Economics Past Paper PDF

INDEX ECONOMICS 1 NATURE AND SCOPE OF BUSINESS ECONOMICS 01 - 11 2 THEORY OF DEMAND AND SUPPLY 12 - 25 3 THEORY OF PRODUCTION AND COST 26 - 43 4 PRICE DETERMINATION IN DIFFERENT MARKET...

INDEX ECONOMICS 1 NATURE AND SCOPE OF BUSINESS ECONOMICS 01 - 11 2 THEORY OF DEMAND AND SUPPLY 12 - 25 3 THEORY OF PRODUCTION AND COST 26 - 43 4 PRICE DETERMINATION IN DIFFERENT MARKET 44 - 66 5 BUSINESS CYCLES 67 - 76 6 DETERMINATION OF NATIONAL INCOME 77 - 97 7 PUBLIC FINANCE 98 - 116 8 MONEY MARKET 117 - 135 9 INTERNATIONAL TRADE 136 - 156 10 INDIAN ECONOMY 157 - 167 SOLUTION 168 - 178  CA FOUNDATION - ECONOMICS NATURE AND SCOPE OF 1 BUSINESS ECONOMICS 1. The famous book abbreviated as “The Wealth of Nations”, which is also considered as the first modern work of Economics, was written by __________ (a) Frederic Engels (b) Karl Marx (c) David Ricardo (d) Adam Smith 2. The concept of socialist economy was propounded by Karl Marx and Frederic Engels in their work. The Communist Manifesto was published in the year. (a) 1947 (b) 1848 (c) 1949 (d) 1950 3. Which one is the feature of Marshall’s definition? (a) Limited ends (b) Scarce means (c) Study of wealth as well as study of man (d) Study of allocation of resources 4. According to Robbins, ‘means’ are: (a) Scarce (b) Unlimited (c) Undefined (d) All of these 5. Scarcity definition of Economics is given by. (a) Alfred Marshall (b) Samuelson (c) Robinson (d) Adam Smith 6. The definition “Science which deals with wealth of Nation” was given by: (a) Alfred Marshall (b) A C Pigou (c) Adam Smith (d) JB Say 7. Economics is the study of: (a) How society manages its unlimited resources (b) How to reduce our wants until we are satisfied (c) How society manages its scarce resources (d) How to fully satisfy our unlimited wants 1 Revision Notes  CA FOUNDATION - ECONOMICS 8. In Economics, we use “scarcity” the term to mean: (a) Absolute scarcity and lack of resources in less developed countries. (b) Relative scarcity i.e. scarcity in relation to the wants of the society. (c) Scarcity during times of business failure and natural calamities. (d) Scarcity caused on account of excessive consumption by the rich. 9. In Economics, we use the term scarcity to mean: (a) Absolute scarcity and lack of resources in less developed countries. (b) Relative scarcity i.e. scarcity in relation to the wants of the society. (c) Scarcity during times of business failure and natural calamities. (d) Scarcity caused on account of excessive consumption by the rich. 10. An economy exists because of two basic facts i.e. ______________. (a) Human wants are limited and resources are unlimited (b) Human wants are unlimited and resources are unlimited (c) Human wants are unlimited and resources are scare (d) Human wants are limited and resources are abundant 11. What implication(s) does resource scarcity have for the satisfaction of wants? (a) Not all wants can be satisfied. (b) We will never be faced with the need to make choices. (c) We must develop ways to decrease our individual wants. (d) The discovery of new natural resources is necessary to increase our ability to satisfy wants. 12. Adam Smith defined Economies In terms of (a) The Science of welfare (b) The Science of scarcity (c) The Science of wealth (d) The Science of wealth and welfare 13. Who defines Economies in terms of Dynamic Growth and Development? (a) Robbins (b) Paul A Samuelson (c) Adam Smith (d) None of these 2 Revision Notes  CA FOUNDATION - ECONOMICS 14. Which of the following is not a basic problem of an economy? (a) Whether to produce more of consumer goods or capital goods (b) Whether to lay emphasis on labour-intensive techniques or on capital intensive techniques (c) Whether to produce for rich people or for poor people (d) Whether to accept foreign direct investment in the economy 15. In every economic system, scarcity imposes limitations on (a) Households, business firms, governments and the nation as a whole. (b) Households and business firms, but not the governments. (c) Local and state governments, but not the federal government. (d) Households and governments, but not business firms. (e) Business firms, governments, and the nation as a whole. 16. Economic goods are considered scarce resources because they (a) Cannot be increased in quantity. (b) Do not exist in adequate quantity to satisfy the requirements of the society. (c) Are of primary importance in satisfying social requirements. (d) Are limited to man made goods. 17. ‘Economics is the study of man- kind in the ordinary business of life’ was given by: (a) Adam Smith (b) Lord Robbins (c) Alfred Marshall (d) Samuelson 18. Consider the following and decide which, if any, economy is without scarcity: (a) The pre-independent Indian economy, where most people were farmers. (b) A mythical economy where everybody is a billionaire. (c) Any economy where income is distributed equally among its people. (d) None of the above. 19. Human wants are __________ in response to satisfy their wants? (a) Unlimited (b) Limited (c) Scarce (d) Multiple 20. There is need of economic study, because- (a) The resources are limited (b) The wants are unlimited (c) The resources are unlimited (d) Both (a) and (b) 3 Revision Notes  CA FOUNDATION - ECONOMICS 21. The benefit of economic study is- (a) It ensure that all problems will be appropriately tackled (b) It helps in identifying problems (c) It enable to examine a problem in its right perspective (d) It gives exact solutions to every problem. 22. Economic goods are considered as scarce resources because ______________. (a) Inadequate quantity to satisfy the needs of the society (b) Not possible to increase in quantity (c) Limited hands to make goods (d) Primary importance in satisfying social requirements 23. The meaning of time element in Economics is: (a) Calendar time (b) Clock time (c) Operational time in which supply adjusts with the market demand (d) None of the above 24. All wants of an individual are not of: (a) Equal importance (b) Immediate importance (c) Fixed importance (d) All of the above 25. ___________ refers to the process of selecting an appropriate alternative that will provide the most efficient means of attaining a desired end, from two or more alterative courses of action. (a) Decision making (b) Strategy (c) Problem Solving (d) Effectiveness 26. Which of the following is not within the scope of Business Economics? (a) Capital Budgeting (b) Risk Analysis (c) Business Cycles (d) Accounting Standards 27. Business Economics is (a) Abstract and applies the tools of Microeconomics. (b) Involves practical application of economic theory in business decision making. (c) Incorporates tools from multiple disciplines. (d) (b) and (c) above. 4 Revision Notes  CA FOUNDATION - ECONOMICS 28. Business Economics is also known as? (a) Applied Economics (b) Managerial Economics (c) Micro Economics (d) All of the above 29. The question of choice arises because our productive resources _____________ (a) Are limited (b) Can be employed in alternatives (c) Both (a) & (b) (d) None of the above 30. The management of a business unit generally needs to make _____________. (a) Strategic Decision (b) Tactical Decision (c) Operational Decision (d) All of the above 31. Concept of Business Economics was given by: (a) Joel Dean (b) Alfred Marshall (c) Adam Smith (d) L. Robbins 32. Which one of the following is in-correct about Business Economics? (a) It is applied economics that fills the gap between economic theory and business practice. (b) Business Economics integrates economic theory with business practice. (c) Business Economics is also referred to as Managerial Economics. (d) Business Economics is more concerned with Macro Economics. 33. The managerial economics- (a) Is Applied Economics that fills the gap between economic theory and business practice (b) Is just a theory concept (c) Trains managers how to behave in recession (d) Provides the tools which explain various concepts 34. ______________ defined Business Economics in terms of the use of economics analysis in the formula- tion of business policies. (a) Joel Dean (b) Karl Marks (c) Adam Smith (d) Schumpeter 5 Revision Notes  CA FOUNDATION - ECONOMICS 35. Business Economics is essentially a component of _________ as it includes application of selected quantitative techniques. (a) Pure Economics (b) Applies Economics (c) Statistical Economics (d) None of the above 36. Which of the following is not included in Economics? (a) Family Structure (b) Managerial Economics (c) Micro Economics (d) Macro Economics 37. The heart of Business Economics is (a) Micro Economic Theory of the behaviour of consumers and firms in competitive markets. (b) Macro-Economic Theory of the national income (c) Income Economic analysis to analyze the industry (d) All of the above 38. Which one of the following is not a subject matter of Micro-Economics? (a) Behaviour of Firms (b) External Value of Currency (c) Factor Pricing (d) Location of Industry 39. Micro economics does not study (a) Consumer behaviour (b) Factor pricing (c) General price level (d) Firms equilibrium 40. Micro Economics is also known as ______________. (a) Public Economics (b) Income Theory (c) Demand Theory (d) Price Theory 41. Micro Economics is the study of: (a) Individual parts of the economy (b) The economy as a whole (c) Choice making (d) Development of the economy 42. Economics is classified into ________________. (a) Normative & positive (b) Micro & Macro (c) Internal & External (d) None of the above 6 Revision Notes  CA FOUNDATION - ECONOMICS 43. Mrs. Reshma, a CEO of a company had decided to expand the business by introducing a new product into market. She hires a consultant to guide her for deciding the pricing of the new product, study the consumer behaviour and the staff requirements. Approach of consultant will be towards __________________. (a) Applied Economics (b) Econometrics (c) Macro Economics (d) Micro Economics 44. The branch of economic theory that deals with the problem of allocation of resources is (a) Micro-Economic theory. (b) Macro-Economic theory. (c) Econometrics. (d) None of the above. 