Mock Test: Business Economics and Business & Commercial Knowledge(Paper-4) - Series-II(Dec. 2022) | Mock Tests & Past Year Papers for CA Foundation PDF Download

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1 
Test Series: November, 2022 
MOCK TEST PAPER 2 
FOUNDATION COURSE 
PAPER 4: BUSINESS ECONOMICS AND BUSINESS AND COMMERCIAL KNOWLEDGE 
PART- I: BUSINESS ECONOMICS 
1. Microeconomic theory studies how a free-enterprise economy determines  
(a)  the price of goods  
(b)  the price of services 
(c)  the price of economic resources 
(d)  all of the above. 
2.  Which aspect of taxation involves normative economics?  
(a)  the incidence of (i.e., who actually pays for) the tax 
(b)  the effect of the tax on incentives to work 
(c)  the “fairness” of the tax 
(d)  all of the above.  
3.  When the price of a substitute of commodity X falls, the demand for X  
(a)  rises,  
(b)  falls,  
(c)  remains unchanged 
(d)  any of the above.  
4.  An increase in the price of a commodity when demand is inelastic causes the total expenditures of 
consumers of the commodity to  
(a)  increase 
(b)  decrease 
(c)  remain unchanged 
(d)  any of the above.  
5.  If the amounts of two commodities purchased both increase or decrease when the price of one change, 
the cross elasticity of demand between them is  
(a)  negative 
(b)  positive 
(c)  zero 
(d)  1. 
6.  A consumer who is below the personal budget line (rather than on it)  
(a)  is not spending all personal income  
(b) is spending all personal income 
(c)  may or may not be spending all personal income 
(d) is in equilibrium.  
 
© The Institute of Chartered Accountants of India
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1 
Test Series: November, 2022 
MOCK TEST PAPER 2 
FOUNDATION COURSE 
PAPER 4: BUSINESS ECONOMICS AND BUSINESS AND COMMERCIAL KNOWLEDGE 
PART- I: BUSINESS ECONOMICS 
1. Microeconomic theory studies how a free-enterprise economy determines  
(a)  the price of goods  
(b)  the price of services 
(c)  the price of economic resources 
(d)  all of the above. 
2.  Which aspect of taxation involves normative economics?  
(a)  the incidence of (i.e., who actually pays for) the tax 
(b)  the effect of the tax on incentives to work 
(c)  the “fairness” of the tax 
(d)  all of the above.  
3.  When the price of a substitute of commodity X falls, the demand for X  
(a)  rises,  
(b)  falls,  
(c)  remains unchanged 
(d)  any of the above.  
4.  An increase in the price of a commodity when demand is inelastic causes the total expenditures of 
consumers of the commodity to  
(a)  increase 
(b)  decrease 
(c)  remain unchanged 
(d)  any of the above.  
5.  If the amounts of two commodities purchased both increase or decrease when the price of one change, 
the cross elasticity of demand between them is  
(a)  negative 
(b)  positive 
(c)  zero 
(d)  1. 
6.  A consumer who is below the personal budget line (rather than on it)  
(a)  is not spending all personal income  
(b) is spending all personal income 
(c)  may or may not be spending all personal income 
(d) is in equilibrium.  
 
© The Institute of Chartered Accountants of India
2 
7.  The substitution effect for a fall in the price of a commodity (ceteris paribus) is g iven by  
(a)  a movement up a given indifference curve 
(b)  a movement from a higher to a lower indifference curve  
(c)  a movement down a given indifference curve 
(d)  any of the above. 
8.  When real income rather than money income is kept constant in drawing a consumer’s demand curve 
for a commodity, the demand curve is negatively sloped,  
(a)  Always  
(b)  never 
(c)  sometimes 
(d)  often.  
9.  Traditional economic theory could not explain choices involving risk because it assumed that  
(a)  MU always declines 
(b)  MU first declines and then rises  
(c)  MU first rises and then declines 
(d)  MU always increases.  
