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

 Page 1


1 
MOCK TEST PAPER 2 
FOUNDATION COURSE 
PAPER 4: BUSINESS ECONOMICS AND BUSINESS AND COMMERCIAL KNOWLEDGE 
PART- I: BUSINESS ECONOMICS 
QUESTIONS 
1. Most of the economic problems are of _____________ nature and are affected by ______________. 
(a)  Complex, Several forces 
(b)  Simple, Several forces 
(c)  Simple, single factor 
(d)  Complex, Single factor 
2.  The survival and success of any business depends on sound_________________. 
(a)  Mind 
(b)  Environment 
(c)  Decisions 
(d)  None of these 
3.  Management of the firm _______________ control over macro-economic factors. 
(a)  has 
(b)  has no 
(c)  has partial 
(d)  None of these 
4. In a planned or command economy all the economic decisions are taken by the _________.  
(a)  Workers 
(b)  Consumers 
(c)  Voters 
(d)  Government 
5.  The regulatory mechanism of the market system is- 
(a)  Self interest 
(b)  Private property 
(c)  Competition 
(d)  Specialization 
6.   Which of the following statements is/are correct about mixed economic system? 
(a)  Mixed economic system depends on both markets and governments for allocation of resources 
(b)  Mixed economy is not always a golden path between capitalism and socialism.  
(c)  It is very difficult to maintain a proper balance between private and public sectors. 
(d)  All of the above 
 
Page 2


1 
MOCK TEST PAPER 2 
FOUNDATION COURSE 
PAPER 4: BUSINESS ECONOMICS AND BUSINESS AND COMMERCIAL KNOWLEDGE 
PART- I: BUSINESS ECONOMICS 
QUESTIONS 
1. Most of the economic problems are of _____________ nature and are affected by ______________. 
(a)  Complex, Several forces 
(b)  Simple, Several forces 
(c)  Simple, single factor 
(d)  Complex, Single factor 
2.  The survival and success of any business depends on sound_________________. 
(a)  Mind 
(b)  Environment 
(c)  Decisions 
(d)  None of these 
3.  Management of the firm _______________ control over macro-economic factors. 
(a)  has 
(b)  has no 
(c)  has partial 
(d)  None of these 
4. In a planned or command economy all the economic decisions are taken by the _________.  
(a)  Workers 
(b)  Consumers 
(c)  Voters 
(d)  Government 
5.  The regulatory mechanism of the market system is- 
(a)  Self interest 
(b)  Private property 
(c)  Competition 
(d)  Specialization 
6.   Which of the following statements is/are correct about mixed economic system? 
(a)  Mixed economic system depends on both markets and governments for allocation of resources 
(b)  Mixed economy is not always a golden path between capitalism and socialism.  
(c)  It is very difficult to maintain a proper balance between private and public sectors. 
(d)  All of the above 
 
2 
7.  After reaching the saturation point, consumption of additional units of the commodity cause -. 
(a)  Total utility to fall and marginal utility to increase. 
(b)  Total and marginal utility both to increase. 
(c)  Total utility to fall and marginal utility to become negative. 
(d)  Marginal utility to fall and total utility to become negative. 
8.  The substitution effect works to encourage a consumer to purchase more of a product when the price 
of that product is falling because- 
(a)  The consumer’s real income has increased. 
(b)  The consumer’s real income has decreased. 
(c)  The product is now relatively less expensive than before. 
(d)  Other products are now less expensive than before. 
9.   Which of the following statements is correct? 
(a)  When the slope of the demand curve is zero, demand is infinitely elastic and when the slope is 
infinite, elasticity is zero. 
(b)  When the slope of the demand curve is zero, the elasticity is also zero and when the slope is 
infinite, elasticity is also infinite. 
(c)  When the slope of the demand curve is zero, the elasticity is unity and also when the slope i s 
infinite, elasticity is unity. 
(d)  None of these 
10.  Diminishing marginal utility implies that the  
(a)  marginal utility of a good diminishes over time. 
(b) total utility is negative. 
(c)  last unit of a good consumed will contribute most to the consumer’s satisfaction. 
(d)  first unit of a good consumed will contribute most to the consumer’s satisfaction. 
11. The law of diminishing marginal utility states that 
(a)  total utility is maximized when a consumer obtain the same amount of utility per unit o f each 
product consumed 
(b)  beyond some point additional units of a product will yield less and less extra satisfaction to a 
consumer. 
(c)  price must be lowered to induce firms to supply more of a product. 
(d)  it will take larger and larger amounts of resources beyond some point to produce successive 
units of a product. 
12.  Marshallian theory of consumer’s behavior is based on 
(a)  Hypothesis of additive utilities. 
(b)  Hypothesis of independent utilities. 
(c)  Both (A) and (B) 
(d)  Weak ordering 
13.   Demand and ________ are the forces that make market economies work. 
(a)  Elasticity of demand 
(b)  Quantity demanded 
Page 3


