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Business Economics Sample Paper- 1
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Page 1 FOUNDATION COURSE MOCK TEST PAPER PAPER – 4 : BUSINESS ECONOMICS AND BUSINESS AND COMMERCIAL KNOWLEDGE PART I: BUSINESS ECONOMICS QUESTIONS Max. Marks: 60 1. In the case of a straight line demand curve meeting the two axes, the price elasticity of demand at y-axis of the line would be equal to (a) 1 (b) infinity (c) 3 (d) 1.25 2. A firm under perfect competition will be making minimum losses (in the short run) at a point where: (a) MC > MR (b) MR> MC (c) MC = MR (d) AC = AR 3. When the consumer is in equilibrium his price line is ______ to indifference curve (a) Parallel (b) At right angle (c) Diagonally opposite (d) Tangent 4. The Law of variable proportions examines the Production function with: (a) One factor variable and only one factor fixed (b) One factor variable keeping quantities of other factors fixed (c) All factors variable (d) None of the above © The Institute of Chartered Accountants of India Page 2 FOUNDATION COURSE MOCK TEST PAPER PAPER – 4 : BUSINESS ECONOMICS AND BUSINESS AND COMMERCIAL KNOWLEDGE PART I: BUSINESS ECONOMICS QUESTIONS Max. Marks: 60 1. In the case of a straight line demand curve meeting the two axes, the price elasticity of demand at y-axis of the line would be equal to (a) 1 (b) infinity (c) 3 (d) 1.25 2. A firm under perfect competition will be making minimum losses (in the short run) at a point where: (a) MC > MR (b) MR> MC (c) MC = MR (d) AC = AR 3. When the consumer is in equilibrium his price line is ______ to indifference curve (a) Parallel (b) At right angle (c) Diagonally opposite (d) Tangent 4. The Law of variable proportions examines the Production function with: (a) One factor variable and only one factor fixed (b) One factor variable keeping quantities of other factors fixed (c) All factors variable (d) None of the above © The Institute of Chartered Accountants of India 5. Indifference Curve analysis is based on (a) Ordinal utility (b) Cardinal utility (c) Marginal utility (d) None of the above 6. MC curve cuts AVC Curve (a) At its falling point (b) At its minimum Point (c) At its rising point (d) At different points 7. Accounting profit is equal to: (a) Total Revenue – Total variable cost (b) Total Revenue – Total direct cost (c) Total Revenue – Total Cost (d) Total Revenue – Total Explicit cost and Total Implicit Cost. 8. Which of the following is a cause of an economic problem? (a) Scarcity of Resources (b) Unlimited wants (c) Alternative uses (d) All of the above 9. When two goods are perfect substitutes of each other then (a) MRS is falling (b) MRS is rising (c) MRS is constant (d) None of the above 10. In case of a Giffen good, the demand curve will be: (a) Horizontal (b) Downward – sloping to the right (c) Vertical © The Institute of Chartered Accountants of India Page 3 FOUNDATION COURSE MOCK TEST PAPER PAPER – 4 : BUSINESS ECONOMICS AND BUSINESS AND COMMERCIAL KNOWLEDGE PART I: BUSINESS ECONOMICS QUESTIONS Max. Marks: 60 1. In the case of a straight line demand curve meeting the two axes, the price elasticity of demand at y-axis of the line would be equal to (a) 1 (b) infinity (c) 3 (d) 1.25 2. A firm under perfect competition will be making minimum losses (in the short run) at a point where: (a) MC > MR (b) MR> MC (c) MC = MR (d) AC = AR 3. When the consumer is in equilibrium his price line is ______ to indifference curve (a) Parallel (b) At right angle (c) Diagonally opposite (d) Tangent 4. The Law of variable proportions examines the Production function with: (a) One factor variable and only one factor fixed (b) One factor variable keeping quantities of other factors fixed (c) All factors variable (d) None of the above © The Institute of Chartered Accountants of India 5. Indifference Curve analysis is based on (a) Ordinal utility (b) Cardinal utility (c) Marginal utility (d) None of the above 6. MC curve cuts AVC Curve (a) At its falling point (b) At its minimum Point (c) At its rising point (d) At different points 7. Accounting profit is equal to: (a) Total Revenue – Total variable cost (b) Total Revenue – Total direct cost (c) Total Revenue – Total Cost (d) Total Revenue – Total Explicit cost and Total Implicit Cost. 8. Which of the following is a cause of an economic problem? (a) Scarcity of Resources (b) Unlimited wants (c) Alternative uses (d) All of the above 9. When two goods are perfect substitutes of each other then (a) MRS is falling (b) MRS is rising (c) MRS is constant (d) None of the above 10. In case of a Giffen good, the demand curve will be: (a) Horizontal (b) Downward – sloping to the right (c) Vertical © The Institute of Chartered Accountants of India (d) Upward – sloping 11. Which of the following statements is incorrect? (a) The services of doctors, lawyers, teachers etc. are termed as production (b) Man cannot create matter (c) Accumulation of capital does not depend solely on income (d) None of the above 12. In perfect competition utilization of resources is (a) Partial (b) Moderate (c) Full (d) Over 13. Price discrimination occurs when: (a) Producer sells a specific commodity or service to different buyers for the same price (b) Producer sells specific commodity or service to different buyers at two or more different prices due to difference in cost (c) Producer sells a specific commodity or service to different buyers at two or more different prices for reasons not associate with difference in cost (d) Producer under perfect competition sells different goods to consumers at different prices 14. MR curve under Monopoly lies between AR and Y – axis because, the rate of decline of the MR is (a) Just half of the rate of decline of AR (b) Just equal to the rate of decline of AR (c) Just triple the rate of decline of the average revenue (d) Just double the rate of decline of the average revenue 15. In the long run, normal profits are included in the ______ curve. (a) LAC (b) LMC (c) AFC (d) SAC © The Institute of Chartered Accountants of India Page 4 FOUNDATION COURSE MOCK TEST PAPER PAPER – 4 : BUSINESS ECONOMICS AND BUSINESS AND COMMERCIAL KNOWLEDGE PART I: BUSINESS ECONOMICS QUESTIONS Max. Marks: 60 1. In the case of a straight line demand curve meeting the two axes, the price elasticity of demand at y-axis of the line would be equal to (a) 1 (b) infinity (c) 3 (d) 1.25 2. A firm under perfect competition will be making minimum losses (in the short run) at a point where: (a) MC > MR (b) MR> MC (c) MC = MR (d) AC = AR 3. When the consumer is in equilibrium his price line is ______ to indifference curve (a) Parallel (b) At right angle (c) Diagonally opposite (d) Tangent 4. The Law of variable proportions examines the Production function with: (a) One factor variable and only one factor fixed (b) One factor variable keeping quantities of other factors fixed (c) All factors variable (d) None of the above © The Institute of Chartered Accountants of India 5. Indifference Curve analysis is based on (a) Ordinal utility (b) Cardinal utility (c) Marginal utility (d) None of the above 6. MC curve cuts AVC Curve (a) At its falling point (b) At its minimum Point (c) At its rising point (d) At different points 7. Accounting profit is equal to: (a) Total Revenue – Total variable cost (b) Total Revenue – Total direct cost (c) Total Revenue – Total Cost (d) Total Revenue – Total Explicit cost and Total Implicit Cost. 8. Which of the following is a cause of an economic problem? (a) Scarcity of Resources (b) Unlimited wants (c) Alternative uses (d) All of the above 9. When two goods are perfect substitutes of each other then (a) MRS is falling (b) MRS is rising (c) MRS is constant (d) None of the above 10. In case of a Giffen good, the demand curve will be: (a) Horizontal (b) Downward – sloping to the right (c) Vertical © The Institute of Chartered Accountants of India (d) Upward – sloping 11. Which of the following statements is incorrect? (a) The services of doctors, lawyers, teachers etc. are termed as production (b) Man cannot create matter (c) Accumulation of capital does not depend solely on income (d) None of the above 12. In perfect competition utilization of resources is (a) Partial (b) Moderate (c) Full (d) Over 13. Price discrimination occurs when: (a) Producer sells a specific commodity or service to different buyers for the same price (b) Producer sells specific commodity or service to different buyers at two or more different prices due to difference in cost (c) Producer sells a specific commodity or service to different buyers at two or more different prices for reasons not associate with difference in cost (d) Producer under perfect competition sells different goods to consumers at different prices 14. MR curve under Monopoly lies between AR and Y – axis because, the rate of decline of the MR is (a) Just half of the rate of decline of AR (b) Just equal to the rate of decline of AR (c) Just triple the rate of decline of the average revenue (d) Just double the rate of decline of the average revenue 15. In the long run, normal profits are included in the ______ curve. (a) LAC (b) LMC (c) AFC (d) SAC © The Institute of Chartered Accountants of India 16. Calculate Income-elasticity for the household when the income of a household rises by 10% the