CA-CPT Paper No.

7 (Economics) TEST ID 00035380

CA-CPT TEST
Paper No. 7 (Economics)
Time Allowed: 60 Minutes Maximum Marks: 50

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

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When can oligopolists achieve an economic profit? (a) if the demand for their products is inelastic (b) if the demand for their products is elastic (c) only in the long run (d) if the competitive firms co-operate Which of the following is true? (a) MP does not decreases during first stage. (b) TP remains positive during first stage. (c) AP starts declining after the point of inflexion. (d) All of these. Returns to scale will be said to be in operation when quantity of (a) All inputs are changed (b) All inputs are changed in already established proportion (c) All inputs are not changed (d) one input is changed while quantity of all other inputs remains the same. Of the following which one corresponds to fixed cost? (a) Payments for raw material (b) Labour costs (c) Transportation charges (d) Insurance premium on property When shape of average cost curve is upward, marginal cost (a) must be decreasing (b) must be constant (c) must be rising (d) any of the above Which of the following is true with respect to average fixed cost? (a) It is a bell shaped curve. (b) As the quantity increases it approaches zero (c) If quantity produced tends to zero, average fixed cost approaches infinity (d) Both (b) and (c) above
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CA-CPT Paper No. 7 (Economics)

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If a firms cost of raw material increases then (a) Market price of the final product will also increase. (b) Equilibrium level of quantity also increases. (c) Marginal cost curve will shift upward. (d) Marginal cost curve will shift downward. Which of the following is a sunk cost? (a) The cost of plant and machinery installed five years ago become redundant due to change in production technology. (b) Payment of arrears of income tax liability. (c) Retrenchment compensation paid to the staff. (d) Minimum bonus payment to industrial workers. A firm total cost is not dependent upon which of the following? (a) Maximum retail price of the final product. (b) Taxes (c) input output ratio (d) Cost of inputs ________ is the improvement in the production techniques for existing products. (a) Process Innovation (b) Product Innovation (c) Plant Innovation (d) Production function In which stage of production is the marginal product greater than the average product? (a) Stage of decreasing returns (b) Stage of increasing returns (c) Stage of negative returns (d) Both (a) and (c) Which of the following explains the rate at which a firm can substitute one factor of production for another while producing the same level of output? (a) Degree of returns to scale (b) Marginal rate of substitution (c) Marginal rate of technical substitution (d) Marginal physical product Which type of price discrimination is often used in services like power and telecom? (a) first degree (b) second degree (c) third degree (d) all of the above In the theory of production the long run is defined as the period of time in which: (a) all factors can be varied (b) no factor can be varied (c) some factors are fixed but other can be varied (d) none Which of the following is not the reason for increasing returns to scale? (a) Indivisibility of the factors (b) Fuller utilization of fixed factors (c) Greater specialization of factors (d) Dimensional economies An Entrepreneur spend a total of Rs.1800 to produce 100 units of a commodity per week. In response to increase in demand he increases output by100 units spending a total of Rs.3,000 on 200 units produced per week. Which of the following laws applies to it?
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CA-CPT Paper No. 7 (Economics)

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(a) increasing returns (b) diminishing returns (c) Constant returns (d) None of these . includes all payments paid to factors of production and opportunity cost. (a) Implicit cost (b) Explicit cost (c) Economic cost (d) Accounting cost Which of the following is not a fixed cost? (a) Payment of interest on borrowed capital (b) Charges for fuel & electricity (c) Depreciation charges on equipment & building (d) Contractual Rent on Equipment & Building. A wooden chair manufacturer incurres fixed cost of Rs.1,15,000 per annum. If the selling price is Rs.200 per unit and variable cost per unit is Rs.32.5, what is the breakeven quantity for the firm? (a) 754 units (b) 687 units (c) 695 units (d) 550 units In the short run, if the firm cannot cover its total variable cost. (a) It continues its operations (b) It shuts down its operations temporarily (c) It shuts down its operations forever. (d) It makes investments to make the operations more viable The average fixed cost of a firm. (a) is parallel to the horizontal axis (b) is parallel to vertical axis (c) is U shaped (d) is a downward sloping curve from left to right. At which point does the marginal cost (MC) curve intersect the average variable and short run average total cost curve? (a) At equilibrium point (b) At their lowest points (c) At their optimum points (d) They dont intersect Which one of the following curve is not U shaped? (a) The AVC curve (b) The AFC Curve (c) The AC Curve (d) The MC Curve The efforts and sacrifices made by the owners of factors of production used in the production of a commodity is known as. (a) opportunity cost (b) implicit cost (c) explicit cost (d) real cost The Long Run average cost curve always passes through (a) each SAC Curve (b) each SVC Curve (c) each AC Curve (d) each VC curve Market price prevails in which of the following market situations? (a) Very short period (b) Short period (c) Long Period (d) Very long period One characteristic not typical of oligopolistic industry is (a) too much importance to non-price competition (b) price leadership (c) horizontal demand curve (d) a small number of firms in the industry
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CA-CPT Paper No. 7 (Economics)