45. Which of the following is not the subject matter of micro economics? (a) Consumer Behaviour (b) Foreign Exchange Rate (c) Behaviour of Firms (d) Location of Industry 46. Micro economics theories deal with _______________. (a) Productions and Cost analysis (b) Government Policies (c) Total Consumption (d) Social and political environment 47. Which of the following is used for allocation of resources? (a) Micro-Economics (b) Marco-Economics (c) Econometrics (d) Descriptive Economics 48. Which of the following is not the subject matter of Business Economics? (a) Should our firm be in this business? (b) How much should be produced and at price should be kept? (c) How will the product be placed in the market? (d) How should we decrease unemployment in the economy? 49. The branch of economic theory that deals with the problem of al- location of resources is: (a) Micro Economics (b) Macro Economics (c) Econometrics (d) None of these 7 Revision Notes  CA FOUNDATION - ECONOMICS 50. Which of the following is not a subject matter of micro economics? (a) Behaviour of firms (b) Location of industry (c) Consumer behaviour (d) Foreign exchange rate 51. An example of ‘positive’ economic analysis would be: (a) An analysis of the relationship between the price of food and the quantity purchased. (b) Determining how much income each person should be guaranteed. (c) Determining the ‘fair’ price for food. (d) Deciding how to distribute the output of the economy. 52. Which of the following is not a correct statement? (a) Business Economics is a normative science (b) Business Economics is an art (c) Business Economics is based largely on Micro Economics (d) Business Economics does not incorporate elements of Macro Economics 53. Which of the following is not a correct statement? (a) Business economics is a normative science (b) Business economics is an art (c) Business economics is based largely on micro economics (d) Business economics does not incorporate elements of macro economic analysis 54. Business Economics is _____________ in its approach as it tackles practical problems which the firm faces in the real world. (a) Scientific (b) Programmatic (c) Theoretical (d) Mathematical 55. In a socialistic economy the allocation of resources is done by (a) Market prices (b) Consumer preferences (c) A central planning authority (d) The level of corporate profits 8 Revision Notes  CA FOUNDATION - ECONOMICS 56. ___________involves the predominance of bureaucracy and resulting in inefficiencies and delays. (a) Socialistic economy (b) Capitalist economy (c) Mixed economy (d) Free market economy 57. The erstwhile U.S.S.R. is an example of ______________ economy. (a) Capitalist (b) Socialist (c) Mixed (d) Price 58. The concept of Socialist economy was propounded by _______________. (a) Karl Marx and Adam Smith (b) Frederic Engels and Adam Smith (c) Frederic Engels (d) Karl Marx and Frederic Engels 59. Which one of the following is Not a feature of socialist economy? (a) Collective ownership (b) Absence of consumer choice (c) Minimum role of Price Mechanism (d) High Competition 60. Which of the following is an example of Socialist economy? (a) Erstwhile U.S.S.R. (b) North Korea (c) China and Cuba (d) All of the above 61. A socialist economy is called as which of the following (a) Command economy (b) Military economy (c) Behaviouralist economy (d) Applied economy 62. The demerits of Socialism do not include: (a) Predominance of bureaucracy (b) Red tapism & favouritism (c) Corruption (d) Consumer Sovereignty 63. ________________ involves the predominance of bureaucracy and resulting inefficiencies and delays. (a) Socialistic economy (b) Capitalist economy (c) Mixed economy (d) Free market economy 64. Under __________ the Consumers have no freedom of choice. (a) Capitalist (b) Socialist (c) Mixed (d) None of the above 9 Revision Notes  CA FOUNDATION - ECONOMICS 65. Socialist Economy is also known as (a) Mixed Economy (b) Planned Economy (c) Capitalist Economy (d) None of the above 66. Socialist economy is called as _________. (a) Centrally planned economy (b) Mixed economy (c) Private economy (d) Consumer economy 67. In which economic system production and distribution of goods and services aim at maximizing the welfare of community as a whole (a) Normative (b) Mixed (c) Socialism (d) Capitalistic economy 68. In which economy market and government both play on important role? (a) Mixed economy (b) Socialistic economy (c) Capitalistic economy (d) Business economy 69. Important feature of mixed economy is _____________. (a) Only Public Sector (b) Absence of consumer behaviour (c) Absence of government interferences (d) Co-existences of both private and public enterprises 70. Which economic system is described by Schumpeter as capitalism in the oxygen tent? (a) Laissez-faire Economy (b) Command Economy (c) Mixed Economy (d) Agrarian Economy 71. The Government itself must run important and selected industries and eliminate the free play of profit motive and self-interest. It is applicable in case of ___________ economy. (a) Capitalist (b) Socialist (c) Mixed (d) Price 10 Revision Notes  CA FOUNDATION - ECONOMICS 72. _____________ both are the tools used in the Mixed economy. (a) Price mechanism and market (b) Central planning and bureaucracy (c) Price mechanism and central planning (d) Administered prices and competition 73. Co-existence of public and private sector is the feature of _____________. (a) Capitalist Economy (b) Mixed Economy (c) Socialist Economy (d) Federal Economy 74. The term “Mixed Economy” denotes: (a) Co-existence of both consumers and producers goods’ industries in the economy. (b) Co-existence of both private and public sectors in the economy. (c) Co-existence of both rural and urban sectors in the economy. (d) Co-existence of both large and small industries in the economy 75. In which economy, cost benefit analysis is used to answer fundamental questions of the economy (a) Socialistic economy (b) Capitalistic economy (c) Regulatory economy (d) Mixed economy 11 Revision Notes  CA FOUNDATION - ECONOMICS THEORY OF DEMAND AND 2 SUPPLY 1. Demand for a commodity refers to: (a) Desire backed by ability to pay for the commodity. (b) Need for the commodity and willingness to pay for it. (c) The quantity demanded of that commodity at a certain price. (d) The quantity of the commodity demanded at a certain price during any particular period of time. 2. The term ‘demand’ refers to: (a) Demand of money (b) Need for the commodity (c) Need for services (d) The quantity of a good or service that buyers are willing and able to purchase at various prices during a given period of time 3. Demand is the: (a) The desire for a commodity given its price and those of related commodities. (b) The entire relationship between the quantity demanded and the price of a good other things remaining the same. (c) Willingness to pay for a good if income is larger enough. (d) Ability to pay for a good. 4. The quantity demanded is always expressed _______________. (a) Separately in isolation (b) Separately with quantity supplied (c) At a given price (d) None of these 5. Which of the following statements is correct? (a) With the help of statistical tools, the demand can be forecasted accurately. (b) The more the number of substitutes of a commodity, more elastic is the demand. (c) Demand for butter is perfectly elastic. (d) Gold jewellery will have negative income elasticity. 12 Revision Notes  CA FOUNDATION - ECONOMICS 6. The demand for a firm’s product when expressed as a percentage of industry demand it signifies the _________ of the firm (a) Product share (b) Market share (c) Demand (d) Supply 7. The quantity demanded is a _____________. (a) Flow (b) Stock (c) Single isolated purchase (d) Concept without reference to time 8. Effective demand depends on. (a) Price (b) Cost (c) Desire (d) Product 9. In economics, Effective Demand for a thing depends on : (a) Desire (b) Means to purchase (c) Willingness to use those means for that purchase (d) All of the above 10. All of the following are determinants of demand except: (a) Tastes and preferences. (b) Quantity supplied. (c) Income of the consumer. (d) Price of related goods. 11. _____________ is not a determinant of demand for commodity. (a) Price of substitute commodities (b) Price of complementary goods (c) Consumer expectations about future price of the commodity (d) Quantity of stock of the commodity. 