CA-Foundation- Business Economics and Business & Commercial Knowledge ROUND-2

NAME : _______________________
ROLL NO. : ___________
DATE : ___________

CA – Foundation - Test Series - 2023/I : Test Paper 2 Marks: 100

Time : 2 hrs.
Subject : Business Economics and Business and Commercial Knowledge

INSTRUCTIONS
General:
(i) Marking: +1 for correct answer & -0.25 for incorrect.
(ii) Mark only one correct answer out of four alternatives.
(iii) Use Pencil or Blue/Black Ball Point Pen only for writing particulars for any marking.
(iv) Darken the circles in the space provided only.
(v) Use of white fluid or any other material which damages the answer sheet, is not permitted.

PART A: BUSINESS ECONOMICS

1] The central problems relating to allocation of resources are ––
(a) What to produce? (b) How to produce?
(c) For whom to produce? (d) All the above.
2] Study of unemployment problem and then framing suitable policies to reduce the extent of unemployment
shows that economics is—
(i) Both a science and an art
(ii) Neither a science nor an art
(iii) Positive science
(iv) Normative science
(a) i and iii only (b) ii and iv only
(c) i, iii and iv (d) ii, iii and iv
3] Macro – economics is also known as –
(i) Method of Lumping (ii) Price Theory
(iii) General equilibrium analysis (iv) Aggregative Economics
(a) i and ii only (b) iii and iv only (c) i, iii and iv only (d) ii, iii and iv only
4] Which of the following is not correct?
(a) Micro and Macro economics are complementary to each other
(b) Every macro economic problem requires micro economic analysis for its proper understanding
(c) Micro – economic behaviour can be added-up to derive macro economic behaviour.
(d) What is macro from the national angle is micro from world angle
5] Find the odd –
(a) Normative economics is concerned with welfare propositions.
(b) Normative economics is prescriptive in nature.
(c) Normative economics is regulatory in nature
(d) Economic laws are hypothetical.
6] A dual system of pricing exists in –
(a) Capitalist economy (b) Socialist economy
(c) Mixed economy (d) None of these
7] Positive economics remains strictly neutral towards ends. This means that ––
(a) Positive economics study the facts as they are
(b) Positive economics is prescriptive in nature
(c) Positive economics is based on ethical, philosophical and religious beliefs
(d) Only (a) and (b)

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CA-Foundation- Business Economics and Business & Commercial Knowledge ROUND-2

8] “ During the boom periods when aggregate demand, national income and prices are high, entrepreneurs
tend to make high profits”. This statement shows ––
(a) Effect of micro economic variables on macro variables
(b) Effect of macro economic variables on micro variables
(c) Interdependence of micro and macro economics
(d) Both (b) and (c)
9] Capital intensive technique would be chosen in a____
(a) labour surplus economy where the relative price of capital is lower
(b) capital surplus economy where the relative price of capital is lower
(c) developed economy where technology is better
(d) developing economy where technology is poor
10] Which of the following statement is incorrect?
(a) Business economics is a normative in nature
(b) Business economics is closely related with statistics
(c) Business economics only considers micro variables
(d) Business economics is also called Managerial economics
11] All of the following are within the scope of Business Economics except____
(a) Capital Budgeting (b) Risk Analysis
(c) Business Cycles (d) Accounting Standards
12] Which of the following is considered as a disadvantage of allocating resources in a capitalist economy?
(a) Income will tend to be unevenly distributed
(b) People do not get goods of their choice
(c) Men of initiative and enterprise are not rewarded
(d) Profits will tend to be low
13] Market Demand is the sum total of–
(a) all quantities that producer’s can produce
(b) all quantities actually sold in the market
(c) all quantities demanded by individual households and consumers
(d) all the above
14] The demand function of a commodity ‘X’ is given by Qx = 20 - 3 Px. What would be he value of Px when the
corresponding value of Qx = 14.
(a) ` 5 (b) ` 4 (c) ` 3 (d) ` 2
15] A relative price is–
(a) price expressed in terms of money
(b) what you get paid for babysitting your cousin
(c) the ratio of one price to another
(d) equal to a money price
16] Consumers buy a good till Px = MUx. If the price falls, the consumer will reach equilibrium-
(a) at a lower quantity
(b) at a higher quantity
(c) at zero quantity level
(d) all the above
17] If the demand rises with the rise in consumer’s real income, such a good is called ________.
(a) Normal goods
(b) Neutral goods
(c) Inferior goods
(d) Luxury goods

