CA CPT General Economics Sample Paper

general studies finance and economics sample paper

Question: Scarcity means that
(a) we cannot have everything that we might want.
(b) we have to make choices between the things we desire.
(c) there are costs to just about any activity we undertake.
(d) all of the above are correct.

Ans. (d)

Question: In the production of wheat, all of the following are variable factors that are used by 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 farmer in planting and cultivating not only wheat but also corn and barley.
(d) the number of hours that the farmer spends cultivating the wheat fields.

Ans. (b)

Question: What implication 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.

Ans. (a)

Question: The unsustainable levels of government deficits in the late 80’s can be attributed to:
(a) high levels of government expenditures.
(b) insufficient revenues.
(c) poor returns on government investments.
(d) all of the above.

Ans. (d)

Question: The economic analysis expects the consumer to behave in a manner which is:
(a) Rational
(b) Irrational
(c) Emotional
(d) Indifferent

Ans. (a)

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Question: In order to control credit:
(a) CRR should be increased and Bank rate should be decreased.
(b) CRR should be reduced and Bank rate should be reduced.
(c) CRR should be increased and Bank rate should be increased.
(d) CRR should be reduced and Bank rate should be increased.

Ans. (c)

Question: Which one of the following is the best example of agreement between oligopolists?
(a) GATT
(b) OPEC
(c) WTO
(d) UNIDO

Ans. (d)

Question: Which of the following is a positive economic statement?
(a) Reducing the speed limit on U. S. highways to 55 m.p.h. would waste people’s time, and thus is a stupid idea.
(b) Higher gasoline prices will have no effect on the amount of gasoline that consumers want to buy.
c) Protecting the environment is more important than protecting jobs or preserving some greedy notion of people’s standard of living.
(d) In a free society, unemployment of workers is undesirable.

Ans. (b)

Question: Larger production of ____ would lead to higher production in future.
(a) Consumer goods
(b) Capital goods
(c) Agricultural goods
(d) Public goods

Ans. (b)

Question: Consumer surplus is highest in the case of:
(a) Necessities
(b) Luxuries
(c) Comforts
(d) Conventional necessities

Ans. (a)

Question: ____ is the apex bank for agriculture credit.
(a) RBI
(b) SIDBI
(c) NABARD
(d) SBI

Ans. (c)

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Question: Price taker firms:
(a) Advertise to increase the demand for their products.
(b) Do not advertise because most advertising is harmful for the society.
(c) Do not advertise because they can sell as much as they want at the current price.
(d) Who advertise will get more profits than those who do not.

Ans. (c)

Question: ______ pair of commodities is an example of substitutes.
(a) Coffee and Milk
(b) Diamond and Cow
(c) Pen and Ink
(d) Mustard oil and coconut oil

Ans. (d)

Question: Stagflation means _____.
(a) Inflation with recession
(b) Recession with stagnation
(c) Inflation galloping like a stag
(d) Inflation and increasing output

Ans. (a)

Question: Excess capacity is not found under ______
(a) Monopoly
(b) Monopolistic competition
(c) Perfect competition
(d) Oligopoly

Ans. (c)

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Question: When _______, we know that the firms are earning just normal profits.
(a) AC = AR
(b) MC = MR
(c) MC = AC
(d) AR = MR

Ans. (a)

Question: Marginal revenue will be negative if elasticity of demand is _____.
(a) Less than one
(b) More than one
(c) Equal to one
(d) Equal to zero

Ans. (a)

Question: A horizontal supply curve parallel to the quantity axis implies that the elasticity of supply is ______
(a) zero
(b) infinite
(c) equal to one
(d) greater than zero but less than one

Ans. (b)

Question: ______ unemployment may result when some workers are temporarily out of work while changing job.
(a) Cyclical
(b) Voluntary
(c) Frictional
(d) Seasonal

Ans. (c)

Question: 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

Ans. (c)

Read the following paragraph and answer next 2 questions.

In 1940, Hitler’s air force bombed Rotterdam, a beautiful city in Holland. Twenty five thousand homes, 1200 factories, 69 schools and 13 hospitals were destroyed. Nearly 75,000 people became homeless and 1000 people died. 35 % of the port was gutted by the German army.

Question: The above destruction would mean:
(a) A complete wipe off of the Production Possibilities Curve (PPC) of Rotterdam.
(b) An outward shift of the PPC of Rotterdam.
(c) An inward shift of the PPC of Rotterdam.
(d) A downward movement on the same PPC of Rotterdam.

Ans. (c)

Question: If immediately after the war, Rotterdam rebuilt its port with the help of most up to date cranes, docks and cargo handling technology. By the end of the reconstruction, ships were loading and unloading faster and at lower cost than anywhere in the world. It became more efficient than it was before the destruction. This me

Ans. (a)
Rotterdam has come back to its original PPC.
(b) Rotterdam has shifted to a higher PPC.
(c) Rotterdam has shifted to a lower PPC.
(d) Nothing can be said
Ans. (b)

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Question: Which of the following statements is correct?
(a) The public sector was given a dominant position in the newly Independent India.
(b) The foreign trade policy post Independence allowed free trade of all goods and services.
(c) Monetary policy post Independence sought to keep the CRR at a very low level.
(d) None of the above

Ans. (a)

Direction: The following data give the production possibilities frontier of an economy that produces two types of goods, guns and bread. Read the following table and answer next 3 questions.