1 
MOCK TEST PAPER 2 
FOUNDATION COURSE 
PAPER 4: BUSINESS ECONOMICS AND BUSINESS AND COMMERCIAL KNOWLEDGE 
PART- I: BUSINESS ECONOMICS 
QUESTIONS 
1. Most of the economic problems are of _____________ nature and are affected by ______________. 
(a)  Complex, Several forces 
(b)  Simple, Several forces 
(c)  Simple, single factor 
(d)  Complex, Single factor 
2.  The survival and success of any business depends on sound_________________. 
(a)  Mind 
(b)  Environment 
(c)  Decisions 
(d)  None of these 
3.  Management of the firm _______________ control over macro-economic factors. 
(a)  has 
(b)  has no 
(c)  has partial 
(d)  None of these 
4. In a planned or command economy all the economic decisions are taken by the _________.  
(a)  Workers 
(b)  Consumers 
(c)  Voters 
(d)  Government 
5.  The regulatory mechanism of the market system is- 
(a)  Self interest 
(b)  Private property 
(c)  Competition 
(d)  Specialization 
6.   Which of the following statements is/are correct about mixed economic system? 
(a)  Mixed economic system depends on both markets and governments for allocation of resources 
(b)  Mixed economy is not always a golden path between capitalism and socialism.  
(c)  It is very difficult to maintain a proper balance between private and public sectors. 
(d)  All of the above 
 
2 
7.  After reaching the saturation point, consumption of additional units of the commodity cause -. 
(a)  Total utility to fall and marginal utility to increase. 
(b)  Total and marginal utility both to increase. 
(c)  Total utility to fall and marginal utility to become negative. 
(d)  Marginal utility to fall and total utility to become negative. 
8.  The substitution effect works to encourage a consumer to purchase more of a product when the price 
of that product is falling because- 
(a)  The consumer’s real income has increased. 
(b)  The consumer’s real income has decreased. 
(c)  The product is now relatively less expensive than before. 
(d)  Other products are now less expensive than before. 
9.   Which of the following statements is correct? 
(a)  When the slope of the demand curve is zero, demand is infinitely elastic and when the slope is 
infinite, elasticity is zero. 
(b)  When the slope of the demand curve is zero, the elasticity is also zero and when the slope is 
infinite, elasticity is also infinite. 
(c)  When the slope of the demand curve is zero, the elasticity is unity and also when the slope i s 
infinite, elasticity is unity. 
(d)  None of these 
10.  Diminishing marginal utility implies that the  
(a)  marginal utility of a good diminishes over time. 
(b) total utility is negative. 
(c)  last unit of a good consumed will contribute most to the consumer’s satisfaction. 
(d)  first unit of a good consumed will contribute most to the consumer’s satisfaction. 
11. The law of diminishing marginal utility states that 
(a)  total utility is maximized when a consumer obtain the same amount of utility per unit o f each 
product consumed 
(b)  beyond some point additional units of a product will yield less and less extra satisfaction to a 
consumer. 
(c)  price must be lowered to induce firms to supply more of a product. 
(d)  it will take larger and larger amounts of resources beyond some point to produce successive 
units of a product. 
12.  Marshallian theory of consumer’s behavior is based on 
(a)  Hypothesis of additive utilities. 
(b)  Hypothesis of independent utilities. 
(c)  Both (A) and (B) 
(d)  Weak ordering 
13.   Demand and ________ are the forces that make market economies work. 
(a)  Elasticity of demand 
(b)  Quantity demanded 
3 
(c)  Supply 
(d)  Quantity supplied 
14.   Computers and computer software are______  
(a)  Substitute goods  
(b)  Complementary goods 
(c)  Independent goods 
(d)  Normal goods 
15.   Let slope of supply curve is 0.6, calculate elasticity of demand when initial price is $ 30 per unit and 
initial quantity is 100 units of the commodity. 
(a)  0.5 
(b)  5.55 
(c)  (-) 0.5  
(d)  (-) 0.18 
16.   Demonstration effect, a term coined by _____________ 
(a)  Adam Smith 
(b)  James Duesenberry 
(c)  Alfred Marshall 
(d)  None of these 
17.   Consider the following statements and select the correct answer from the given options. 
Assertion (A): Demand curve is vertical when elasticity of demand is zero. 
Reason (R):  Marginal utility of a product is increasing 
(a)  Both (A) and (R) are true and (R) is the correct explanation of (A)  
(b)  Both (A) and (R) are true and (R) is not the correct explanation of (A) 
(c)  (A) is true but (R) is false 
(d)  (A) is false but (R) is true 
18.   A rise in price of a good ___________________ consumer surplus. 
(a)  Reduces 
(b)  Increases 
(c)  Either (A) and (B) 
(d)  Doesn’t effect 
19.   A consumer is in equilibrium when s/he is deriving ____________ satisfaction from the goods. 
(a)  maximum 
(b)  possible 
(c)  maximum possible  
(d)  None of these 
20.   Which one of the following statements is true regarding Indifference Curve? 
(a)  Two ICs can never be parallel to each other 
(b)  Two ICs are always parallel to each other 
Page 4