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CA-Foundation- Business Economics and Business & Commercial Knowledge ROUND-2

18] Consider the following figure:

In the above figure, RS part of the demand curve represents–

(a) Superior good (b) Inferior good
(c) Normal good (d) Giffen’s good
19] Some buyer’s demand more of certain commodities at a higher price, such an effect is called ______.
(a) Bandwagon Effect (b) Snob Effect
(c) Veblen Effect (d) None of the above
20] The total effect of price change of a good is–
(a) Substitution Effect + Income Effect
(b) Substitution Effect + Price Effect
(c) Substitution Effect + Demonstration Effect
(d) Demonstration Effect + Veblen Effect
21] Substitution Effect subscribe to the inverse relation between Px and Qx in case of–
(a) normal goods only
(b) inferior goods only
(c) normal and inferior goods both
(d) none of the above
22] The Law of Demand will fail in case of inferior goods only if-
(a) Substitution Effect is greater than Income Effect
(b) Income Effect is greater than Substitution Effect
(c) Both ‘a’ and ‘b’
(d) Neither ‘a’ nor ‘b’
23] When the quantity of a good that a buyer demands rises when there is growth of purchases by other
individuals, such an effect is called ________
(a) Bandwagon Effect (b) Snob Effect
(c) Veblen Effect (d) None of the above
24] Match the following
(1) Joint Demand (i) Tea and coffee
(2) Competitive Demand (ii) Sugar and Molasses
(3) Joint Supply (iii) Taj Mahal Tea and Society Tea
(4) Competitive Supply (iv) Car and Petrol
(a) 1 (iv) ; 2 (i) ; 3 (iii) ; 4 (ii)
(b) 1 (iv) ; 2 (i) ; 3 (ii) ; 4 (iii)
(c) 1 (iv) ; 2 (iii) l 3 (i) ; 4 (ii)
(d) 1 (ii) ; 2 (iii) ; 3 (iv) ; 4 (ii)
25] If more is demanded at the same price or the same quantity is demanded at a higher price, it is known as–
(a) Extension of Demand
(b) Contraction of Demand
(c) Increase in Demand
(d) Decrease in Demand

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CA-Foundation- Business Economics and Business & Commercial Knowledge ROUND-2

26] Consider the following figure–

It shows demand curve for–

(a) Necessities (b) Comforts and Luxuries
(c) Inferior Goods (d) None of the above
27] If the quantity demanded of a commodity is plotted against the price of a substitute goods ceteris paribus
the curve is expected to be–
(a) Verticle (b) Negatively sloped (c) Horizontal (d) Positively sloped
28] 30 units of a commodity is purchased by a consumer at the price of ` 46 per unit. When the price rises to ` 50
per unit, he buy 15 units only. The co-efficient of elasticity do demand is–
(a) 4.75 (b) 5 (c) 5.75 (d) 6
29] All but one are the assumptions of the law of variable proportions. Which one is not?
(a) There is only one factor which is variable
(b) All units of variable factor are homogeneous
(c) State of technology remains constant
(d) Applies in long run
30] MP curve is –
(a) U – shaped (b) S – shaped
(c) inverted U – shaped (d) inverted S – shaped
31] Reason for fall in both AP and MP curves is–
(a) under utilization of the fixed factor
(b) over utilization of the fixed factor
(c) under utilization of the variable factor
(d) full utilization of the variable factor
32] Diminishing marginal returns for the first four doses of inputs when all factors of production are increased in
the same proportion is revealed by the total product sequence
(a) 50, 50, 50, 50 (b) 50, 100, 150, 200
(c) 50, 90, 120, 140 (d) 50, 110, 180, 260
33] The slope is iso-product curve show–
(a) MRSxy
(b) MRTSxy
(c) elasticity of an iso-product curve
(d) none of the above
34] What will be the output with 10 units of L and 10 units of K, if the production function is Q = 5L + 2K production
(a) 50 (b) 60 (c) 70 (d) 80
35] The two inverted ‘S’ shaped short run cost curves are parallel to each other and maintain a constant distance
of ` 100. Which cost is indicated by ` 100?
(a) Total Variable Cost (b) Total Cost
(c) total Fixed Cost (d) Average Fixed Cost
36] When a bus with a seating capacity of 50 passengers is carrying on 40 passengers. The cost of passenger
ticket is ` 100. What would be the Marginal Cost of carrying one additional passenger?
(a) ` 100 (b) zero (c) ` 4,100 (d) ` 4,000
37] In the short period the firm can control only the _________ cost and not the ________ cost and therefore
must recover at least __________ cost
(a) fixed ; variable ; fixed (b) variable ; fixed ; variable
(c) average ; marginal ; average (d) accounting ; opportunity ; accounting