12. Which is not an important factor that determines demand? (a) Price of commodity (b) Disposable income of consumer (c) Tastes and preferences of buyers (d) Educational qualification of buyer 13. Price of goods expresses value. (a) Exchange (b) Cost (c) Demand (d) Fair 13 Revision Notes  CA FOUNDATION - ECONOMICS 14. Which of the following will affect the demand for non-durable goods? (a) Disposable income (b) Price (c) Demography (d) All of the above 15. What is not a determinant of demand? (a) Consumer’s expectations (b) Consumer’s tastes and preferences (c) Income of the consumers (d) Prices of unrelated goods. 16. The term “Ceteris Paribus” refers to _________________. (a) Other things being equal (b) Other things also change (c) Other things may change (d) None of the above 17. Ceteris Paribus, the demand for a commodity is inversely related to its price. This happens because of: (a) Income Effect (b) Substitution Effect (c) Both (a) & (b) (d) None of above 18. _____________ is/are the types of Related Commodities. (a) Complementary (b) Substitutes (c) Complementary and Substitutes (d) Complementary or Substitutes 19. The increase in demand on account of an increase in real income is known as: (a) Substitution effect (b) Income effect (c) Marginal effect (d) Demand effect 20. Which one of the following set of Commodities represents Complementary goods? (a) Tea and Sugar (b) Automobile and Petrol (c) Pen and ink (d) All of the above 21. ____________ are those goods which are consumed together or simultaneously. (a) Complementary (b) Substitutes (c) Similar (d) Unrelated 22. Goods which are inferior, with no close substitutes easily available and which occupy a substantial place in consumer’s budget are called ___________ goods. (a) Speculative (b) Prestige (c) Conspicuous (d) Giffen 14 Revision Notes  CA FOUNDATION - ECONOMICS 23. When two commodities are complementary, a fall in the price of one (other things being equal) will cause the demand for the other to ______________. (a) Fall (b) Rise (c) Remain constant (d) Fall substantially 24. Two Commodities are called _______________ when they satisfy the same want and can be used with ease in place of one another. (a) Substitutes (b) Complementary (c) Unrelated (d) Opposite 25. There is a _____________ relation between the demand for a product and the price of its substitutes. (a) Direct (b) Positive (c) Indirect (d) Both (a) & (b) 26. In case of Veblen goods, the demand curve is (a) Horizontal (b) Vertical (c) Upward sloping to the right (d) Downward sloping to the right 27. Highly priced goods are consumed by status seeking rich people to satisfy their need for conspicuous consumption. This is called as _____________. (a) Veblen Effect (b) Snob Effect (c) Helen Effect (d) None of these 28. Name the term which refers to the demand for consumer goods which is decreased owing be the fact that others are also consuming the same commodity. (a) Hallo effect (b) Snob effect (c) Veblen effect (d) Demonstration effect 29. _______ are the commodities for which the quantity demanded rises only up to a certain level of income and decreases with an increase in money income beyond this level. (a) Inferior Goods (b) Normal Goods (c) Consumption Goods (d) Durable Goods 30. The substitution effect will be what when the price of the product falls? (a) Zero (b) Negative (c) Positive (d) Lower cost 15 Revision Notes  CA FOUNDATION - ECONOMICS 31. When goods are substitutes, a fall in the price of one (Ceteris Paribus) leads to in the quantity demanded of its substitutes. (a) Rise (b) Fall (c) Constant (d) No effect 32. A group of people decrease or altogether stop consumption of a common to which of the following effect? (a) Bandwagon effect (b) Veblen effect (c) Snob effect (d) Marshall effect 33. The term demonstration effect was coined by ______________. (a) Hicks (b) Veblen (c) James Duesen berry (d) Marshall 34. Which of the following will affect the demand for non-durable goods? (a) Disposable income (b) Price (c) Demography (d) All of the above 35. Which of the following pairs of goods is an example of substitutes? (a) Tea and sugar (b) Tea and coffee. (c) Pen and ink. (d) Shirt and trousers. 36. When the price of petrol decreases, people reduce the consumption of diesel, then the goods are: (a) Complementary (b) Substitutes (c) Superior (d) Any of the above 37. If the price of Pepsi decreases relative to the price of Coke and 7-UP, the demand for: (a) Coke will decrease. (b) 7-Up will decrease. (c) Coke and 7-UP will increase. (d) Coke and 7-Up will decrease. 38. Which of the following is an in-correct statement? (a) When goods are substitutes, a fall in the price of one (ceteris pari- bus) leads to a fall in the quantity demanded of its substitutes. 16 Revision Notes  CA FOUNDATION - ECONOMICS (b) When commodities are complements, a fall in the price of one (other things being equal) will cause the demand of the other to rise. (c) As the income of the consumer increases, the demand for the commodity increases always and vice versa. (d) When a commodity becomes fashionable people prefer to buy it and therefore its demand increases. 39. What will happen in the rice market if buyers are expecting higher rice prices in the near future? (a) The demand for rice will increase. (b) The demand for rice will decrease. (c) The demand for rice will be unaffected. (d) None of the above. 40. Conspicuous goods are also known as: (a) Prestige goods. (b) Snob goods. (c) Veblen goods. (d) All of the above. 41. A good which cannot be consumed more than once is known as (a) Durable good (b) Non-durable good (c) Producer good (d) None of the above 42. A relative price is (a) Price expressed in terms of money. (b) What you get paid for baby-sitting your cousin. (c) The ratio of one money price to another. (d) Equal to a money price. 43. The price of tomatoes increases and people buy tomato puree. You infer that tomato puree and tomatoes are (a) Normal goods. (b) Complements. (c) Substitutes. (d) Inferior goods. 17 Revision Notes  CA FOUNDATION - ECONOMICS 44. Chicken and fish are substitutes. If the price of chicken increases, the demand for fish will (a) Increase or decrease but the demand curve for chicken will not change. (b) Increase and the demand curve for fish will shift rightwards. (c) Not change but there will be a movement along the demand curve for fish. (d) Decrease and the demand curve for fish will shift leftwards. 45. If the price of X commodity increases and due to that the demand for Y commodity increases, then x and y goods are____________. (a) Complementary (b) Substitutes (c) Normal (d) Giffen 46. A Table which represents the different prices of a good and the corresponding quantity demanded per unit of time is called as _______________. (a) Demand Curve (b) Demand Table (c) Demand Schedule (d) Demand Tabulation 47. The Demand Schedule depicts ______________ relationship between price and quantity demanded. (a) Direct (b) Inverse (c) Adverse (d) None of these 48. ______________ is a graphical presentation of the ________________. (a) Demand Curve, Demand Schedule (b) Demand Schedule, Demand Curve (c) Demand Curve, Supply Schedule (d) Supply Curve, Demand Schedule 49. All but one of the following are assumed to remain the same while drawing an individual’s demand curve for a commodity. Which one is it? (a) The preference of the individual. (b) His monetary income. (c) Price of the commodity. (d) Price of related goods, 50. In the case of a straight line demand curve meeting the two axes, the price-elasticity of demand at the mid-point of the line would be: (a) 0 (b) 1 (c) 1.5 (d) 2 18 Revision Notes  CA FOUNDATION - ECONOMICS 51. The Concept of point elasticity is used for measuring price elasticity where the change in price is ________________. (a) Finite (b) Limited (c) Infinite small (d) None of the above 52. If indifference curve is ‘L’ shaped then two goods will be called as _____________. (a) Perfect superior goods (b) Perfect inferior goods (c) Perfect quality goods (d) Perfect complementary goods 53. Which one of the following Statement is incorrect about Indifference Curve? (a) Always Convex to the origin (b) Never intersects each other (c) Higher Curve represents higher level of satisfaction. (d) It may touch X axis but never Y axis. 54. A higher indifference curve shows a higher level of satisfaction than a lower one. Therefore, a consumer, in his attempt to maximize satisfaction will try to reach the ____________ possible indifference curve. (a) Highest (b) Lowest (c) Any of (a) or (b) (d) None of these 55. The consumer is in equilibrium at a point where the budget line: (a) Is above an indifference curve. (b) Is below an indifference curve. (c) Is tangent to an indifference curve. (d) Cuts an indifference curve. 56. The scope of the indifference curve shows consumer equilibrium at point where P MRS(xy) _______________ x (Price line). P (a) Less than y (b) More than (c) Equal to (d) None of the above 57. The Slope of Indifference curve is __________. (a) Marginal Rate of Substitution (b) Minimal Rate of Substitution (c) Average Rate of Substitution (d) Total Rate of Substitution 19 Revision Notes  CA FOUNDATION - ECONOMICS 58. Supply is the: (a) Limited resources that are avail- able with the seller. (b) Cost of producing a good. (c) Entire relationship between the quantity supplied and the price of good. (d) Willingness to produce a good if the technology to produce it becomes available. 