CA FOUNDATION NOVEMBER 2022

PAPER 4: BUSINESS ECONOMICS AND BUSINESS AND COMMERCIAL KNOWLEDGE

PART- I: BUSINESS ECONOMICS -FULL PORTION
CUSTOMIZED TEST

Time – 1.25 Hours Maximum Marks – 60

1. Which of the following is not a characteristics of capitalist economy:

(a) Right to Private Property
(b) Freedom of Enterprise
(c) Consumer Sovereignty
(d) Combined Sector
2. Which are the areas that come under Macro economics ___
(a) External Value of currency
(b) The general price level and interest rate
(c) Location of the industry
(d) National Income and National Output
3. Business Economics is a :
(a) Normative Science
(b) Interdisciplinary
(c) Pragmatic
(d) All of these
4. Scarcity of resource has to be dealt in:
(a) Capitalist Economy
(b) Socialist Economy
(c) Mixed Economy
(d) All of these
5. Large number of _____ goods would lead to higher production in future:
(a) Capital Goods
(b) Public Goods
(c) Consumer Goods
(d) None of these

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6. In case of Interior goods:
(a) Income effect and substitution effect work in same direction.
(b) Income effect are substitution effect work in opposite direction
(c) Either (a) or (b)
(d) None of these
7. Rationale of the law of demand is:
(a) Price effect of a fall in price
(b) Different uses
(c) Arrival of new consumers
(d) All of these
8. The cross elasticity between two goods will be:
(a) Positive
(b) Negative
(c) Either (a) or (b)
(d) None of these
9. Demand for complementary goods are:
(a) Derived Demand
(b) Autonomous demand
(c) Aggregate Demand
(d) None of these
10. Methods of demand forecasting are:
(a) Survey of Buyer’s intension
(b) Collective opinion Method
(c) Both (a) and (b)
(d) None of these
11. A Vertical supply curve parallel to Y axis implies that the elasticity of supply is:
(a) Infinity
(b) Equal to One
(c) Zero
(d) Greater than one but less than Infinity
12. When total demand for a commodity whose price has fallen increases it is due to:
(a) Price effect
(b) Income effect

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 (c) Substitution effect
(d) Complementary effect
13. In the quality supplied is exactly equal to the relative change in price then the elasticity of supply is:
(a) Greater than one
(b) Less than one
(c) One
(d) None of these
14. Production is the organized activity of transforming resource into finished products in the form of
goods and services and the objective of production is to satisfy the demand of such transformed
resources:
(a) Jamed Bates and J.R Parteinson
(b) Malthus
(c) Walras
(d) Lipsey
15. What are the assumptions of Production Function:
(a) Relationship between inputs and output exists for a specific period of time.
(b) There is a given ‘state of the art’ in the production technology.
(c) Both (a) and (b)
(d) None of these
16. Envelope curve is also called:
(a) Long Run Average Cost curve
(b) Short Run Average Cost curve
(c) Average Fixed Cost
(d) None of these
17. Diminishing marginal returns inputs:
(a) Increasing Marginal Costs
(b) Decreasing Marginal Costs
(c) Decreasing Average Variable Costs
(d) None of these
18. Entrepreneur has its most important function as ______
(a) Bear the sense of responsibility
(b) Earn profit
(c) Innovate
(d) None of these

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19. Elasticity of substitution in cobb Douglas Function is:
(a) Less than 1
(b) Equal to 1
(c) More than 1
(d) Infinity
20. Perfect Competition is closely represented by:
(a) Stock Market
(b) Wheat Market
(c) Soft Drinks Market
(d) None of these
21. The budget line is also known as:
(a) Production Possibility Curve
(b) Consumption Possibility Curve
(c) Iso Utility Curve
(d) None of these
22. When will a firm decides to exit the industry:
(a) Total curve starts rising
(b) Marginal cost starts rising
(c) Average cost starts rising
(d) Price is less than LAC
23. The Average Product of labour is maximized when marginal product of labour:
(a) Equals Zero
(b) Is maximized
(c) Equal the average product of labour
(d) None of those
24. If e < 1 the marginal reverse will be:
(a) Positive
(b) Negative
(c) Zero
(d) None of these
25. If ATC > AR the monopolist will be incurring ____
(a) Losses
(b) Profit

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 (c) Neutral
(d) None of these
26 Electricity Companies sells electricity at a cheaper rate in rural areas than for industrial use due to :
(a) Price Discrimination
(b) Perfect Competition
(c) Monopolistic Competition
(d) None of these
27. Pears, Liril & Dove are example of
(a) Perfect Competition
(b) Monopoly
(c) Monopolistic Competition
(d) None of these
28. Which of the following is not the characteristic of Oligopoly market:
(a) Strategic Independence
(b) Importance of advertising and selling cost
(c) Group behaviour
(d) Regional Market
29. The element of market are:
(a) Buyers and Sellers
(b) A Product or Service
(c) Geographical Area
(d) Bargaining for a price
30. U Shaped Cost Curve is never represented as:
(a) Average Fixed Cost Curve
(b) Marginal Cost Curve
(c) Average Cost Curve
(d) Average Variable Cost Curve
31. For a Price taking firm:
(a) Marginal revenue is less than Price
(b) Marginal revenue is equal to Price
(c) The relationship between behavior marginal revenue and Price is indeterminate
(d) Marginal revenue is greater than price
32. Monopolist Charges different price for his commodity in discriminating monopoly implies:
(a) At different places

