MCQ - Theory of Production | Business Economics for CA Foundation PDF Download

 Page 1


CA Foundation  
 
THEORY OF PRODUCTION & COST  
Practice Questions
1. The term production in economics means- 
(a) creation of a physical product only, 
(b) rendering of a service only 
(c) creation of economic utilities 
(d) none of the above 
 
2. Which of the following is considered 
production in economics? 
(a) Singing a song in a birthday party 
(b) Run for fun 
(c) Giving tuitions 
(d) Helping an old man to cross road 
 
3. Making use of personal skill of doctors, 
lawyers, actors, etc. results in the creation 
of- 
(a) form utility  
(b) place utility 
(c) personal/ service utility 
(d) time utility 
 
4. Making available materials at times when 
they are normally not available is called 
conferring of utility of- 
(a) place    (b) time 
(c) form    (d) service 
 
5. Which of the following statements 
incorrect? 
(a) Man cannot create matter. 
(b) Production is an activity of making 
something material only. 
(c) Production can be defined as addition 
of utility. 
(d) Production is any economic utility 
which is directed towards the 
satisfaction of the wants of the people. 
 
6. Economic utilities may be created or added 
(a) By changing the form of raw materials 
into finished goods 
(b) By transporting goods from one place 
to another 
(c) By making things available when they 
are required 
(d) All the above 
 
7. Which of the following is not a feature of 
land 
(a) Free gift 
(b) Limited in quantity 
(c) Mobile factor 
(d) Indestructible 
 
8. The factor of production which has no 
reserve price is- 
(a) land    (b) labour 
(c) capital   (d) all the above 
 
9. Which of the following can be considered 
as labour in economics- 
(a) Singing for pleasure 
(b) A teacher teaching his own child at 
home 
(c) Looking after, a sick friend 
(d) A teacher teaching in school 
 
10. The supply of land is- 
(a) Unlimited   (b) Increased 
(c) Decreased   (d) Limited 
 
11. Land in economics means- 
(a) Material and Non-material goods 
(b) Minerals under the surface of earth 
(c) All natural resources available to man 
for producing wealth 
(d) All the above 
 
12. Labour is- 
(a) Active factor 
(b) Passive factor 
(c) Alternative factor 
(d) None of the above 
Page 2


CA Foundation  
 
THEORY OF PRODUCTION & COST  
Practice Questions
1. The term production in economics means- 
(a) creation of a physical product only, 
(b) rendering of a service only 
(c) creation of economic utilities 
(d) none of the above 
 
2. Which of the following is considered 
production in economics? 
(a) Singing a song in a birthday party 
(b) Run for fun 
(c) Giving tuitions 
(d) Helping an old man to cross road 
 
3. Making use of personal skill of doctors, 
lawyers, actors, etc. results in the creation 
of- 
(a) form utility  
(b) place utility 
(c) personal/ service utility 
(d) time utility 
 
4. Making available materials at times when 
they are normally not available is called 
conferring of utility of- 
(a) place    (b) time 
(c) form    (d) service 
 
5. Which of the following statements 
incorrect? 
(a) Man cannot create matter. 
(b) Production is an activity of making 
something material only. 
(c) Production can be defined as addition 
of utility. 
(d) Production is any economic utility 
which is directed towards the 
satisfaction of the wants of the people. 
 
6. Economic utilities may be created or added 
(a) By changing the form of raw materials 
into finished goods 
(b) By transporting goods from one place 
to another 
(c) By making things available when they 
are required 
(d) All the above 
 
7. Which of the following is not a feature of 
land 
(a) Free gift 
(b) Limited in quantity 
(c) Mobile factor 
(d) Indestructible 
 
8. The factor of production which has no 
reserve price is- 
(a) land    (b) labour 
(c) capital   (d) all the above 
 
9. Which of the following can be considered 
as labour in economics- 
(a) Singing for pleasure 
(b) A teacher teaching his own child at 
home 
(c) Looking after, a sick friend 
(d) A teacher teaching in school 
 
10. The supply of land is- 
(a) Unlimited   (b) Increased 
(c) Decreased   (d) Limited 
 
11. Land in economics means- 
(a) Material and Non-material goods 
(b) Minerals under the surface of earth 
(c) All natural resources available to man 
for producing wealth 
(d) All the above 
 
12. Labour is- 
(a) Active factor 
(b) Passive factor 
(c) Alternative factor 
(d) None of the above 
CA Foundation  
 
13. Which factor loses its value of it cannot 
find a purchaser today- 
(a) Land   (b) Labour 
(c) Capital  (d) All the above 
 
14. Supply curve of labour is- 
(a) upward sloping (b) horizontal 
(c) backward bending (d) vertical 
 
15. Income effect when wage rises means 
(a) work hours rise 
(b) work hours fall 
(c) work hours remain constant 
(d) work hours first fall and then rise 
 
16. Which of the following statements is not 
true? 
(a) Capital is a produced means a 
production. 
(b) Capital is a man made instruments of 
production. 
(c) Capital is a primary factor of 
production. 
(d) Machine tools, factories, dams, canals, 
etc. are examples of capital. 
 