10.  Empirical demand curves refer to demand curves estimated from  
(a)  utility theory  
(b)  the new approach to consumer theory  
(c)  information provided by individual consumers  
(d)  actual market price-quantities observations.  
11.  Within the relevant range, isoquants  
(a)  are negatively sloped  
(b)  are convex to the origin  
(c)  cannot cross 
(d)  are all of the above.  
12.  At the point where a straight line from the origin is tangent to the TC curve, AC  
(a)  is minimum 
(b)  equals MC 
(c)  equals AVC plus AFC 
(d)  is all of the above.  
13.  At the best, or optimum, short-run level of output, the firm will be  
(a)  maximizing total profits  
(b)  minimizing total losses 
(c)  either maximizing total profits or minimizing total losses 
(d)  maximizing profits per unit.  
14.  In the short run, the monopolist  
(a)  breaks even, 
© The Institute of Chartered Accountants of India
Page 3


1 
Test Series: November, 2022 
MOCK TEST PAPER 2 
FOUNDATION COURSE 
PAPER 4: BUSINESS ECONOMICS AND BUSINESS AND COMMERCIAL KNOWLEDGE 
PART- I: BUSINESS ECONOMICS 
1. Microeconomic theory studies how a free-enterprise economy determines  
(a)  the price of goods  
(b)  the price of services 
(c)  the price of economic resources 
(d)  all of the above. 
2.  Which aspect of taxation involves normative economics?  
(a)  the incidence of (i.e., who actually pays for) the tax 
(b)  the effect of the tax on incentives to work 
(c)  the “fairness” of the tax 
(d)  all of the above.  
3.  When the price of a substitute of commodity X falls, the demand for X  
(a)  rises,  
(b)  falls,  
(c)  remains unchanged 
(d)  any of the above.  
4.  An increase in the price of a commodity when demand is inelastic causes the total expenditures of 
consumers of the commodity to  
(a)  increase 
(b)  decrease 
(c)  remain unchanged 
(d)  any of the above.  
5.  If the amounts of two commodities purchased both increase or decrease when the price of one change, 
the cross elasticity of demand between them is  
(a)  negative 
(b)  positive 
(c)  zero 
(d)  1. 
6.  A consumer who is below the personal budget line (rather than on it)  
(a)  is not spending all personal income  
(b) is spending all personal income 
(c)  may or may not be spending all personal income 
(d) is in equilibrium.  
 
© The Institute of Chartered Accountants of India
2 
7.  The substitution effect for a fall in the price of a commodity (ceteris paribus) is g iven by  
(a)  a movement up a given indifference curve 
(b)  a movement from a higher to a lower indifference curve  
(c)  a movement down a given indifference curve 
(d)  any of the above. 
8.  When real income rather than money income is kept constant in drawing a consumer’s demand curve 
for a commodity, the demand curve is negatively sloped,  
(a)  Always  
(b)  never 
(c)  sometimes 
(d)  often.  
9.  Traditional economic theory could not explain choices involving risk because it assumed that  
(a)  MU always declines 
(b)  MU first declines and then rises  
(c)  MU first rises and then declines 
(d)  MU always increases.  
10.  Empirical demand curves refer to demand curves estimated from  
(a)  utility theory  
(b)  the new approach to consumer theory  
(c)  information provided by individual consumers  
(d)  actual market price-quantities observations.  
11.  Within the relevant range, isoquants  
(a)  are negatively sloped  
(b)  are convex to the origin  
(c)  cannot cross 
(d)  are all of the above.  
12.  At the point where a straight line from the origin is tangent to the TC curve, AC  
(a)  is minimum 
(b)  equals MC 
(c)  equals AVC plus AFC 
(d)  is all of the above.  
13.  At the best, or optimum, short-run level of output, the firm will be  
(a)  maximizing total profits  
(b)  minimizing total losses 
(c)  either maximizing total profits or minimizing total losses 
(d)  maximizing profits per unit.  
14.  In the short run, the monopolist  
(a)  breaks even, 
© The Institute of Chartered Accountants of India
3 
(b)  incurs a loss,  
(c)  makes a profit 
(d)  any of the above.  