59. The quantity supplied of a good or service is the amount that (a) Is actually bought during a given time period at a given price. (b) Producers wish they could sell at a higher price. (c) Producers plan to sell during a given time period at a given price. (d) People are willing to buy during a given time period at a given price. 60. In a very short period, the supply: (a) Can be changed. (b) Cannot be changed. (c) Can be increased. (d) None of the above. 61. Which of the following statement is correct? (a) Supply is inversely related to its cost of production (b) Price and quantity demand of a goods have direct relationship (c) Taxes and subsidy has no impact on the supply of the product (d) Seasonal changes have no impact on the supply of the commodity 62. If a short run supply curve is plotted for the following table which presents price and quantity of the aeroplanes, what will be its shape? Price in Million $ Number of Aeroplanes 248 52 280 52 300 52 320 52 350 52 (a) Horizontal straight line parallel to the quantity axis (b) A perfectly elastic supply curve (c) A perfectly inelastic supply curve (d) Steeply rising with elasticity less than one 20 Revision Notes  CA FOUNDATION - ECONOMICS 63. The term supply refers to the amount of goods or services that the producers are ____________ to the market at value prices during a given period of time. (a) Willing to offer (b) Able to Offer (c) Actually Sold (d) Both (a) & (b) 64. Which of the following is a factor determining the supply? (a) Price of the good (b) Price of related goods (c) Price of factor of Production (d) All of the above 65. Other things being equal, the _____________ the ____________ the relative price of a good the quantity of it that will be supplied. (a) Higher, Lesser (b) Higher, Greater (c) Lower, Lower (d) None of these 66. Under ____________ conditions, Supply will be more than that under ___________ conditions. (a) Competitive, Monopolized (b) Monopolized, Competitive (c) Monopolized, Oligopoly (d) Duopoly, Monopolized 67. The supply of a particular product depends upon the state of technology also. Inventions and innovations tend to make it possible to produce ______________ goods with the same resources. (a) More (b) Better (c) Lesser (d) More and/or Better 68. According to law of supply, change in supply is related to? (a) Price of goods (b) Price of related goods (c) Factors of production (d) None of the above 69. If the demand is more than supply, then the pressure on price will be: (a) Upward (b) Downward (c) Constant (d) None of the above 70. If the supply of bottled water decreases, other things remaining the same, the equilibrium price ___________ and the equilibrium quantity _____________. (a) Increases; decreases. (b) Decreases; increases. (c) Decreases; decreases. (d) Increases; increases. 21 Revision Notes  CA FOUNDATION - ECONOMICS 71. In the book market, the supply of books will decrease if any of the following occurs except (a) A decrease in the number of book publishers. (b) A decrease in the price of the book. (c) An increase in the future expected price of the book. (d) An increase in the price of paper used. 72. An increase in the number of sellers of bikes will increase the (a) The price of a bike. (b) Demand for bikes. (c) The supply of bikes. (d) Demand for helmets. 73. If good growing conditions increases the supply of strawberries and hot weather increases the demand for strawberries, the quantity of strawberries bought. (a) Increases and the price might rise, fall or not change. (b) Does not change but the price rises. (c) Does not change but the price falls. (d) Increases and the price rises. 74. The supply curve for perishable commodities is _____________. (a) Elastic (b) Inelastic (c) Perfectly elastic (d) Perfectly inelastic 75. When supply price increase in the short run, the profit of the producer ________. (a) Increases (b) Decreases (c) Remains constant (d) Decreases marginally 76. The _____________ is a graphical presentation of the _____________. (a) Supply Curve, Demand Schedule (b) Supply Curve, Supply Schedule (c) Demand Curve, Supply Schedule (d) None of these 77. Contraction of supply is the result of: (a) Decrease in the number of producers. (b) Decrease in the price of the good concerned. (c) Increase in the prices of other goods, (d) Decrease in the outlay of sellers. 22 Revision Notes  CA FOUNDATION - ECONOMICS 78. When the supply of a good Increase as a result of an increase in its price, then it is an increase in _____________ and there is a upward the _________ supply curve. (a) Quantity Supplied, movement on (b) Quantity Supplied, Shift of (c) Supply, movement on (d) Supply, Shift of 79. Movements on the supply curve may be due to: (a) Change in price of goods (b) Change in price of related goods (c) Change in technology (d) None of the above 80. Contraction of supply implies ________________. (a) Decrease in cost of production (b) Decrease in price of the good concerned (c) Decrease in price of related good (d) Increase in price of the good concerned 81. When supply curves moves to right, it means (a) Supply increases (b) Supply decreases (c) Supply remains constant (d) Supply expands 82. An increase in the supply of a good is caused by: (a) Improvements in its technology. (b) Fall in the prices of other goods. (c) Fall in the prices of factors of production. (d) All of the above. 83. When supply curve moves to right, it means (a) Supply increases. (b) Supply decreases. (c) Supply remains constant. (d) None of the above. 84. When supply curve shifts to the right there is: (a) An increase (b) Expansion (c) Contraction (d) Decrease” 85. When supply curve moves to the left, it means (a) Smaller supply at a given price. (b) Larger supply at a given price. (c) Constant supply at a lower price. (d) None of the above. 23 Revision Notes  CA FOUNDATION - ECONOMICS 86. When the supply curve shifts to the left or right, it is called as ___________ or _____________ in supply, respectively. (a) Decrease, Decrease (b) Decreases, Increase (c) Increase, Increase (d) Increase, Decrease 87. Elasticity of supply refers to the degree of responsiveness of supply of a good to changes in its: (a) Demand. (b) Price. (c) Cost of production. (d) State of technology. 88. If there are large number of producers in the market of a product and there is high competition among them, then the elasticity of supply will be: (a) More (b) Less (c) Zero (d) Infinity 89. A vertical supply curve parallel to the Y-axis exhibits that the elasticity of supply is (a) Zero (b) Infinite (c) Elastic (d) Inelastic 90. If elasticity of supply is infinite, the supply curve will be: (a) Parallel to x axis (b) Parallel to y axis (c) Upward sloping (d) Downward sloping 91. Price elasticity of supply refers to change in responsiveness of quantity to change in: (a) Price (b) Price in substitute (c) Income (d) Preference 92. The elasticity of supply is defined as the (a) Responsiveness of the quantity supplied of a good to a change in its price. (b) Responsiveness of the quantity supplied of a good without change in its price. (c) Responsiveness of the quantity demanded of a good to a change in its price. (d) Responsiveness of the quantity demanded of a good without change in its price. 93. Elasticity of supply is measured by dividing the percentage change in quantity supplied of a good by __________________. (a) Percentage change in income. (b) Percentage change in quantity demanded of goods. (c) Percentage change in price. (d) Percentage change in taste and preference. 24 Revision Notes  CA FOUNDATION - ECONOMICS 94. Which of the following statements is correct? (a) When the price falls the quantity demanded falls. (b) Seasonal changes do not affect the supply of a commodity. (c) Taxes and subsidies do not influence the supply of the commodity. (d) With lower cost, it is profitable to supply more of the commodity 25 Revision Notes  CA FOUNDATION - ECONOMICS THEORY OF PRODUCTION 3 AND COST 1. What is Production is Economics: (a) Creating/Addition of Utility (b) Production of food grains (c) Creation of services (d) Manufacturing of goods 2. Which of the following is considered as production in economics? (a) Helping a blind person in crossing the road (b) Group dance performance in a college annual function (c) Holding a child who is falling from a wall (d) Performing an art in a theatre 3. Which of the following is considered production in Economics? (a) Tilling of soil. (b) Singing a song before friends. (c) Preventing a child from falling into a manhole on the road. (d) Painting a picture for pleasure. 4. Which of the following statements is true? (a) The services of a doctor are considered production. (b) Man can create matter. (c) The services of a housewife are considered production. (d) When a man creates a table, he creates matter. 