Economics: CUET Mock Test - 8 - Commerce MCQ

Ford Motors entered the Indian machine business with Mahindra and Mahindra, an Indian manufacturer.
Ford Motor is a multinational corporation (MNC). Ford Motors, an American company, is one of the world's largest machine manufacturers, with products spread over 26 countries. In 1995, Ford Motors came to India for the collaboration. Globalisation is the process of commerce and integration among people, companies, and governments worldwide. Globalisation has eased since the 18th century because of transportation and communication technology advances. India introduced globalisation under the New Economic Reforms in 1991.

Following are some factors which affect the price of a commodity in different countries.
One of the major factors that affects the prices of goods is the difference in taxes and import duties across countries. When dealing in commodities, or any physical good, the cost to transport them must be included, resulting in different prices when commodities from two different locations are examined. Because transaction costs exist and can vary across different markets and geographic regions, prices for the same good can also vary between markets. Legal barriers such as capital controls, or in the case of wages, immigration restrictions, can lead to persistent price differentials rather than one price. 

Rapid improvement in technology is definitely helped in stimulating the process of the globalization. Globalization is the process of interaction and integration among people, companies, and governments worldwide.
With the help of technology, it is so much faster to communicate across the world which has helped the businesses and companies to grow faster across the world.

Tax on imports is an example of a trade barrier. Trade barriers are the boundaries set by countries while trading with other countries. With globalisation, most countries had to open their markets, and it was challenging to put physical barriers on imports. But to keep the imports low, many governments imposed taxes on them. This was done to protect the domestic industry from low-cost foreign goods and decrease the flow of foreign exchange due to imports. Thus, taxes on imports created a barrier to the import of goods and services.

World Trade Organisation (WTO) is one such organisation whose aim is to liberalise international trade. Started at the initiative of the developed countries, WTO establishes rules regarding international trade, and sees that these rules are obeyed.

Globalisation has created new opportunities of employment, emerging multinationals and providing service.
There are several advantages of globalisation. Several new opportunities are available now. As new MNCs set up offices in a country, employment is generated. New opportunities are also generated for the service sector, particularly the IT field. Moreover, several services are done at a low rate in India and exported to different countries. Emerging multinationals have also gained quite a lot from the opportunities created by globalisation. They have invested in new technology and also raised their production standards. Some companies have gained from collaborations with the MNCs, while some have emerged as multinationals themselves. Thus, all the options given in the question are correct.

• Globalization has posed significant challenges for small producers, particularly in developing countries.
• This is due to increased competition from larger, often multinational companies that can produce goods more efficiently and at lower costs.
• Small producers may struggle to access global markets, face price pressures, and deal with the complexities of international trade, which often leads to marginalization.

The American MNC, Cargill Foods, has bought Parakh Foods.
MNCs have colossal wealth, and so the most common route for MNCs to expand their manufacturing is to buy up local companies to enhance production. Cargill Foods is a vast American MNC that has bought over a smaller Indian company, Parakh Foods.
Parakh Foods had already established an extensive marketing network across various parts of India, where it had garnered a strong reputation. Parakh Foods also had four oil refineries. All of these assets have now shifted into the control of Cargill Foods. With this acquisition, Cargill Foods is currently the largest producer of edible oil in India, with a capacity to produce 5 million pouches daily.

The import of Chinese toys into India typically results in a greater variety of toys being available in the Indian market at relatively lower prices compared to domestically manufactured toys. This broadens the choices available to Indian consumers, often at more competitive rates. The availability of inexpensive imports from China can influence consumer behavior by providing more options across different price points, which can appeal to a wider demographic. This situation highlights the impact of global trade dynamics on local markets, where imports can either complement or compete with domestic products.

• Sustainable development is the idea that human beings should sustain themselves by meeting their basic needs and ensuring that future generations can meet their basic needs.
• Sustainable development is essential because it balances countries' economic growth and humanity.
• Today is fear of overuse or complete exhaustion of these limited natural resources. 
• In an economic growth, the damage is being caused to the environment and ecology, which ultimately will create insecurity for human beings.
• Careful use of resources needed by the present generation and a reserve for future generations.
• Humans are overusing renewable resources like groundwater.
• The problem of soil degradation is because of overusing chemical fertilizers.
• Coal, petrol, and natural gas are non-renewable resources limited in stock.
• It can take thousands of years to be replenished.

Final Answer:

• Sustainable development is essential because stocks of natural resources are limited.
• Natural resources are exhausted by humans for economic development.
• In an economic growth, the damage is being caused to the environment and ecology, which ultimately will create insecurity for human beings.
• Careful use of resources needed by the present generation and a reserve for future generations.