Production Posibilities

Production Possibilities A B C D E F G H
Guns 0 10 20 30 40 50 60 30
Bread 105 100 90 75 55 30 0 45

Question: According to Table, the opportunity cost of increasing gun’s production from 20 to 30 units is equal to
(a) 10 units of bread
(b) 15 units of bread
(c) 25 units of bread
(d) 24 units of bread.

Ans. (b)

Question: Given the data in Table, one moves successively from point A to points B, C, D,E and F, the opportunity cost of guns:
(a) Increases as more of guns are produced.
(b) Decreases as more of guns are is produced.
(c) Remains constant as more of guns are produced.
(d) Nothing can be said

Ans. (a)

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Question: Point D is efficient while point H (30 guns and 45 loaves of bread) is inefficient. Why?
(a) Point D is outside the PPF while point H is on the PPF.
(b) Point D is inside the PPF while point H is on the PPF.
(c) Point D is on the PPF while point H is inside the PPF.
(d) nothing can be said

Ans. (c)

Question: As a result of the New Industrial Policy, 1991:
(a) the public sector has been stripped off all its power.
(b) the public sector has been given the commanding heights of the economy.
(c) the public sector’s portfolio will be reviewed with greater realism. The focus will be on strategic high tech and essential infrastructure industries.
(d) the public sector’s management has been passed over to the private sector.

Ans. (c)

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Direction: In Econoville, there is one grocery shop, Eco-convenience. It used to sell fresh milk at Rs.20 per litre, at which price 400 litres of milk were sold per month. After some time, the price was raised to Rs 30 per litre. Following the price rise:

  • Only 200 litres of milk was sold every month.
  • The number of boxes of cereal customers bought went down from 280 to 240.
  • The number of packets of powdered milk customers bought went up from 90 to 220 per month.

Now answer next 7 Questions.

Question: The price elasticity of demand when fresh milk’s price increases from Rs. 20 per litre to Rs 30 per litre is equal to:
(a) 2.5
(b) 1.0
(c) 1.66
(d) 2 .66

Ans. (c)

Question: The cross elasticity of monthly demand for powdered milk when the price of fresh milk increases from Rs 20 to Rs 30 per litre is equal to:
(a) + 1.05
(b) -1.05
(c) -2.09
(d) + 2.09

Ans. (d)

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Question: The cross elasticity of monthly demand for cereal when the price of fresh milk increases from Rs 20 to Rs.30 is equal to:
(a) – 0.38
(b) + 0.25
(c) – 0.19
(d) + 0.38

Ans. (a)

Question: We can say that fresh milk in economics sense is a/an:
(a) luxury good
(b) inferior good
(c) normal good
(d) nothing can be said

Ans. (c)

Question: Find the tax which is direct tax among the following:
(a) Personal income tax
(b) Excise duty
(c) Sales tax
(d) Service tax

Ans. (a)

Question: Suppose that a sole proprietorship is earning total revenues of Rs.2,00,000 and is incurring explicit costs of Rs.1,50,000. If the owner could work for another company for Rs.60,000 a year, we would conclude that:
(a) the firm is incurring an economic loss.
(b) implicit costs are Rs.50,000.
(c) the total economic costs are Rs.2,00,000.
(d) the individual is earning an economic profit of Rs.50,000.

Ans. (a)

Question: Suppose income of the residents of Ecoville increases by 50% and the quantity of fresh milk demanded increases by 30%. What is income elasticity of demand for fresh milk?
(a) 0.5
(b) 0.6
(c) 1.25
(d) 1.50

Ans. (b)

Question: What can be said about the price elasticity of demand for fresh milk?
(a) It is perfectly elastic
(b) It is elastic
(c) It is perfectly inelastic
(d) It is inelastic

Ans. (b)

Question: Which method of rationing (distributing) passing grades in economics courses is most
likely to lead to students trying to learn the subject?
(a) The highest grades are assigned to those students who pay the most money to get them.
(b) The highest grades are assigned to students who do the most personal chores or favors for the professor.
(c) The highest grades are assigned to students whom the professor likes the most.
(d) The highest grades are assigned to students who can answer the most questions correctly on exams covering course material.

Ans. (d)

Use this data to answer next 3 questions.

Output (O) 0 1 2 3 4 5 6
Total Cost (TC) Rs. 240 Rs. 330 Rs. 410 Rs. 480 Rs. 540 Rs. 610 Rs. 690

Question: The marginal cost of the sixth unit of output is:
(a) Rs.133
(b) Rs.75
(c) Rs.80
(d) Rs.450

Ans. (c)

Question: Diminishing marginal returns starts to occur between units:
(a) 2 and 3
(b) 3 and 4
(c) 4 and 5
(d) 5 and 6

Ans. (c)

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Question: The average fixed cost of 2 units of output is :
(a) Rs.80
(b) Rs.85
(c) Rs.120
(d) Rs.205

Ans. (c)

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1 Comment

  • Which of the following is not a ratio which is used to explain how well the operations of a business have been managed?
    (a) Asset turnover
    (b) Profit margin
    (c) Gearing
    (d) Return on capital employed
    Aanswe(c)