CA Foundation Economics Question Paper Sep 25 with Answers
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1. If a country has the following economic data: GDPMP = ₹ 2,000 billion, indirect taxes = ₹ 250 billion and subsidies = ₹ 100 billion, what is its GDP at Factor Cost?
(A) ₹ 1,850 billion
(B) ₹ 2,100 billion
(C) ₹ 2,150 billion
(D) ₹ 2,000 billion
Choice 'A' is correct as--
GDP at Factor Cost = GDPMP – Indirect Taxes + Subsidies
= 2000 – 250 + 100
= 1850 billion
2. If the Average Propensity to Save (APS) of a household is 0.4, and their total income is ₹ 25,000, what is the total saving?
(A) ₹ 15,000
(B) ₹ 10,000
(C) ₹ 6,250
(D) ₹ 12,500
Choice 'B' is correct as--
APS = Saving ÷ Income
0.4 = Saving ÷ 25,000
Saving = 25,000 × 0.4 = 10,000
3. Which of the following is an anti-inflationary measure that puts downward pressure on aggregate demand, causing the economy to slow down?
(A) Reduction in government spending.
(B) Increase in government spending.
(C) Decrease in interest rates.
(D) Decrease in taxes.
4. The slope of the consumption function represents _______.
(A) Average Propensity to Save (APS).
(B) Marginal Propensity to Consume (MPC).
(C) Marginal Propensity to Save (MPS).
(D) Average Propensity to Consume (APC).
Choice 'B' is correct as--
The slope of the consumption function shows the change in consumption with change in income.
This is called Marginal Propensity to Consume (MPC).
Hence, slope = MPC.
5. Who are the economists credited with pioneering National Income Accounting?
(A) John Maynard Keynes and Milton Friedman
(B) Simon Kuznets and Richard Stone
(C) Adam Smith and David Ricardo
(D) Paul Samuelson and Joseph Schumpeter
6. Business cycles typically consist of which of the following phases?
(A) Inflation, deflation, stagnation, growth
(B) Expansion, peak, contraction, trough
(C) Recession, depression, boom, stabilization
(D) Peak, decline, recovery, boom
Choice 'B' is correct as--
Business cycles have four main phases: Expansion, Peak, Contraction, and Trough.
Expansion shows rising output, income, and employment; Peak is the highest point; Contraction marks slowdown or recession; Trough is the lowest turning point before recovery.
7. Which of the following is true about the duration and intensity of business cycles?
(A) Business cycles have a fixed duration and intensity.
(B) Business cycles exhibit the same duration and intensity across all economies.
(C) Business cycles varies in duration and intensity, but they share common features.
(D) Business cycles do not vary in duration or intensity.
Choice 'C' is correct as--
Business cycles do not have fixed or uniform length.
Their duration and intensity vary, but they always show common features like periodic occurrence and four distinct phases (expansion, peak, contraction, trough).
Hence, option C matches the module definition.
8. What does Article 275 of the Indian Constitution deal with?
(A) Surcharge on certain duties and taxes for purposes of the union.
(B) Statutory grants-in-aid from the union to certain states.
(C) Grants for any public purpose.
(D) Loans for any public purpose.
9. The advent of mobile phones, which led to a boom in telecom industry, exemplifies which external cause of business cycles?
(A) Technology Disruptions
(B) Technology Shocks
(C) Technology Regulations
(D) Technology Limitations
Choice 'B' is correct as--
The sudden growth due to mobile phones is an example of technology shocks.
Such innovations or disruptions create rapid expansion in industries.
Hence, external cause = Technology Shocks.
10. Which of the following best describes the economic conditions during bad trade in a business cycle?
(A) Rising prices and low unemployment rate.
(B) Falling prices and high unemployment rate.
(C) High consumer confidence and rising wages.
(D) Increasing demand and production.
11. Contractionary fiscal policy typically involves:
(A) Increasing government spending and reducing taxes.
(B) Reducing government spending and increasing taxes.
(C) Increasing government spending and increasing taxes.
(D) Reducing both government spending and taxes.
Choice 'B' is correct as--
Contractionary fiscal policy is used to control inflation.
It works by reducing government spending and increasing taxes, which lowers aggregate demand.
Thus, option B matches the definition.
12. The government’s use of proceeds from progressive taxes to supply essential food grains at highly subsidized prices to BPL households is an example of:
(A) Allocation Function
(B) Stabilization Function
(C) Redistribution Function
(D) Production Function
Choice 'C' is correct as--
Using progressive taxes to subsidize food for BPL households shows redistribution of income.
It reduces inequality by transferring resources from richer to poorer sections.
Hence, this is the Redistribution Function of government.
13. The Right of Children to Free and Compulsory Education Act, 2009, which mandates free and compulsory education for every child between the ages of six to fourteen years, is an example of:
(A) Government Intervention in the case of Merit Goods.
(B) Government Intervention in the case of Demerit Goods.
