Jaju’s Professional Academy

CA Foundation – Business Economics (Micro)

Mock Test 10
Time : 2 Hours Marks : 100

1. Who has defined the economics as (a) An Indifference Curve always has a
“Science which deals with wealth”. positive slope
(a) Adam Smith (b) Indifference Curve slopes
(b) Canon downward to the right
(c) JB Say (c) Two Indifference Curves do not
(d) AC Pigou intersect each other
(d) Higher level of Indifference Curve
shows higher level of satisfaction
2. When firm considers the strategic
interdependence under oligopoly, then
8. What is the MR at a mid point on a
price and output is determined by;
straight line demand curve meeting
(a) Principle of Marginalism
two axis.
(b) Common Interest
(a) Positive
(c) Reaction pattern of competitor
(b) Negative
(d) None of the above
(c) Zero
(d) None of the above
3. Under Bertrand Model, _____ is the
control variable.
9. Shares traded in capital market is an
(a) Price
example of
(b) Output
(a) Oligopoly
(c) Both
(b) Perfect competition
(d) None of the above
(c) Monopolistic competition
(d) Monopoly
4. If at equilibrium point (MC=MR) firm is
incurring losses in the short run then it
is due to; 10. The erstwhile U.S.S.R is an example of
(a) Fixed Cost ____ economy.
(b) Variable Cost (a) Capitalist
(c) Both (b) Socialist
(d) None (c) Mixed
(d) Price
5. What if the price elasticity of demand
under Monopoly? 11. Exploitation and inequality are
(a) Large minimal under;
(b) Small
(a) Socialism
(c) Infinite
(b) Capitalism
(d) Zero
(c) Mixed economy
6. The Consumer is said to be _____ (d) None of the above
among different points on an IC-
(a) Indifferent 12. Which one of the following is incorrect
(b) Interesting about business economics?
(c) Irrational (a) It is applied economics that fills the
(d) Intelligent gap between economic theories
and business practice.
7. Which of the following statements (b) Business economics integrates
regarding Indifference Curve is not economic theories with business
true? practice
 (c) Business economics is a also 19. In case of an normal good the income
referred to as managerial elasticity of demand is
economics (a) Zero
(d) Business economics is more (b) Positive
concerned with macro economics. (c) Negative
(d) None of the above
13. Which of the following is not included
20. When the quantity demanded changes
in economics? by larger percentage than does price,
(a) Family structure elasticity is termed as
(b) Managerial economics (a) Inelastic
(c) Micro economics (b) Elastic
(d) Macro economics (c) Perfectly elastic
(d) Perfectly inelastic
14. Which of the following is not the
feature of perfect competition? 21. In the beginning the name of
(a) Large number of buyers and sellers economics was _________.
(b) Small number of buyers and sellers (a) Economics of wealth
(c) Free entry and free exit (b) Political economy
(d) Goods are homogeneous (c) Welfare economics
(d) None of these
15. If the proportion of income spent on a
good decreases as income decreases,
22. Diminishing marginal returns for the
then income elasticity for the good is
(a) Greater than one first four units of a variable input is
(b) Less than one exhibited by the total product
(c) One sequence
(d) Infinite (a) 50, 50, 50, 50
(b) 50, 110, 180, 260
16. A leading indicator is (c) 50, 100, 150, 200
(a) a variable that tends to move along
(d) 50, 90, 120, 140
with the level of economic activity
(b) a variable that tends to move in
advance of aggregate economic 23. _____ is the produced means of
activity production.
(c) a variable that tends to move (a) Capital
consequent on the level of (b) Labour
aggregate economic activity
(c) Land
(d) None of the above
(d) Entrepreneur
17. If the distribution of income is
uneven/unequal then the propensity 24. The word economics has been derived
to consume of the country will be from a ________ word.
(a) Relatively high (a) French
(b) Relatively low (b) Latin
(c) High (c) Greek
(d) Low (d) German

