Mock Test: Business Economics and Business and Commercial Knowledge(Paper-4) - Series-II(Dec. 2023) | Mock Tests & Past Year Papers for CA Foundation PDF Download

 Page 1


1 
MOCK TEST PAPER 2 
FOUNDATION COURSE 
PAPER 4: BUSINESS ECONOMICS AND BUSINESS AND COMMERCIAL KNOWLEDGE 
PART- I: BUSINESS ECONOMICS 
QUESTIONS 
 
1.  Which aspect of taxation involves Normative Economics? 
(a)  the incidence of the tax  
(b)  the effect of the tax on incentives to work 
(c)  the “fairness” of the tax  
(d)  all the above. 
2. 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  
3. If the quantity of a commodity demanded remains unchanged as its price changes, the coefficient of 
price elasticity of demand is: 
(a)  >1  
(b)  = 1  
(c)  < 1   
(d) 0 
4.  A consumer who is below the personal budget line: 
(a)  is not spending all personal income 
(b)  is spending all personal income  
(c)  may be spending all personal income  
(d)  is in equilibrium 
5.  If the income elasticity of demand is greater than 1, the commodity is 
(a)  a necessity 
(b)  a luxury 
(c)  an inferior good 
(d)  a non-related good 
 
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Page 2


1 
MOCK TEST PAPER 2 
FOUNDATION COURSE 
PAPER 4: BUSINESS ECONOMICS AND BUSINESS AND COMMERCIAL KNOWLEDGE 
PART- I: BUSINESS ECONOMICS 
QUESTIONS 
 
1.  Which aspect of taxation involves Normative Economics? 
(a)  the incidence of the tax  
(b)  the effect of the tax on incentives to work 
(c)  the “fairness” of the tax  
(d)  all the above. 
2. 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  
3. If the quantity of a commodity demanded remains unchanged as its price changes, the coefficient of 
price elasticity of demand is: 
(a)  >1  
(b)  = 1  
(c)  < 1   
(d) 0 
4.  A consumer who is below the personal budget line: 
(a)  is not spending all personal income 
(b)  is spending all personal income  
(c)  may be spending all personal income  
(d)  is in equilibrium 
5.  If the income elasticity of demand is greater than 1, the commodity is 
(a)  a necessity 
(b)  a luxury 
(c)  an inferior good 
(d)  a non-related good 
 
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6.  The substitution effect for a fall in the price of a commodity (ceteris paribus) is given by: 
(a)  a movement up a given IC 
(b)  a movement from a higher to a lower IC 
(c)  a movement down a given IC 
(d)  any of the above  
7.  If the MRTSLK equals 2, then the MPK/MPL is: 
(a)  2 
(b)  1 
(c) 2 
(d)  4 
8.  The MC curve reaches its minimum point before the AVC curve and the AC curve. In addition, the MC 
curve intersects the AVC curve and the AC curve at their lowest point. The above statements are both 
true:  
(a)  always 
(b)  never 
(c)  often 
(d)  sometimes 
9.  At the shut-down point: 
(a)  P = AVC 
(b)  TR = TVC 
(c)  the total losses of the firm equal TFC 
(d)  all of the above.  
10.  If the monopolist incurs losses in the short run, then in the long run: 
(a)  the monopolist will go out of business 
(b)  the monopolist will stay in business 
(c)  the monopolist will break even  
(d)  any of the above  
11.  In monopolistic competition, we have: 
(a)  few firms selling a differentiated product 
(b)  many firms selling a homogeneous product 
(c)  few firms selling a homogeneous product 
(d)  many firms selling a differentiated product  
12.  In both the Chamberlin and the kinked demand curve models, the oligopolists: 
(a)  recognize their interdependence 
(b)  do not collude 
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Page 3


1 
MOCK TEST PAPER 2 
FOUNDATION COURSE 
PAPER 4: BUSINESS ECONOMICS AND BUSINESS AND COMMERCIAL KNOWLEDGE 
PART- I: BUSINESS ECONOMICS 
QUESTIONS 
 
