UGC NET Paper 2 Commerce Mock Test - 7 - UGC NET MCQ

The correct answer is Both (i) and (ii)

Key Points Both statements (i) and (ii) are accurate descriptions of a perfectly elastic supply curve.

•  A Horizontal Supply Curve: A perfectly elastic supply curve is represented by a horizontal line where the price is constant regardless of the quantity supplied. It indicates that producers are willing to supply any amount of the good at one price, but nothing at any other price.
•  Price Elasticity of Supply = Infinity: When supply is perfectly elastic, the price elasticity of supply, which measures the responsiveness of the quantity supplied to a change in price, is indeed infinity. This is because even a very small change in price leads to an infinitely large change in the quantity supplied. In reality, perfectly elastic supply is more of a theoretical construct and is rarely observed because it requires that suppliers have the flexibility to ramp up production immediately and without limit in response to even a tiny increase in price and cease production completely in response to even a small decrease in price.

Additional Information Here are some additional points about perfectly elastic supply:

1. Industry Implication: Perfectly elastic supply situations are more likely to apply to industries where it's easy to rapidly increase or decrease production without significant costs.
2. Extreme Case: Perfectly elastic supply is an extreme case, often more theoretical than practical. Most real-world markets will exhibit some degree of elasticity, but not to the extent of being perfectly elastic.
3. Zero Revenue: If a firm attempts to charge more than the going price in a market with a perfectly elastic supply, it will find no buyers, and its revenue will drop to zero.
4. Infinite Quantity: Conversely, if it lowers the price, there is theoretically no limit to the quantity it could sell.
5. Product Homogeneity: Perfect elasticity is more likely in markets where the product is identical across suppliers, like in perfectly competitive markets. Here, buyers don't differentiate between products based on the brand or other characteristics. If a seller charges even slightly more, buyers will switch to a competitor's product.
6. No Seller Control Over Price: Producers are price takers in a market with a perfectly elastic supply, as they have no control over the price and must accept the market price.
7. Perfect Information: Such situations also assume perfect information, where everyone in the market is fully informed about prices, quality, and production costs.
8. Limitless Stock: A perfectly elastic supply assumes that producers have limitless stock and can supply any amount at a given price. As is evident, there are very few, if any, real-world examples of this — making it largely a theoretical concept.

Assertion (A): The demand curve of FMCG products is usually relatively inelastic.

Reasoning (R): The FMCG companies do not follow skimming pricing as a strategy to fix the price, they follow penetration pricing.

Here (A) is correct and (R) is incorrect. Hence Option4 is the correct answer.

Key-Points

• Price elasticity of demand is an indicator of the impact on the demand for a product in relation to its price change.
• Some types of consumer goods show a higher price elasticity of demand than others.
• For example, non-essential goods have a high elasticity of demand, while essential goods or consumer staples have a low elasticity of demand.
• Factors that affect the price elasticity of demand include the availability of competitive substitutes and the brand recognition of products.
• Relatively inelastic demand is one when the percentage change produced in demand is less than the percentage change in the price of a product. 
• Price skimming is a product pricing strategy by which a firm charges the highest initial price that customers will pay and then lowers it over time.
• As the demand of the first customers is satisfied and competition enters the market, the firm lowers the price to attract another, a more price-sensitive segment of the population.
• This approach contrasts with the penetration pricing model, which focuses on releasing a lower-priced product to grab as much market share as possible.

The insurance Regulatory and Development Authority of India or the IRDAI (also referred to as IRDA) is a government body responsible for regulating and developing the insurance industry in India.

Important Points

The Insurance Regulatory and Development Authority of India or the IRDAI is the apex body responsible for regulating and developing the insurance industry in India.

• It is an autonomous body.
• It was established by an act of Parliament known as the Insurance Regulatory and Development Authority Act, 1999. Hence, it is a statutory body.

• The functions of the IRDA are listed below:

  • Its primary purpose is to protect the rights of the policyholders in India. 
  • It gives the registration certificate to insurance companies in the country.
  • It also engages in the renewal, modification, cancellation, etc. of this registration.
  • It also creates regulations to protect policyholders’ interests in India.