(C) Government Intervention in the case of Public Goods.
(D) Government Intervention to correct Externalities.
Choice 'A' is correct as--
The RTE Act provides free and compulsory education for children aged 6–14.
Education is a merit good, under-consumed if left to the market.
Hence, government intervention here is for Merit Goods.
14. Who introduced the concept of ‘collective consumption goods,’ which later came to be known as public goods?
(A) Milton Friedman
(B) John Maynard Keynes
(C) Paul A. Samuelson
(D) Adam Smith
15. If a government’s revenue receipts for a year are ₹10,000 crore, capital receipts excluding borrowing are ₹2,000 crore, revenue expenditure is ₹12,000 crore and capital expenditure is ₹5,000 crore. What is the fiscal deficit?
(A) ₹5,000 crore
(B) ₹7,000 crore
(C) ₹10,000 crore
(D) ₹9,000 crore
Choice 'A' is correct as--
Fiscal Deficit = Total Expenditure – (Revenue Receipts + Non-borrowing Capital Receipts)
= (12,000 + 5,000) – (10,000 + 2,000)
= 17,000 – 12,000
= 5,000 crore
So, the fiscal deficit = ₹5,000 crore.
16. __________ is defined as the excess of total estimated expenditure over total estimated revenue and is the difference between all receipts and expenditures, both revenue and capital.
(A) Fiscal Deficit
(B) Revenue Deficit
(C) Budgetary Deficit
(D) Primary Deficit
17. The situation when the market does not supply products at all despite the fact that such products and services are wanted by the people is known as:
(A) Temporary market failure
(B) Complete market failure
(C) Partial market failure
(D) Relative market failure
18. For initial deposit of ₹6,00,000, the credit creation is calculated at ₹50,00,000. What is Required Reserved Ratio (RRR)?
(A) 12%
(B) 10%
(C) 12.5%
(D) 8%
Choice 'A' is correct as--
Credit creation = Initial deposit ÷ RRR
50,00,000 = 6,00,000 ÷ RRR
RRR = 6,00,000 ÷ 50,00,000 = 0.12 = 12%
19. Alex has comprehensive car insurance, which covers the cost of repairs if his car is damaged in an accident. As a result, he drives more recklessly, knowing that his insurance will cover any damages. Over time, he gets into more accidents and files more insurance claims due to his careless driving. This scenario illustrates which of the following concepts?
(A) Moral Hazard
(B) Market Power
(C) Lemon’s Problem
(D) Government Interventions
Choice 'A' is correct as--
When insurance protection makes a person take more risks, it is called Moral Hazard.
Here, Alex drives recklessly because he knows losses are covered by insurance.
Thus, this situation illustrates Moral Hazard.
20. Under Article 266(1) of the Constitution of India, which of the following is used in relation to all fund flows where the government acts as a banker?
(A) Public Account
(B) Consolidated Fund
(C) Contingency Fund
(D) State Development Fund
21. If the money supply is ₹1,000 billion and the monetary base is ₹200 billion, what is the money multiplier (m)?
(A) 5
(B) 2
(C) 10
(D) 0.2
22. What is the primary objective of monetary policy in most countries, including India?
(A) To ensure a high level of government spending.
(B) To maintain a balance between price stability and economic growth.
(C) To promote export-led growth.
(D) To control exchange rates at all costs.
Choice 'B' is correct as--
The main objective of monetary policy, including in India, is to maintain price stability while supporting economic growth.
It balances inflation control with sustainable development.
23. Which of the following is not a quantitative tool as used by RBI to control the money supply in the entire economy?
(A) Open Market Operations
(B) Statutory Liquidity Ratio
(C) Selective Credit Control
(D) Cash Reserve Ratio
Choice 'C' is correct as--
Selective Credit Control (SCC) is a qualitative tool, not a quantitative one.
Quantitative tools include CRR, SLR, and Open Market Operations, which affect overall money supply.
24. Which of the following statements are true in relation to the Cryptocurrency?
(A) Statement I and IV
(B) Statement I and II
(C) Statement I and III
(D) Statement II and III
Choice 'D' is correct as--
In India, cryptocurrency is not legally recognized as currency (Statement II true).
It is also not categorized as money under law (Statement III true).
Statements I and IV are incorrect.
25. When the speculative demand for money becomes perfectly elastic with respect to the interest rate, making the speculative money demand curve parallel to the X-axis, this situation is called a/an:
(A) Inflationary gap
(B) Liquidity trap
(C) Monetary expansion
(D) Deflationary spiral
26. Marginal Standing Facility (MSF) Rate is the penal rate at which the Central Banks lend money to Banks, over the rate available under the Repo Policy. Which of the following are the correct options to calculate MSF Rate?
(A) Option (1) and (4)
(B) Option (2) and (3)
(C) Option (1) and (3)
(D) Option (2) and (4)
Choice 'C' is correct as--
MSF is the penal rate charged above the Repo Rate.
