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BILT has 10% market share in paper and sells 1000 pieces for Rs. 10 each. It launches a new product to captivate the customer. The overall market grows by 20% each year for the next 2 years and BILT is able to increase its market by gaining 20% market share every year for the next 2 years. It raises prices by Rs. 5 every year. The cost structure has a fixed and variable component. Its fixed costs are Rs. 5,000 every year. Variable costs are Rs. 5 in the first year and this increase by Rs. 3 every year. The market share here refers to share by volume i.e. number of items sold.
Revenus = number of items sold x price
Profits = Revenue - Total costs
Q. What is the market size in the second year?
Detailed Solution: Question 1
BILT has 10% market share in paper and sells 1000 pieces for Rs. 10 each. It launches a new product to captivate the customer. The overall market grows by 20% each year for the next 2 years and BILT is able to increase its market by gaining 20% market share every year for the next 2 years. It raises prices by Rs. 5 every year. The cost structure has a fixed and variable component. Its fixed costs are Rs. 5,000 every year. Variable costs are Rs. 5 in the first year and this increase by Rs. 3 every year. The market share here refers to share by volume i.e. number of items sold.
Revenus = number of items sold x price
Profits = Revenue - Total costs
Q. What is BILT’s revenue in the first year?
Detailed Solution: Question 2
BILT has 10% market share in paper and sells 1000 pieces for Rs. 10 each. It launches a new product to captivate the customer. The overall market grows by 20% each year for the next 2 years and BILT is able to increase its market by gaining 20% market share every year for the next 2 years. It raises prices by Rs. 5 every year. The cost structure has a fixed and variable component. Its fixed costs are Rs. 5,000 every year. Variable costs are Rs. 5 in the first year and this increase by Rs. 3 every year. The market share here refers to share by volume i.e. number of items sold.
Revenus = number of items sold x price
Profits = Revenue - Total costs
Q. What was BILT’s average revenue over the 3 years?
Detailed Solution: Question 3
BILT has 10% market share in paper and sells 1000 pieces for Rs. 10 each. It launches a new product to captivate the customer. The overall market grows by 20% each year for the next 2 years and BILT is able to increase its market by gaining 20% market share every year for the next 2 years. It raises prices by Rs. 5 every year. The cost structure has a fixed and variable component. Its fixed costs are Rs. 5,000 every year. Variable costs are Rs. 5 in the first year and this increase by Rs. 3 every year. The market share here refers to share by volume i.e. number of items sold.
Revenus = number of items sold x price
Profits = Revenue - Total costs
Q. What is the profit made by the company in the third year?
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