demand for T.V. rises by 20% (a) + .5 (b) -.5 (c) + 2 (d) -2 17. In case of necessaries the marginal utilities of the earlier units are large. In such cases the consumer surplus will be: (a) nfinite (b) Zero (c) Marginally positive (d) Marginally Negative 18. Which of the following is not the characteristic of Labour? (a) Labour is highly ‘Perishable’ in the sense that a day’s labour lost cannot be completely recovered (b) Labour is inseparable from the labourer himself (c) Labour has a strong bargaining power (d) The supply of labour and wage rate are directly related in the initial stages 19. Indicate which of the following is a variable cost? (a) Payment of rent on building (b) Cost of Machinery (c) Interest payment on Loan taken from bank (d) Cost of raw material 20. Marginal costs are closely associated with: (a) Variable cost (b) Total fixed cost (c) Average cost (d) Total cost 21. Economic cost means (a) Accounting cost + Implicit cost © The Institute of Chartered Accountants of India Page 5 FOUNDATION COURSE MOCK TEST PAPER PAPER – 4 : BUSINESS ECONOMICS AND BUSINESS AND COMMERCIAL KNOWLEDGE PART I: BUSINESS ECONOMICS QUESTIONS Max. Marks: 60 1. In the case of a straight line demand curve meeting the two axes, the price elasticity of demand at y-axis of the line would be equal to (a) 1 (b) infinity (c) 3 (d) 1.25 2. A firm under perfect competition will be making minimum losses (in the short run) at a point where: (a) MC > MR (b) MR> MC (c) MC = MR (d) AC = AR 3. When the consumer is in equilibrium his price line is ______ to indifference curve (a) Parallel (b) At right angle (c) Diagonally opposite (d) Tangent 4. The Law of variable proportions examines the Production function with: (a) One factor variable and only one factor fixed (b) One factor variable keeping quantities of other factors fixed (c) All factors variable (d) None of the above © The Institute of Chartered Accountants of India 5. Indifference Curve analysis is based on (a) Ordinal utility (b) Cardinal utility (c) Marginal utility (d) None of the above 6. MC curve cuts AVC Curve (a) At its falling point (b) At its minimum Point (c) At its rising point (d) At different points 7. Accounting profit is equal to: (a) Total Revenue – Total variable cost (b) Total Revenue – Total direct cost (c) Total Revenue – Total Cost (d) Total Revenue – Total Explicit cost and Total Implicit Cost. 8. Which of the following is a cause of an economic problem? (a) Scarcity of Resources (b) Unlimited wants (c) Alternative uses (d) All of the above 9. When two goods are perfect substitutes of each other then (a) MRS is falling (b) MRS is rising (c) MRS is constant (d) None of the above 10. In case of a Giffen good, the demand curve will be: (a) Horizontal (b) Downward – sloping to the right (c) Vertical © The Institute of Chartered Accountants of India (d) Upward – sloping 11. Which of the following statements is incorrect? (a) The services of doctors, lawyers, teachers etc. are termed as production (b) Man cannot create matter (c) Accumulation of capital does not depend solely on income (d) None of the above 12. In perfect competition utilization of resources is (a) Partial (b) Moderate (c) Full (d) Over 13. Price discrimination occurs when: (a) Producer sells a specific commodity or service to different buyers for the same price (b) Producer sells specific commodity or service to different buyers at two or more different prices due to difference in cost (c) Producer sells a specific commodity or service to different buyers at two or more different prices for reasons not associate with difference in cost (d) Producer under perfect competition sells different goods to consumers at different prices 14. MR curve under Monopoly lies between AR and Y – axis because, the rate of decline of the MR is (a) Just half of the rate of decline of AR (b) Just equal to the rate of decline of AR (c) Just triple the rate of decline of the average revenue (d) Just double the rate of decline of the average revenue 15. In the long run, normal profits are included in the ______ curve. (a) LAC (b) LMC (c) AFC (d) SAC © The Institute of Chartered Accountants of India 16. Calculate Income-elasticity for the household when the income of a household rises by 10% the demand for T.V. rises by 20% (a) + .5 (b) -.5 (c) + 2 (d) -2 17. In case of necessaries the marginal utilities of the earlier units are large. In such cases the consumer surplus will be: (a) nfinite (b) Zero (c) Marginally positive (d) Marginally Negative 18. Which of the following is not the characteristic of Labour? (a) Labour is highly ‘Perishable’ in the sense that a day’s labour lost cannot be