18. If as a result of increase in the fare of

25. Economics is mainly concerned with
Railways, its Total revenue increases,
(a) the achievement of economic
then the demand for Railways is
(a) Elastic development
(b) Inelastic (b) the achievement and use of
(c) Perfectly material requirements to satisfy
(d) Unitary elastic human wants
 (c) the exploring more resources to 31. “Generally a business manager is
satisfy human wants concerned with problems of his own
(d) the limiting human wants with business units. He does not study the
respect to given resources economic problems of an economy as a
whole.”
26. Business economics is a field in State whether the above statement is
________ which uses economic theory ___________
and quantitative methods to analyze (a) True
business enterprises. (b) False
(a) Welfare Economics (c) Partly True
(b) Development Economics (d) Partly False
(c) Applied economics
(d) None of these 32. Business economics is _______ in its
approach.
27. The period of 1929-33 is cited for ____ (a) Idealistic
of World Economy. (b) Pragmatic
(a) Great Depression (c) Both (a) and (b)
(b) Great Recovery (d) None of these
(c) Great Upswing
(d) Great Downswing
33. “A business manager must know the
28. Business cycle generally originate in external forces working over his
free market economies, what is a free business environment.” State whether
market economy? the above statement is ___________
(a) The economy where government is (a) True
in possession of major assets (b) False
(b) The economy where private firms (c) Partly True
control major assets (d) Partly False
(c) The economy where decisions of
productions are taken by public 34. The scope of business economics
sector undertakings includes _______.
(d) The economy where price is
(a) Demand analysis
controlled by government.
(b) Cost analysis
(c) Inventory management
29. Business economics is based on micro
(d) All of these
economics in two categories ______
and _____.
35. A socialist economy is a system of
(a) Positive, Normative
production where goods and services
(b) Qualitative, Quantitative
are produced _____.
(c) Both (A) and (B)
(a) to generate profit
(d) None of these
(b) directly for use
(c) Both (A) and (B)
30. Economics is a branch of
(d) None of these
______________ focused on the
production, distribution and
36. Which one of the following statements
consumption of goods and services.
is correct regarding socialist economy?
(a) Natural science
(a) Production is planned or
(b) Physical science
coordinated and suffers from the
(c) Social science
business cycle
(d) None of these
(b) Production suffers from the
business cycle
 (c) Production is planned and does not (a) Perfect competition
suffers from business cycle (b) Monopoly
(d) None of these (c) Oligopoly
(d) None of these
37. Which of the following is not a merit of
socialist economy? 43. Monopolistic Competition theory
(a) It provides equal access to health architect was
care and education (a) Roden
(b) Workers are no longer exploited (b) Marx
because they own the means of (c) J R Hicks
production (d) Chamberlin
(c) Profits are not spread equitably
among all workers according to 44. Snob effect is explained as ______
their individual contributions. (a) It is a function of consumption of
(d) Natural resources are preserved for others
the good of the whole. (b) It is a function of price
(c) Both (a) and (b)
38. Which of the following is/are the (d) None of these
merit(s) of mixed economic system?
(a) Entrepreneurs able to make profit 45. The rate at which the consumer is
(b) Progressive taxes to reduce prepared to exchange -good x and y is
inequality :
(c) Government’s provision of public (a) Marginal rate of substitution
goods (b) Elasticity of Substitution
(d) All of the above (c) Diminishing Marginal Utility
(d) None of these
39. Capital intensive technique of
production is used in ______. 46. Supply and Stock are ________
(a) Developed Economy (a) Same thing
(b) Underdeveloped Economy (b) Different
(c) Labour surplus economy (c) Having no comparison
(d) Capital surplus economy (d) Both (a) and (c)