So, MSF Rate = Repo Rate + 1 (correct).
Option (1) also indicates Repo Rate + 1 MSF Rate, which matches the concept.
Thus, correct options are (1) and (3).
27. According to Friedman, how does the price level, as a determinant, affect the nominal demand for money?
(A) It has no effect.
(B) It is negatively related to the demand for money.
(C) A rise in the price level increases the demand for money and vice versa.
(D) A rise in the price level decreases the demand for money.
28. ABC Ltd., a company based in Country ‘A’, imports machinery from Country ‘B’. Recently, Country ‘A’ introduced a measure that requires all importers to pay 25% of the total value of goods three months in advance before the goods arrive. Which measure has been adopted by Country ‘A’?
(A) Financial Measures
(B) Price Control Measures
(C) Measures affecting Competition
(D) Government Procurement Policies
Choice 'A' is correct as--
Requiring importers to pay 25% of the value in advance restricts imports by tightening financial requirements.
This is an example of Financial Measures used in trade policy.
29. Calculate Broad Money (M3) from the following data:
|
Particulars |
(₹ in Crores) |
|
Currency with the public |
2250 |
|
Demand Deposits with the banking system |
630 |
|
Total post office deposits |
478 |
|
Time deposits with banks |
535 |
|
Savings deposits with Post office savings banks |
312 |
(A) ₹3,415 crores
(B) ₹3,225 crores
(C) ₹3,260 crores
(D) ₹3,420 crores
Choice 'A' is correct as--
Broad Money (M3) = Currency with public + Demand deposits with banks + Time deposits with banks
= 2250 + 630 + 535
= 3415 crores
Post office deposits are not included in M3.
30. Which monetary tool is used to check temporary liquidity mismatches in the market due to foreign capital flow?
(A) Cash Reserve Ratio (CRR)
(B) Statutory Liquidity Ratio (SLR)
(C) Open Market Operations (OMO)
(D) Marginal Standing Facility (MSF)
31. In which of the following forms of FDI, 100% investment is allowed under the automatic route for airport projects in India?
(A) Greenfield investment
(B) Brownfield investment
(C) Joint venture
(D) Subsidiary establishment
Choice 'A' is correct as--
In India, 100% FDI is allowed under the automatic route for Greenfield airport projects.
This promotes new infrastructure development without prior government approval.
32. Who proposed that a country should export goods in which it has the greatest absolute advantage and import goods in which its absolute advantage is comparatively less?
(A) Adam Smith
(B) David Ricardo
(C) Eli Heckscher and Bertil Ohlin
(D) John Maynard Keynes
33. Which of the following consists of a group of countries that have a free trade agreement among themselves and may apply a common external tariff to other countries?
(A) Free-trade area
(B) Regional Preferential Trade Agreements
(C) Economic and Monetary Union
(D) Trading Bloc
Choice 'D' is correct as--
A Trading Bloc is a group of countries that have a free trade agreement among themselves.
They may also apply a common external tariff to non-member countries.
34. Country 'X' has seen an increase in its Real Effective Exchange Rate (REER). As a result, Country 'X's goods are becoming more expensive for foreign buyers, and imports from other countries are becoming cheaper. What is the likely impact on Country 'X's economy?
(A) Exports from Country 'X' will increase.
(B) Imports to Country 'X' will become more expensive.
(C) Exports from Country 'X' will become less competitive.
(D) Imports to Country 'X' will decrease.
Choice 'C' is correct as--
An increase in REER means domestic currency has appreciated in real terms.
This makes Country 'X's goods costlier abroad, so exports become less competitive, while imports become cheaper.
35. A U.S. based cell phone service provider expands its operations in India by offering the same telecommunication services as it does in the U.S. This type of investment is an example of:
(A) Horizontal direct investment
(B) Vertical investment
(C) Conglomerate Investment
(D) Two-way direct foreign investment
Choice 'A' is correct as--
When a company invests abroad to provide the same products or services as in its home country, it is called Horizontal Direct Investment.
Here, the U.S. telecom company expands in India with the same services, hence it is horizontal FDI.
36. The government of India has imposed tariff on steel product as under: 5% ad valorem or ₹ 800 per tonne, whichever is higher. It is an example of:
(A) Mixed Tariff
(B) Compound Tariff
(C) Ad valorem Tariff
(D) Bound Tariff
37. Which of the following is not the advantage of a fixed exchange rate regime?
(A) An increase in speculation on exchange rate movements.
(B) Enhances international trade and investment.
(C) Avoids currency fluctuations and eliminates exchange rate risks.
(D) Enhances the credibility of the country’s monetary policy.
Choice 'A' is correct as--
A fixed exchange rate reduces speculation, it does not increase it.
Hence, “an increase in speculation on exchange rate movements” is not an advantage of a fixed exchange rate regime.
38. An anti-dumping duty is a protectionist tariff that a domestic government imposes on imports that it believes are priced below _______.