15. In long-run equilibrium, the pure monopolist (as opposed to the perfectly competitive firm) can make 
pure profits because of 
(a)  blocked entry  
(b)  high selling prices 
(c)  low LAC costs 
(d)  advertising.  
16.  When the industry is in long-run equilibrium, the monopolistic competitor will produce at the lowest point 
on its LAC curve,  
(a)  always 
(b)  never  
(c)  sometimes  
(d)  cannot say.  
17.  In the kinked demand curve models, the oligopolists  
(a)  recognize their interdependence  
(b)  do not collude  
(c)  tend to keep prices constant 
(d)  all of the above 
18.  “If Americans today, for example were to content to live at the level of the Indian middle -class people, 
all their wants would be fully satisfied with their available resources and capacity to produce. “On the 
basis of the above statement, which of the following conclusion can be made? 
(a)  The possession of goods and services by USA has enormously increased to exceed their wants. 
(b)  The affluent and developed countries of USA and Western Europe face the problem of scarcity 
even today as their present wants to remain a head of their increased resources and capacity to 
produce. 
(c)  The affluent and developed countries are not facing the problem of scarcity. 
(d)  None of these 
19.  Economics is a branch of ___________________ focused on the production, distribution and 
consumption of goods and services. 
(a)  Natural science  
(b)  Physical science  
(c)  Social science  
(d)  None of these 
20.  A socialist economy is a system of production where goods and services are produced_______. 
(a)  to generate profit  
(b)  directly for use  
(c)  Both (a) and (b) 
(d)  None of these 
© The Institute of Chartered Accountants of India
Page 4


1 
Test Series: November, 2022 
MOCK TEST PAPER 2 
FOUNDATION COURSE 
PAPER 4: BUSINESS ECONOMICS AND BUSINESS AND COMMERCIAL KNOWLEDGE 
PART- I: BUSINESS ECONOMICS 
1. Microeconomic theory studies how a free-enterprise economy determines  
(a)  the price of goods  
(b)  the price of services 
(c)  the price of economic resources 
(d)  all of the above. 
2.  Which aspect of taxation involves normative economics?  
(a)  the incidence of (i.e., who actually pays for) the tax 
(b)  the effect of the tax on incentives to work 
(c)  the “fairness” of the tax 
(d)  all of the above.  
3.  When the price of a substitute of commodity X falls, the demand for X  
(a)  rises,  
(b)  falls,  
(c)  remains unchanged 
(d)  any of the above.  
4.  An increase in the price of a commodity when demand is inelastic causes the total expenditures of 
consumers of the commodity to  
(a)  increase 
(b)  decrease 
(c)  remain unchanged 
(d)  any of the above.  
5.  If the amounts of two commodities purchased both increase or decrease when the price of one change, 
the cross elasticity of demand between them is  
(a)  negative 
(b)  positive 
(c)  zero 
(d)  1. 
6.  A consumer who is below the personal budget line (rather than on it)  
(a)  is not spending all personal income  
(b) is spending all personal income 
(c)  may or may not be spending all personal income 
(d) is in equilibrium.  
 
© The Institute of Chartered Accountants of India
2 
7.  The substitution effect for a fall in the price of a commodity (ceteris paribus) is g iven by  
(a)  a movement up a given indifference curve 
(b)  a movement from a higher to a lower indifference curve  
(c)  a movement down a given indifference curve 
(d)  any of the above. 
8.  When real income rather than money income is kept constant in drawing a consumer’s demand curve 
for a commodity, the demand curve is negatively sloped,  
(a)  Always  
(b)  never 
(c)  sometimes 
(d)  often.  
9.  Traditional economic theory could not explain choices involving risk because it assumed that  
(a)  MU always declines 
(b)  MU first declines and then rises  
(c)  MU first rises and then declines 
(d)  MU always increases.  
10.  Empirical demand curves refer to demand curves estimated from  
(a)  utility theory  
(b)  the new approach to consumer theory  
(c)  information provided by individual consumers  
(d)  actual market price-quantities observations.  