1 
MOCK TEST PAPER 2 
FOUNDATION COURSE 
PAPER 4: BUSINESS ECONOMICS AND BUSINESS AND COMMERCIAL KNOWLEDGE 
PART- I: BUSINESS ECONOMICS 
QUESTIONS 
1. Most of the economic problems are of _____________ nature and are affected by ______________. 
(a)  Complex, Several forces 
(b)  Simple, Several forces 
(c)  Simple, single factor 
(d)  Complex, Single factor 
2.  The survival and success of any business depends on sound_________________. 
(a)  Mind 
(b)  Environment 
(c)  Decisions 
(d)  None of these 
3.  Management of the firm _______________ control over macro-economic factors. 
(a)  has 
(b)  has no 
(c)  has partial 
(d)  None of these 
4. In a planned or command economy all the economic decisions are taken by the _________.  
(a)  Workers 
(b)  Consumers 
(c)  Voters 
(d)  Government 
5.  The regulatory mechanism of the market system is- 
(a)  Self interest 
(b)  Private property 
(c)  Competition 
(d)  Specialization 
6.   Which of the following statements is/are correct about mixed economic system? 
(a)  Mixed economic system depends on both markets and governments for allocation of resources 
(b)  Mixed economy is not always a golden path between capitalism and socialism.  
(c)  It is very difficult to maintain a proper balance between private and public sectors. 
(d)  All of the above 
 