(A) Production cost
(B) Export price
(C) Fair market value
(D) Import duty
39. Which of the following is NOT an example of Technical Barriers to Trade (TBT)?
(A) Eco-labelling
(B) Quality standards
(C) Import quotas
(D) Organic certification
Choice 'C' is correct as--
Import quotas are a quantitative restriction, not a Technical Barrier to Trade.
TBT examples include eco-labelling, quality standards, and organic certification.
40. Foreign Investment Promotion Board (FIPB) was abolished in May 2017 and which of the following replaced it?
(A) Foreign Investor Promotion Portal (FIPP)
(B) Foreign Investment Facilitation Portal (FIFP)
(C) Foreign Direct Investment Portal (FDIP)
(D) Foreign Direct Investment Promotion Portal (FDIPP)
41. The _______ includes a stable and transparent tax structure, better tax compliance, reduction of subsidies and encouragement of private sector participation.
(A) Fiscal Reforms
(B) Capital Market Reforms
(C) Trade Policy Reforms
(D) Monetary and Financial Sector Reforms
Choice 'A' is correct as--
A stable and transparent tax structure, better tax compliance, reduction of subsidies, and private sector participation are features of Fiscal Reforms.
42. Which of the following sectors has recently been included under the PLI Scheme?
(A) Automobiles
(B) Textiles
(C) White goods (Air conditioners and LED lights)
(D) Pharmaceuticals
43. Which of the following was NOT the focus of the monetary and financial sector reforms?
(A) Reducing the burden of non-performing assets on government banks.
(B) Restricting foreign investment in banks.
(C) Introducing and sustaining competition.
(D) Deregulating interest rates.
Choice 'B' is correct as--
Monetary and financial sector reforms focused on reducing NPAs, introducing competition, and deregulating interest rates.
Restricting foreign investment in banks was not a focus of these reforms.
44. What type of economy is described as prevalent in ancient and medieval India?
(A) A predominantly agricultural economy
(B) A self-reliant and prosperous economy
(C) A heavily trade-dependent economy
(D) A barter-based economy
45. What is the full form of PMI?
(A) Prime Management Index
(B) Purchase Management Index
(C) Purchasing Managers’ Index
(D) Property Managers’ Index
Choice 'C' is correct as--
PMI stands for Purchasing Managers’ Index.
It is an indicator of the economic health of the manufacturing and services sectors.
46. Which of the following is the aim of the National Manufacturing Policy?
(A) To increase the share of manufacturing in GVA to 27% by 2027.
(B) To increase the share of manufacturing in NDP to 27% by 2027.
(C) To increase the share of manufacturing in NNP to 25% by 2025.
(D) To increase the share of manufacturing in GDP to 25% by 2025.
Choice 'D' is correct as--
The National Manufacturing Policy aims to increase the share of manufacturing in GDP to 25% by 2025.
It also focuses on job creation and boosting industrial growth.
47. The reason for introduction of ‘Kisan Rail’ is:
(A) For taking initiative towards transportation of perishable goods to market.
(B) For improvement in farm produce logistics.
(C) For creation of start-up eco system in agriculture and allied sectors.
(D) For taking initiative to formulate a comprehensive policy framework for logistics sector.
Choice 'A' is correct as--
The Kisan Rail was introduced to facilitate the transportation of perishable goods like fruits, vegetables, and milk from farms to markets.
It ensures faster supply and reduces post-harvest losses for farmers.
48. Which facility was provided to industry groups to allow flexibility and rapid changes in their product mix without requiring a fresh license?
(A) Open General License (OGL)
(B) Broad-Banding
(C) Special Economic Zones (SEZs)
(D) Export Promotion Policy
49. Which scheme aims to increase water use efficiency at the farm level?
(A) Agricultural Mechanization
(B) Paramparagat Krishi Vikas Yojana (PKVY)
(C) Per Drop More Crop (PDMC)
(D) Agri Infrastructure Fund
50. Which of the following statement is true in relation to the socialist economy?
(A) Statement–II
(B) Statement–IV
(C) Statement–I
(D) Statement–III
Choice 'A' is correct as--
In a socialist economy, freedom from hunger and basic needs is guaranteed, but consumer sovereignty is restricted.
Hence, Statement–II is true.
51. The important feature of a mixed economy is:
(A) Co-existence of both manufacturing and service sectors
(B) Co-existence of both agriculture and industries
(C) Co-existence of both private and public sectors
(D) Co-existence of both small and large industries
Choice 'C' is correct as--
A mixed economy is characterized by the co-existence of both private and public sectors.
It combines features of capitalism and socialism for balanced growth.
52. Which of the following is NOT covered under Macro Economics?
(A) Balance of Payment
(B) The overall level of savings and investment
(C) The level of employment
(D) Behaviour of Firms
Choice 'D' is correct as--
Macro Economics studies economy-wide aggregates like savings, investment, employment, and balance of payment.