17. Tools, machines, etc. are included in- 
capital 
(a) circulating capital (b) fixed capital 
(c) sunk capital  (d) human capital 
 
18. The capital which belongs to the society as 
a whole is called- 
(a) Individual Capital   (b) Human Capital 
(c) Social Capital            (d) Floating Capital 
 
19. Raw material is an example of- 
(a) Circulating Capital (b) Fixed Capital 
(c) Tangible Capital (d) Real Capital 
 
20. Which capital includes education training, 
skill, ability? 
(a) Human Capital  (b) Individual Capital 
(c) Social Capital     (d) Real Capital 
 
21. Goodwill, patent rights, etc. are examples 
of- 
(a) Tangible Capital (b) Real Capital 
(c) Intangible Capital (d) Human Capital 
 
22. Which of the following statements is true? 
(a) Capital Formation involves production 
of more capital goods. 
(b) Capital Formation is also called 
investment. 
(c) To accumulate capital goods, some 
current consumption is to be sacrificed. 
(d) All the above 
 
23. Surplus of production over consumption 
in an economy in a year is called- 
(a) Capital (b) Capital formation 
(c) Stock  (d) Savings 
 
24. The third stage of capital formation is- 
(a) creation of savings 
(b) mobilization of savings 
(c) distribution of savings 
(d) investment of savings 
 
25. With an increase in income- 
(a) the propensity to consume increases 
(b) the propensity y to save increases 
(c) the propensity to consume remains 
constant  
(d) the propensity to save falls  
 
26. A_______ country has greater ability to 
save. 
(a) poor  
(b) developing 
(c) rich 
(d) under developed 
 
27. An individual's saving level depends 
upon- 
(a) ability to save     
(b) willingness to save 
(c) both (a) & (b)      
(d) only (a) 
Page 3


CA Foundation  
 
THEORY OF PRODUCTION & COST  
Practice Questions
1. The term production in economics means- 
(a) creation of a physical product only, 
(b) rendering of a service only 
(c) creation of economic utilities 
(d) none of the above 
 
2. Which of the following is considered 
production in economics? 
(a) Singing a song in a birthday party 
(b) Run for fun 
(c) Giving tuitions 
(d) Helping an old man to cross road 
 
3. Making use of personal skill of doctors, 
lawyers, actors, etc. results in the creation 
of- 
(a) form utility  
(b) place utility 
(c) personal/ service utility 
(d) time utility 
 
4. Making available materials at times when 
they are normally not available is called 
conferring of utility of- 
(a) place    (b) time 
(c) form    (d) service 
 
5. Which of the following statements 
incorrect? 
(a) Man cannot create matter. 
(b) Production is an activity of making 
something material only. 
(c) Production can be defined as addition 
of utility. 
(d) Production is any economic utility 
which is directed towards the 
satisfaction of the wants of the people. 
 
6. Economic utilities may be created or added 
(a) By changing the form of raw materials 
into finished goods 
(b) By transporting goods from one place 
to another 
(c) By making things available when they 
are required 
(d) All the above 
 
7. Which of the following is not a feature of 
land 
(a) Free gift 
(b) Limited in quantity 
(c) Mobile factor 
(d) Indestructible 
 
8. The factor of production which has no 
reserve price is- 
(a) land    (b) labour 
(c) capital   (d) all the above 
 
9. Which of the following can be considered 
as labour in economics- 
(a) Singing for pleasure 
(b) A teacher teaching his own child at 
home 
(c) Looking after, a sick friend 
(d) A teacher teaching in school 
 
10. The supply of land is- 
(a) Unlimited   (b) Increased 
(c) Decreased   (d) Limited 
 
11. Land in economics means- 
(a) Material and Non-material goods 
(b) Minerals under the surface of earth 
(c) All natural resources available to man 
for producing wealth 
(d) All the above 
 