1.  Which aspect of taxation involves Normative Economics? 
(a)  the incidence of the tax  
(b)  the effect of the tax on incentives to work 
(c)  the “fairness” of the tax  
(d)  all the above. 
2. 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  
3. If the quantity of a commodity demanded remains unchanged as its price changes, the coefficient of 
price elasticity of demand is: 
(a)  >1  
(b)  = 1  
(c)  < 1   
(d) 0 
4.  A consumer who is below the personal budget line: 
(a)  is not spending all personal income 
(b)  is spending all personal income  
(c)  may be spending all personal income  
(d)  is in equilibrium 
5.  If the income elasticity of demand is greater than 1, the commodity is 
(a)  a necessity 
(b)  a luxury 
(c)  an inferior good 
(d)  a non-related good 
 
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2 
6.  The substitution effect for a fall in the price of a commodity (ceteris paribus) is given by: 
(a)  a movement up a given IC 
(b)  a movement from a higher to a lower IC 
(c)  a movement down a given IC 
(d)  any of the above  
7.  If the MRTSLK equals 2, then the MPK/MPL is: 
(a)  2 
(b)  1 
(c) 2 
(d)  4 
8.  The MC curve reaches its minimum point before the AVC curve and the AC curve. In addition, the MC 
curve intersects the AVC curve and the AC curve at their lowest point. The above statements are both 
true:  
(a)  always 
(b)  never 
(c)  often 
(d)  sometimes 
9.  At the shut-down point: 
(a)  P = AVC 
(b)  TR = TVC 
(c)  the total losses of the firm equal TFC 
(d)  all of the above.  
10.  If the monopolist incurs losses in the short run, then in the long run: 
(a)  the monopolist will go out of business 
(b)  the monopolist will stay in business 
(c)  the monopolist will break even  
(d)  any of the above  
11.  In monopolistic competition, we have: 
(a)  few firms selling a differentiated product 
(b)  many firms selling a homogeneous product 
(c)  few firms selling a homogeneous product 
(d)  many firms selling a differentiated product  
12.  In both the Chamberlin and the kinked demand curve models, the oligopolists: 
(a)  recognize their interdependence 
(b)  do not collude 
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(c)  tend to keep prices constant 
(d)  all of the above.  
13.  Who gave the theory of price discrimination? 
(a)  Marshall 
(b)  Pigou 
(c)  Cournot 
(d)  Simon 
14.  If a good has a price elasticity of demand greater than 1, it is considered:  
(a)  Price inelastic 
(b)  Price elastic 
(c)  Unit price elastic 
(d)  Price neutral 
15. The income elasticity of demand measures: 
(a)  The responsiveness of quantity demanded to changes in price 
(b)  The responsiveness of quantity demanded to changes in income 
(c)  The responsiveness of quantity supplied to changes in price  
(d)  The responsiveness of quantity supplied to changes in income 
16.  Which of the following factors does NOT influence supply?  
(a)  Production costs 
(b)  Technological advancements 
(c)  Prices of inputs 
(d)  Consumer preferences 
17.  In a market economy, resource allocation is primarily determined by:  
(a)  Central planning by the government 
(b)  Consumer demand and supply in the marketplace  
(c)  The decisions of a few large corporations  
(d)  international trade agreements 
18.  During a recession, the economy experiences:  
(a)  A decrease in prices and inflation 
(b)  High levels of economic growth and expansion  
(c)  A decline in employment and economic activity 
(d)  Increased business investments and consumer spending 
19.  Which of the following policy measures is typically used by central banks to manage the business cycle? 
(a)  Fiscal policy 
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1 
MOCK TEST PAPER 2 
FOUNDATION COURSE 
PAPER 4: BUSINESS ECONOMICS AND BUSINESS AND COMMERCIAL KNOWLEDGE 
PART- I: BUSINESS ECONOMICS 
QUESTIONS 
 