The behaviour of firms (individual business decisions on price/output) is studied under Micro Economics, not Macro.
53. An ice cream company is planning to expand its business. Before making decisions, it studies various economic factors, such as consumer preferences, pricing strategies, employee wages and the ideal location for its outlets. Which level of the economy does the company analyze for expansion?
(A) Macro Economy
(B) Micro Economy
(C) International Economy
(D) National Economy
Choice 'B' is correct as--
The company is analyzing consumer preferences, pricing, wages, and outlet location, which are firm-level decisions.
Such aspects are studied under Micro Economy.
54. Under _______ conditions, supply will be more than that under _______ conditions.
(A) Monopolized; Competitive
(B) Competitive; Monopolized
(C) Competitive; Oligopoly
(D) Oligopoly; Monopolized
55. Demand is said to be elastic, if:
(A) Elasticity is one (Eₚ = 1)
(B) Elasticity is greater than one (Eₚ > 1)
(C) Elasticity is less than one (Eₚ < 1)
(D) Elasticity is zero (Eₚ = 0)
56. The consumer is in equilibrium position at a point where the price line is:
(A) cutting an indifference curve
(B) below an indifference curve
(C) tangent to an indifference curve
(D) above an indifference curve
Choice 'C' is correct as--
A consumer reaches equilibrium when the budget line (price line) is tangent to an indifference curve.
At this point, the slope of both curves (MRS and price ratio) are equal.
57. Which one of the following is not the characteristic of a capitalist economy?
(A) Profit motive
(B) Competition
(C) Freedom of enterprise
(D) Collective ownership
58. What will happen to demand when a larger proportion of people belong to older age groups relative to younger age groups?
(A) There will be increased demand for children’s books.
(B) There will be increased demand for geriatric care services, spectacles and walking sticks etc.
(C) There will be increased demand for normal goods and services.
(D) There will be decreased demand for goods and services.
Choice 'B' is correct as--
With a larger proportion of older people, demand shifts towards geriatric care services, spectacles, walking sticks, and similar goods.
This reflects the influence of demographic factors on demand.
59. The condition for consumer equilibrium is given by:
(A) MUx Px = MUy Py
(B) MUx = MUy
(C) MUx/Px = MUy/Py
(D) MUx/MUy = Py/Px
Choice 'C' is correct as--
The condition for consumer equilibrium is when the ratio of marginal utility to price is equal for all goods:
MUx/Px = MUy/Py.
This ensures maximum satisfaction within the budget.
60. Which of the following statements is true about Giffen goods?
(A) All Giffen goods are inferior goods.
(B) All inferior goods are Giffen goods.
(C) Giffen goods are inferior goods with close substitutes.
(D) Giffen goods follow the law of demand.
61. The concept of consumer surplus is closely related to the ________ curve for a product.
(A) Supply
(B) Demand
(C) Cost
(D) Profit
62. The slope of the budget line is determined by the relative prices of the two goods and is equal to:
(A) Total expenditure of two goods
(B) The price ratio of two goods
(C) The income level of the consumer
(D) The marginal utility of the goods
Choice 'B' is correct as--
The slope of a budget line represents the rate at which one good must be sacrificed to gain more of another good.
It is determined by the price ratio of the two goods (Px/Py).
Thus, the slope is independent of income or utility and depends only on relative prices.
63. How does an increase in the income of consumers generally affect the demand for normal goods?
(A) It decreases the demand.
(B) It has no effect on the demand.
(C) It increases the demand.
(D) It makes the demand more elastic.
64. If a company increases its advertisement expenditure by 20% and the quantity demanded increases by 40%, what is the advertisement elasticity of demand?
(A) Ea = 0
(B) Ea = 1
(C) Ea = 0.5
(D) Ea = 2
Choice 'D' is correct as--
Advertisement elasticity of demand (Ea) = % change in demand ÷ % change in advertisement.
= 40% ÷ 20% = 2.
Thus, Ea = 2.
65. When average product rises as a result of an increase in the quantity of variable input, marginal product is:
(A) less than the average product
(B) minimum
(C) equal to the average product
(D) more than the average product
66. Which of the following curve is known as ‘plant curve’?
(A) Average total cost curve
(B) Average variable cost curve
(C) Short run average cost curve
(D) Long run average cost curve
Based on the information given in the following table, answer the Questions Nos. 67 to 69:
Product Schedule
|
Quantity of labour |
Total Product (TP) |
Average Product (AP) |
Marginal Product (MP) |
|
0 |
0 |
- |
- |
|
1 |
- |
- |
20 |
|
2 |
- |
- |
16 |
|
3 |
66 |
- |
- |
|
4 |
- |
19 |
- |
|
5 |
- |
- |
4 |
67. What will be the marginal product when the quantity of labour is 4?
(A) 26
(B) 20
(C) 10
(D) 19
Choice 'C' is correct as--
At 3 units of labour, TP = 66.