40. The desire for a commodity by a person 47. Economic indicator required to predict
depends upon the ________ he expects the turning point of business cycle is :
to obtain from it. (a) Leading indicator
(a) Utility (b) Lagging indicator
(b) Pleasure (c) Coincident
(c) Taste (d) All of the above
(d) None of these
48. Normative economics can be best
41. Information Technology bubble burst explained through:
of 2000 is an example of : (a) Fairness to tax
(a) Business Cycle (b) Incidence to tax
(b) Consumer Sovereignty (c) Effect of tax on incentives to work
(c) Freedom of choice (d) None of these
(d) None of these
49. For Giffen good the Engel curve is:
42. In which form of market Cartels can be (a) Positive sloped
formed: (b) Vertical
 (c) Horizontal (a) Large number of sellers
(d) Negative sloped (b) Product differentiation
(c) Freedom of entry and exit
50. If the monopolist incurs losses in the (d) All of the above
short run then in the long run:
(a) It will stay in the business 57. Total Utility is maximum when:
(b) Go out of business (a) Marginal Utility is negative
(c) Will break even (b) Marginal Utility is zero
(d) Any of the above is possible (c) Marginal Utility is at its highest
point.
51. Globalization indicate rapid ___ (d) None of these
between Countries :
(a) Competition 58. Stock Exchange is an example of __
(b) Investment (a) Forward market
(c) Integration (b) Regulated market
(d) None of these (c) Spot market
(d) None of these
52. Elasticity of supply to the degree of
responsiveness of supply of a good to 59. Which of the following is not a
changes in its; characteristic of monopolistic
(a) Demand competition?
(b) Price (a) Ease of entry into the industry
(c) Cost of production (b) Product differentiation
(d) State of technology (c) A homogeneous Product
(d) A relatively large number of sellers
53. Monopsony market and monopoly
market when combined is called: 60. Under which model of leader firm
(a) Oligopoly market commits to an output before all other
(b) Monopolistic market firms?
(c) Duopoly market (a) Cournot Model
(d) Bilateral Monopoly Market (b) Stackleberg Model
(c) Bertrand Model
54. Consumer under Income effect: (d) None of the above
(a) Always purchase higher quantities
of both the commodities 61. Let slope of demand curve is (-) 0.6,
(b) moves to higher or lower calculate elasticity of demand when
indifference curve initial price is $ 30 per unit and initial
(c) moves along the original quantity is 100 units of the commodity.
indifference Curve. (a) 0.5
(d) None of these (b) 5.55
(c) (-) 0.5
55. Which is not the External Causes of (d) (-) 0.18
business cycle:
(a) Technology shock 62. Let Qx = 1500/Px, the elasticity of
(b) Population Growth demand of the good X when its price
(c) Money Supply falls from $ 8 to $ 2 per unit, will be-
(d) Technology Shock (a) greater than one
(b) less than one
56. Which is the feature of monopolistic (c) equal to one
Competition: (d) can’t say
63. Budget line or price line is downward 67. A new technique of production reduces
sloping because ______. the marginal cost of producing paper.
(a) There is inverse relationship How will this affect the supply curve of
between the price and demand of a writing material like notebook,
commodity. register & notepad etc?
(b) If a consumer wants to buy more of (a) Upward movement on same supply
one good, he has to buy less of curve
other good at given money income. (b) Downward movement on same
(c) If a consumer wants to buy more of supply curve
one goods, he has to buy less of (c) Leftward shift in supply curve
other goods as his money income (d) Rightward shift in supply curve
falls.
(d) None of these 68. Socialist Economy is also known as
(a) Mixed Economy
64. While drawing budget line of a (b) Planned Economy
consumer consuming Nachos chips and (c) Capitalist Economy
Pepsi, if the quantity of Nachos taken (d) None of the above
on Y-axis and quantity of Pepsi on X-
axis. The slope of budget line will be- 69. In which economy market and
(a) PP/PN government both play an important
(b) PN/PP role?
(c) M/PN (a) Mixed economy
(d) M/PP (b) Socialist economy
[Where, PP – Price of Pepsi, PN - Price (c) Capitalist economy
of Nachos & M – Money income of (d) Business economy
consumer]
70. Which of the following would be
65. If there is decrease in quantity considered a topic of study in Macro-
supplied of a commodity, there will economics
be- (a) The effect of increase in wages on
(a) Upward movement on same supply the profitability of cotton industry
curve (b) The effect on steel prices when
(b) Rightward shift in supply curve more steel is imported
(c) Downward movement on same (c) The effect on an increasing
supply curve inflation rate on living standards of
(d) Leftward shift in supply curve people I'm India
(d) The effect of an increase in the
66. Relationship between slope of supply price of coffee on the quantity of
curve and elasticity of supply can be tea consumed
defined as –
(a) Product of slope of supply curve 71. In socialist economy, allocation of
and ratio of quantity supply to resources is done by
price (a) Producers
(b) Elasticity of supply is equal to the (b) Government
slope of supply curve. (c) Planners
(c) Product of reciprocal of supply (d) Price mechanism
curve and ratio of price to quantity
supplied 72. A system of economy in which all the
(d) Elasticity of supply is equal to means of production are owned and
reciprocal of slope of supply curve.
 controlled by the private individuals 78. Supply is essentially expressed with
for the purpose of profit is called reference to ___________.
(a) Socialist (a) Price and Place
(b) Capitalist (b) Price and Time
(c) Mixed (c) Time and Place.
(d) All of the above (d) None of the above.