11.  Within the relevant range, isoquants  
(a)  are negatively sloped  
(b)  are convex to the origin  
(c)  cannot cross 
(d)  are all of the above.  
12.  At the point where a straight line from the origin is tangent to the TC curve, AC  
(a)  is minimum 
(b)  equals MC 
(c)  equals AVC plus AFC 
(d)  is all of the above.  
13.  At the best, or optimum, short-run level of output, the firm will be  
(a)  maximizing total profits  
(b)  minimizing total losses 
(c)  either maximizing total profits or minimizing total losses 
(d)  maximizing profits per unit.  
14.  In the short run, the monopolist  
(a)  breaks even, 
© The Institute of Chartered Accountants of India
3 
(b)  incurs a loss,  
(c)  makes a profit 
(d)  any of the above.  
15. In long-run equilibrium, the pure monopolist (as opposed to the perfectly competitive firm) can make 
pure profits because of 
(a)  blocked entry  
(b)  high selling prices 
(c)  low LAC costs 
(d)  advertising.  
16.  When the industry is in long-run equilibrium, the monopolistic competitor will produce at the lowest point 
on its LAC curve,  
(a)  always 
(b)  never  
(c)  sometimes  
(d)  cannot say.  
17.  In the kinked demand curve models, the oligopolists  
(a)  recognize their interdependence  
(b)  do not collude  
(c)  tend to keep prices constant 
(d)  all of the above 
18.  “If Americans today, for example were to content to live at the level of the Indian middle -class people, 
all their wants would be fully satisfied with their available resources and capacity to produce. “On the 
basis of the above statement, which of the following conclusion can be made? 
(a)  The possession of goods and services by USA has enormously increased to exceed their wants. 
(b)  The affluent and developed countries of USA and Western Europe face the problem of scarcity 
even today as their present wants to remain a head of their increased resources and capacity to 
produce. 
(c)  The affluent and developed countries are not facing the problem of scarcity. 
(d)  None of these 
19.  Economics is a branch of ___________________ focused on the production, distribution and 
consumption of goods and services. 
(a)  Natural science  
(b)  Physical science  
(c)  Social science  
(d)  None of these 
20.  A socialist economy is a system of production where goods and services are produced_______. 
(a)  to generate profit  
(b)  directly for use  
(c)  Both (a) and (b) 
(d)  None of these 
© The Institute of Chartered Accountants of India
4 
21.  Capital intensive technique of production is used in _____________________. 
(a)  Developed Economy  
(b)  Underdeveloped Economy  
(c)  Labour surplus economy  
(d)  Capital surplus economy 
22.  During lockdown due to COVID-19, a consumer finds the vegetable vendors selling vegetables in the 
street have raised the prices of vegetables than usual prices. She will buy ____________ vegetables 
than/as her usual demand showing the demand of vegetables is ____________. 
(a)  more, inelastic demand 
(b)  less, elastic demand  
(c)  same, inelastic demand  
(d)  same, elastic demand 
23.  At saturation point of TU curve, the slope of TU curve is_________ 
(a)  1  
(b)  Infinity  
(c)  Zero  
(d)  Positive 
24.  The most crucial determinant of demand for an item is __________________________. 
(a)  Income of consumer 
(b)  Prices of other related goods  
(c)  Taste and preference of consumer  
(d)  It’s own price 
25.  With reference to Arc elasticity measures the responsiveness of demand _____________ on the 
demand curve. 
(a)  at one given point  
(b)  at intercepts on X-axis & Y-axis  
(c)  between two points  
(d)  Any of the above 
26.  Cost incurred which has ‘no relevance’ to future planning is called____ 
(a)  Marginal Cost  
(b)  Sunk Cost  
(c)  Book Cost 
(d)  Average Cost 
27.  After identifying the market, the enterprise has to make decision regarding 4 Ps. Which one of the 
following is not one of these 4 Ps. 
