MH SET Paper 2 Mock Test - 10 (Commerce) - MAHA TET MCQ

 Market Demand: The total of each individual demand curve in a given market creates the market demand curve. It demonstrates the quantity of the commodity that people want at various price points.

Perfectly competitive market: According to economic theory, perfect competition exists when all businesses sell the same goods, market share has no impact on prices; businesses can enter or quit the market without any barriers, consumers have perfect or complete information, and businesses are unable to set prices.

Market Equilibrium: If the quantity demanded and the quantity provided are equal at the market price, the market is in equilibrium. The equilibrium price, or market clearing price, is the price at which the amounts supplied and demanded are equal, and the corresponding quantity is the equilibrium quantity.

Important PointsQD = 12 - 2P (Quantity Demanded) -- (1)

QS = 3 + P (Quantity supplied)-- (2)

 Condition for Market Equilibrium

Quantity demanded = Quantity supplied

Therefore,

 12 - 2P = 3 + P

  3P = 12 - 3

  3P = 9

  P = 3

Therefore, the equilibrium price is 3

Substituting the value of P in either (1) or (2)

QD = 12 - 2P 

QD = 12 - 2 x 3

QD = 12 - 6

 QD = 6

Therefore, the equilibrium Quantity is 3

Hence, the correct answer is P = 3, Q = 6

The correct answer is ​(A) - (IV), (B) - (II), (C) - (I), (D) - (III)

Key Points

Net Stable Funding Ratio

• The net stable funding ratio is a liquidity standard requiring banks to hold enough stable funding to cover the duration of their long-term assets.
• Banks must maintain a ratio of 100% to satisfy the requirement.
• The Net Stable Funding Ratio (NSFR) and Liquidity Coverage Ratio (LCR) are significant components of the Basel III reforms.

Innovative Perpetual Debt Instrument

• Tier I Capital consists mainly of share capital and disclosed reserves. Since this capital is fully available to cover the core losses, it is also called Core Capital. For this reason, this is considered the highest quality capital.
• IPDIs issued as Tier I cannot exceed 15 percent of total capital.
• This limitation is based on the Tier I capital amount as of March 31 of the previous year along with deductions of intangible assets before investment deductions.

Time Maturity Gap

• Assets Liabilities Management is the process whereby a bank’s total assets and liabilities are controlled and managed simultaneously in an integrated fashion. In the management of the overall balance sheet.
• A maturity gap is a term used to describe a strategy that is designed to assess the relationship between the risk of owning assets and liabilities that generate revenue due to interest rate accruals and the volatility of those holdings.

Risk-Weighted Assets

• Tier II Capital is also known as supplementary capital. It consists of certain reserves and certain types of subordinated debt.
• Any loan which is repayable after other debts have been paid is called subordinated debt. Tier 2 capital also has a ratio.
• This is the formula utilized to describe the capital being held versus what's known as total risk-weighted assets (RWAs).
• Risk-weighted assets are the assets held by the bank that is weighted by its credit risk.

Every year, we have to pay a fixed portion of our income to the central government in the form of income tax. As per the rule of the central government for Income tax, a certain tax is applicable on the income of all people as per slab. Every business and person is supposed to pay the tax and the return is to be submitted every year. Total funds collected through tax are used by the government for services as well as to fulfill the requirements for the country's development.

The correct combination is a - (ii), b - (iv), c - (i), d - (iii).

Perfect Competition is a type of market structure where many firms sell similar products – and profits are virtually non-existent due to fierce competition. With that said, it is important to realize that perfect competition is an abstract term used to compare against real-life markets.

One could argue that the U.S. airline industry is an oligopoly, controlled by the four main domestic carriers: American Airlines, Delta Airlines, Southwest Airlines, and United Airlines.

The Railways is a monopoly that has underinvested in capacity and created a systemic shortage. To squeeze the monopoly-induced artificial shortage to jack up fares is unfair.

Role-plays are not recommended for top-level positions. Interviews, presentations and group discussions are mandatorily required for top-level positions.