12. Labour is- 
(a) Active factor 
(b) Passive factor 
(c) Alternative factor 
(d) None of the above 
CA Foundation  
 
13. Which factor loses its value of it cannot 
find a purchaser today- 
(a) Land   (b) Labour 
(c) Capital  (d) All the above 
 
14. Supply curve of labour is- 
(a) upward sloping (b) horizontal 
(c) backward bending (d) vertical 
 
15. Income effect when wage rises means 
(a) work hours rise 
(b) work hours fall 
(c) work hours remain constant 
(d) work hours first fall and then rise 
 
16. Which of the following statements is not 
true? 
(a) Capital is a produced means a 
production. 
(b) Capital is a man made instruments of 
production. 
(c) Capital is a primary factor of 
production. 
(d) Machine tools, factories, dams, canals, 
etc. are examples of capital. 
 
17. Tools, machines, etc. are included in- 
capital 
(a) circulating capital (b) fixed capital 
(c) sunk capital  (d) human capital 
 
18. The capital which belongs to the society as 
a whole is called- 
(a) Individual Capital   (b) Human Capital 
(c) Social Capital            (d) Floating Capital 
 
19. Raw material is an example of- 
(a) Circulating Capital (b) Fixed Capital 
(c) Tangible Capital (d) Real Capital 
 
20. Which capital includes education training, 
skill, ability? 
(a) Human Capital  (b) Individual Capital 
(c) Social Capital     (d) Real Capital 
 
21. Goodwill, patent rights, etc. are examples 
of- 
(a) Tangible Capital (b) Real Capital 
(c) Intangible Capital (d) Human Capital 
 
22. Which of the following statements is true? 
(a) Capital Formation involves production 
of more capital goods. 
(b) Capital Formation is also called 
investment. 
(c) To accumulate capital goods, some 
current consumption is to be sacrificed. 
(d) All the above 
 
23. Surplus of production over consumption 
in an economy in a year is called- 
(a) Capital (b) Capital formation 
(c) Stock  (d) Savings 
 
24. The third stage of capital formation is- 
(a) creation of savings 
(b) mobilization of savings 
(c) distribution of savings 
(d) investment of savings 
 
25. With an increase in income- 
(a) the propensity to consume increases 
(b) the propensity y to save increases 
(c) the propensity to consume remains 
constant  
(d) the propensity to save falls  
 
26. A_______ country has greater ability to 
save. 
(a) poor  
(b) developing 
(c) rich 
(d) under developed 
 
27. An individual's saving level depends 
upon- 
(a) ability to save     
(b) willingness to save 
(c) both (a) & (b)      
(d) only (a) 
CA Foundation  
 
28. The factor which mobilize land labour and 
capital; combines them in the right 
proportion and then organizes the 
production activity is – 
(a) Owner   (b) Labour 
(c) Manger  (d) Entrepreneur 
 
29. The reward of all factors of production is 
usually predetermined (pre-fixed) except- 
(a) Land   (b) Labour 
(c) Capital  (d) Entrepreneur 
 
30. The reward of an entrepreneur for his 
efforts and risk-taking is- 
(a) Interest   (b) Profit/Loss 
(c) Rent    (d) Wages 
 
31. The reward of capital is- 
(a) Rent    (b) Interest 
(c) Wages   (d) Profit 
 
32. The reward of an entrepreneur i.e. profit is- 
(a) pre-determined income 
(b) residual income 
(c) constant income 
(d) none of the above 
 
33. The risks which can be anticipated and can 
be insured against are called- 
(a) Insurable risks  
(b) Non-Insurable risks 
(c) Unforeseeable risks 
(d) None of the above 
 
34. The risks like change in demand for a 
commodity, the cost structure, fashion, 
technological, etc. which an entrepreneur 
has to bear are called- 
(a) Uncertainties  (b) Insurable risks 
(c) Foreseeable risks (d) Both (a) and (c) 
 
35. According to________ innovations 
introduced by an entrepreneur give rise to' 
profits. 
(a) Prof. FH. Knight 
(b) Prof. Joseph A. Schumpeter 
(c) Prof. Paul Samuelson 
(d) Dr. Alfred Marshall 
 
36. Which of the following statement is 
incorrect? 
(a) Mobilisation of savings done through 
network of banking and other financial 
institutions. 
(b) Land lacks geographical mobility but 
has occupational mobility. 
(c) Entrepreneur is also called the 
organizer, the manager or the risk 
taker. 
(d) Labour can be stored. 
 