(a)  Promotion  
(b)  Place  
(c)  People 
(d)  Product 
© The Institute of Chartered Accountants of India
Page 5


1 
Test Series: November, 2022 
MOCK TEST PAPER 2 
FOUNDATION COURSE 
PAPER 4: BUSINESS ECONOMICS AND BUSINESS AND COMMERCIAL KNOWLEDGE 
PART- I: BUSINESS ECONOMICS 
1. Microeconomic theory studies how a free-enterprise economy determines  
(a)  the price of goods  
(b)  the price of services 
(c)  the price of economic resources 
(d)  all of the above. 
2.  Which aspect of taxation involves normative economics?  
(a)  the incidence of (i.e., who actually pays for) the tax 
(b)  the effect of the tax on incentives to work 
(c)  the “fairness” of the tax 
(d)  all of the above.  
3.  When the price of a substitute of commodity X falls, the demand for X  
(a)  rises,  
(b)  falls,  
(c)  remains unchanged 
(d)  any of the above.  
4.  An increase in the price of a commodity when demand is inelastic causes the total expenditures of 
consumers of the commodity to  
(a)  increase 
(b)  decrease 
(c)  remain unchanged 
(d)  any of the above.  
5.  If the amounts of two commodities purchased both increase or decrease when the price of one change, 
the cross elasticity of demand between them is  
(a)  negative 
(b)  positive 
(c)  zero 
(d)  1. 
6.  A consumer who is below the personal budget line (rather than on it)  
(a)  is not spending all personal income  
(b) is spending all personal income 
(c)  may or may not be spending all personal income 
(d) is in equilibrium.  
 
© The Institute of Chartered Accountants of India
2 
7.  The substitution effect for a fall in the price of a commodity (ceteris paribus) is g iven by  
(a)  a movement up a given indifference curve 
(b)  a movement from a higher to a lower indifference curve  
(c)  a movement down a given indifference curve 
(d)  any of the above. 
8.  When real income rather than money income is kept constant in drawing a consumer’s demand curve 
for a commodity, the demand curve is negatively sloped,  
(a)  Always  
(b)  never 
(c)  sometimes 
(d)  often.  
9.  Traditional economic theory could not explain choices involving risk because it assumed that  
(a)  MU always declines 
(b)  MU first declines and then rises  
(c)  MU first rises and then declines 
(d)  MU always increases.  
10.  Empirical demand curves refer to demand curves estimated from  
(a)  utility theory  
(b)  the new approach to consumer theory  
(c)  information provided by individual consumers  
(d)  actual market price-quantities observations.  
11.  Within the relevant range, isoquants  
(a)  are negatively sloped  
(b)  are convex to the origin  
(c)  cannot cross 
(d)  are all of the above.  
12.  At the point where a straight line from the origin is tangent to the TC curve, AC  
(a)  is minimum 
(b)  equals MC 
(c)  equals AVC plus AFC 
(d)  is all of the above.  
13.  At the best, or optimum, short-run level of output, the firm will be  
(a)  maximizing total profits  
(b)  minimizing total losses 
(c)  either maximizing total profits or minimizing total losses 
(d)  maximizing profits per unit.  
14.  In the short run, the monopolist  
(a)  breaks even, 
© The Institute of Chartered Accountants of India
3 
(b)  incurs a loss,  
(c)  makes a profit 
(d)  any of the above.  
15. In long-run equilibrium, the pure monopolist (as opposed to the perfectly competitive firm) can make 
pure profits because of 
(a)  blocked entry  
(b)  high selling prices 
(c)  low LAC costs 
(d)  advertising.  
16.  When the industry is in long-run equilibrium, the monopolistic competitor will produce at the lowest point 
on its LAC curve,  
(a)  always 
(b)  never  
(c)  sometimes  
(d)  cannot say.  
17.  In the kinked demand curve models, the oligopolists  
(a)  recognize their interdependence  
(b)  do not collude  
(c)  tend to keep prices constant 
(d)  all of the above 
18.  “If Americans today, for example were to content to live at the level of the Indian middle -class people, 
all their wants would be fully satisfied with their available resources and capacity to produce. “On the 
basis of the above statement, which of the following conclusion can be made? 
