships is not a reason why firms tend to engage in business ethics. Business ethics, which is also referred to as corporate ethics, is a form of ethics that focuses on the principles or problems that exist in a business environment. These ethics have their origin coming from people, morality, the organization’s statements, and from the legal system. Professionals working in these sectors tend to follow these ethics that contain the standard code of conduct and rules to follow while working in organizations and corporate areas. They are extremely vital to a business’s success and the overall image that it has in the market.

QUESTION: 76

Which one of the following facilitates easy purchase of goods and services without making immediate payment?

Solution:

Trade credit facilitates easy purchase of supplies without immediate payment. Such credit appears in the records of the buyer of goods as accounts payable.

QUESTION: 77

Which of the following is a good quality of a leader?

Solution:

Communication skills, initiative, and integrity are all good qualities of a leader.

QUESTION: 78

___ reviews the operations in a business unit.

Solution:

Controlling reviews the operations in a business unit.

QUESTION: 79

Ram bought a shoe from the mall for his birthday. What did he receive? 

Solution:

Ram bought a shoe from the mall for his birthday. He bought a "good"  that is a physical product that is capable of being delivered to a purchaser and involves the transfer of ownership from a seller to a customer. 

QUESTION: 80

Which of the following is a good quality of a leader?

Solution:

Communication skills, initiative, and integrity are all good qualities of a leader.

QUESTION: 81

A partner who contributes capital but does not take part in the business management of a firm. 

Solution:

A sleeping partner is one who contributes capital but does not take part in the business management of a firm. 

QUESTION: 82

CSR stands for

Solution:

Corporate Social Responsibility 

QUESTION: 83

People interact with others in order to persuade them to act in a particular way, say to purchase a product or a service, rather than forcing them to do so. Therefore, marketing is a ___ process.

Solution:

People interact with others in order to persuade them to act in a particular way, say to purchase a product or a service, rather than forcing them to do so. Therefore, marketing is a social process.

QUESTION: 84

What does 'online registration' mean? 

Solution:

Registration means that you have an account with the online vendor. Among various details that need to be filled in is a password as the sections relating to your 'account' and 'shopping cart' are password protected. 

QUESTION: 85

Which step precedes the allotment of shares? 

Solution:

Application to stock exchange precedes allotment of shares. 

QUESTION: 86

______ is a prerequisite to creation of a company.

Solution:

Issuing equity shares is a prerequisite to the creation of a company. When a company is formed it can issue shares to the public or to private individuals.

QUESTION: 87

What kind of a store is Big Bazaar? 

Solution:

Big Bazaar is a departmental store. 

QUESTION: 88

Which principle of scientific management suggests the introduction of scientific investigation and analysis of management practice? 

Solution:

Science, not rule of thumb. It suggests the introduction of scientific investigation and analysis of management practice.

QUESTION: 89

Which plan is defined as the formalised or systematic way of doing routine or repetitive jobs?

Solution:

Method plan is defined as the formalised or systematic way of doing routine or repetitive jobs.

QUESTION: 90

Which function of management ensures work accomplishment according to plans?

Solution:

The controlling function of management ensures work accomplishment according to plans.

QUESTION: 91

1. Indian Railways runs 12,617 trains to carry over 23 million passengers daily.
2. Railways play a vital role in helping the people in the event of natural calamtities like droughts, floods, famines, earthquakes etc. 

Q. Which of the above statements is correct?

Solution:

Both statements 1 and 2 are correct.
1. Indian Railways runs 12,617 trains to caary over 23 million passengers daily.
2. Railways play a vital role in helping the people in the event of natural calamtities like droughts, floods, famines, earthquakes etc.

QUESTION: 92

The new economic policy consisted of ___,___ and ___

Solution:

The new economic policy consisted of liberalisation, globalisation and privatisation.

QUESTION: 93

What are the two types of cheque?

Solution:

The two type of cheques are:
1. Bearer cheque
2. Crossed cheque 

QUESTION: 94

Which of the following are the different forms of consumer grievance agencies around India?

Solution:

The different forms of consumer grievance agencies around India are:
1.District forum
2. State commission
3. National commission

QUESTION: 95

A mobile wallet is also known as mobile money or a __________________. 

Solution:

A mobile wallet is also known as mobile money or a mobile money transfer.

QUESTION: 96

Freedom in fixing prices of goods and services and the reduction in sales tax rates is ___.

Solution:

Freedom in fixing prices of goods and services and the reduction in sales tax rates is Liberalisation. 

QUESTION: 97

What type of instruments are traded in a Money Market?

Solution:

Treasury Bills. Treasury bills (T-bills) are short-term notes issued by the government. Certificates of Deposit.
Commercial Paper.
Call money

QUESTION: 98

Which of the following is an example of Departmental undertakings?

Solution:

All of these ar examples of Departmental undertakings.

QUESTION: 99

Which of the following is a part of villages and small business sector?

Solution:

All the given options come under villages and small business sector.

QUESTION: 100

___ organisation may become a disruptive force when it spreads rumours.

Solution:

Informal organisation may become a disruptive force when it spreads rumours.

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