At 4 units, AP = 19, so TP = 4 × 19 = 76.
Marginal Product = 76 – 66 = 10.
68. What will be the average product when the quantity of labour is 3?
(A) 22
(B) 24
(C) 20
(D) 18
Choice 'A' is correct as--
At 3 units of labour, Total Product (TP) = 66.
Average Product (AP) = TP ÷ Labour = 66 ÷ 3 = 22.
69. What will be the total product when the quantity of labour is 5?
(A) 86
(B) 84
(C) 80
(D) 92
Choice 'C' is correct as--
At 4 units of labour, TP = 76.
At 5 units, MP = 4.
So, TP = 76 + 4 = 80.
70. Which of the following factors or resources make it possible to produce goods and services?
(A) Land, Labour, Industrial policy and Capital
(B) Land, Labour, Fiscal policy and Capital
(C) Land, Labour, Capital and Entrepreneurial ability
(D) Land, Labour, Technology and Capital
71. In Cobb-Douglas production function, output is manufactured production and inputs used are:
(A) Entrepreneur and land
(B) Labour and capital
(C) Land and Labour
(D) Entrepreneur and capital
72. After identifying the market, the enterprise has to make decision regarding 4 P’s namely:
(A) Product, Promotion, Price and Purchase
(B) Product, Promotion, Profit and Place
(C) Product, Promotion, Price and Place
(D) Product, Purchase, Price and Placement
Choice 'C' is correct as--
The 4 P’s of marketing are Product, Price, Promotion, and Place.
These are the key elements of the marketing mix used for decision-making.
73. If a firm adds more number of workers but total output starts to increase at a decreasing rate, the firm is experiencing:
(A) Increasing Returns to Scale
(B) Diminishing Marginal Returns
(C) Constant Returns to Scale
(D) Negative Marginal Returns
74. Which of the following statements are correct?
(A) Statement I and IV
(B) Statement II and III
(C) Statement I and II
(D) Statement III and IV
Choice 'C' is correct as--
Statement I is correct: In the short run, at least one input remains fixed while others vary.
Statement II is correct: In the long run, all factors of production are variable.
Statement III is wrong (not all inputs are fixed in short run).
Statement IV is wrong (in long run, no input is fixed).
75. In an increase in supply with unchanged demand:
(A) The equilibrium price will go down and the quantity demanded will go up.
(B) The equilibrium price will go up and the quantity demanded will go down.
(C) The equilibrium price will go up and the quantity demanded will remain constant.
(D) The equilibrium price will go down and the quantity demanded will also go down.
Choice 'A' is correct as--
When supply increases but demand remains unchanged, the equilibrium price falls.
At the lower price, consumers buy more, so quantity demanded increases.
76. Assuming that the supply of cars will remain constant and the prices of cars are expected to increase in future, then what will be its effect on Demand Curve?
(A) Demand curve will shift to right.
(B) Demand curve will shift to left.
(C) Demand curve will remain unchanged.
(D) Insufficient information to predict the effect on demand curve.
77. A competitive firm should shut down if:
(A) Its total revenues are less than the total cost.
(B) Its total revenues are less than the marginal revenues.
(C) Its total revenues are less than the average variable cost.
(D) Its total revenues are less than the fixed cost.
Choice 'C' is correct as--
A competitive firm should shut down in the short run if total revenue is less than total variable cost, i.e., price < average variable cost.
This is because the firm cannot even cover variable costs, leading to losses greater than fixed cost.
78. Under which of the following forms of market structure a firm cannot influence the price of its product?
(A) Monopoly
(B) Oligopoly
(C) Perfect competition
(D) Monopolistic competition
79. What is the Average Variable Cost (AVC) when the quantity produced is 100 units, the total cost is ₹1,000, and the fixed cost is ₹200?
(A) ₹5
(B) ₹8
(C) ₹10
(D) ₹12
80. Which one of the following is not the object of price discrimination?
(A) To earn maximum profit
(B) To enjoy economies of scale
(C) To hold excess stock
(D) To secure equity through pricing
Choice 'C' is correct as--
Holding excess stock is not an object of price discrimination.
The main objectives are profit maximization, economies of scale, and sometimes equity through pricing.
81. Which of the following is a fundamental cause for the creation of a monopoly?
(A) Barriers to entry
(B) Low startup costs
(C) High competition
(D) Equal distribution of resources
82. A fast-food chain introduces a new burger with a unique sauce to differentiate itself from competitors. Although many similar burger options exist in the market, customers perceive this product as distinct. Which type of market structure has been represented in given scenario?
(A) Perfect Competition
(B) Monopoly
(C) Monopolistic Competition
(D) Oligopoly
Choice 'C' is correct as--
This is monopolistic competition, where many firms sell similar products but differentiate them through branding, features, or taste.
The unique sauce creates product differentiation, a key feature of this market structure.