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CA-Foundation- Business Economics and Business & Commercial Knowledge ROUND-2

38] Which of the following statements is correct of the relationship among the short run costs?
(a) ATC = AFC – AVC (b) AVC = AFC + ATC
(c) AFC = ATC + AVC (d) AFC = ATC – AVC
39] Find the odd out –
(a) Monopoly may be the result of control over raw materials
(b) Monopoly may be the result of business combines
(c) Monopoly may be the result of patents, copyrights, etc.
(d) Monopoly may be the result of control over demand of commodity
40] Highly elastic negatively sloped demand curve is related to –
(a) monopoly (b) monopolistic competition
(c) perfect competition (d) both (a) and (b)

Use the following data for Q 41.

A perfectly competitive firm has the following cost schedule
Output( units) 0 1 2 3 4 5 6 7 8 9 10
MC (Rs.) – 11 10 9 8 7 6 7 10 13 19
TC ( Rs.) 9 20 30 39 47 54 60 67 77 90 109

41] If the market price is Rs. 13, to maximize profits the firm should produce –
(a) 8 units (b) 7 units (c) 6 units (d) 9 units
42]

In the above figure, the demand curves facing a seller under perfect competition, monopolistic competition
and Monopoly are–
(a) AR2 ; AR1 , AR (b) AR1 , AR2 , AR
(c) AR , AR2, AR1 (d) AR , AR1 , AR2
43] A bilateral monopoly is one which–
(a) there are two products with one producer
(b) there are international monopoly agreements
(c) monopoly is shared between the people
(d) a monopolist is facing a monopsonist
44] Which of the following is not correct?
(a) if e > 1 , MR is +ve (b) if e < 1 , MR is –ve
(c) if e = 1 , MR = 0 (d) if e = 0 , MR = 0
45] Market price is the price that prevails in a ________
(a) very short period market (b) short period market
(c) long period market (d) secular period market
46] Which of the following is not a characteristics of a “price taker”?
(a) TR = P X Q (b) AR = Price
(c) Negatively sloped demand curve (d) Marginal Revenue = Price
47] Which market explains that Marginal Cost is equal to price for attaining equilibrium.
(a) Perfect Competition (b) Monopoly
(c) Oligopoly (d) Monopolistic Competition

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CA-Foundation- Business Economics and Business & Commercial Knowledge ROUND-2