37. Labour is________ 
(a) Human factor 
(b) Perishable 
(c) inseparable from labour 
(d) All the above 
 
38. Leather in a shoe factory is_______ 
(a) Fixed capital 
(b) Sunk capital 
(c) Floating Capital 
(d) Circulating capital 
 
39. _________Cannot be stored. 
(a) Land   (b) Labour 
(c) Capital  (d) Both (a) & (b) 
 
40. Capital that can be used for several 
purposes or by several industries is_____ 
(a) Working capital (b) Social capital 
(c) Floating capital (d) Human capital 
 
41. Addition to the stock of capital good sin a 
country means________ 
(a) Capital reduction 
(b) Investment 
(c) Capital formation 
(d) Both (b) & (c) 
 
 
Page 4


CA Foundation  
 
THEORY OF PRODUCTION & COST  
Practice Questions
1. The term production in economics means- 
(a) creation of a physical product only, 
(b) rendering of a service only 
(c) creation of economic utilities 
(d) none of the above 
 
2. Which of the following is considered 
production in economics? 
(a) Singing a song in a birthday party 
(b) Run for fun 
(c) Giving tuitions 
(d) Helping an old man to cross road 
 
3. Making use of personal skill of doctors, 
lawyers, actors, etc. results in the creation 
of- 
(a) form utility  
(b) place utility 
(c) personal/ service utility 
(d) time utility 
 
4. Making available materials at times when 
they are normally not available is called 
conferring of utility of- 
(a) place    (b) time 
(c) form    (d) service 
 
5. Which of the following statements 
incorrect? 
(a) Man cannot create matter. 
(b) Production is an activity of making 
something material only. 
(c) Production can be defined as addition 
of utility. 
(d) Production is any economic utility 
which is directed towards the 
satisfaction of the wants of the people. 
 
6. Economic utilities may be created or added 
(a) By changing the form of raw materials 
into finished goods 
(b) By transporting goods from one place 
to another 
(c) By making things available when they 
are required 
(d) All the above 
 
7. Which of the following is not a feature of 
land 
(a) Free gift 
(b) Limited in quantity 
(c) Mobile factor 
(d) Indestructible 
 
8. The factor of production which has no 
reserve price is- 
(a) land    (b) labour 
(c) capital   (d) all the above 
 
9. Which of the following can be considered 
as labour in economics- 
(a) Singing for pleasure 
(b) A teacher teaching his own child at 
home 
(c) Looking after, a sick friend 
(d) A teacher teaching in school 
 
10. The supply of land is- 
(a) Unlimited   (b) Increased 
(c) Decreased   (d) Limited 
 
11. Land in economics means- 
(a) Material and Non-material goods 
(b) Minerals under the surface of earth 
(c) All natural resources available to man 
for producing wealth 
(d) All the above 
 
12. Labour is- 
(a) Active factor 
(b) Passive factor 
(c) Alternative factor 
(d) None of the above 
CA Foundation  
 
13. Which factor loses its value of it cannot 
find a purchaser today- 
(a) Land   (b) Labour 
(c) Capital  (d) All the above 
 
14. Supply curve of labour is- 
(a) upward sloping (b) horizontal 
(c) backward bending (d) vertical 
 
15. Income effect when wage rises means 
(a) work hours rise 
(b) work hours fall 
(c) work hours remain constant 
(d) work hours first fall and then rise 
 
16. Which of the following statements is not 
true? 
(a) Capital is a produced means a 
production. 
(b) Capital is a man made instruments of 
production. 
(c) Capital is a primary factor of 
production. 
(d) Machine tools, factories, dams, canals, 
etc. are examples of capital. 
 
17. Tools, machines, etc. are included in- 
capital 
(a) circulating capital (b) fixed capital 
(c) sunk capital  (d) human capital 
 
18. The capital which belongs to the society as 
a whole is called- 
(a) Individual Capital   (b) Human Capital 
(c) Social Capital            (d) Floating Capital 
 
19. Raw material is an example of- 
(a) Circulating Capital (b) Fixed Capital 
(c) Tangible Capital (d) Real Capital 
 
20. Which capital includes education training, 
skill, ability? 
(a) Human Capital  (b) Individual Capital 
(c) Social Capital     (d) Real Capital 
 
21. Goodwill, patent rights, etc. are examples 
of- 
(a) Tangible Capital (b) Real Capital 
(c) Intangible Capital (d) Human Capital 
 
22. Which of the following statements is true? 
(a) Capital Formation involves production 
of more capital goods. 
(b) Capital Formation is also called 
investment. 
(c) To accumulate capital goods, some 
current consumption is to be sacrificed. 
(d) All the above 
 