Imposing a tax on Chinese toys can make them more expensive for Indian consumers, thereby reducing their competitive pricing edge. This potentially leads to a decrease in demand for Chinese toys as they become less affordable compared to their previous market position. Consequently, Indian toy-makers may benefit from this shift, as consumers could turn to locally made toys, which might remain more affordable in comparison. This situation can foster growth and prosperity for the Indian toy industry by leveling the playing field against cheaper imported goods.

Removing barriers or restrictions set by the government is called liberalisation. Liberalisation is the act of eliminating restrictions or barriers put in place by the government. Liberalisation occurs when something previously forbidden is made legal or when governmental restrictions are loosened. For example, most restrictions on certain personal activities are removed. Simply put, liberalisation is loosening governmental restrictions on social, political, and fiscal policy. The term "liberalisation" refers to easing governmental restrictions and regulations to allow for greater participation by private businesses in economic policy. It is a technique for lowering control systems to encourage economic growth. To increase the role of private and foreign investment and market orientation in the economy, economic liberalisation was started in India in 1991.

The automobile industry is characterized by a large number of well-off buyers, particularly in urban areas. Cars and other vehicles often represent significant investments and are associated with higher levels of disposable income. Urban environments offer the infrastructure and lifestyle that accommodate and even necessitate private vehicle ownership, making automobiles a common choice among affluent buyers. In contrast, while industries like footwear, jewelry, and clothing and accessories also cater to well-off consumers, the level of financial commitment and the demographic breadth interested in automobiles typically surpasses that of the other listed options.

Special Economic Zones (SEZs) are a significant government initiative designed to attract foreign investment into India. These zones provide a conducive business environment with favorable tax regimes, simpler compliance regulations, and infrastructure tailored to the needs of business operations. By establishing SEZs, the government aims to enhance foreign investment by creating regions that are economically and legally advantageous for foreign companies looking to establish operations in India. This focus on improving the business environment directly targets foreign investors and is distinctly different from educational improvements or employment policies in the public sector.

In today's competitive job market, employers often prefer to employ workers flexibly. This flexibility can manifest in various forms, such as offering part-time positions, temporary contracts, remote working options, or flexible working hours. Such arrangements allow businesses to adapt more efficiently to market conditions, manage costs effectively, and respond to fluctuations in demand. Employing workers flexibly also enables companies to tap into a wider talent pool, including those who may not be able to commit to traditional full-time roles but can contribute significantly in more flexible setups.

FDI stands for Foreign Direct Investment, which is when an investor from one country establishes a lasting interest in a business or corporation in another country. This can involve owning at least 10% of the voting power in the company.

The EXIM policy is often called the Foreign Trade Policy (FTP). It was introduced in 1992 and regulated by the Foreign Trade Development and Regulation Act. It comprises the guidelines relevant to the import and export of products and services in and out of the country.

• Disinvestment is the process in which a certain percentage of shares of public sector units are disinvested to the private sector. It is also known as privatization.
• The government undertakes disinvestment to reduce the fiscal burden on the exchequer, or to raise money for meeting specific needs.
• The government sells up to 50% or such a higher percentage of its ownership rights to private companies.
• Disinvestment policy began with the introduction of economic reforms in 1991.
• National Investment Fund was created in 2005 into which the proceeds from disinvestment of Central Public Sector Enterprises were collected.
• The main reasons for disinvestment in India are:
  • To meet the budgetary needs.
  • To reduce the fiscal deficit.
  • To improve public finance and overall economic efficiency.
  • To diversify the ownership of PSUs for enhancing efficiency.
  • To introduce competition in the market.

Cross holding method of Disinvestment refers to Government selling part of its Shares in one PSU to other PSUs. The term disinvestment is more popularly used where central/ state government sells its holdings of public sector companies. Disinvestment means selling of Public investment to a Private entrepreneur.

The correct answer is D: All of these.

Privatization can be achieved through various methods, including leasing, franchising, and contracting. These approaches allow private entities to manage public services or assets, thereby reducing the government's role in certain sectors and increasing efficiency and innovation through private sector participation.

1. Leasing: This involves the government allowing a private company to operate a public asset for a specified period while retaining ownership of the asset.
2. Franchising: This method grants a private entity the right to deliver public services under specific conditions, typically in sectors like public transport or utilities.
3. Contracting: Here, the government contracts out services it would typically provide to private firms, which then carry out these services under agreed terms and conditions.