48] When AR = Rs. 10 and AC = Rs. 8 the firm makes

(a) Normal Profit (b) Net Profit
(c) Gross Profit (d) Supernormal Profit
49] When a market is in equilibrium or has cleared it means _____
(a) No shortages exist
(b) Quantity demanded equals quantity supplied
(c) A price is established that clears the market
(d) All the above
50] The cross elasticity of demand for the product of a firm under perfect competition is -
(a) zero (b) less than zero
(c) infinite (d) unity
51] A firm has to take decision whether to produce 15th unit of output but finds its marginal cost of 15th unit to
be ` 25 and marginal revenue of 15th unit to be ` 18 hence firm -
(a) should produce 15th unit
(b) should cut down its output level
(c) should further expand production beyond 15th unit
(d) can not determine output level
52] The degree of monopoly power is measured in terms of difference between-
(a) Marginal Cost and the price
(b) Average Cost and Average Revenue
(c) Marginal Cost and Average Cost
(d) Marginal Revenue and Average Cost
53] Expansion phase all but one of the following characteristics.
(a) Increase in national output
(b) Increase in consumer spending
(c) Excess production capacity of industries
(d) Expansion of bank credit
54] The economy is said to be overheated at the _______ phase of business cycle.
(a) Expansion (b) Peak
(c) Contraction (d) Depression
55] __________ is the severe form of recession with lowest level of economic activity.
(a) Upswing (b) Depression
(c) Downswing (d) Peak
56] Which of the following is not the features of business cycle?
(a) Business cycle follow perfectly timed cycle
(b) Business cycle vary in intensity
(c) Business cycle vary in length
(d) Business cycle have no set pattern
57] A variable that moves later than aggregate economic activity is called ______
(a) a leading variable (b) a coincident variable
(c) a lagging variable (d) a cyclical variable
58] A variable that occur simultaneously with the business cycle movements is ___________ indicator.
(a) Leading (b) Lagging (c) Coincident (d) Cyclical
59] When aggregate economic activity is declining, the economy is said to be in _____
(a) contraction (b) an expansion
(c) a trough (d) a turning point
60] Production of _______ goods fall during the war times.
(a) arms and ammunition (b) non-durable and capital
(c) capital and weapons (d) capital and consumer

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CA-Foundation- Business Economics and Business & Commercial Knowledge ROUND-2

PART B: BUSINESS AND COMMERCIAL KNOWLEDGE

61. Which of the following statements distinguishes business from entrepreneurship?
(a) Entrepreneurs are the business owners too
(b) All business owners are entrepreneurs too
(c) Entrepreneurs seek out new opportunities and pursue innovative business ideas
(d) (a) and (b)
62. Which of the following occupations requires rendering of services based upon specialised knowledge and
membership of an accreditation and assessment body?
(a) Employment (b) Profession (c) Business (d) Agriculture
63. Find the odd one out from the following
There can be partnership between:
(a) Natural persons (b) Artificial persons
(c) Partnership firms (d) Any combination of natural and artificial persons
64. Organisations depend upon which environment for Input:
a) Technological Environment b) Social-Economic Environment
c) External Environment d) Legal Environment
65. Who occupies the central position in the marketing environment?
a) Consumer b) Customer c) Organisation d) All of the above
66. Competition is beneficial to the competing firms besides benefiting the______?
a) Intermediaries b) Customers c) Producers d) Financiers
67. What is the kind of response that businesses should make efforts to exploit the opportunity and thought the
threats:
a) Strategic Responses b) Least resistance c) Diversify d) Simplify
68. Process of strategy formulation starts with:
a) Appraisal of external and internal environment of the of an organisation
b) Performance analysis
c) Choice of strategy
d) None of the above
69. Relationship between organisation and environment can be described through:
a) Exchange of information b) Exchange of resources
c) Exchange of influence and power d) All of the above
70. All are elements of macro environment except:
(a) Society. (b) Government. (c) Competitors. (d) Technology
71. Which pharmaceutical company has the slogan ‘caring for life’?
(a) Dr. Reddy’s (b) Lupin Ltd.
(c) Cipla Ltd. (d) Sun Pharmaceutical Industries Ltd.
72. Which industrial category does Wipro Ltd. come under?
(a) Pharmaceuticals & Drugs (b) Diversified
(c) Media (d) IT- Software
73. The major textile brand ‘Vimal’ was introduced in which year?
(a) 1975 (b) 1965 (c) 1985 (d) 1986
74. Who is the present CFO of Adani Ports and Special Economic Zone Ltd.?
(a) Ravi Bhamidipaty (b) Karan Gautambhai Adani
(c) Deepak Maheshwari (d) Farokh Nariman Subedar
75. When did Microsoft begin its business in India?
(a) 1990 (b) 1991 (c) 1995 (d) 1989
76. Which of the following is not a subsidiary of NTPC?
(a) Kanti Bijlee Utpadan Nigam Limited
(b) Patratu Vidyut Utpadan Nigam Limited
(c) Bhartiya Rail Bijlee Company Limited
(d) Kalinga Bidyut Prasaran Nigam Private Limited

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CA-Foundation- Business Economics and Business & Commercial Knowledge ROUND-2