(a)  The possession of goods and services by USA has enormously increased to exceed their wants. 
(b)  The affluent and developed countries of USA and Western Europe face the problem of scarcity 
even today as their present wants to remain a head of their increased resources and capacity to 
produce. 
(c)  The affluent and developed countries are not facing the problem of scarcity. 
(d)  None of these 
19.  Economics is a branch of ___________________ focused on the production, distribution and 
consumption of goods and services. 
(a)  Natural science  
(b)  Physical science  
(c)  Social science  
(d)  None of these 
20.  A socialist economy is a system of production where goods and services are produced_______. 
(a)  to generate profit  
(b)  directly for use  
(c)  Both (a) and (b) 
(d)  None of these 
© The Institute of Chartered Accountants of India
4 
21.  Capital intensive technique of production is used in _____________________. 
(a)  Developed Economy  
(b)  Underdeveloped Economy  
(c)  Labour surplus economy  
(d)  Capital surplus economy 
22.  During lockdown due to COVID-19, a consumer finds the vegetable vendors selling vegetables in the 
street have raised the prices of vegetables than usual prices. She will buy ____________ vegetables 
than/as her usual demand showing the demand of vegetables is ____________. 
(a)  more, inelastic demand 
(b)  less, elastic demand  
(c)  same, inelastic demand  
(d)  same, elastic demand 
23.  At saturation point of TU curve, the slope of TU curve is_________ 
(a)  1  
(b)  Infinity  
(c)  Zero  
(d)  Positive 
24.  The most crucial determinant of demand for an item is __________________________. 
(a)  Income of consumer 
(b)  Prices of other related goods  
(c)  Taste and preference of consumer  
(d)  It’s own price 
25.  With reference to Arc elasticity measures the responsiveness of demand _____________ on the 
demand curve. 
(a)  at one given point  
(b)  at intercepts on X-axis & Y-axis  
(c)  between two points  
(d)  Any of the above 
26.  Cost incurred which has ‘no relevance’ to future planning is called____ 
(a)  Marginal Cost  
(b)  Sunk Cost  
(c)  Book Cost 
(d)  Average Cost 
27.  After identifying the market, the enterprise has to make decision regarding 4 Ps. Which one of the 
following is not one of these 4 Ps. 
(a)  Promotion  
(b)  Place  
(c)  People 
(d)  Product 
© The Institute of Chartered Accountants of India
5 
28.  Which of the following is incorrect formula? 
(a)  TC = AC × Q 
(b)  ?MC = TC  
(c)  ?MC = TVC  
(d)  ?MC + TFC = TC 
29.  Which of the following is true at equilibrium in monopolistic competition? 
(a)  Price is greater than marginal cost  
(b)  Price is greater than marginal revenue 
(c)  Both (A) and (B) 
(d)  Price is equal to marginal revenue 
30.  A purely competitive seller’s average revenue curve coincides with 
(a)  its marginal revenue curve only 
(b)  its demand curve only 
(c)  both its demand & marginal revenue curves 
(d)  Neither demand nor marginal revenue curve. 
31.  According to British economist J. M. Keynes _______________ was the main cause of massive decline 
in income and employment during Great Depression of 1930. 
(a)  Lower aggregate expenditure in the economy.  
(b)  Banking crises and low money supply. 
(c)  Overdebtness. 
(d)  Lower profits & pessimism 
32.  Post war reconstruction 
(a)  will push the economy to slow down because of excess external debts.  
(b)  will cause pickup in economic activities as the reconstruction pushes up effective demand & in turn 
employment and income. 
(c)  can cause boom or recession depending upon the policies for reconstruction adopted by govt.  
(d)  None of these 
33.  The price which a consumer would be willing to pay for a commodity equals to his -. 
(a)  Total utility 
(b)  Marginal utility 
(c)  Average utility 
(d)  Does not have any relation to any of these 
34.  Computers and computer software are______ 
(a)  Substitute goods 
(b)  Complementary goods 
(c)  Independent goods 
(d)  Normal goods 
 
© The Institute of Chartered Accountants of India