1.  Which aspect of taxation involves Normative Economics? 
(a)  the incidence of the tax  
(b)  the effect of the tax on incentives to work 
(c)  the “fairness” of the tax  
(d)  all the above. 
2. 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  
3. If the quantity of a commodity demanded remains unchanged as its price changes, the coefficient of 
price elasticity of demand is: 
(a)  >1  
(b)  = 1  
(c)  < 1   
(d) 0 
4.  A consumer who is below the personal budget line: 
(a)  is not spending all personal income 
(b)  is spending all personal income  
(c)  may be spending all personal income  
(d)  is in equilibrium 
5.  If the income elasticity of demand is greater than 1, the commodity is 
(a)  a necessity 
(b)  a luxury 
(c)  an inferior good 
(d)  a non-related good 
 
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6.  The substitution effect for a fall in the price of a commodity (ceteris paribus) is given by: 
(a)  a movement up a given IC 
(b)  a movement from a higher to a lower IC 
(c)  a movement down a given IC 
(d)  any of the above  
7.  If the MRTSLK equals 2, then the MPK/MPL is: 
(a)  2 
(b)  1 
(c) 2 
(d)  4 
8.  The MC curve reaches its minimum point before the AVC curve and the AC curve. In addition, the MC 
curve intersects the AVC curve and the AC curve at their lowest point. The above statements are both 
true:  
(a)  always 
(b)  never 
(c)  often 
(d)  sometimes 
9.  At the shut-down point: 
(a)  P = AVC 
(b)  TR = TVC 
(c)  the total losses of the firm equal TFC 
(d)  all of the above.  
10.  If the monopolist incurs losses in the short run, then in the long run: 
(a)  the monopolist will go out of business 
(b)  the monopolist will stay in business 
(c)  the monopolist will break even  
(d)  any of the above  
11.  In monopolistic competition, we have: 
(a)  few firms selling a differentiated product 
(b)  many firms selling a homogeneous product 
(c)  few firms selling a homogeneous product 
(d)  many firms selling a differentiated product  
12.  In both the Chamberlin and the kinked demand curve models, the oligopolists: 
(a)  recognize their interdependence 
(b)  do not collude 
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(c)  tend to keep prices constant 
(d)  all of the above.  
13.  Who gave the theory of price discrimination? 
(a)  Marshall 
(b)  Pigou 
(c)  Cournot 
(d)  Simon 
14.  If a good has a price elasticity of demand greater than 1, it is considered:  
(a)  Price inelastic 
(b)  Price elastic 
(c)  Unit price elastic 
(d)  Price neutral 
15. The income elasticity of demand measures: 
(a)  The responsiveness of quantity demanded to changes in price 
(b)  The responsiveness of quantity demanded to changes in income 
(c)  The responsiveness of quantity supplied to changes in price  
(d)  The responsiveness of quantity supplied to changes in income 
16.  Which of the following factors does NOT influence supply?  
(a)  Production costs 
(b)  Technological advancements 
(c)  Prices of inputs 
(d)  Consumer preferences 
17.  In a market economy, resource allocation is primarily determined by:  
(a)  Central planning by the government 
(b)  Consumer demand and supply in the marketplace  
(c)  The decisions of a few large corporations  
(d)  international trade agreements 
18.  During a recession, the economy experiences:  
(a)  A decrease in prices and inflation 
(b)  High levels of economic growth and expansion  
(c)  A decline in employment and economic activity 
(d)  Increased business investments and consumer spending 
19.  Which of the following policy measures is typically used by central banks to manage the business cycle? 
(a)  Fiscal policy 
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(b)  Monetary policy 
(c)  Trade policy  
(d)  Industrial policy 
20.  Which of the following is a lagging economic indicator? 
(a)  Consumer confidence index 
(b)  Stock market performance 
(c)  Unemployment rate  
(d)  New housing starts 
21. Price Elasticity of Demand of a good is (-) 3. It shows that:  
(a)  When price falls by 1%, demand rises by 3%  
(b)  When price rises by 1%, demand falls by 3%  
(c)  Either (a) or (b) 
(d)  Neither (a) nor (b) 
22.  The demand for meals at a medium-priced restaurant is elastic. If the management of the restaurant is 
considering raising prices, it can expect a relatively: 
(a)  Proportionately large fall in quantity demanded 
(b)  No change in quantity demanded  
(c)  Proportionately small fall in quantity demanded  
(d)  Infinite change in quantity demanded 
23.  Which of the following is not a reason for operation of increasing returns to a factor?  
(a)  Better utilisation of fixed factor  
(b)  Limitation of fixed factor  
(c)  Increase in efficiency of variable factor  
(d)  Indivisibility of fixed factor 
24.  At the Point of Inflexion:  
(a)  Total Product is maximum  
(b)  Average Product is maximum 
(c)  Marginal Product is maximum  
(d)  Marginal Product is zero 
25.  Cost function is a __________ concept:  
(a)  Economical  
(b)  Functional  
(c)  Financial 
(d)  Technical 
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1 
MOCK TEST PAPER 2 
FOUNDATION COURSE 
PAPER 4: BUSINESS ECONOMICS AND BUSINESS AND COMMERCIAL KNOWLEDGE 
PART- I: BUSINESS ECONOMICS 
QUESTIONS 
 