23. Surplus of production over consumption 
in an economy in a year is called- 
(a) Capital (b) Capital formation 
(c) Stock  (d) Savings 
 
24. The third stage of capital formation is- 
(a) creation of savings 
(b) mobilization of savings 
(c) distribution of savings 
(d) investment of savings 
 
25. With an increase in income- 
(a) the propensity to consume increases 
(b) the propensity y to save increases 
(c) the propensity to consume remains 
constant  
(d) the propensity to save falls  
 
26. A_______ country has greater ability to 
save. 
(a) poor  
(b) developing 
(c) rich 
(d) under developed 
 
27. An individual's saving level depends 
upon- 
(a) ability to save     
(b) willingness to save 
(c) both (a) & (b)      
(d) only (a) 
CA Foundation  
 
28. The factor which mobilize land labour and 
capital; combines them in the right 
proportion and then organizes the 
production activity is – 
(a) Owner   (b) Labour 
(c) Manger  (d) Entrepreneur 
 
29. The reward of all factors of production is 
usually predetermined (pre-fixed) except- 
(a) Land   (b) Labour 
(c) Capital  (d) Entrepreneur 
 
30. The reward of an entrepreneur for his 
efforts and risk-taking is- 
(a) Interest   (b) Profit/Loss 
(c) Rent    (d) Wages 
 
31. The reward of capital is- 
(a) Rent    (b) Interest 
(c) Wages   (d) Profit 
 
32. The reward of an entrepreneur i.e. profit is- 
(a) pre-determined income 
(b) residual income 
(c) constant income 
(d) none of the above 
 
33. The risks which can be anticipated and can 
be insured against are called- 
(a) Insurable risks  
(b) Non-Insurable risks 
(c) Unforeseeable risks 
(d) None of the above 
 
34. The risks like change in demand for a 
commodity, the cost structure, fashion, 
technological, etc. which an entrepreneur 
has to bear are called- 
(a) Uncertainties  (b) Insurable risks 
(c) Foreseeable risks (d) Both (a) and (c) 
 
35. According to________ innovations 
introduced by an entrepreneur give rise to' 
profits. 
(a) Prof. FH. Knight 
(b) Prof. Joseph A. Schumpeter 
(c) Prof. Paul Samuelson 
(d) Dr. Alfred Marshall 
 
36. Which of the following statement is 
incorrect? 
(a) Mobilisation of savings done through 
network of banking and other financial 
institutions. 
(b) Land lacks geographical mobility but 
has occupational mobility. 
(c) Entrepreneur is also called the 
organizer, the manager or the risk 
taker. 
(d) Labour can be stored. 
 
37. Labour is________ 
(a) Human factor 
(b) Perishable 
(c) inseparable from labour 
(d) All the above 
 
38. Leather in a shoe factory is_______ 
(a) Fixed capital 
(b) Sunk capital 
(c) Floating Capital 
(d) Circulating capital 
 
39. _________Cannot be stored. 
(a) Land   (b) Labour 
(c) Capital  (d) Both (a) & (b) 
 
40. Capital that can be used for several 
purposes or by several industries is_____ 
(a) Working capital (b) Social capital 
(c) Floating capital (d) Human capital 
 
41. Addition to the stock of capital good sin a 
country means________ 
(a) Capital reduction 
(b) Investment 
(c) Capital formation 
(d) Both (b) & (c) 
 
 
CA Foundation  
 
42. Find the odd out________ 
(a) Capital is man-made 
(b) All capital is wealth 
(c) Capital is durable 
(d) Mobilisation of savings 
 
43. Consider the following groups of items: 
(i) Factory buildings 
(ii) Plant and Machinery 
(iii) Stocks of raw materials 
(iv) Wage bills 
Which of these are known as working 
capital? 
(a) (i) and (ii)  (b) (iii) and (iv) 
(c) (i), (ii) and (iii) (d) (i), (iii) and (iv) 
 
44. The production function means 
relationship between 
(a) Cost of input 
(b) Cost of output 
(c) Physical input to physical output 
(d) Wages of profit 
 
45. A production function is an expression of 
________ relation between inputs and 
outputs. 
(a) monetary  (b) economic 
(c) quantitative  (d) qualitative 
 
46. A short run production function is one in 
which- 
(a) at least one factor is fixed 
(b) all factors are fixed 
(c) all factors are variable 
(d) at least one factor is variable 
 
47. Technically efficient combinations of 
inputs of those which- 
(a) minimizes wastage 
(b) maximizes profits 
(c) minimises cost 
(d) maximises revenue 
 