From the above, we can conclude that IRDA regulates Insurance Companies.

The correct answer is Organising.

Key Points Among the given options, the managerial function of staffing is most closely related to "organizing."

Here's how they are connected:

Staffing: Staffing involves acquiring and organizing the workforce to ensure that the right people are in the right positions. This process includes recruitment, selection, training, and development to structure the organization's human resources effectively.

Organizing: Organizing is one of the primary functions of management and is concerned with designing the structure of the organization. This includes defining roles and responsibilities, establishing reporting relationships, and ensuring that resources, including personnel, are allocated appropriately to achieve the organization's goals.

While staffing is specifically focused on acquiring and managing human resources, the broader process of organizing sets the framework for how those human resources are integrated into the organizational structure.

Financial statement analysis refers to using financial data of a company to study its past performance and make recommendations about how it will perform in the future. It is done by the internal and external stakeholders to make informed decisions regarding investing.

Key Points

• The short-term analysis of financial statements is mainly concerned with working capital analysis so that a forecast could be made of the aspects to determine the liquidity and sufficiency of current assets as compared to current liabilities.
• The working capital analysis also helps to forecast the future earnings, ability to pay interest, debt maturities – both current and long term, and the probability of a sound dividend policy.

Therefore, the short-term analysis of financial statements is mainly concerned with the working capital analysis

Important Point

Types of short term and long-term analysis are differentiated below:

The correct option is the Poisson distribution

Key Points Queuing Theory

Queuing theory is a branch of operation research that studies the movement of people, objects, or information through a line.

Important Points

• The analytical modeling of a queue would involve providing an input specification describing the queue
• The arrival describes the way the customer enter the system
• Poisson distribution is a discrete probability distribution that expresses the probability of the given number of an event occurring in fixed intervals.
• The arrival pattern can be expressed as

P ( X ) = λ x e − λ X ! μ

• The inter-arrival follows the exponential distribution

The correct answer is Both (A) and (R) are true and (R) is the correct explanation of (A).

Key Points

• Assertion (A): SEBI issues guidelines for all companies for the disclosure of information and protection of investors' interests.
  • ​To make available details relevant to an investment in the public domain, the Securities and Exchange Board of India has adopted a disclosure-based regulatory regime.
  • Under this regime, issuers and intermediaries disclose relevant details about themselves, the products, the market, and the regulations so that the investor can make informed investment decisions based on such disclosures.

Thus, the assertion is correct.

• Reason (R): Computerised screen-based trading has been introduced on all major stock exchanges.
  • The screen-based trading system enables distant trade participants to trade with each other, improving the liquidity of the securities markets.
  • The high speed with which the exchange of securities is executed and the large number of participants who can trade simultaneously facilitate faster incorporation of price-sensitive information into prevailing prices.
  • The screen-based trading system ensures transparency and helps in fixing the prices efficiently, because of the efficiency of information dissemination.

Thus, the reason is correct.

Screen-based trading in stock exchanges facilitates efficient disclosure of information and protection of investors' interests.

On the basis of the above information, it can be concluded that both assertion and reason are true and the reason is the correct explanation of the assertion.

The correct answer is Sorting and transferring products from inbound trucks to outbound trucks with minimal storage time.

Key Points

• In supply chain management, "cross-docking" refers to a logistics practice where products from suppliers are distributed directly to retail stores or customers with little or no handling or storage time.
• Essentially, it involves unloading incoming shipments from suppliers' trucks or containers and then immediately loading them onto outbound trucks or vehicles, often with minimal or no warehousing in between.
• The primary purpose of cross-docking is to streamline the distribution process, reduce storage costs, minimize handling, and improve the overall efficiency of the supply chain. This method is particularly useful for products with high turnover rates or those that are time-sensitive, such as perishable goods or items in high demand.
• Cross-docking helps in achieving faster order fulfillment, reducing transit times, and ultimately ensuring that products reach the end customers more quickly and efficiently.