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 (b) For different uses
(c) From different group of consumers
(d) Any of the above
33. Full capacity is utilized only when there is:
(a) Perfect Competition
(b) Monopoly
(c) Monopolistic Competition
(d) Price discrimination
34. Coincident indicator is not indicated as:
(a) Inflation
(b) Industrial Production
(c) Retail Sales
(d) New order for Plant and equipment
35. Which of the following is not an external causes of Business Cycle:
(a) Technology Shock
(b) Fluctuations in Investment
(c) Natural Factors
(d) Population Growth
36. According to whom fluctuations in economic activities are due to fluctuations in aggregate effective
demand:
(a) ScIumpeter
(b) Pigou
(c) Keynes
(d) Hawtrey
37. Collectively peaks and troughs together is known as:
(a) Turning Points
(b) Contraction
(c) Expansion
(d) A trough
38. Variables that change before the real output changes are called:
(a) Lagging indicator
(b) Leading Indicator
(c) Concurrent Indicator
(d) None of these

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39. ‘Competition among the few’ is also referred as:
(a) Oligopoly
(b) Monopoly
(c) Monopolistic Competition
(d) None of these
40. The slope of budget line is:
(a) Px/Py
(b) Py/Px
(c) Px.Py
(d) None of these
41. Indifference Curve analysis is superior to utility analysis:
(a) It dispenses with the assumption of measurability
(b) It segregates income effect and substitution effect
(c) It does not assume constancy of marginal utility of money
(d) All of the above
42. The shape of the Cost curve depends upon:
(a) Cost function
(b) Factor of Production
(c) Outlay
(d) None of these
43. Allocation of resources is dealt in:
(a) Macro Economic
(b) Micro Economics
(c) Public Finance
(d) None of these
44. All Giffen goods are:
(a) Inferior goods
(b) Non Inferior goods
(c) Normal Goods
(d) None of these
45. For Substitute products the demand is:
(a) Downward sloping
(b) Horizontal

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 (c) Upward Sloping
(d) None of these
46. Delphi technique was developed by:
(a) Robinson
(b) Olaf Helmer
(c) Amartya Sen
(d) None of these
47. Indifference Curve analysis of demand is based on:
(a) Cardinal Utility approach
(b) Marginal Utility approach
(c) Ordinal Utility approach
(d) None of these
48. The Product under Pure Monopoly Is:
(a) Homogenous
(b) Differentiated
(c) Unrelated
(d) None of these
49. Perfectly Competitive firm and industry are both in long run equilibrium when:
(a) P = MR = SMC = LMC
(b) P = MR = Lowest point on the LAC
(c) P = MR = SAC = LAC
(d) All of the above
50. When α = 3/5 and β = 2/5 the return to scale for Cobb Douglas Production function are:
(a) Increasing
(b) Decreasing
(c) Constant
(d) First decreasing and then increasing
51. A market refers to ______
(a) Meeting place of buyer and seller
(b) Does not necessarily refer to meeting place between buyer and seller
(c) Extends over a city
(d) Extends over the entire nation.
52. An economic profit is earned by a perfectly competitive firm when:
(a) MR < MC

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 (b) P < ATC
(c) P > AVC
(d) P > ATC

53. When the output increased by more than double if firm doubles it input is known as:
(a) Constant return to scale
(b) Economies to scale
(c) Diseconomies of scale
(d) Violation of the law of diminishing return
54. In Oligopoly the firms may collude in order to:
(a) Increase Competition
(b) Prisoner dilema for buyers
(c) To raise the price of the good they offer
(d) None of these
55. In which of the market firm price discrimination cannot persist:
(a) Monopoly
(b) Oligopoly
(c) Monopolistic Competition
(d) Perfect Competition
56. Short run production function is explained by:
(a) Returns to scale
(b) Law of variable proportion
(c) Law of demand
(d) None of these
57. In monopoly and monopolistic Competition:
(a) Average Revenue > Marginal Revenue
(b) Average Revenue < Marginal Revenue
(c) Average Revenue = Marginal Revenue
(d) None of these
58. Factor of Production which is active:
(a) Labour
(b) Land
(c) Capital
(d) None of these
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59. How to Produce is related to:
(a) Product’s Choice
(b) Choice of technique
(c) Either (a) or (b)
(d) None of these
60. Economy’s historical performance was reflected by:
(a) Lagging indicating
(b) Leading indicating
(c) Either (a) or (b)
(d) None of these