The correct answer is Fully-taxable

Key Points

• Uncommuted pension: The term "uncommuted pension" refers to a pension that is paid on a regular basis. The pension may be received monthly, quarterly or yearly.
• Commuted Pension: When the amount of pension is received in a lump sum, it is referred to as Commuted Pension.

Important Points

• In the hands of both government and non-government employees, any money received as Uncommuted Pension is fully taxable.
• The amount of Commuted Pension may be fully or partly commuted.

Stakeholders - A stakeholder is a person who has an interest in a business and who has the potential to affect or be impacted by it. The main parties involved in a traditional business are its creditors, employees, customers, and suppliers.

Important PointsCorporate social responsibility -

• Corporate social responsibility (CSR) is a self-policing corporate strategy that enables an organization to be socially accountable to its customers, employees, and stakeholders.
• Corporate social responsibility (CSR) is a company's ongoing commitment to act morally, promote economic growth, and enhance the lives of its employees, their families, the local community, and society as a whole.
• It must fulfil its economic, legal, ethical, and discretionary obligations as a responsible corporate citizen.

The Sale of Goods Act, 1930 herein referred to as the Act, is the law that governs the sale of goods in all parts of India. It doesn’t apply to the state of Jammu & Kashmir.

Implied conditions according to the Sale of Goods Act.

(i) Seller’s title to goods is valid

(ii) Goods comply with description & sample

(iii) Quality or fitness of goods for the purpose specified by Buyer

(iv) Wholesomeness of eatables

A firm producing a large number of products will follow the pricing strategy known as product line pricing. Product line pricing refers to the practice of reviewing and setting prices for multiple products that a company offers in coordination with one another. This strategy aims to maximize the sales of different products by creating more complementary, rather than competing products.

The correct combination is (a) - (iii), (b) - (iv), (c) - (ii), (d) - (i).

This concept was originated by Paul Mazur. According to him, "Marketing is the delivery of standard of living." Prof. McNair made an important amendment in the definition. According to him, "Marketing if the creation and delivery of standard of living to the society." It is a consumer-oriented concept.

According to Pyle, “Marketing comprises both buying and selling activities.” This definition of marketing consists only of the purchase and sale. It ignores the functions of physical distribution and other auxiliary functions of marketing.

According to Philip Kotler "Marketing is a human activity directed at satisfying needs and wants through an exchange process" (Philip Kotler, 2013). It is clear from this definition that customer is the centre of marketing which begins with the identification of customer needs and wants and ends with his satisfaction.

According to Peter F. Drucker, "Marketing is a process which converts a resource distinct knowledge into a contribution of economic value in the market place. This definition recognizes marketing as a process in which the goods and services having economic value are manufactured and distributed". This presents the social approach to marketing.

Production Function 

Production function depicts the technical relationship between physical inputs and physical output.

• The given production function Q = 10 L^0.8K^0.2 is an example of a Cobb-Douglass production function. 
• This production function was given by C.W. Cobb and P.H. Douglas.

The Marginal product of labour (MP_L)

The marginal product of labour is the addition made to total physical product through the employment of an additional unit of labour, given, the quantities of other inputs remain constant.

In mathematical terms, MP_L can be expressed as

MP_L = dQ / dL = Change in output / Change in labour

Marginal product of capital (MP_K)

Marginal product of capital is the addition made to total physical product through the employment of an additional unit of capital, given, the quantities of other inputs remain constant.

In mathematical terms, MP_K can be expressed as - 

MP_K = dQ / dK = Change in output / Change in capital

Important Points Numerical solution

Calculation of Marginal product of labour

 Q = 10 L^0.8K^0.2    (Given)

Taking the first derivative w.r.t. labour, 

MP_L = dQ / dL 

MP_L = 0.8 (10 L^0.8-1)K^0.2

MP_L = 8L^-0.2K^0.2

MP_L = 8K^0.2 / L^0.2

MP_L = 8 (K/L)^0.2

Calculation of marginal product of capital

Taking the first derivative w.r.t. capital,

MP_K = dQ / dK

MP_K = 10 L ^0.8  (0.2 K ^0.2-1)

MP_K = 10 L^0.8 (0.2 K^-0.8)

MP_k = 2 L ^0.8 K^-0.8

MP_K = 2 (L / K)^0.8

Hence, given the production function Q = 10 L^0.8 K^0.2, the marginal product of labour (MP_L) and capital (MP_K) are given by MP^L = 8 (K/L)^0.2 and MP_K = 2 (L / K)^0.8 respectively.