2 
7.  After reaching the saturation point, consumption of additional units of the commodity cause -. 
(a)  Total utility to fall and marginal utility to increase. 
(b)  Total and marginal utility both to increase. 
(c)  Total utility to fall and marginal utility to become negative. 
(d)  Marginal utility to fall and total utility to become negative. 
8.  The substitution effect works to encourage a consumer to purchase more of a product when the price 
of that product is falling because- 
(a)  The consumer’s real income has increased. 
(b)  The consumer’s real income has decreased. 
(c)  The product is now relatively less expensive than before. 
(d)  Other products are now less expensive than before. 
9.   Which of the following statements is correct? 
(a)  When the slope of the demand curve is zero, demand is infinitely elastic and when the slope is 
infinite, elasticity is zero. 
(b)  When the slope of the demand curve is zero, the elasticity is also zero and when the slope is 
infinite, elasticity is also infinite. 
(c)  When the slope of the demand curve is zero, the elasticity is unity and also when the slope i s 
infinite, elasticity is unity. 
(d)  None of these 
10.  Diminishing marginal utility implies that the  
(a)  marginal utility of a good diminishes over time. 
(b) total utility is negative. 
(c)  last unit of a good consumed will contribute most to the consumer’s satisfaction. 
(d)  first unit of a good consumed will contribute most to the consumer’s satisfaction. 
11. The law of diminishing marginal utility states that 
(a)  total utility is maximized when a consumer obtain the same amount of utility per unit o f each 
product consumed 
(b)  beyond some point additional units of a product will yield less and less extra satisfaction to a 
consumer. 
(c)  price must be lowered to induce firms to supply more of a product. 
(d)  it will take larger and larger amounts of resources beyond some point to produce successive 
units of a product. 
12.  Marshallian theory of consumer’s behavior is based on 
(a)  Hypothesis of additive utilities. 
(b)  Hypothesis of independent utilities. 
(c)  Both (A) and (B) 
(d)  Weak ordering 
13.   Demand and ________ are the forces that make market economies work. 
(a)  Elasticity of demand 
(b)  Quantity demanded 
3 
(c)  Supply 
(d)  Quantity supplied 
14.   Computers and computer software are______  
(a)  Substitute goods  
(b)  Complementary goods 
(c)  Independent goods 
(d)  Normal goods 
15.   Let slope of supply curve is 0.6, calculate elasticity of demand when initial price is $ 30 per unit and 
initial quantity is 100 units of the commodity. 
(a)  0.5 
(b)  5.55 
(c)  (-) 0.5  
(d)  (-) 0.18 
16.   Demonstration effect, a term coined by _____________ 
(a)  Adam Smith 
(b)  James Duesenberry 
(c)  Alfred Marshall 
(d)  None of these 
17.   Consider the following statements and select the correct answer from the given options. 
Assertion (A): Demand curve is vertical when elasticity of demand is zero. 
Reason (R):  Marginal utility of a product is increasing 
(a)  Both (A) and (R) are true and (R) is the correct explanation of (A)  
(b)  Both (A) and (R) are true and (R) is not the correct explanation of (A) 
(c)  (A) is true but (R) is false 
(d)  (A) is false but (R) is true 
18.   A rise in price of a good ___________________ consumer surplus. 
(a)  Reduces 
(b)  Increases 
(c)  Either (A) and (B) 
(d)  Doesn’t effect 
19.   A consumer is in equilibrium when s/he is deriving ____________ satisfaction from the goods. 
(a)  maximum 
(b)  possible 
(c)  maximum possible  
(d)  None of these 
20.   Which one of the following statements is true regarding Indifference Curve? 
(a)  Two ICs can never be parallel to each other 
(b)  Two ICs are always parallel to each other 
4 
(c)  Two ICs may not intersect each other 
(d)  Two ICs may be parallel to each other 
21.  Law of Equi-marginal Utility can be expressed as- 
(a)  MU X/P X = Q X 
(b)  P X Q X = MU M  
(c)  MU X/P X = MU Y/P Y = MU M 
(d)  MU X = MU M 
22.  Consider the following statements and select the correct answer from the given options. 
Assertion (A): Consumer surplus is the difference between the potential price and actual price.  
Reason (R):  There exists an inverse relationship between the price and consumer surplus. 
(a)  Both (A) and (R) are true and (R) is the correct explanation of (A) 
(b)  Both (A) and (R) are true and (R) is not the correct explanation of (A) 
(c)  (A) is true but (R) is false 
(d)  (A) is false but (R) is true 
23.  For substitutes, cross elasticity of demand is-  
(a)  Positive 
(b)  Negative 
(c)  Zero 
(d)  Always less than one 
24.   The oldest approach to the theory of demand is _______________. 
(a)  the total utility approach 
(b)  the cardinal utility approach 
(c)  the ordinal utility approach 
(d)  None of these 
25.  “Returns to a factor” refers to the effect on total output of changes in  
(a)  One factor only 
(b)  Various inputs separately 
(c)  All the inputs simultaneously  
(d)  None of the above 
26.  A factor of production is said to be superior if its expenditure elasticity 
(a)  is negative 
(b)  lies in unit interval 
(c)  exceeds unity 
(d)  is zero 
27.  Which of the following is correct regarding long run cost? 
1.  It is least cost of producing each level of output 
2. LAC curve is envelope of SAC curves. 
3.  LAC is U-shaped 
Page 5