1.  Which aspect of taxation involves Normative Economics? 
(a)  the incidence of the tax  
(b)  the effect of the tax on incentives to work 
(c)  the “fairness” of the tax  
(d)  all the above. 
2. 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  
3. If the quantity of a commodity demanded remains unchanged as its price changes, the coefficient of 
price elasticity of demand is: 
(a)  >1  
(b)  = 1  
(c)  < 1   
(d) 0 
4.  A consumer who is below the personal budget line: 
(a)  is not spending all personal income 
(b)  is spending all personal income  
(c)  may be spending all personal income  
(d)  is in equilibrium 
5.  If the income elasticity of demand is greater than 1, the commodity is 
(a)  a necessity 
(b)  a luxury 
(c)  an inferior good 
(d)  a non-related good 
 
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6.  The substitution effect for a fall in the price of a commodity (ceteris paribus) is given by: 
(a)  a movement up a given IC 
(b)  a movement from a higher to a lower IC 
(c)  a movement down a given IC 
(d)  any of the above  
7.  If the MRTSLK equals 2, then the MPK/MPL is: 
(a)  2 
(b)  1 
(c) 2 
(d)  4 
8.  The MC curve reaches its minimum point before the AVC curve and the AC curve. In addition, the MC 
curve intersects the AVC curve and the AC curve at their lowest point. The above statements are both 
true:  
(a)  always 
(b)  never 
(c)  often 
(d)  sometimes 
9.  At the shut-down point: 
(a)  P = AVC 
(b)  TR = TVC 
(c)  the total losses of the firm equal TFC 
(d)  all of the above.  
10.  If the monopolist incurs losses in the short run, then in the long run: 
(a)  the monopolist will go out of business 
(b)  the monopolist will stay in business 
(c)  the monopolist will break even  
(d)  any of the above  
11.  In monopolistic competition, we have: 
(a)  few firms selling a differentiated product 
(b)  many firms selling a homogeneous product 
(c)  few firms selling a homogeneous product 
(d)  many firms selling a differentiated product  
12.  In both the Chamberlin and the kinked demand curve models, the oligopolists: 
(a)  recognize their interdependence 
(b)  do not collude 
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(c)  tend to keep prices constant 
(d)  all of the above.  
13.  Who gave the theory of price discrimination? 
(a)  Marshall 
(b)  Pigou 
(c)  Cournot 
(d)  Simon 
14.  If a good has a price elasticity of demand greater than 1, it is considered:  
(a)  Price inelastic 
(b)  Price elastic 
(c)  Unit price elastic 
(d)  Price neutral 
15. The income elasticity of demand measures: 
(a)  The responsiveness of quantity demanded to changes in price 
(b)  The responsiveness of quantity demanded to changes in income 
(c)  The responsiveness of quantity supplied to changes in price  
(d)  The responsiveness of quantity supplied to changes in income 
16.  Which of the following factors does NOT influence supply?  
(a)  Production costs 
(b)  Technological advancements 
(c)  Prices of inputs 
(d)  Consumer preferences 
17.  In a market economy, resource allocation is primarily determined by:  
(a)  Central planning by the government 