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The AR curve and industry demand curve are same (a) In the case of monopoly. (b) In the case of oligopoly. (c) In the case of perfect competition. (d) None of these The kinked demand cure was introduced by (a) Samuelson (b) Hicks (c) Sweezy (d) Dalton Supply of a product in __________is perfectly elastic. (a) Short period (b) Long period (c) Very short period (d) None of these When will be profitable for the firm to expand output ? (a) MR > MC (b) MR < MC (c) TR > MR (d) AR < MR Which one of the following is the best example of agreement between oligopolists ? (a) GATT (b) OPEC (c) WTO (d) UNIDO The structure of toothpaste industry in India is best described as (a) Perfectly competitive (b) Monopolistic (c) Monopolistically competitive (d) Oligopolistic In a perfect competitive market (a) firm is the price-giver and industry the price-taker (b) firm is the price-taker and industry the price giver (c) both are the price takers (d) none of the above In the short run, the monopolist can earn (a) supernormal profits (b) normal profits (c) either (a) or (b) (d) both (a) and (b) For a competitive firm, its demand curve is (a) perfectly inelastic (b) relatively elastic (c) perfectly elastic (d) relatively elastic The kinked demand curve is observed in (a) duopoly market (b) monopoly market (c) competitive market (d) oligopoly market Product differentiation is the features of _________ (a) Perfect competition (b) Monopoly (c) Oligopoly (d) Monopolistic competition MR of the nth unit is given by (a) TRn TRn1 (b) TRn + TRn1 (c) TRn/TRn1 (d) TRn+1/TRn Given the relation MR = P(1 1/e), if e = 1, then (a) MR > 0 (b) MR < 0 (c) MR = 0 (d) none of these A firm will not operate unless the AR is atleast equal to AVC only in: (a) Long Run (b) Market Period (c) Short Run (d) Perfect Competition
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CA-CPT Paper No. 7 (Economics)

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Calculate the average variable cost per unit if the total cost of 20 units and 40 units is Rs.400 and Rs.550 respectively. (a) Rs.13.75 (b) Rs.10 (c) Rs.5.00 (d) Rs.7.50 At the point of inflexion, the marginal product is ____. (a) Maximum (b) Minimum (c) Modest (d) Optimum Which of these activities is considered production in economics? (a) A person teaching his son at his home (b) A professional dancer rendering her performance in hotels on payment of professional charges (c) A musician giving performance at his sons marriage (d) None Along the long run supply curve, all of the following can be varied except_____. (a) Level of output (b) Level of capital (c) Level of labor (d) All the three Which of these cost line never start with 0 origin? (a) TFC (b) AVC (c) TVC (d) MC _____ is that price at which, price is equal to average variable cost. (a) Break-even point (b) Shut down point (c) No losses no gain level (d) All the three The point at which the production has reached after continuous rise for several years is called_______ level of production. (a) Peak (b) Trough (c) Optimum (d) Desirable In the short run with the increase in output: (a) The fixed cost also increases (b) Total variable cost increase in totality but total fixed cost remain same (c) Total variable cost falls along with fixed cost (d) Average variable cost fall If total costs are rising, the marginal cost would be: (a) Falling (b) Increasing (c) Positive (d) zero