1 
MOCK TEST PAPER 2 
FOUNDATION COURSE 
PAPER 4: BUSINESS ECONOMICS AND BUSINESS AND COMMERCIAL KNOWLEDGE 
PART- I: BUSINESS ECONOMICS 
QUESTIONS 
1. Most of the economic problems are of _____________ nature and are affected by ______________. 
(a)  Complex, Several forces 
(b)  Simple, Several forces 
(c)  Simple, single factor 
(d)  Complex, Single factor 
2.  The survival and success of any business depends on sound_________________. 
(a)  Mind 
(b)  Environment 
(c)  Decisions 
(d)  None of these 
3.  Management of the firm _______________ control over macro-economic factors. 
(a)  has 
(b)  has no 
(c)  has partial 
(d)  None of these 
4. In a planned or command economy all the economic decisions are taken by the _________.  
(a)  Workers 
(b)  Consumers 
(c)  Voters 
(d)  Government 
5.  The regulatory mechanism of the market system is- 
(a)  Self interest 
(b)  Private property 
(c)  Competition 
(d)  Specialization 
6.   Which of the following statements is/are correct about mixed economic system? 
(a)  Mixed economic system depends on both markets and governments for allocation of resources 
(b)  Mixed economy is not always a golden path between capitalism and socialism.  
(c)  It is very difficult to maintain a proper balance between private and public sectors. 
(d)  All of the above 
 