5. Production may be defined as an act of: (a) Creating utility (b) Destroying utility (c) Earning profit in best way (d) Providing services professionally 6. In Economics, entire process of ________ is nothing but creation of utilities in the form of goods and services. (a) Consumption (b) Production (c) Exchange (d) Distribution 26 Revision Notes  CA FOUNDATION - ECONOMICS 7. Which activity is the base of all production activities (a) Consumption (b) Production (c) Exchange (d) Investment 8. Production is defined as: (a) Creation of matter (b) Creation of utility in matter (c) Creation of infrastructural facilities (d) None of the above 9. According to ________, Production is the organized activity of transforming resources 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) James Bates (b) J.R. Parkinson (c) Marshall (d) Both (a) and (b) 10. ________ to exchange in the market is an essential component of production. (a) Intention (b) Ability (c) Capacity (d) Possibility 11. Production does not include work done ________. (a) Within a household out of love & affection (b) Voluntary services (c) For self consumption (d) All of the above. 12. Factors of production refer to: (a) Inputs (b) Outputs (c) Both (a) & (b) (d) Either (a) or (b) 13. _______ are the factors or resources which make it possible to produce goods and services. (a) Land, Labour, and Bank (b) Capital, Owner and manpower (c) Land, Labour and Entrepreneurial ability (d) Land, Labour, Capital and Entrepreneurial ability 14. Which of the following factors of production is a free gift of nature and refers to Natural resources? (a) Land (b) Labour (c) Capital (d) Entrepreneurial Ability 27 Revision Notes  CA FOUNDATION - ECONOMICS 15. Which of the following is not a characteristic of land? (a) Its supply for the economy is limited. (b) It is immobile. (c) Its usefulness depends on human efforts. (d) It is produced by our forefathers. 16. Which of the following is not a characteristic of Land? (a) It is a free gift of nature (b) It is a mobile factor of production (c) It is limited in quantity (d) Its productive power is indestructible 17. The term _____ means any mental or physical exertion directed to produce goods or services. (a) Land (b) Labour (c) Capital (d) Entrepreneur 18. Which among the following is not a characteristic of land? (a) It is an active factor (b) It has variety of uses (c) Its production powers are indestructible (d) Its supply is limited 19. Which one of the following is not a characteristic of land? (a) Land is immobile (b) Land is active factor (c) Land has multiple uses (d) Land is heterogeneous 20. Which of the following statement about factors of production is not true? (a) Land is a passive factor (b) Land is a free gift of nature (c) Land is immobile (d) Land is perishable 21. ‘Land is heterogeneous’ implies which of the following? (a) Two lands are alike (b) Two lands are not alike (c) Two lands are fixed (d) Two lands are mobile 28 Revision Notes  CA FOUNDATION - ECONOMICS 22. No two pieces of land and alike. They differ in fertility and situation. Therefore, Land is_________ (a) Homogenous (b) Heterogeneous (c) Bitrogeneous (d) None of these. 23. Which of the following is correct about Land? (a) It is mobile (b) It has single use (c) Its supply is fixed (d) It is homogeneous. 24. Supply of land is : (a) Elastic (b) Perfectly Elastic (c) Perfectly Inelastic (d) Inelastic 25. The total supply of Land is ________ from the point of view of the economy. However, it is relatively __________from the point of view of a firm. (a) Perfectly Inelastic, Inelastic (b) Perfectly Inelastic, Relatively Elastic (c) Perfectly Elastic, Inelastic (d) Perfectly Elastic, elastic 26. Labour force wants more _________. (a) Facility (b) Leisure (c) Benefit (d) All of the above 27. Which of the following is not a characteristic of labour? (a) It is perishable (b) It has weak bargaining power (c) Labour and Labour power cannot be separated (d) Labour is not mobile 28. The concept of “innovative entrepreneurship” was given by (a) Adam smith (b) Marshall (c) JK Mehta (d) Schumpeter 29. The labour power or efficiency of labour depends upon the _________. (a) Laborer’s inherent and acquired qualities. (b) Features of work environment (c) Incentive to work (d) All of the above. 29 Revision Notes  CA FOUNDATION - ECONOMICS 30. Labour is highly perishable in the sense that _________. (a) A labourer cannot store his labour. (b) The life of labour is short. (c) The labourer sells his labour against wages, but retains the capacity to work. (d) The labour is always low priced. 31. Without the active participation of labour, land and capital may not produce anything. It means labour is _________ factor. (a) Passive (b) Active (c) Working (d) Executing 32. Profit is income from which of the following? (a) Labour (b) Business (c) Land (d) Investment 33. Which one of the following is not a necessary function of an entrepreneur? (a) Innovations. (b) Risk and uncertainty bearing (c) Initiating a business enterprise (d) Supervision of day-to-day production activities. 34. Human capital refers to: (a) Savings by individuals (b) Mobilisation of saving (c) Human skills and abilities (d) Productive investment 35. ________ Capital performs its function is production in a single use and is not available for future use. (a) Circulating (b) Fixed (c) Tangible (d) Human 36. Which of the following is not a passive factor of production? (a) Building (b) Machine (c) Land (d) Labour 37. Which one of the following may be regarded as a part of social capital? (a) Roads (b) Bridges (c) Machinery (d) Both (a) & (b) 30 Revision Notes  CA FOUNDATION - ECONOMICS 38. The three stages of capital formation are: (a) Savings, Mobilization of Savings and investment (b) Mobilization of Saving, Savings, and investment (c) Investment, Saving and mobilization of Saving (d) Saving, Investment and mobilization of savings. 39. _________ means a sustained increase in the stock of real capital in a Country. (a) Capital formation (b) Savings (c) Mobilization of Savings (d) Mobilization of Capital 40. Which one of the following statements is not correct? (a) Land has indestructible powers (b) Labour is mobile (c) Capital is nature’s gift (d) Land is a passive factor. 41. Functions of the entrepreneur are: (a) Risk bearing (b) Initiating a business enterprise and resource co-ordinating (c) Introducing new innovations (d) All of the above 42. An Entrepreneur undertakes which one of the following functions? (a) Initiating a business and resource co-ordination (b) Risk or uncertainty bearing (c) Innovations. (d) All of the above 43. Innovation theory of entrepreneurship is propounded by: (a) Knight (b) Schumpeter (c) Max Weber (d) Peter Drucker 44. Concept of innovative entrepreneurship was propounded by ________. (a) Joel dean (b) Schumpeter (c) Marshall (d) Karl Marx 45. The most important function of an entrepreneur is to ________. (a) Innovate (b) Bear the sense of responsibility (c) Finance (d) Earn profit 31 Revision Notes  CA FOUNDATION - ECONOMICS 46. Who, has given the concept of Innovative Entrepreneurship? (a) Robbins (b) Adam Smith (c) Schumpeter (d) Sweezy 47. The basic minimum objective of all kinds of enterprises is to survive or to stay alive. It may be regarded as ________ objective of the enterprise. (a) Organic (b) Economic (c) Social (d) National 48. _______ objective implies the profit maximizing behaviour of the firm. (a) Organic (b) Economic (c) Social (d) National 49. _________ mobilizes factors of production, combines them in the right proportion, initiates the process of production and bears the risks involved in it. (a) Businessman (b) Manager (c) CEO (d) Entrepreneur 50. Which one of the following function is performed by entrepreneur? (a) Initiating Business Enterprise and resource Co-ordination (b) Risk-bearing or uncertainty bearing (c) Innovations (d) All of the above 51. Marginal, average and total product of a firm in the short run will not comprise with (a) When marginal production is at a maximum, average product is equal to marginal product, and total product is rising (b) When average product is maximum, average product is equal to marginal product, and total product is rising (c) When marginal product is negative, total product and average product are falling (d) When total product is increasing. average product and marginal product may be either rising or falling 52. When average product rises as a result of an increase in the quantity of variable factor, marginal product is: (a) Equal to average product (b) More than average product (c) Less than average product (d) Becomes negative 32 Revision Notes  CA FOUNDATION - ECONOMICS 53. The marginal product curve is above the average product curve when the average product is: (a) Increasing (b) Decreasing (c) Constant (d) None 54. Identify the correct statement: (a) The average product is at its maximum when marginal product is equal to average product. (b) The law of increasing returns to scale relates to the effect of changes in factor proportions. (c) Economies of scale arise only because of indivisibilities of factor proportions. (d) Internal economies of scale can accrue when industry expands beyond optimum. 55. Which of the following is correct in relation to Marginal Product? (a) What is produced units when all factors of production are employed at optimum efficiency? (b) The extra output obtained from employing an additional unit of a factor (c) The left revenue to the entrepreneur after he has incurred all expenses (d) None of the above 56. If the marginal product of labour is below the average product of labour, it must be true that: (a) The marginal product of labour is negative. (b) The marginal product of labour is zero. (c) The average product of labour is falling. (d) The average product of labour is negative. 