 
 
48. In the short period there is no change in 
_________ factors. 
(a) fixed    (b) variable 
(c) human   (d) physical 
 
49. In the______ period all factors are variable.  
(a) short   (b) long 
(c) market   (d) secular 
 
50. In its original for Cobb-Douglas 
production function applies to- 
(a) individual manufacturing firm 
(b) individual firm  
(c) whole of manufacturing in US 
(d) None of the above 
 
51. Cobb-Dauglas production function 
revealed that the increase in the 
manufacturing production was 
contributed by labour and capital 
respectively by 
(a) 3/4th and 1/4th   (b) 1/4th and 3/4th 
(c) 2/3rd and 1/3rd    (d) None of the above 
 
52. Cobb-Douglas production- 
(a) is linear 
(b) is homogeneous 
(c) shows constant returns to scale 
(d) all the above 
 
53. Cobb-Douglas production function 
exhibits______ returns to scale. 
(a) increasing   (b) diminishing 
(c) Constant   (d) negative 
 
54. 
( )
50 5 , 4
xL
fk = 
( )
50 6 , 4
xL
fk = 
The above equations shows that- 
(a) One factor is fixed and another variable 
(b) Both factors are fixed 
(c) Both factors are variable 
(d) Both factors are semi-variable 
 
Page 5


CA Foundation  
 
THEORY OF PRODUCTION & COST  
Practice Questions
1. The term production in economics means- 
(a) creation of a physical product only, 
(b) rendering of a service only 
(c) creation of economic utilities 
(d) none of the above 
 
2. Which of the following is considered 
production in economics? 
(a) Singing a song in a birthday party 
(b) Run for fun 
(c) Giving tuitions 
(d) Helping an old man to cross road 
 
3. Making use of personal skill of doctors, 
lawyers, actors, etc. results in the creation 
of- 
(a) form utility  
(b) place utility 
(c) personal/ service utility 
(d) time utility 
 
4. Making available materials at times when 
they are normally not available is called 
conferring of utility of- 
(a) place    (b) time 
(c) form    (d) service 
 
5. Which of the following statements 
incorrect? 
(a) Man cannot create matter. 
(b) Production is an activity of making 
something material only. 
(c) Production can be defined as addition 
of utility. 
(d) Production is any economic utility 
which is directed towards the 
satisfaction of the wants of the people. 
 
6. Economic utilities may be created or added 
(a) By changing the form of raw materials 
into finished goods 
(b) By transporting goods from one place 
to another 
(c) By making things available when they 
are required 
(d) All the above 
 
7. Which of the following is not a feature of 
land 
(a) Free gift 
(b) Limited in quantity 
(c) Mobile factor 
(d) Indestructible 
 
8. The factor of production which has no 
reserve price is- 
(a) land    (b) labour 
(c) capital   (d) all the above 
 
9. Which of the following can be considered 
as labour in economics- 
(a) Singing for pleasure 
(b) A teacher teaching his own child at 
home 
(c) Looking after, a sick friend 
(d) A teacher teaching in school 
 
10. The supply of land is- 
(a) Unlimited   (b) Increased 
(c) Decreased   (d) Limited 
 
11. Land in economics means- 
(a) Material and Non-material goods 
(b) Minerals under the surface of earth 
(c) All natural resources available to man 
for producing wealth 
(d) All the above 
 
12. Labour is- 
(a) Active factor 
(b) Passive factor 
(c) Alternative factor 
(d) None of the above 
CA Foundation  
 
13. Which factor loses its value of it cannot 
find a purchaser today- 
(a) Land   (b) Labour 
(c) Capital  (d) All the above 
 
14. Supply curve of labour is- 
(a) upward sloping (b) horizontal 
(c) backward bending (d) vertical 
 
15. Income effect when wage rises means 
(a) work hours rise 
(b) work hours fall 
(c) work hours remain constant 
(d) work hours first fall and then rise 
 
16. Which of the following statements is not 
true? 
(a) Capital is a produced means a 
production. 
(b) Capital is a man made instruments of 
production. 
(c) Capital is a primary factor of 
production. 
(d) Machine tools, factories, dams, canals, 
etc. are examples of capital. 
 