completely recovered (b) Labour is inseparable from the labourer himself (c) Labour has a strong bargaining power (d) The supply of labour and wage rate are directly related in the initial stages 19. Indicate which of the following is a variable cost? (a) Payment of rent on building (b) Cost of Machinery (c) Interest payment on Loan taken from bank (d) Cost of raw material 20. Marginal costs are closely associated with: (a) Variable cost (b) Total fixed cost (c) Average cost (d) Total cost 21. Economic cost means (a) Accounting cost + Implicit cost © The Institute of Chartered Accountants of India (b) Accounting cost + Marginal cost (c) Cash cost + Opportunity cost (d) Implicit cost 22. When is average product at its maximum point? (a) When AP intersects MP (b) When AP intersects TP (c) When MP is highest (d) At the point of inflexion 23. A firm has producing 7 units of output has an average total cost of Rs. 150 and has to pay Rs. 350 to its fixed factors of production whether it produces or not. How much of the average total cost is made up of variable cost? (a) 200 (b) 50 (c) 300 (d) 100 24. Calculate Income-elasticity for the household when the income of a household rises by 5% and the demand for bajra falls by 2% (a) + 2.5 (b) – 2.5 (c) -.4 (d) +.4 25. The consumer surplus concept is derived from: (a) Law of demand (b) Indifference curve analysis (c) Law of diminishing marginal utility (d) All of above 26. The cost that firm incurs in hiring or purchasing any factor of production is referred as: (a) Explicit cost (b) Implicit cost (c) Variable cost © The Institute of Chartered Accountants of IndiaRead More
FAQs on Business Economics Sample Paper- 1
| 1. What are the key concepts I need to focus on for the Business Economics sample paper? |  |
Ans. Business Economics sample papers test understanding of microeconomic principles, demand-supply dynamics, production costs, market structures, and consumer behaviour. Students should prioritise mastering elasticity of demand, cost concepts (fixed and variable), perfect competition versus monopoly, and pricing strategies. Refer to flashcards and mind maps to consolidate these foundational topics before attempting practice questions.
| 2. How do I identify which economic concepts are most likely to appear in CA Foundation Business Economics exams? | |
Ans. CA Foundation exams emphasise practical application of economic theory over theoretical definitions. Focus on consumer surplus, producer surplus, break-even analysis, marginal revenue, and market equilibrium concepts. Previous year papers reveal that questions frequently test understanding of how businesses use economics for decision-making. Review past year papers systematically to recognise recurring question patterns and frequently tested subtopics across multiple exam cycles.
| 3. Why do I keep getting confused between perfect competition and monopolistic competition in sample papers? | |
Ans. Perfect competition involves many sellers offering identical products with no barriers to entry, while monopolistic competition features differentiated products and moderate entry barriers. The critical distinction lies in product nature and seller influence over pricing. In perfect competition, firms are price-takers; in monopolistic competition, firms have slight pricing power. Use comparison charts and visual worksheets to clarify these market structure differences before solving sample questions.
| 4. What's the best way to solve numerical problems on cost, revenue, and profit in Business Economics sample papers? | |
Ans. Identify given data (fixed costs, variable costs, price, quantity) first, then calculate total cost (FC + VC), total revenue (Price × Quantity), and profit (TR - TC). Always draw diagrams showing cost curves and revenue lines-this prevents calculation errors. Practice with sample problems gradually increasing in complexity. Flashcards listing cost formulas and revenue relationships help reinforce calculation methods during revision.
| 5. How should I approach questions about elasticity of demand when solving the sample paper? | |
Ans. Elasticity measures responsiveness of quantity demanded to price changes, calculated as percentage change in quantity divided by percentage change in price. Identify whether demand is elastic (>1), inelastic (<1), or unit elastic (=1), then interpret business implications-elastic demand means revenue falls with price increases. Sample papers test application through real scenarios; practise determining elasticity types and predicting revenue outcomes to build confidence before examinations.
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