2 
7.  After reaching the saturation point, consumption of additional units of the commodity cause -. 
(a)  Total utility to fall and marginal utility to increase. 
(b)  Total and marginal utility both to increase. 
(c)  Total utility to fall and marginal utility to become negative. 
(d)  Marginal utility to fall and total utility to become negative. 
8.  The substitution effect works to encourage a consumer to purchase more of a product when the price 
of that product is falling because- 
(a)  The consumer’s real income has increased. 
(b)  The consumer’s real income has decreased. 
(c)  The product is now relatively less expensive than before. 
(d)  Other products are now less expensive than before. 
9.   Which of the following statements is correct? 
(a)  When the slope of the demand curve is zero, demand is infinitely elastic and when the slope is 
infinite, elasticity is zero. 
(b)  When the slope of the demand curve is zero, the elasticity is also zero and when the slope is 
infinite, elasticity is also infinite. 
(c)  When the slope of the demand curve is zero, the elasticity is unity and also when the slope i s 
infinite, elasticity is unity. 
(d)  None of these 
10.  Diminishing marginal utility implies that the  
(a)  marginal utility of a good diminishes over time. 
(b) total utility is negative. 
(c)  last unit of a good consumed will contribute most to the consumer’s satisfaction. 
(d)  first unit of a good consumed will contribute most to the consumer’s satisfaction. 
11. The law of diminishing marginal utility states that 
(a)  total utility is maximized when a consumer obtain the same amount of utility per unit o f each 
product consumed 
(b)  beyond some point additional units of a product will yield less and less extra satisfaction to a 
consumer. 
(c)  price must be lowered to induce firms to supply more of a product. 
(d)  it will take larger and larger amounts of resources beyond some point to produce successive 
units of a product. 
12.  Marshallian theory of consumer’s behavior is based on 
(a)  Hypothesis of additive utilities. 
(b)  Hypothesis of independent utilities. 
(c)  Both (A) and (B) 
(d)  Weak ordering 
13.   Demand and ________ are the forces that make market economies work. 
(a)  Elasticity of demand 
(b)  Quantity demanded 
3 
(c)  Supply 
(d)  Quantity supplied 
14.   Computers and computer software are______  
(a)  Substitute goods  
(b)  Complementary goods 
(c)  Independent goods 
(d)  Normal goods 
15.   Let slope of supply curve is 0.6, calculate elasticity of demand when initial price is $ 30 per unit and 
initial quantity is 100 units of the commodity. 
(a)  0.5 
(b)  5.55 
(c)  (-) 0.5  
(d)  (-) 0.18 
16.   Demonstration effect, a term coined by _____________ 
(a)  Adam Smith 
(b)  James Duesenberry 
(c)  Alfred Marshall 
(d)  None of these 
17.   Consider the following statements and select the correct answer from the given options. 
Assertion (A): Demand curve is vertical when elasticity of demand is zero. 
Reason (R):  Marginal utility of a product is increasing 
(a)  Both (A) and (R) are true and (R) is the correct explanation of (A)  
(b)  Both (A) and (R) are true and (R) is not the correct explanation of (A) 
(c)  (A) is true but (R) is false 
(d)  (A) is false but (R) is true 
18.   A rise in price of a good ___________________ consumer surplus. 
(a)  Reduces 
(b)  Increases 
(c)  Either (A) and (B) 
(d)  Doesn’t effect 
19.   A consumer is in equilibrium when s/he is deriving ____________ satisfaction from the goods. 
(a)  maximum 
(b)  possible 
(c)  maximum possible  
(d)  None of these 
20.   Which one of the following statements is true regarding Indifference Curve? 
(a)  Two ICs can never be parallel to each other 
(b)  Two ICs are always parallel to each other 
4 
(c)  Two ICs may not intersect each other 
(d)  Two ICs may be parallel to each other 
21.  Law of Equi-marginal Utility can be expressed as- 
(a)  MU X/P X = Q X 
(b)  P X Q X = MU M  
(c)  MU X/P X = MU Y/P Y = MU M 
(d)  MU X = MU M 
22.  Consider the following statements and select the correct answer from the given options. 
Assertion (A): Consumer surplus is the difference between the potential price and actual price.  
Reason (R):  There exists an inverse relationship between the price and consumer surplus. 
(a)  Both (A) and (R) are true and (R) is the correct explanation of (A) 
(b)  Both (A) and (R) are true and (R) is not the correct explanation of (A) 
(c)  (A) is true but (R) is false 
(d)  (A) is false but (R) is true 
23.  For substitutes, cross elasticity of demand is-  
(a)  Positive 
(b)  Negative 
(c)  Zero 
(d)  Always less than one 
24.   The oldest approach to the theory of demand is _______________. 
(a)  the total utility approach 
(b)  the cardinal utility approach 
(c)  the ordinal utility approach 
(d)  None of these 
25.  “Returns to a factor” refers to the effect on total output of changes in  
(a)  One factor only 
(b)  Various inputs separately 
(c)  All the inputs simultaneously  
(d)  None of the above 
26.  A factor of production is said to be superior if its expenditure elasticity 
(a)  is negative 
(b)  lies in unit interval 
(c)  exceeds unity 
(d)  is zero 
27.  Which of the following is correct regarding long run cost? 
1.  It is least cost of producing each level of output 
2. LAC curve is envelope of SAC curves. 
3.  LAC is U-shaped 
5 
(a)  1 & 2 only 
(b)  2 & 3 only 
(c)  1 & 3 only 
(d)  1, 2 & 3 
28.  The law of diminishing returns only applies in cases where 
(a)  There is increasing scarcity of factors of production  
(b)  The price of extra unit of a factor is increasing 
(c)  There is atleast one fixed factor of production  
(d)  Capital is a variable input 
29.   Economies and diseconomies of scale explain why the 
(a)  short run average fixed cost curve declines so long as output increases. 
(b)  marginal cost curve must intersect the minimum point the firm’s average variable cost curve. 
(c)  long run average cost curve is typically U-shaped. 
(d)  short run average total cost curve is U-shaped. 
30.  Production function: Q = 4L
1/2
k
2/3
 exhibits- 
(a)  increasing returns to scale  
(b)  decreasing returns to scale 
(c)  constant returns to scale 
(d)  increasing returns to a factor 
31.  Which of the following is correct regarding the slope of iso-cost line? 
Slope of iso-cost line can change due to 
1.  Change in factor(s) price(s) 
2.  Change in total outlay or total cost. 
(a)  1 only 
(b)  2 only 
(c)  1 & 2 both 
(d)  None of these 
32.  Which one of the following is not an internal economies of scale? 
(a)  Technical economies 
(b)  Financial economies 
(c)  Economies due to localization of industries 
(d)  Marketing economies 
33.   Isoquant word is made up of two words i.e., Iso & Quant. Where Iso means equal then Quant means- 
(a)  Quantity sold 
(b)  Output 
(c)  Quantity demanded  
(d)  Quantity supplied