All these methods are viable ways to implement privatization, each facilitating private sector involvement in public services or asset management.

• Globalization is defined as the integration between countries through foreign trade and foreign investments by multinational corporations (MNCs).
• An increase in foreign trade, migration of people from one country to another, the flow of capital finance from one country to another, and private and public investments from foreign countries all together contribute to globalization.
• MNCs set up and control production by investing a huge amount of money in a country’s economy.
• It sets up production units close to the market so that they get cheaper labour.
• The most common route for investments by MNCs in countries around the world is to buy existing local companies.
• To increase production, MNCs collaborate with some local companies as the production rate would rapidly increase.
• In most cases, the MNCs buy local companies and expand their production.
• The other way in which they control production is by placing the orders for production with small and local producers.
• They help production using technology and heavy machinery, which makes the work more efficient and productive.

A multinational corporation (MNC) is a company that owns or controls production or service facilities outside the country in which it is based. This means the company operates in multiple countries, often with a centralized head office but with various operational branches or subsidiaries tailored to local conditions in different international markets. This setup allows multinational corporations to benefit from a global presence, accessing broader markets and resources.

Multinational corporations (MNCs) often choose to set up production in locations where labor resources are cheaper. This strategic decision helps reduce overall production costs, making operations more cost-effective and enhancing competitive advantage in global markets. By leveraging lower labor costs, MNCs can significantly improve profit margins while maintaining or even enhancing production output and quality.

Liberalisation refers to the relaxation of government restrictions, typically in the areas of social and economic policies. This process involves reducing or eliminating barriers to business operations, such as trade tariffs, government monopolies, and regulations, to foster a more open and competitive marketplace. Liberalisation is aimed at encouraging free trade, attracting foreign investment, and promoting overall economic growth by increasing the efficiency and competitiveness of the business environment.

EPCG, which stands for Export Promotion Capital Goods, is a scheme under which businesses in India can import capital goods at reduced tariffs or duty-free, provided these goods are used to produce goods for export. This scheme is designed to enhance India's manufacturing capabilities and competitiveness in the global market by facilitating the upgrade of technology and reduction of production costs.

The Foreign Trade Policy of India encompasses a range of measures designed to promote the country's exports and improve its trade performance. These measures include:

A: Identifying certain thrust areas for growth, focusing on sectors and products that have significant potential to enhance exports.

B: Initiating programs like "Serve from India Scheme" to boost service exports by encouraging various service industries to market their services globally.

C: Implementing provisions for duty-free export credit, which allows exporters to import inputs for the production of export goods without having to pay duties on those inputs.

Together, these strategies aim to make Indian exports more globally competitive and to foster overall economic growth through enhanced trade performance.

Centaur Hotel is an example of a 100 percent privatization in India. The government completely divested its interest in this property, transferring ownership to private entities. This move is part of broader efforts to reduce the government's role in certain sectors of the economy and improve efficiency through private sector management and investment. Other options like CMC Limited, Maruti Udyog Limited, and VSNL have also seen significant privatization, but Centaur Hotel is a clear case where complete privatization has occurred.

Cost, insurance, and freight (CIF) is an international shipping agreement, which represents the charges paid by a seller to cover the costs, insurance, and freight of a buyer's order while the cargo is in transit.

• The past two decades of globalization has seen rapid movements in goods, services and investments between countries.
• This has resulted in the improvement of standard of living of well fortuned consumers. 
• Globalisation is defined as the integration between countries through foreign trade and foreign investments by multinational corporations (MNCs).
• Increase in foreign trade, migration of people from one country to another, the flow of capital finance from one country to another and private and public investments from foreign countries all together contribute to globalisation.
• The main reason for putting barriers to foreign trade and foreign investment by the Indian government was to protect the interest earned by producers and small industrialists of our country from foreign competition.
• But later it was accepted by the government that foreign competition would encourage Indian industrialists to improve the quality of their products and removing these barriers would increase trade and quality of products produced in the country.
• The impact of globalisation has not been uniform because only the developed countries have gained profits due to globalisation.
• The developing countries are only a source of setting industries and getting cheaper labour, and the entire profits are earned by the developed countries.
• The small industries and companies in developing countries have constantly been facing challenges in terms of earning profits and brings their goods in the market.

Globalization has indeed contributed to higher standards of living for well-off consumers. This demographic often benefits from increased access to a wider variety of goods and services, often at lower prices due to the competitive pressures and efficiencies created by global trade. Well-off consumers are also more likely to take advantage of the increased economic opportunities, such as higher-paying jobs, investment options, and technological advancements, that globalization typically brings.