17. Tools, machines, etc. are included in- 
capital 
(a) circulating capital (b) fixed capital 
(c) sunk capital  (d) human capital 
 
18. The capital which belongs to the society as 
a whole is called- 
(a) Individual Capital   (b) Human Capital 
(c) Social Capital            (d) Floating Capital 
 
19. Raw material is an example of- 
(a) Circulating Capital (b) Fixed Capital 
(c) Tangible Capital (d) Real Capital 
 
20. Which capital includes education training, 
skill, ability? 
(a) Human Capital  (b) Individual Capital 
(c) Social Capital     (d) Real Capital 
 
21. Goodwill, patent rights, etc. are examples 
of- 
(a) Tangible Capital (b) Real Capital 
(c) Intangible Capital (d) Human Capital 
 
22. Which of the following statements is true? 
(a) Capital Formation involves production 
of more capital goods. 
(b) Capital Formation is also called 
investment. 
(c) To accumulate capital goods, some 
current consumption is to be sacrificed. 
(d) All the above 
 
23. Surplus of production over consumption 
in an economy in a year is called- 
(a) Capital (b) Capital formation 
(c) Stock  (d) Savings 
 
24. The third stage of capital formation is- 
(a) creation of savings 
(b) mobilization of savings 
(c) distribution of savings 
(d) investment of savings 
 
25. With an increase in income- 
(a) the propensity to consume increases 
(b) the propensity y to save increases 
(c) the propensity to consume remains 
constant  
(d) the propensity to save falls  
 
26. A_______ country has greater ability to 
save. 
(a) poor  
(b) developing 
(c) rich 
(d) under developed 
 
27. An individual's saving level depends 
upon- 
(a) ability to save     
(b) willingness to save 
(c) both (a) & (b)      
(d) only (a) 
CA Foundation  
 
28. The factor which mobilize land labour and 
capital; combines them in the right 
proportion and then organizes the 
production activity is – 
(a) Owner   (b) Labour 
(c) Manger  (d) Entrepreneur 
 
29. The reward of all factors of production is 
usually predetermined (pre-fixed) except- 
(a) Land   (b) Labour 
(c) Capital  (d) Entrepreneur 
 
30. The reward of an entrepreneur for his 
efforts and risk-taking is- 
(a) Interest   (b) Profit/Loss 
(c) Rent    (d) Wages 
 
31. The reward of capital is- 
(a) Rent    (b) Interest 
(c) Wages   (d) Profit 
 
32. The reward of an entrepreneur i.e. profit is- 
(a) pre-determined income 
(b) residual income 
(c) constant income 
(d) none of the above 
 
33. The risks which can be anticipated and can 
be insured against are called- 
(a) Insurable risks  
(b) Non-Insurable risks 
(c) Unforeseeable risks 
(d) None of the above 
 
34. The risks like change in demand for a 
commodity, the cost structure, fashion, 
technological, etc. which an entrepreneur 
has to bear are called- 
(a) Uncertainties  (b) Insurable risks 
(c) Foreseeable risks (d) Both (a) and (c) 
 
35. According to________ innovations 
introduced by an entrepreneur give rise to' 
profits. 
(a) Prof. FH. Knight 
(b) Prof. Joseph A. Schumpeter 
(c) Prof. Paul Samuelson 
(d) Dr. Alfred Marshall 
 
36. Which of the following statement is 
incorrect? 
(a) Mobilisation of savings done through 
network of banking and other financial 
institutions. 
(b) Land lacks geographical mobility but 
has occupational mobility. 
(c) Entrepreneur is also called the 
organizer, the manager or the risk 
taker. 
(d) Labour can be stored. 
 
37. Labour is________ 
(a) Human factor 
(b) Perishable 
(c) inseparable from labour 
(d) All the above 
 
38. Leather in a shoe factory is_______ 
(a) Fixed capital 
(b) Sunk capital 
(c) Floating Capital 
(d) Circulating capital 
 
39. _________Cannot be stored. 
(a) Land   (b) Labour 
(c) Capital  (d) Both (a) & (b) 
 
40. Capital that can be used for several 
purposes or by several industries is_____ 
(a) Working capital (b) Social capital 
(c) Floating capital (d) Human capital 
 
41. Addition to the stock of capital good sin a 
country means________ 
(a) Capital reduction 
(b) Investment 
(c) Capital formation 
(d) Both (b) & (c) 
 
 
CA Foundation  
 
42. Find the odd out________ 
(a) Capital is man-made 
(b) All capital is wealth 
(c) Capital is durable 
(d) Mobilisation of savings 
 
43. Consider the following groups of items: 
(i) Factory buildings 
(ii) Plant and Machinery 
(iii) Stocks of raw materials 
(iv) Wage bills 
Which of these are known as working 
capital? 
(a) (i) and (ii)  (b) (iii) and (iv) 
(c) (i), (ii) and (iii) (d) (i), (iii) and (iv) 
 