57. The average product of labour is maximized when marginal product of labour: (a) Equals the average product of labour. (b) Equals zero. (c) Is maximized. (d) None of the above. 58. The marginal, average, and total product curves encountered by the firm producing in the short run exhibit all of the following relationships except: (a) When total product is rising, average and marginal product may be either rising or falling. 33 Revision Notes  CA FOUNDATION - ECONOMICS (b) When marginal product is negative, total product and average product are falling. (c) When average product is at a maximum, marginal product equals average product, and total product is rising. (d) When marginal product is at a maximum, average product equals marginal product, and total product is rising. 59. If the marginal product of labour is below the average product of labour. It must be true that: (a) Marginal product of labour is negative (b) Marginal product of labour is zero (c) Average product of labour is falling (d) Average product of labour is negative 60. In the production of wheat, all of the following are variable factors that are usedby the farmer except: (a) The seed and fertilizer used when the crop is planted. (b) The field that has been cleared of trees and in which the crop is planted. (c) The tractor used by the in and cultivating not only wheat but also corn and barley. (d) The number of hours that the farmer spends in cultivating the wheat fields. 61. Law of variable proportion is valid when: (a) Only one input is fixed and all other inputs are kept variable (b) All factors are kept constant (c) All inputs are varied in the same proportion (d) None of these 62. Diminishing marginal returns implies: (a) Decreasing average variable costs (b) Decreasing marginal costs (c) Increasing marginal costs (d) Decreasing average fixed costs 63. Diminishing marginal returns for the first four units of a variable input is exhibited by the total product sequence: (a) 50, 50, 50, 50 (b) 50, 110, 180, 260 (c) 50, 100, 150, 200 (d) 50, 90, 120, 140 34 Revision Notes  CA FOUNDATION - ECONOMICS 64. In short run the Law of variable proportions is also known as _________. (a) Law of increasing returns (b) Law of diminishing returns (c) Law of decreasing returns (d) Law of constant returns 65. Production activity in the short period is analysed with the help of: (a) Law of variable proportion (b) Laws of returns to scale (c) Both (a) & (b) (d) None of the above 66. The Law of Variable Proportions is associated with: (a) Short period (b) Long period (c) Both short and long periods (d) Neither short nor long period 67. The law of diminishing returns” applies to: (a) The short run, but not the long run. (b) The long run, but not the short run. (c) Both the short run and the long run. (d) Neither the short run nor the long run. 68. The law of variable proportions is drawn under all of the assumptions mentioned below except the assumption that: (a) The technology is changing. (b) There must be some inputs whose quantity is kept fixed. (c) We consider only physical inputs and not economically profitability in monetary terms. (d) The technology is given and stable. 69. Law of increasing returns is applicable because of ________. (a) Indivisibility of factors. (b) Specialization. (c) Economies of scale. (d) Both (a) & (b) above. 35 Revision Notes  CA FOUNDATION - ECONOMICS 70. In the first stage of law of variable proportions, total product increases at the ________. (a) Decreasing rate (b) Increasing rate (c) Constant rate (d) Both (a) and (b). 71. During 2nd stage of law of Diminishing returns: (a) MP and TP is maximum (b) MP and AP are decreasing (c) AP is negative (d) TP is negative 72. A rational producer will produce in the stage in which marginal product is positive and: (a) MP > AP (b) MP = AP (c) MP < AP (d) MP is zero 73. Diminishing marginal returns implies: (a) Decreasing average variable costs (b) Decreasing marginal costs (c) Increasing marginal costs (d) Decreasing average fixed costs 74. The phenomenon of diminishing returns rests upon the ______ of the fixed factor: (a) Divisibility (b) Flexibility (c) Indivisibility (d) None of these 75. Law of diminishing returns is applicable in: (a) Manufacturing industry (b) Agriculture (c) Neither (a) nor (b) (d) Any economic activity at a point of time. 76. In the third of the three stages of production: (a) The marginal product curve has a positive slope. (b) The marginal product curve lies completely below the average product curve. (c) Total product increases. (d) Marginal product is positive. 36 Revision Notes  CA FOUNDATION - ECONOMICS 77. Consider the following combinations of inputs and outputs: This production technology satisfies Labour Capital Output 5 10 1 6 12 2 7 14 3 8 16 4 9 18 5 10 20 6 (a) Increasing returns to scale (b) Diminishing returns to scale (c) Constant returns to scale (d) Increasing returns initially, following by decreasing returns to scale. 78. Linear homogeneous production function is based on: (a) Increasing returns to scale (b) Decreasing returns to scale (c) Constant returns to scale (d) None of the above 79. If decreasing returns to scale are present, then if all inputs are increased by 10% then: (a) Output will also decrease by 10%. (b) Output will increase by 10%. (c) Output will increase by less than 10%. (d) Output will increase by more than 10%. 80. In Cobb-Douglas Production function [Q = KL aC b], there will be increasing returns to scale if: (a) a+b>1 (b) a+b=1 (c) a+b=0 (d) a+b MR (c) MC < MR (d) None 42 Revision Notes  CA FOUNDATION - ECONOMICS 117. Large scale production is associated with (a) Technical Economies (b) Un-managerial economies (c) Commercial Economies (d) Financial Economies 118. Which of the following statements is true? (a) Accumulation of capital depends solely on income of individuals. (b) Savings can be influenced by government policies. (c) External economies go with size and internal economies with location. (d) The supply curve of labour is an upward slopping curve. 43 Revision Notes  CA FOUNDATION - ECONOMICS PRICE DETERMINATION IN 4 DIFFERENT MARKET 1. In Economics, the term 'market' refers to a: (a) place where buyer and seller bargain a product or service for a price. (b) place where buyer does not bargain (c) place where seller does not bargain (d) none of the above 2. Which one is not a part of the elements of a market? (a) Buyers and sellers (b) A product or service (c) Bargaining for a price (d) Volume of business 3. A market is a network of dealings between which of the following? (a) Dealers and wholesalers (b) Buyers and sellers (c) Owners and channel partners (d) Sales man and competitors 4. Which of the following is not an element of a market? (a) Knowledge about market condition (b) No bargaining for a price (c) A product or service (d) Buyers and seller 5. Which of the following is not the element of markets? (a) A product/service (b) Bargaining of price (c) Knowledge about market conditions (d) Advertisement (or) brand aware- ness 6. Which one of the following is not element of market? (a) buyer (b) service (c) firm (d) bargaining for price 7. Market consists of: (a) Buyer and Seller (b) One price for one product at a given time (c) Both (a) and (b) (d) None 44 Revision Notes  CA FOUNDATION - ECONOMICS 8. The Price Elasticity of demand of a firm in Pure Competition is: (a) Infinite (b) Finite (c) Large (d) Small 9. On the basis of nature of transaction, a market may be classified into: (a) Wholesale and retail market (b) Cash and forward rate (c) National and international market (d) Regulated and unregulated market 10. When commodities are sold in small quantities are called as which of the following? (a) Wholesale market (b) Regulated market (c) Spot market (d) Retail market 11. For market the essential condition is: (a) A particular geographical place (b) Control of the government (c) Close contact between buyers and sellers (d) None of these 12. Who conceived the 'time element' in markets? (a) Alfred Marshall (b) Adam Smith (c) Robert Malthus (d) Schumpeter 13. On the basis of nature of transaction, a market can be classified into which of the following? (a) Cash and forward market (b) National and international market (c) Organized and unorganized market (d) Retail and wholesale market 14. ____________ conceived the "Time" element in markets and on the basis of this markets are classified into very short period, Short-Period, Long-Period & Very Long period. (a) Alfred Marshall (b) Schumpeter (c) Adam Smith (d) Paul Samuelson 15. On the basis of nature of trans- actions, a market may be classified into: (a) Spot market and future market (b) Regulated market and unregulated market (c) Wholesale market and retail market (d) Local market and national market. 