The correct answer is K Kasturirangan.

Key Points

• Krishnaswamy Kasturirangan is an Indian space scientist who served as the Director-General of the Indian Space Research Organisation (ISRO) between 1994 and 2003.
• He is currently the Chancellor of the Central University of Rajasthan and the National Institute of Technology.
• He is the chairman of the Karnataka Knowledge Commission and the former chancellor of Jawaharlal Nehru University.
• He was a member of the Rajya Sabha from 2003 to 2009, as well as the now-defunct Planning Commission of India.
• From April 2004 to 2009, he was the director of the National Institute of Advanced Studies in Bangalore. He has received the Padma Shri (1982), Padma Bhushan (1992), and Padma Vibhushan (1993) civilian honours from the Indian government (2000).

Important Points

• Dr. Manmohan Singh served as Governor of the Reserve Bank of India from 1982 to 1985, as Deputy Chairman of the Planning Commission from 1985 to 1987, and as India's Finance Minister from 1991 to 1996.
• From November 22, 1997, to September 6, 2003, Bimal Jalan was the Governor of the Reserve Bank of India.
• Duvvuri Subbarao was the Reserve Bank of India's 22nd Governor. 

Additional Information

• Reserve Bank of India:
  • First Governor: Sir Osborne Smith
  • First Indian Governor: Sir C D Deshmukh

The correct answer is 139; 140.

Key Points

• An auditor is a person with the right to access financial operations, which includes looking through books of accounts, paperwork, and vouchers, confirming the accuracy of financial records, going over them, and determining whether or not they adhere to generally accepted accounting principles (GAAP).
• They significantly contribute to preventing business firm frauds and also improve the organization's operational effectiveness.

Important Points

Section 139 of Companies Act,2013: Appointment of Auditor

• Every company must name a person or company as an auditor of the company at the first AGM, according to Section 139 of the Companies Act of 2013.
• From the end of the AGM in which he was appointed until the end of the sixth AGM, the person so appointed shall hold the office.
• Although the auditor will occupy the position for a period of five years, the topic relating to such an appointment will be brought up at each AGM for member ratification.

Section 140 of Companies Act, 2013: Removal, resignation of auditor and giving of special notice

• The auditor appointed under Section 139 may be removed from his position prior to the end of his term, in accordance with Subsection (1) of Section 140 of the CA 2013.
• Since the relationship with the auditors has developed over a period of five or ten years, depending on the situation, certain requirements must be followed to get rid of the auditors before their term expires.

The following steps should be taken in accordance with section 140(1) read in conjunction with Rule 7 of the Companies (Audit and Auditors) Rules, 2014, in order to remove the company's auditor from office prior to the end of his term:

1. Pass a Board Resolution (BR) at Board Meeting (BM) of company
2. Obtaining the prior approval of the Central Government (CG).
3. A Special Resolution (SR) must be passed by the company for removal of auditors before expiry of term of office.
4. Before taking any action for removal of auditor before the expiry of his term, the auditor concerned shall be given a reasonable opportunity of being heard.

Hence, it can be concluded that an auditor appointed under section 139 of the Companies Act, 2013 may be removed from office before the expiry of his term by a special resolution of the company in accordance with the provisions of section 140 of the Companies Act, 2013.

Snowballl sampling is not an example of probability sampling.

Snowball Sampling is also called network or chain referral sampling.

• To start with, the researcher identifies a small number of respondents having a set of characteristics of interest to the researcher.
• After collecting the required data from those respondents, the same respondents are asked to identify others having the same characteristics set.
• E.g., collecting data from drug addicts, rape victims, etc.

The correct answer is Hull insurance

Key PointsMarine insurance defined—A contract of marine insurance is an agreement whereby the insurer undertakes to indemnify the assured, in the manner and to the extent thereby agreed, against marine losses, that is to say, the losses incidental to marine adventure.

