Business Economics Sample Paper Series - I | Mock Tests & Past Year Papers for CA Foundation PDF Download

 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 India