45 Revision Notes  CA FOUNDATION - ECONOMICS 16. Secular period is also known as: (a) Very short period (b) Short period (c) Very long period (d) Long period 17. Very short period market is suitable for which of the following products? (a) Gold and silver (b) Vegetable and fruits (c) Bricks and sand (d) Supply of capital 18. On the basis of nature of transactions, market can be classified a ____________. (a) Wholesale market and retail market (b) Future market and spot market (c) Regulated market and unregulated market (d) Money market and Future market 19. Example of a commodity said to have an International Market is? (a) Perishable Goods. (b) High Value and Small Bulk Commodities. (c) Product whose trading is restricted by government. (d) Bulky Articles. 20. Stock exchange market is an example of: (a) Unregulated market (b) Regulated market (c) Spot market (d) None of the above 21. The market for ultimate consumer is known as: (a) Wholesale market (b) Regulated market (c) Unregulated market (d) Retail market 22. The ____________ is the market where the commodities are bought and sold in bulk or large quantities. Transactions generally take place between trades. (a) Wholesale market (b) Regulated market (c) Local market (d) Retail market 46 Revision Notes  CA FOUNDATION - ECONOMICS 23. ____________ are those markets in which firm buy the resources they need (Land, Labour, Capital and entrepreneurship) to produce goods and services. (a) Regular Markets (b) Producer's Markets (c) Product Markets (d) Factor Markets 24. A market where goods are exchanged for money payable either immediately or within short span of time is: (a) Forwarded market (b) Regulate market (c) Wholesale market (d) Spot market 25. When the commodities are sold in small quantities, it is called as: (a) Retail Market (b) Wholesale Market (c) Small Market (d) Local Market 26. From the following table, what will be equilibrium market price? Price (in `) Demand (Tonnes per annum) Supply (Tonnes per annum) 1 500 200 2 450 250 3 400 300 4 350 350 5 300 400 6 250 450 7 200 500 8 150 550 (a) `2 (b) `3 (c) `4 (d) `5 27. The equilibrium is restored automatically through: (a) The fundamental working of the market. (b) Price movements eliminate shortage or Surplus. (c) Both (a) and (b) (d) None of these. 28. ____________ is the price at which demand for a commodity is equal to its supply: (a) Normal Price (b) Equilibrium Price (c) Short run Price (d) Secular Price 47 Revision Notes  CA FOUNDATION - ECONOMICS 29. When increase in demand is equal to increase in supply and equilibrium price remains constant, then what about equilibrium quantity? (a) Increases (b) Decreases (c) Remains Constant (d) None of the above 30. With a given supply curve, a decrease in demand causes: (a) An overall decrease in price but an increase in equilibrium quantity. (b) An overall increase in price but a decrease in equilibrium quantity. (c) An overall decrease in price and a decrease in equilibrium quantity. (d) No change in overall price but a reduction in equilibrium quantity. 31. If supply decreases and demand remains constant, then equilibrium price will be: (a) Increases (b) Decreases (c) No change (d) Become Negative 32. Assume that in the market for good Z there is a simultaneous increase in demand and the quantity supplied. The result will be: (a) An increase in equilibrium price and quantity. (b) A decrease in equilibrium price and quantity. (c) An increase in equilibrium quantity and uncertain effect on equilibrium price. (d) A decrease in equilibrium price and increase in equilibrium quantity. 33. An increase in supply with demand remaining the same, brings about. (a) An increase in equilibrium quantity and decrease in equilibrium price. (b) An increase in equilibrium price and decrease in equilibrium quantity. (c) Decrease in both equilibrium price and quantity. (d) None of these. 34. An increase in supply with unchanged demand leads to: (a) Rise in price and fall in quantity (b) Fall in both price and quantity (c) Rise in both price and quantity (d) Fall in price and rise in quantity 48 Revision Notes  CA FOUNDATION - ECONOMICS 35. Suppose the technology for producing personal computers improves and, at the same time, individuals discover new uses for personal computers so that there is greater utilisation of personal computers. Which of the following will happen to equilibrium price and equilibrium quantity? (a) Price will increase; quantity can- not be determined. (b) Price will decrease; quantity can- not be determined. (c) Quantity will increase; price can- not be determined. (d) Quantity will decrease; price can- not be determined. 36. Which of the following may lead to changes in demand and Supply? (a) Income and population (b) Tastes and Preferences (c) Technology & Prices of Factors of Production (d) All of the above. 37. Changes in Demand & Supply may be due to: (a) Increase in Price (b) Decrease in Price (c) Change in determinants of Dem- and & other (d) None of the above. 38. If price is forced to stay below equilibrium price then consequently it can be said that: (a) Excess supply exists (b) Excess demand exists (c) Either (a) or (b) (d) Neither (a) nor (b) 39. Lower prices in railways for senior citizens is a typical example of: (a) Concessional pricing (b) Marginal cost pricing (c) Differential pricing (d) Subsidized pricing 40. If the price of a commodity is fixed, then with every increase in its sold quantity the total revenue will ___________ and the marginal revenue will ___________. (a) Increase, also increase (b) Increase, remain unchanged (c) Increase, decline (d) Remain fixed, increase 49 Revision Notes  CA FOUNDATION - ECONOMICS 41. If supply increases in a greater proportion than demand: (a) The new equilibrium price and quantity will be greater than the original equilibrium price and quantity (b) The new equilibrium price will be greater than the original equilibrium price but equilibrium quantity will be higher. (c) The new equilibrium price and quantity will be lower than the original equilibrium price and quantity. (d) The new equilibrium price will be lower than the original equilibrium and the new equilibrium quantity will be higher. 42. Assume that consumers' incomes and the number of sellers in the market for a good both decrease. Based upon this information, we can conclude, with certainty, that the equilibrium: (a) Price will increase. (b) Price will decrease. (c) Quantity will increase. (d) Quantity will decrease. 43. When demand for commodity is decreasing as a result of fall in income and it's supply remains constant, what will be the impact on its price? (a) Price increases (b) Price decreases (c) No change (d) Uncertain change in price 44. It is assumed in economic theory that: (a) Decision making within the firm is usually undertaken by managers, but never by the owners. (b) The ultimate goal of the firm is to maximize profits, regardless of firm size or type of business organization. (c) As the firm's size increases, so do its goals. (d) the basic decision making unit of any firm is its owners. 45. Suppose that a sole proprietor ship is earning total revenues of `1,00,000 and is incurring explicit costs of `75,000. If the owner could work for another company for `30,000 a year, we would conclude that: (a) The firm is incurring an economic loss. (b) Implicit costs are `25,000. (c) The total economic costs are `1,00,000. (d) The individual is earning an economic profit of `25,000. 50 Revision Notes  CA FOUNDATION - ECONOMICS 46. Shift of the Demand curve to the ___________ means increase in demand. (a) right (b) left (c) downward (d) no change in Demand Curve. 47. If demand does not change but improved technology, then: (a) Demand Curve will shift to the right. (b) Demand Curve will shift to the Left. (c) Supply curve will shift to the right. (d) Supply curve will shift to the Left. 48. When the Supply and demand curves shift in the some direction and both demand and Supply ___________, the equilibrium quantity ___________ but the change in equilibrium price is ___________. (a) Increase, Increases, Uncertain (b) Increase, Increases, Increases (c) Increase, Increases, decreases (d) None of the above 49. When demand increases and supply ___________, the equilibrium price ___________ but nothing certain can be said about the change in equilibrium quantity. (a) Decreases, decreases (b) Decreases, rises (c) Decreases, remain constant (d) None of the above 50. If demand increases without any corresponding increase in supply, there will be: (a) Increase in equilibrium price (b) Quantity sold increases (c) Quantity purchased increases (d) All of the above. 51. Identify correct possible out- come when the supply and demand curves shift in the same direction. (a) When demand increases and sup- ply decreases, the equilibrium price rises but nothing certain can be said about the change in equilibrium quantity. (b) When both demand and supply increase, the equilibrium quantity increases but the change in equilibrium price is uncertain. (c) When both demand and supply decrease, the equilibrium quantity increases but the change in equilibrium price is uncertain. (d) When demand decreases and supply increases, the equilibrium price falls but nothing certain can be said about the change in equilibrium quantity. 