77. Public Policies are always _______________. Fill in the gap by taking the appropriate expression from the
following:
(a) Goal oriented (b) Minutely defined
(c) Pro-rich (d) For the poor
78. Which of the following institutions has been scrapped recently?
(a) Minerals and Metals Regulatory Commission
(b) Coal India Limited
(c) Planning Commission
(d) FIPB
79. The method of FDI other than Automatic route is called :
(a) NRI Route (b) Government Route
(c) Institutional Route (d) Priority Route
80. Sale of 50% stake in a PSU to a single private sector company is an example of:
(a) Displacement of stake
(b) Decentralization of Authority
(c) Delegation of stake
(d) Disinvestment to form a Joint Venture
81. Where can the first appeal against SEBI be made?
(a) High Court (b) Supreme Court
(c) Securities Appellate Tribunal (d) RBI
82. Which of the following is not the concern of monetary policy?
(a) Interest rate (b) Quantity of money and credit
(c) Disposable income with the households (d) Both (a) & (b)
83. Which of the following is incorrect?
(a) SLR and CRR are quantitative measures of credit control RBI
(b) Repo rate is the rate at which banks borrow money from RBI
(c) Bank rate and Repo rate are the same rate used for different purposes
(d) Qualitative measures of credit control are also called selective credit control
84. Which of the given statements does not stand true for EXIM Bank?
(a) It was set up in 1982.
(b) It finances joint ventures abroad
(c) It provides counselling services to companies engaged in exports and imports.
(d) It is a member of the Alliance for Financial inclusion
85. SEBI has to be responsive to the needs of groups, which constitute the market:
(a) The issuers of securities
(b) The investors
(c) The market intermediaries
(d) All of the above
86. NABARD is the most important institution in the country which looks after the development of the
(a) Cottage industry, (b) Small industry
(c) Village industry (d) All of the above.
87. The Reserve Bank of India being the Central Bank of India performs all the central banking functions. Which
one of the following is not the functions of RBI?
(a) Issue of currency
(b) Banker to the government
(c) Watchdog of the unethical competition in the market
(d) Custodian of the nation’s foreign exchange reserves
88. A portion of the after‐tax profits paid out to the owners of a business as a return on their investment is:
(a) Dividend (b) Expense
(c) Expenditure (d) Deferred income

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89. What is meant by B2B?

(a) Buying behaviour that concerns the process that buyers go through when deciding whether or not to
purchase goods or services.
(b) A company’s business model is management’s storyline for how the strategy will be a money maker.
(c) Marketing activity directed from one business to another.
(d) None of the above
90. What is price sensitivity?
(a) the effect a change in price will have on customers.
(b) charging a relatively high price for a short time where a new, innovative, or much-improved product is
launched onto a market.
(c) a strategy involves setting low prices in order to discourage or deter potential new entrants to the suppliers
market.
(d) It measures the responsiveness of a change in demand for a product following a change in its own price.
91. ________is a very wide term that is used in context with financial agreements and contracts.
(a) Account balance (b) Acceptance (c) Annuity (d) Arbitrage
92. _________________ is the simultaneous purchase and sale of two identical commodities or instruments. This
simultaneous sale and purchase is done in order to take advantage of the price variations in two different
markets.
(a) Cap (b) Term insurance (c) Arbitrage (d) Hedge
93. Terminology “Bull & “Bear” are used in which Market:
(a) Finance Market (b) Stock Market (c) Money Market (d) Meat Market
94. Economic activities are:
(a) income generating (b) non productive
(c) time consuming (d) all the above
95. “Playing of piano as a hobby” This is –
(a) Economic activity (b) Non Economic activity
(c) Both a & b (d) None of the above
96. Who is present chairman of SBI?
(a) Arundhati Bhattacharya (b) Anshula Kant
(c) Rajnish Kumar (d) Dinesh Kumar Khara
97. What is full form of FII:
(a) Foreign Institutional Investors (b) Foreign Indian Institute
(c) Foreign Institute of India (d) None of the above
98. India initiate its mammoth privatization programme in which year
(a) 1992 (b) 1961 (c) 1991 (d) 2018
99. “Custom duties may be imposed to protect Indian Products” This is example of–
(a) Regulatory Policies (b) Restrictive Policies
(c) Facilitating Policies (d) None of the above
100. Pre opening session is for
(a) 15 minutes (b) 20 minutes
(c) 120 minutes (d) 10 minutes