Key Points Long term Capital Gains:

• Long-term capital gains refer to the profit made on the sale of an asset that has been held for more than one year.
• The tax rate for long-term capital gains is usually lower than the tax rate for short-term capital gains.
• Long-term capital gains can be realized from the sale of various assets, such as stocks, bonds, real estate, and mutual funds.

Important Points Calculation of Long-Term Capital gain

Long term Capital Gain tax = Taxable long-term capital gains × Applicable long-term capital gains tax rate

Hence, the correct sequence is (A), (C), (D), (B), (E).

Additional Information The formula to calculate indexed cost of acquisition is:

The correct answer is Both Assertion and Reasoning are true, but Reasoning is not the correct

Key Points

• In the passage, "While well-conceived policies can foster a conducive business environment, hasty or ill-considered decisions may engender uncertainty and hinder long-term planning."
• The passage supports both the assertion and the reasoning, as it acknowledges that well-conceived policies can foster a conducive business environment.
• However, the reasoning is not the correct explanation of the assertion, as it focuses on the potential negative impact of hasty or ill-considered decisions, which is not explicitly addressed in the assertion. Option 2 is the correct answer.

Additional Information

• The other options (1. Both Assertion and Reasoning are true, and Reasoning is the correct explanation of Assertion, 3. Assertion is true, but Reasoning is false, 4. Both Assertion and Reasoning are false) are ruled out based on the accurate alignment of the Assertion and Reasoning with the passage.
• The passage introduces the notion that economic policies can have both positive (fostering a conducive business environment) and negative (hinder long-term planning) aspects, adding complexity to the relationship between economic policies and business outcomes.

The correct answer is Assertion is true, but Reasoning is false.

Key Points

• In the passage, "Variances in state-level policies, tax structures, and administrative efficiency create a complex web that businesses must adeptly navigate."
• The passage contradicts the reasoning by stating that there are variances in state-level policies, tax structures, and administrative efficiency.
• Therefore, while the assertion is true (political decisions do affect businesses at the state level), the reasoning is false, leading to option 3 as the correct answer.

Additional Information

• The other options (1. Both Assertion and Reasoning are true, and Reasoning is the correct explanation of Assertion, 2. Both Assertion and Reasoning are true, but Reasoning is not the correct explanation of Assertion, 4. Both Assertion and Reasoning are false) are ruled out based on the accurate alignment of the Assertion and Reasoning with the passage.
• The mention of a "complex web" emphasizes the intricate nature of navigating state-level policies for businesses.

The correct answer is option 4.

Concept:

Intellectual property rights:

Intellectual property rights (IPR) refer to the legal rights given to the inventor or creator to protect his invention or creation for a certain period of time. Intellectual Property is legally protected through patents, trademarks, copyrights, trade secrets, etc.​ 

Copyright:

Copyright grants legal rights to creators for their original works like writing, photograph, audio recordings, video, sculptures, architectural works, computer software, and other creative works like literary and artistic work. 

Patent:

A patent is usually granted for inventions. Unlike copyright, the inventor needs to apply (file) for patenting the invention.

Trademark:

A trademark includes any visual symbol, word, name, design, slogan, label, etc., that distinguishes the brand or commercial enterprise, from other brands or commercial enterprises.

Hence the correct answer is All the above.

The correct answer is the Five lakh rupees, The listed company.

Key PointsAccording to Section 143(12), the auditor is only required to notify management and then the Central Government of an offence involving fraud against the company by its officials or employees if he is the first to see or identify it while carrying out his duties as an auditor.

 Important PointsRequired professionals while auditing

• Professionals must exercise their professional scepticism when conducting audits in order to detect fraud. Unless the financial implications of such acts are recorded in the books of account or financial statements of the firm, it may be difficult to identify activities that have the purpose to violate the interests of the company or produce unlawful gain or loss.
• In order to address the risk of a substantial misstatement caused by fraud, the auditor must take into account the requirements of the SAs insofar as they relate to the risk of fraud, including the definition of fraud as specified in SA 240, when planning and carrying out his audit processes.

Consequences of Not Meeting the Standards

• Any auditor who violates the requirements of Subsection 143(12) is subject to a fine of at least five lakh rupees and a maximum of twenty-five lakh rupees in case of the listed company.