Marine Cargo Insurance : covers loss of or damage to the goods carried in a vessel or aircraft, whether on domestic or international journeys.

Marine Hull Insurance : covers loss of or damage to a vessel or aircraft or its machinery or equipment

Marine Hull Insurance provides coverage for the following risks:

• Damage to the hull of the ship or vessel, including its machinery and equipment
• Damage or loss to the ship due to fire, burglary and/or theft
• Accidental damage to the ship due to earthquake, lightning, etc.
• Damage done to other boats by the insured vessel (third party liability)
• Damage to the vessel during maintenance activity
• World-wide coverage for ocean-going vessels

The subject matter of hull insurance is the vessel or ship. There are many types of designs of ships. Most of them are constructed of steel and welded and are capable of sailing on the sea in ballast in with cargo.

Additional Information

Cargo insurance is essentially a risk management tool that protects the business against financial losses due to lost or damaged cargo. It covers up to the limit of an amount insured and is different from carrier liability.
There are two types of Cargo insurance:

• Land Cargo Insurance
• Marine Cargo Insurance

Freight insurance is an agreement by which insured goods are underwritten (protected) in the event of damages caused by a risk covered in the policy. An insurance invoice is required for customs clearance only when the relevant data does not appear in the commercial invoice.

According to the Indian Marine Insurance Act 1963, a voyage policy is a type of marine insurance policy that provides coverage for losses due to unforeseen risks to cargo during a specific voyage.

The correctly matched pairs are given below-

Task - Preparing forms

Element - Signing paycheques

Duty - Payroll processing

Position - Compensation policy administrator

Job - Compensation design manager

Occupation - Compensation specialist

Balance of payment:

1. The balance of payments of a country is the difference between all money flowing into the country in a particular period of time (e.g., a quarter or a year) and the outflow of money to the rest of the world.
2. These financial transactions are made by individuals, firms, and government bodies to compare receipts and payments arising out of the trade of goods and services.
3. The balance of payments consists of three components: the current account, the capital account, and the financial account.
4. The current account reflects a country's net income, while the capital account reflects the net change in ownership of national assets.

Key Points

Therefore, In the balance of payment account, the transfer payments are included in Current Account.

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 Making loans to risky borrowers by attracting savings from the savers who are risk-averse.

Important Points

• Default-risk intermediation refers to the process by which financial institutions, such as banks or other lending institutions, assume the risk of loan default from borrowers in exchange for a fee or interest rate premium.
• Default-risk intermediation involves the process of taking funds from risk-averse savers and using those funds to make loans to borrowers who may have a higher risk of defaulting on their obligations.

Risk Aversion of Savers -

• Savers typically prefer low-risk investment options to protect their savings.
• They may be hesitant to directly lend their money to risky borrowers who have a higher likelihood of defaulting.

Role of Intermediary -

• The intermediary plays a crucial role in this process.
• They act as a bridge between the risk-averse savers and the potentially risky borrowers.
• The intermediary is responsible for assessing and mitigating the risks associated with lending to these borrowers.

Lending to Risky Borrowers -

• The intermediary takes on the responsibility of assessing the creditworthiness of borrowers.
• They identify potential borrowers who may have a higher risk of default due to factors such as poor credit history, unstable income, or other financial vulnerabilities.

The Consumer Protection Act was enacted in 1986.

Key Points

• It was officially enacted on December 24, 1986, and came into effect on July 1, 1987.
• This act aimed to protect the interests of consumers in India by establishing consumer protection councils and other authorities for dispute settlement and related matters.

Hence, the correct answer is 1986.

The correct answer is Assertion is false but reason is true.

Key Points

As per the passage, "Target markets are chosen based on their attractiveness, which may be determined by factors like segment size, growth potential, profitability, competitive positioning, and resonance with the organization's objectives and resources."

The correct answer is Dividing a broad market into subgroups of consumers with common needs.

 Key Points

As per the passage, "Initially, 'Segmentation' involves breaking down a broad target market into subsets of consumers with common needs or characteristics."