44. The production function means 
relationship between 
(a) Cost of input 
(b) Cost of output 
(c) Physical input to physical output 
(d) Wages of profit 
 
45. A production function is an expression of 
________ relation between inputs and 
outputs. 
(a) monetary  (b) economic 
(c) quantitative  (d) qualitative 
 
46. A short run production function is one in 
which- 
(a) at least one factor is fixed 
(b) all factors are fixed 
(c) all factors are variable 
(d) at least one factor is variable 
 
47. Technically efficient combinations of 
inputs of those which- 
(a) minimizes wastage 
(b) maximizes profits 
(c) minimises cost 
(d) maximises revenue 
 
 
 
48. In the short period there is no change in 
_________ factors. 
(a) fixed    (b) variable 
(c) human   (d) physical 
 
49. In the______ period all factors are variable.  
(a) short   (b) long 
(c) market   (d) secular 
 
50. In its original for Cobb-Douglas 
production function applies to- 
(a) individual manufacturing firm 
(b) individual firm  
(c) whole of manufacturing in US 
(d) None of the above 
 
51. Cobb-Dauglas production function 
revealed that the increase in the 
manufacturing production was 
contributed by labour and capital 
respectively by 
(a) 3/4th and 1/4th   (b) 1/4th and 3/4th 
(c) 2/3rd and 1/3rd    (d) None of the above 
 
52. Cobb-Douglas production- 
(a) is linear 
(b) is homogeneous 
(c) shows constant returns to scale 
(d) all the above 
 
53. Cobb-Douglas production function 
exhibits______ returns to scale. 
(a) increasing   (b) diminishing 
(c) Constant   (d) negative 
 
54. 
( )
50 5 , 4
xL
fk = 
( )
50 6 , 4
xL
fk = 
The above equations shows that- 
(a) One factor is fixed and another variable 
(b) Both factors are fixed 
(c) Both factors are variable 
(d) Both factors are semi-variable 
 
CA Foundation  
 
55. The main difference between the short 
period/run and the long period/run is 
that - 
(a) in the short period all inputs are fixed, 
while in the long period all inputs are 
variable. 
(b) in the short run at least one input is 
fixed 
(c) in the short run firm varies the 
quantities of all inputs 
(d) in the long run, the firm uses the 
existing plant capacity 
 
56. The law of variable proportions is a law of 
production which takes place in the- 
(a) market period        (b) short run 
(c) long run          (d) very long period 
 
57. All but one are the assumptions of the law 
of variable proportions.  Which one is not? 
(a) There is only one factor which is 
variable 
(b) All units of variable factor are 
homogeneous 
(c) State of technology remains constant 
(d) Applies in long run 
 
58. When there is a fixed factor and a variable 
factor, then the law would be- 
(a) law of increasing returns to scale 
(b) law of constant returns to scale 
(c) law of decreasing returns to scale 
(d) law of variable proportions 
 
59. The total quantity of goods and services 
produced by a firm with the given inputs 
during a specified period of time is called- 
(a) Total Product          (b) Average Product 
(c) Marginal Product  (d) Labour Product 
 
60. The amount of output produced per unit of 
variable factor employed is called- 
(a) Total Product         (b) Average Product 
(c) Marginal Product  (d) Labour Product 
 
61. The change in TP resulting from the 
employment of an additional unit of a 
variable factor is called- 
(a) Total Product         (b) Marginal Product 
(c) Average Product   (d) All the above 
 
62. The average product of a variable input 
can be described as- 
(a) total product divided by the number of 
units of variable input 
(b) additional output resulting from 
employment of additional unit of 
variable factor 
(c) the total quantity of good produced 
with all input 
(d) None of the above 
 
63. TP of variable factor is – 
i. MP
?
 
ii. TPn – TPn-1 
iii. APxL (units of variable factor) 
iv. 
TP
L
 
(a) only (i) 
(b) only (i) and (iii) 
(c) only (ii) 
(d) only (ii) and (iv) 
 
64. Initially TP curve increases at an- 
(a) increasing rate 
(b) diminishing rate 
(c) constant rate 
(d) maximum rate  
 
65.  As more units of variable factor is 
employed it will- 
(a) always increase the TP 
(b) always decrease the TP 
(c) not always increase the TP 
(d) always result in constant TP 
 
66. As long as TP is positive, AP is- 
(a) negative   (b) constant 
(c) positive   (d) falling