51 Revision Notes  CA FOUNDATION - ECONOMICS 52. There can be simultaneous change in both demand and Supply. In that case, the equilibrium price will be: (a) Increased (b) Decreased (c) Changes as per the Proportionate change in demand & Supply. (d) None of the above 53. Identity the effect on equilibrium price and quantity demanded due to Increase in supply, with demand remaining the same. (a) The equilibrium price will go up, quantity demanded will go up. (b) The equilibrium price will go down, quantity demanded will go up. (c) The equilibrium price will go down, quantity demanded will go down. (d) The equilibrium price will go up, quantity demanded will go down. 54. Which of the following is not an essential condition of pure competition? (a) Large number of buyers and sellers (b) Homogeneous product (c) Freedom of entry (d) Absence of transport cost 55. Under perfect competition, price elasticity of demand of a firm is: (a) Large (b) Slight (c) Infinite (d) Extreme 56. Under which of the following forms of market structure does a firm has no control over the price of its product: (a) Monopoly (b) Oligopoly (c) Monopolistic competition (d) Perfect competition 57. Which of the following is not a coalition of perfect competition? (a) A large number of firms (b) Perfect mobility of factors (c) Informative advertising to ensure that consumers have good information (d) Freedom of entry and exit into and out of the market 52 Revision Notes  CA FOUNDATION - ECONOMICS 58. Which of the following is not a condition of perfect competition? (a) A large number of firms. (b) Perfect mobility of factors. (c) Informative advertising to ensure that consumers have good information. (d) Freedom of entry and exit into and out of the market. 59. Which is not the characteristic of perfect competition? (a) Large number of sellers (b) Freedom of entry and exit (c) No supernormal profits in the long-run (d) Inefficient allocation of resources 60. ___________ is a ideal Market. (a) Monopoly (b) Monopolistic (c) Perfect Competition (d) Oligopoly 61. A firm, to attain the equilibrium position under perfect competition has to satisfy which of the following conditions? (a) MR > MC (b) MR = MC (c) MR curve should cut MC curve from below (d) MC curve should cut MR curve from below 62. Which of these are characteristics of Perfect Competition (a) Many Sellers & Buyers (b) Homogeneous Product (c) Free Entry and Exit (d) All of the above 63. Under which of the following market condition both average and marginal revenue are same? (a) Perfect competition (b) Monopoly (c) Monopolistic competition (d) Oligopoly 64. In the market structure, demand curve is also known as: (a) Marginal cost curve (b) Average revenue curve (c) Total production curve (d) Marginal utility curve 53 Revision Notes  CA FOUNDATION - ECONOMICS 65. Price-taking firms, i.e., firms that operate in a perfectly competitive market, are said to be "small" relative to the market. Which of the following best describes this smallness? (a) The individual firm must have fewer than 10 employees. (b) The individual firm faces a down- ward-sloping demand curve. (c) The individual firm has assets of less than `20 lakhs. (d) The individual firm is unable to affect market price through its output decisions. 66. Suppose that the demand curve for the XYZ Co. slopes downward and to the right. We can conclude Suppose that the demand curve for the XYZ Co. slopes downward and to the right. We can conclude: (a) The firm operates in perfectly competitive market. (b) The firm can sell all that it was to at the established market price. (c) The XYZ Co. is not a price taker in the market because it must lower price to sell additional units of output. (d) The XYZ Co. will not be maximize profits because price and revenue are subject to change. 67. Conditions for equilibrium of a firm are: (a) MR = MC (b) MC should cut MR from below. (c) MR = AR and MC should cut MR from below. (d) MR = MC and MC should have a positive slope. 68. What is true about the perfect competition market? (a) AR = MR = PRICE (b) AR = AC = P (c) AR > AC (d) None 69. The firm in a perfectly competitive market is a price-taker. This designation as a price-taker is based on the assumption that: (a) The firm has some, but not complete, control over its product price. (b) There are so many buyers and sellers in the market that any individual firm cannot affect the market. (c) Each firm produces a homogeneous product. (d) There is easy entry into or exit from the market place. 54 Revision Notes  CA FOUNDATION - ECONOMICS 70. MR Curve = AR = Demand Curve is a feature of which kind of Market? (a) Perfect Competition (b) Monopoly (c) Monopolistic (d) Oligopoly 71. Which of the following is NOT characteristic of a "Price taker". (a) TR = P x Q (b) AR = Price (c) MR = Price (d) Negatively sloping demand curve 72. If a perfect competition firm is making losses then which condition is suitable. To carry on business as long as it covering variable cost. (a) Shutdown (b) Expand it's plant (c) Do nothing (d) Reduce productions 73. Demand curve is equal to M.R. curve in which market? (a) Oligopoly (b) Monopoly (c) Monopolistic Competition (d) Perfect Competition 74. A perfect market is characterized by:- (a) Existence of large number of buyers and sellers - (b) Homogenous products (c) Perfect knowledge of the market (d) All of the above 75. Elasticity of demand under perfect competition is: (a) One (b) Two (c) Zero (d) Infinite 76. 'Zero economic profit' emerges due to which of the following condition? (a) Average revenue is more than average total cost. (b) Average revenue is just equal to average total cost. (c) Marginal revenue is just equal to average total cost. (d) Marginal revenue is just equal to marginal cost. 77. Which perfect completion firm is described as: (a) Price taker and not price maker. (b) Price maker and not price taker, (c) Neither price maker nor price taker. (d) None of the above. 55 Revision Notes  CA FOUNDATION - ECONOMICS 78. Which of the following State. ment is false as regards Perfect Competition? (a) Firm is said to be in equilibrium when it maximizes its profit. (b) The output which gives maximum profit to the firm is called equilibrium output. (c) In the equilibrium State, the firm has no incentive either to increase or decrease its output. (d) Firms in a Competitive market are Price Makers. 79. Which is the first order condition for the profit of a firm to be maximum? (a) AC = MR (b) MC = MR (c) MR = AR (d) AC = AR 80. For maximum profit, the condition is: (a) AR = AC (b) MR = MC (c) MR = AR (d) MC = AR 81. Condition for producer equilibrium is: (a) TR = TVC (b) MC = MR (C) TC = TAC (d) None of these 82. In market, the price and output equilibrium is determined on the basis of: (a) Total revenue and total cost (b) Total cost and marginal cost (c) Marginal revenue and marginal cost (d) Only marginal cost 83. In a perfectly competitive market the demand curve of a firm is: (a) Elastic (b) Perfectly elastic (c) Inelastic (d) Perfectly inelastic 84. The firm will attain equilibrium at a point where MC curve cuts ____________ from below. (a) AR curve (b) MR curve (c) AC curve (d) AVC curve 85. If in a short run perfect competition earn super per normal profit then which condition satisfy? (a) ATC > MC (b) ATC < MC (c) MR < AR (d) MR > AR 86. Which is the first order condition for the firm to maximize the profit. (a) AC = MR (b) AC = AR (c) MC = MR (d) MR = AR 56 Revision Notes  CA FOUNDATION - ECONOMICS 87. Average revenue curve is also known as: (a) Profit Curve (b) Demand Curve (c) Average Cost Curve (d) Indifference Curve 88. Condition for equilibrium of firm: (a) MR = MC (b) AR = AC (c) MC curve cuts MR curve from below (d) Both (a) and (c) 89. Demand curve is horizontal in the case of: (a) Monopoly (b) Perfect Competition (c) Imperfect Competition (d) Monopolistic Competition 90. In the short run, a firm operates with a ___________ amount of capital and must choose the level of its ___________ so as to ___________ profit. (a) Fixed, Variable inputs, maximize (b) Variable, fixed inputs, minimize (c) Fixed, Fixed inputs, maximize (d) Valuable, Variable inputs, minimize. 91. At the equilibrium position of a firm Under perfect Competition, ___________. (a) The Marginal revenue is equal to the marginal Cost. (b) The MC Curve cuts MR Curve from below. (c) Both (a) & (b) (d) Either (a) or (b) 92. A purely competitive firm's supply schedule in the short run is determined by: (a) Its average revenue. (b) Its marginal revenue. (c) Its marginal utility for money curve. (d) Its marginal cost curve. 93. Which of the following conditions exhibits long run equilibrium of the industry under perfect competition? (a) MR = LMC = AR = LAC = SAC = SMC (b) MR = LMC = AR > LAC (c) MR = LMC = AR < LAC (d) MR = LMC = AR > SAC 57 Revision Notes  CA FOUNDATION - ECONOMICS 94. In a perfectly Competitive Industry, the MC Curve of a firm depicts: (a) The industry demand Curve (b) The Firm's demand Curve (c) The industry's supply Curve (d) The Firm's supply Curve. 95. As regards short run supply curve of the firm in a Competitive market, for Prices ____________ Average Variable Cost, the firm will Supply ____________ units because the firm is ____________ to meet even its variable Cost. (a) Above, maximum, Unable (b) Below, Zero, Unable (c) Above, Maximum, able (d) Below, Zero, able 96. When the average revenues are more than its average total Cost, the Firm is said to have earned: (a) Normal Profits (b) Super Normal Profits (c) Exceptional Profits (d) Expected Profits. 97. The total Cost of production is `40,000 (1,000 units).