Employee benefits refer to all forms of compensation (cash/non-cash) paid by an employer to an employee apart from salary/wages for the service provided to the employer. Offering employee benefits are essential to attract and retain talent for the company.
Key Points

IND AS 19 prescribes the accounting treatment and disclosure w.r.t. employee benefits. Employee benefits provided by the employer during an accounting period has to be recognized as either:

1. Liability – when will the employee benefits be paid – in the future (or)
2. Expense – when the employer consumes the benefit arising from the employee’s service

Different Employee Benefits Under AS-19:

1. Short-term employee benefits – There are those which are expected to be fully paid before 12 months after the end of the accounting period in which the employee rendered service.
2. Other long-term employee benefits – There are those which are not expected to be fully paid within 12 months after the end of the accounting period.
3. Termination benefits -These are those which are paid to an employee who is terminated from service due to the employer’s decision.
4. Post Employment benefits – These are those employee benefits which are paid after the completion of employment.

Additional Information

Employee benefits provided by the employer during an accounting period are recognized as per Indian AS-19.

The following initiatives are taken by the Government of India to tackle the Non-performing assets in their ascending order of chronology: 

1. The Debt Recovery Tribunals (DRTs) – 1993

• To decrease the time required for settling cases.
• They are governed by the provisions of the Recovery of Debt Due to Banks and Financial Institutions Act, 1993.
• However, their number is not sufficient therefore they also suffer from time lag and cases are pending for more than 2-3 years in many areas.

2. Credit Information Bureau – 2000

• A good information system is required to prevent loans from falling into bad hands and therefore prevention of NPAs. It helps banks by maintaining and sharing data of individual defaulters and willful defaulters.

3. Compromise Settlement – 2001

• It provides a simple mechanism for recovery of NPA for the advances below Rs. 10 Crores.
• It covers lawsuits with courts and DRTs (Debt Recovery Tribunals) however willful default and fraud cases are excluded.

4. SARFAESI Act – 2002

• The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 – The Act permits Banks / Financial Institutions to recover their NPAs without the involvement of the Court, through acquiring and disposing of the secured assets in NPA accounts with an outstanding amount of Rs. 1 lakh and above.

5. Corporate Debt Restructuring – 2001

• It is for reducing the burden of the debts on the company by decreasing the rates paid and increasing the time the company has to pay the obligation back.

Statement I: On every point on the straight-line demand curve, the point elasticities are all equal.

Statement II: On every point on the rectangular hyperbola shaped demand curve, the point elasticities are not equal.

Elasticity and demand slope: The slope of a straight-line demand curve, one with a constant slope, has constantly changing elasticity. It includes all five elasticity alternatives--perfectly elastic, relatively elastic, unit elastic, relatively inelastic, and perfectly inelastic. No two points on a straight-line demand curve have the same elasticity.

Rectangular hyperbola is a curve under which all rectangular areas are equal. When the elasticity of demand is equal to unity (ed = 1) at all points of the demand curve, then the demand curve is a rectangular hyperbola.

1. Exim Bank was established by the Government of India, under the Export-Import Bank of India Act, 1981 as a purveyor of export credit, mirroring global Export Credit Agencies.
2. Exim Bank serves as a growth engine for industries and SMEs through a wide range of products and services.
3. Its headquarter are in Mumbai and was established in 1982.
4. The EXIM Bank (Export-Import Bank of India) is the country's largest and leading export finance-based institution engaged in integrating foreign trade and investments with the national economic growth.

1. Exim Bank serves as a growth engine for industries and SMEs through a wide range of products and services.
2. This includes import of technology and export product development, export production, export marketing, pre-shipment and post-shipment, and overseas investment.
3. Harsha Bangari on Wednesday took charge as the Managing Director of Export-Import Bank of India (India Exim Bank)

The industry refers to a group of firms/companies that does related primary activities for their business.

When the number of firms in an area increases then those firms enjoy some of the benefits like availability of raw materials, transport, and communication, research and invention, etc. and they also receive financial assistance from banking and non-banking institutions. Here we can conclude that the concentration of all firms in the industry leads to economies of concentration.