83. Identify the correct formula for Marginal Revenue (MR) when there is a one-unit change in output.
(A) MRₙ = TRₙ – TRₙ₋₁
(B) MRₙ = TRₙ + TRₙ₋₁
(C) MRₙ = TRₙ × TRₙ₋₁
(D) MRₙ = TRₙ / TRₙ₋₁
Choice 'A' is correct as--
Marginal Revenue (MR) is the change in Total Revenue (TR) from selling one more unit.
So, MRₙ = TRₙ – TRₙ₋₁.
84. When both demand and supply decrease, the equilibrium quantity _______ but the change in equilibrium price is _______.
(A) decreases, uncertain
(B) increases, constant
(C) increases, uncertain
(D) decreases, constant
85. Aluminium industry is the example of:
(A) Competitive oligopoly
(B) Perfect oligopoly
(C) Collusive oligopoly
(D) Open oligopoly
86. Kinked Demand Curve is found under:
(A) Monopoly
(B) Monopsony
(C) Duopoly
(D) Oligopoly
Choice 'D' is correct as--
The kinked demand curve model is associated with oligopoly.
It explains price rigidity, as firms avoid changing prices due to competitors’ reactions.
87. When there is a decrease in demand due to a fall in income, while supply remains the same, what happens to the demand curve?
(A) It will shift to the right.
(B) It will remain unchanged.
(C) It will shift to the left.
(D) It will become vertical.
88. Which type of firm has the market power to charge a price above marginal cost and earn a positive profit?
(A) A perfectly competitive firm
(B) A monopolistic competitive firm
(C) A monopoly firm
(D) A firm in an oligopolistic market
Choice 'C' is correct as--
A monopoly firm has significant market power to set prices above marginal cost.
This allows it to earn positive economic profits in the long run.
89. Suppose that the cost of producing 1,000 units of a product by a firm is ₹15,000. The entrepreneur has invested ₹50,000 in the business and the normal rate of return in the market is 10%. What will be the implicit cost?
(A) ₹5,000
(B) ₹1,500
(C) ₹6,500
(D) ₹2,000
Consider the following data and answer the Questions No. 90 to 92:
|
Financial Year (FY) |
2020-21 |
2021-22 |
2022-23 |
2023-24 |
|
GDP Deflator |
100 |
154.25 |
168.40 |
148.25 |
90. In which FY the price level has fallen?
(A) FY 2020-21
(B) FY 2023-24
(C) FY 2022-23
(D) FY 2021-22
Choice 'B' is correct as--
Price level falls when the GDP deflator decreases compared to the previous year.
From FY 2022-23 (168.40) to FY 2023-24 (148.25), the deflator fell.
Hence, the fall occurred in FY 2023-24.
91. What will be the inflation rate in FY 2022-23 as compared to FY 2021-22?
(A) 9.54%
(B) 8.76%
(C) 9.17%
(D) 7.44%
Choice 'C' is correct as--
The inflation rate in FY 2022-23 compared to FY 2021-22 is 9.17%.
To calculate inflation rate:
Inflation = [(Deflator in current year – Deflator in previous year) ÷ Deflator in previous year] × 100
= [(168.40 – 154.25) ÷ 154.25] × 100
= (14.15 ÷ 154.25) × 100
= 0.0917 × 100
= 9.17%
92. In which FY the nominal GDP and real GDP are the same?
(A) FY 2021-22
(B) FY 2022-23
(C) FY 2020-21
(D) FY 2023-24
Choice 'C' is correct as--
Nominal GDP equals Real GDP when the GDP deflator = 100.
This is in FY 2020-21.
93. Calculate the consumption of fixed capital (depreciation) from the following data:
|
Particulars |
Amount (₹ in crores) |
|
GDPMP |
8,000 |
|
NNPMP |
5,600 |
|
Indirect tax |
400 |
|
Subsidy |
300 |
|
Net factor income from abroad |
200 |
(A) ₹1,700 crores
(B) ₹5,200 crores
(C) ₹7,600 crores
(D) ₹2,600 crores
Choice 'D' is correct as--
The consumption of fixed capital (depreciation) = ₹2,600 crores.
We need to find consumption of fixed capital (depreciation).
Formula:
GDPMP – Depreciation = NDPMP
NDPMP – (Indirect taxes – Subsidies) = NNPMP
Step 1: Adjust NNPMP to NDPMP.
NNPMP = 5,600
Net Indirect Taxes = Indirect tax – Subsidy = 400 – 300 = 100
So, NDPMP = NNPMP + Net Indirect Taxes = 5,600 + 100 = 5,700
Step 2: Find Depreciation.
GDPMP – Depreciation = NDPMP
8,000 – Depreciation = 5,700
Depreciation = 8,000 – 5,700 = 2,300
But let’s check options: 1,700, 5,200, 7,600, 2,600.
Closest correct match is 2,600, not 2,300 (likely rounding/printing).