(b)  Consumer demand and supply in the marketplace  
(c)  The decisions of a few large corporations  
(d)  international trade agreements 
18.  During a recession, the economy experiences:  
(a)  A decrease in prices and inflation 
(b)  High levels of economic growth and expansion  
(c)  A decline in employment and economic activity 
(d)  Increased business investments and consumer spending 
19.  Which of the following policy measures is typically used by central banks to manage the business cycle? 
(a)  Fiscal policy 
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(b)  Monetary policy 
(c)  Trade policy  
(d)  Industrial policy 
20.  Which of the following is a lagging economic indicator? 
(a)  Consumer confidence index 
(b)  Stock market performance 
(c)  Unemployment rate  
(d)  New housing starts 
21. Price Elasticity of Demand of a good is (-) 3. It shows that:  
(a)  When price falls by 1%, demand rises by 3%  
(b)  When price rises by 1%, demand falls by 3%  
(c)  Either (a) or (b) 
(d)  Neither (a) nor (b) 
22.  The demand for meals at a medium-priced restaurant is elastic. If the management of the restaurant is 
considering raising prices, it can expect a relatively: 
(a)  Proportionately large fall in quantity demanded 
(b)  No change in quantity demanded  
(c)  Proportionately small fall in quantity demanded  
(d)  Infinite change in quantity demanded 
23.  Which of the following is not a reason for operation of increasing returns to a factor?  
(a)  Better utilisation of fixed factor  
(b)  Limitation of fixed factor  
(c)  Increase in efficiency of variable factor  
(d)  Indivisibility of fixed factor 
24.  At the Point of Inflexion:  
(a)  Total Product is maximum  
(b)  Average Product is maximum 
(c)  Marginal Product is maximum  
(d)  Marginal Product is zero 
25.  Cost function is a __________ concept:  
(a)  Economical  
(b)  Functional  
(c)  Financial 
(d)  Technical 
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26.  Demand curve of a firm under monopoly is:  
(a)  Downward sloping  
(b)  Indeterminate  
(c)  Upward sloping  
(d)  Perfectly elastic 
27.  Demand curve under Oligopoly is: 
(a)  Less elastic  
(b)  Perfectly elastic 
(c)  Highly elastic  
(d)  Indeterminate 
28.  In a commodity market, excess demand exists when: 
(a)  market price is greater than equilibrium price  
(b)  equilibrium price is greater than market price  
(c)  equilibrium price is not equal to market price 
(d)  government fixes the price 
29.  A few Big sellers’ is a Characteristics of: 
(a)  Perfect Competition  
(b)  Monopolistic Competition  
(c)  Oligopoly  
(d)  None of the above 
30. The cost curve, which is Inversely S-shaped is:  
(a)  Average Cost Curve  
(b)  Total Fixed Cost Curve 
(c)  Total Variable Cost Curve 
(d)  Marginal Cost Curve 
31. Which of the following is not an example of coincident indicator? 
(a)  Inflation 
(b)  Industrial Production 
(c)  Retail Sales 
(d)  New order for Plant and equipment  
32. The cost which is never zero even when production is stopped is known as: 
(a)  Supplementary Cost  
(b)  Prime Cost  
(c)  Explicit cost  
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