79. Which of the following method of

73. If as a result of increase in the income elasticity do not consider the finite
of the consumer the demand for the changes.
commodity increases less than (a) Arc Method
proportionately then generally goods (b) Point Method
satisfies; (c) Total Outlay Method
(a) Necessities (d) None of the above
(b) Luxuries
(c) Both 80. The vertical supply curve parallel to Y-
(d) None axis implies that the elasticity of
Supply is
74. In case of straight line demand curve (a) Zero
meeting the two axes, the price (b) Infinite
elasticity of demand at the point on X (c) Equal to one
axes would be (d) Greater than one but less than
(a) 0 infinity
(b) 1
(c) Greater than one 81. _____ refers to the work area where
(d) Less than one
surplus man power is employed out of
which some individuals have zero or
75. In Economics, A rise in demand due to
fall in the prices of goods concerned is almost zero marginal productivity such
referred to as that if they are removed, the total
(a) Expansion of demand level of output remains unchanged.
(b) Contraction of demand (a) Voluntary
(c) Increase in demand (b) Disguised
(d) Decrease in demand. (c) Structural
(d) Technological
76. A fall in demand due to rise in the
prices of goods concerned will lead to 82. In case of straight line demand curve
the meeting the two axes, the price
(a) Downward movement along the elasticity of demand between mid-
same demand curve point and point of Y axis.
(b) Upward movement along the same (a) 0
demand curve. (b) 1
(c) Rightward shift of the demand (c) Greater than one
curve. (d) Less than one
(d) Leftward shift of the demand
curve. 83. The supply of land for the firm is ____
(a) Elastic
77. Amongst the following which of the
following has the lowest price (b) Inelastic
elasticity of demand? (c) Perfectly elastic
(a) Luxury (d) Perfectly inelastic
(b) comforts
(c) Salt 84. Singing of song is
(d) None of these (a) Not production
(b) Production if sung before friends
 (c) Production if sung for money 91. At shut down point
(d) Production if well sung by the (a) Price is equal to AVC
singer (b) Total revenue is equal to TVC
(c) Total loss of the firm is equal to
85. MC curve cuts AVC curve TFC
(a) At its falling point (d) All of the above
(b) At its minimum point
(c) At its rising point 92. With which of the following is the
(d) At different points concept of marginal cost closely
related?
86. Fixed cost are the function of (a) Variable cost
(a) Output (b) Fixed cost
(b) Capacity (c) Opportunity cost
(c) Neither (a) nor (b) (d) Economic cost
(d) None of the above
93. The distinction between fixed cost and
87. When average cost is minimum, variable cost is made in;
marginal cost is ______ to the average (a) Short run
cost. (b) Long run
(a) Less (c) Both
(b) More (d) None
(c) Equal
(d) None of the above 94. A firm under perfect competition will
be making minimum losses (in short
88. The slope of the AFC curve is run) at a point where
(a) MC>MR
(a) Positive
(b) MR>MC
(b) Negative (c) MC=MR
(c) Both (d) AC=AR
(d) None
95. In the long run, normal profits are
89. Economic cost means included in the____ curve
(a) Accounting cost + Implicit cost (a) LAC
(b) LMC
(b) Accounting cost + Marginal cost
(c) AFC
(c) Cash cost + Opportunity cost (d) SAC
(d) Implicit cost
96. In Cournot Model, _______ is the
90. A firm has been producing 10 units of control variable.
output has an average total cost of Rs. (a) Price
200 and has to pay Rs. 500 to its fixed (b) Output
(c) Both
factors of production whether it
(d) None
produces or not. How much of the
average total cost is made up of 97. Price Discrimination can be for any of
variable cost? the following reasons except;
(a) 200 (a) Difference in time
(b) 150 (b) Difference in place
(c) Difference in market
(c) 300
(d) Difference in cost
(d) None of the above
98. The central problem in every economic 99. If the size of the population is large,
society is: then the demand for goods in general
(a) To ensure a minimum level of would be.
income for every individual. (a) More
(b) To allocate scarce resources in such (b) Less
a manner that societies unlimited (c) Constant
(d) None of the above
wants are satisfied in the best
possible manner. 100. When Strategic Interdependence is
(c) To ensure that production occurs in ignored in oligopoly then price and
most efficient manner. output is determined by;
(d) To provide job to every job seeker. (a) Principle of Marginalism
(b) Reaction pattern of competitor
(c) Common interest
(d) None of the above