The correct answer is statement I and II

Key Points

•  Perfect Competition: It refers to that market structure in which there are large number of selling firms who sell homogeneous products to large number of buyers.
• Fixed Cost is also known as supplementary cost and general cost, which is incurred by firm at the time of production and it remains fixed in short run irrespective of volume of output.
• Variable Cost is also known as prime cost and it varies according to the volume of output.
• Total Cost is sum total of fixed and variable cost.
• Average Fixed Cost has the shape of rectangular hyperbola and it is calculated by dividing TFC with Units.

Important Points 

Statement I: Under perfect competition, an increase in fixed cost results in an upward shift in AFC and ATC, and there is no effect on AVC and MC.

• Average Variable Cost has U shape in long run .Due to law of increasing returns it declines at initial point and when a firm attains its full capacity it becomes constant and then again due to law of diminishing returns it starts increasing.
• Marginal Cost refers to the additional cost which arises due to extra unit production.
• In case of Perfect Competition, when Fixed cost (like increase in rent etc.) increases then automatically it brings changes in AFC and ATC. (No effect on MC).
• Diagrammatic Representation of impact of Fixed Cost:
•  

Hence, Statement I is correct.

Statement II: Under perfect competition, an increase in variable cost results in leftward shift in AFC, ATC and MC.

• Under Perfect Competition increase in variable cost (like Raw material etc.) will lead to leftward (upward) shift in Average fixed cost, Average total cost as well as Marginal cost.

Note: Both Fixed and Variable cost affects the Marginal cost of production only in that case when there is existence of variable cost.

Hence, Statement II is correct.

Note: In case of Perfect competition, increase in fixed cost results in upward shifting of AFC and ATC without having any effect on MC, whereas increase in Variable Cost will have impact on Average Cost and MC.

Hence, the correct answer is Statement I and Statement II.

Additional Information

 When Variable Cost increases, it will result into upward shift in average cost curves as well as marginal cost due to which market production cost will rise and causing contraction in supply.

In psychological research, we seek to determine the relationship between two variables for forecasting purposes.

The correlation r measures the strength of the linear relationship between two quantitative variables. 

Pearson

r is always a number between -1 and 1. So, 1.20 does not lie in this range. r > 0 indicates a positive association. r < 0 indicates a negative association. Values of r near 0 indicate a very weak linear relationship. The strength of the linear relationship increases as r moves away from 0 toward -1 or 1. The extreme values r = -1 and r = 1 occur only in the case of a perfect linear relationship.

Since -0.98 is close to -1 as compared between 0.90 and 1 therefore, -0.98 coefficients of correlation indicate the strongest relationship between two sets of variables.

The Peter principle is a concept in management theory formulated by Laurence J. Peter and published in 1969. It states that the selection of a candidate for a position is based on the candidate's performance in their current role, rather than on abilities relevant to the intended role. Thus, employees only stop being promoted once they can no longer perform effectively, and "managers rise to the level of their incompetence." In an organizational structure, assessing an employee's potential for a promotion is often based on their performance in the current job. This eventually results in their being promoted to their highest level of competence and potentially then to a role in which they are not competent, referred to as their "level of incompetence". The employee has no chance of further promotion, thus reaching their career's ceiling in an organization.

The exchange concept of marketing deals with the Exchange of products between sellers and buyers covering distribution and price aspects. 

The central idea of marketing is the exchange of products between the seller and the buyer. Exchange covers the distribution aspect and the price mechanism of the product. 

Marketing theorists consider the exchange to be the central concept without which there would be no such thing as marketing.

The definition that many marketers learn as they start out in the industry is: Putting the right product in the right place, at the right price, at the right time.

Marketing Mix is one of the most fundamental concepts in marketing management. For attracting consumers and for sales promotion, every manufacturer has to concentrate on four basic elements/components. These are product, pricing, distributive channels (place), and sales promotion techniques. A fair combination of these marketing elements is called Marketing Mix.

The job description is a statement of information about the duties and responsibilities of a particular job. whereas job specifications are a statement of information about qualifications, special qualities, skills, and knowledge required for an employee to fit for a job.