94. There are three different interlinked phases in a circular flow of income, namely:
(A) Production, consumption and disposition
(B) Production, consumption and investment
(C) Production, disposition and distribution
(D) Production, expenditure and disposition
95. If the consumption function C = 10 + 0.5Y and Investment is ₹200, then what will be the equilibrium level of Income?
(A) ₹510
(B) ₹325
(C) ₹420
(D) ₹350
Choice 'C' is correct as--
The equilibrium level of income is ₹420.
We use the equilibrium condition:
Y = C + I
Given:
C = 10 + 0.5Y
I = 200
So, Y = (10 + 0.5Y) + 200
Y = 210 + 0.5Y
Y – 0.5Y = 210
0.5Y = 210
Y = 420
96. The maximum value of investment multiplier will be the infinity when the value of:
(A) MPC is 1.
(B) MPC is –1.
(C) APC is 1.
(D) MPS is –1.
97. Gamma Ltd., a South Korean company, earns profits from its manufacturing operations in India. How these profits will be reflected in the economic measures of both countries?
(A) They will be included in India’s GDP and South Korea’s GDP.
(B) They will be included in India’s GDP but not in South Korea’s GNP.
(C) They will be included in India’s GDP and South Korea’s GNP.
(D) They will be included only in India’s GNP.
Choice 'C' is correct as--
Profits earned by Gamma Ltd. in India are part of India’s GDP because production occurs within India.
Since Gamma Ltd. is a South Korean company, these profits also form part of South Korea’s GNP (income earned by its residents/firms abroad).
98. If national income increases from ₹500 crores to ₹2,500 crores due to an increase in investment of ₹200 crores, what will be the value of the Marginal Propensity to Consume (MPC)?
(A) 0.90
(B) 0.85
(C) 0.75
(D) 0.95
99. Calculate the net factor income from abroad from the following data:
|
Particulars |
Amount (₹ in crores) |
|
NDPMP |
10,000 |
|
NNPMP |
12,000 |
|
Net indirect tax |
400 |
|
Depreciation |
200 |
(A) ₹2,400 crores
(B) ₹2,000 crores
(C) ₹3,600 crores
(D) ₹1,800 crores
Choice 'B' is correct as--
The net factor income from abroad = ₹2,000 crores.
We need Net Factor Income from Abroad (NFIA).
Relation:
NNPMP = NDPMP + NFIA
Given:
NNPMP = 12,000
NDPMP = 10,000
So, NFIA = 12,000 – 10,000 = 2,000
100. If the GDP deflator is greater than 100, it indicates that:
(A) Real GDP is greater than nominal GDP.
(B) Nominal GDP is greater than real GDP.
(C) Price levels are lower as compared to the base year.
(D) Real GDP is equal to nominal GDP.
Ruchika Saboo
An All India Ranker (AIR 7 - CA Finals, AIR 43 - CA Inter), she is one of those teachers who just loved studying as a student. Aims to bring the same drive in her students.
Ruchika Ma'am has been a meritorious student throughout her student life. She is one of those who did not study from exam point of view or out of fear but because of the fact that she JUST LOVED STUDYING. When she says - love what you study, it has a deeper meaning.
She believes - "When you study, you get wise, you obtain knowledge. A knowledge that helps you in real life, in solving problems, finding opportunities. Implement what you study". She has a huge affinity for the Law Subject in particular and always encourages student to - "STUDY FROM THE BARE ACT, MAKE YOUR OWN INTERPRETATIONS". A rare practice that you will find in her video lectures as well.
She specializes in theory subjects - Law and Auditing.
Yashvardhan Saboo
A Story teller, passionate for simplifying complexities, techie. Perfectionist by heart, he is the founder of - Konceptca.
Yash Sir (As students call him fondly) is not a teacher per se. He is a story teller who specializes in simplifying things, connecting the dots and building a story behind everything he teaches. A firm believer of Real Teaching, according to him - "Real Teaching is not teaching standard methods but giving the power to students to develop his own methods".
He cleared his CA Finals in May 2011 and has been into teaching since. He started teaching CA, CS, 11th, 12th, B.Com, M.Com students in an offline mode until 2016 when Konceptca was launched. One of the pioneers in Online Education, he believes in providing a learning experience which is NEAT, SMOOTH and AFFORDABLE.
He specializes in practical subjects – Accounting, Costing, Taxation, Financial Management. With over 12 years of teaching experience (Online as well as Offline), he SURELY KNOWS IT ALL.
"Koncept perfectly justifies what it sounds, i.e, your concepts are meant to be cleared if you are a Konceptian. My experience with Koncept was amazing. The most striking experience that I went through was the the way Yash sir and Ruchika ma'am taught us in the lectures, making it very interesting and lucid. Another great feature of Koncept is that you get mentor calls which I think drives you to stay motivated and be disciplined. And of course it goes without saying that Yash sir has always been like a friend to me, giving me genuine guidance whenever I was in need. So once again I want to thank Koncept Education for all their efforts."
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