The defenders of the sustainability approach toward Corporate Social Responsibility (CSR) point out that all economic activity exists within a biosphere that supports all life.

• Corporate social responsibility (CSR) is a self-regulating business model that helps a company be socially accountable—to itself, its stakeholders, and the public. 
• By practicing corporate social responsibility, also called corporate citizenship, companies can be conscious of the kind of impact they are having on all aspects of society, including economic, social, and environmental.
• To engage in CSR means that, in the ordinary course of business, a company is operating in ways that enhance society and the environment, instead of contributing negatively to them.

The paired sample t-test, sometimes called the dependent sample t-test, is a statistical procedure used to determine whether the mean difference between two sets of observations is zero. In a paired sample t-test, each subject or entity is measured twice, resulting in pairs of observations.

Hypothesis testing consists of the following steps are:

(iii) State the hypothesis

(i) Establish a level of significance, prior to sampling

(iv) Determination of a suitable test statistic

(ii) Defining the rejection or critical regions

HRD does not focus on autonomous workgroups. HRD focuses on all the human resources of the organisation i.e. individual staff members.

4 aspects of business that affect the growth of a startup:

• Project management
• Knowledge management
• Sales management
• Customer support

The correct answer is India-UAE (CEPA)

Key Points Free Trade Agreement:

• Free Trade Agreement is an agreement between two or more countries that reduces or eliminates tariffs and other trade barriers on goods and services traded between the countries.
• FTAs can also include provisions on investment, intellectual property, and dispute settlement.
• FTAs are designed to boost trade and economic growth by making it easier for businesses to sell their goods and services in other countries.
• They can also help to create jobs and improve standards of living.

Important Points India-UAE (CEPA):

• The India-UAE Comprehensive Economic Partnership Agreement (CEPA) is a trade agreement between India and the United Arab Emirates (UAE).
• It was signed on February 18, 2022, and entered into force on May 1, 2022.
• The CEPA aims to boost trade and investment between India and the UAE.
• It includes provisions on trade in goods, services, investment, intellectual property, and dispute settlement.
• Under the CEPA, India and the UAE have agreed to reduce or eliminate tariffs on a wide range of goods.
• The UAE has also agreed to grant India preferential market access for a number of services sectors, including IT, financial services, and healthcare.
• The CEPA is expected to boost trade between India and the UAE by up to $100 billion over the next five years.
• It is also expected to create jobs and boost economic growth in both countries.

Additional Information

List of India's FTA's

Post Purchase Behaviour is the last stage in the consumer decision process.

• A buying process is a series of steps that a consumer will take to make a purchasing decision.
• A standard model of consumer purchase decision-making includes recognition of needs and wants, information search, evaluation of choices, purchase, and post-purchase evaluation.

The Buying Process:

Therefore, a good method of identifying and understanding customers is to develop a Customer Profile.

The correct answer is It allows employees to share ideas and concerns

Key Points Open communication is crucial in the workplace for several reasons:

Improved Collaboration: Open communication encourages team members to share ideas, feedback, and insights. This leads to better collaboration, as employees can work together more effectively, leveraging diverse perspectives to solve problems and achieve common goals.

Enhanced Problem Solving: When communication channels are open, issues and challenges can be identified and addressed more quickly. Team members can openly discuss problems, brainstorm solutions, and collectively find effective ways to overcome obstacles.

Increased Transparency: Open communication fosters transparency within an organization. When employees are informed about company goals, strategies, and decisions, they feel more engaged and trusted, which can boost morale and job satisfaction.

Stronger Relationships: Open communication builds trust and rapport among team members. When people feel comfortable sharing their thoughts and concerns, relationships are strengthened, leading to a more positive and supportive work environment.

Effective Leadership: Leaders who practice open communication are perceived as approachable and responsive. Employees are more likely to follow leaders who are transparent and communicate their expectations clearly, leading to better alignment and a more motivated workforce.

The steps taken by the government under the Industrial Policy from July 1991 onwards were aimed at bolstering the country's past industrial achievements and accelerating the process of making Indian industries internationally competitive.