Centers at Malleshwaram Rajajinagar Yelahanka Mathikere

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1 1. Law of demand explains inverse relationship between a) Price and demand b) Demand and Price c) Income and demand d) Demand and income Samvit Tip: Law of demand states, other things remaining constant as the price of a commodity increases, quantity demanded decreases and vice versa 2. Which of the following would cause the demand curve for auto mobiles shift to the left? a) An increase in price of auto mobiles b) An increase in the cost of production of auto mobiles c) Increase in buyer s income d) An increase in the interest rate paid to borrow money to pay for auto mobiles Samvit Tip: Increase in the interest rate to borrow money will decrease money supply and consequently purchasing power of the people as a result of which demand for automobiles will decrease and demand curve will shift to the left. 3. What is Net National Product? a) The money value of final goods & services produce annually in the year b) The money value of annual service generation in the account c) The money value of tangible goods produced annually in the economy d) The money value of tangible goods available in the economy Samvit Tip: Net national product is the money value of all final goods and services produced in the economy annually 4. The law of variable proportions is associated with a) Short period b) Long period c) Both short & long periods d) Neither short nor long period Samvit Tip: Law of variable proportions is associated with the short period 5. Balance of payments a) Current account for goods and services only b) A capital account of financial assets only c) Official settlement accounts only d) All of the above Samvit Tip: Balance of payments is the sum total of all transactions in the current account and capital account. Current account transactions include balance of trade, services and unrequited transfers.

2 6. Iso-Quant is also known as: a) Product possibilities curve b) Production indifference curve c) Indifference curve d) None of these Samvit Tip: Isoquants are indifference curves from the producers point of view 7. Which of the following is not a Khariff crop? a) Jowar b) Maize c) Groundnut d) Wheat Samvit Tip: Kharif crops are monsoon crops. Wheat is a Rabi crop 8. The Philips curve describe the relationship between: a) Savings & investment b) Marginal tax rate and tax revenue c) Unemployment rate and inflation rate d) The budget deficit and the trade deficit Samvit Tip: The Philips curve shows the relationship between unemployment rate and inflation rate within an economy. 9. The concept of entitlements was introduced by a) Pranab Mukharjee b) Amartya sen c) Manmohan singh d) Jagadeesh bhagawathi Samvit Tip: The concept of entitlements was introduced by Amartya Sen. An entitlement is a government program guaranteeing access to some benefit by members of a specific group or and based on established rights or by legislation. 10. Micro Economics is the study of a) Individual parts of economy b) Economy as a whole c) Choice making d) Development of economy Samvit Tip: Micro economics is the study of individual parts of the economy. Ex: a firm, a consumer etc

3 11. Comparing a monopoly and competitive firm the monopolist will a) Produce less at lower price b) Produce more at lower price c) Produce less at higher price d) Produce zero at lower price Samvit Tip: A monopolist will produce more at lower price as he faces a downward sloping demand curve 12. The market price of a good is more than opportunity cost of producing it, then a) Market price increases in the long run b) Producer will increase supply in the long run c) Resources will flow outward and there will be a decline in supply d) There will not be any change until demand and supply are equal Samvit Tip: If the market price of a good is more than the opportunity cost of producing it he will produce more in the long run. Opportunity cost is the cost of alternative forgone. Hence the alternative that he chooses will give him a higher AR over the opportunity cost of the alternative forgone. The producer will produce more of the given good in the long run. 13. The second glass of lemonade gives lesser satisfaction to a thirsty boy. This is clear case of a) Law of variable proportions b) Law of diminishing returns c) Law of diminishing marginal utility d) Law of supply Samvit Tip: As the thirsty boy drinks water his marginal utility for water goes on decreasing as his want to have water is satisfied. This is demonstrated by the law of diminishing marginal utility. 14. Human capital refers to: a) Savings by individuals b) Mobilisation of savings c) Human skills and abilities d) Productive investment Samvit Tip: Human capital refers to human skills and abilities 15. Which of the following statement is false? a) Land has indestructible power b) Land is passive factor c) Capital is nature s gift d) Labour is mobile Samvit Tip: Capital is a man made factor of production and is not provided to us by nature

4 16. Among all the states of India has the lowest birth rate a) Kerala b) Maharashtra c) Delhi d) Uttar Pradesh Samvit Tip: Kerala has the lowest birth rate in India as per statistics 17. What is the average calories required in rural areas for measuring poverty? a) 2,400 calories per person per day b) 2,800 calories per person per day c) 2,100 calories per person per day d) None of these Samvit Tip: The average calories requirement in rural areas is 2400 kcal per day per person as per statistics 18. Multi Dimensional Poverty index is used by to measure poverty a) Human Development Report b) Tendulkar committee c) NSSO d) Planning commission of India Samvit Tip: The Tendulkar committee used multi dimensional poverty index to measure poverty. 19. Which of the following statements defines the density of population? a) No. of persons living per unit area b) No. of persons living in a country c) Change in the no. of inhabitants of a country during a specific per unit of time d) Absolute numbers added every year Samvit Tip: Density of population is the number of people living per square km 20. Which of the following statements about repo rate is not correct? a) At this rate RBI borrows money from banks for short period b) A reduction repo rate helps bank to get money at cheaper rate c) An increase in repo rate makes borrowings from RBI expensive d) At this rate banks borrow money from RBI Samvit Tip: Repo rate is the rate at which banks borrow money from the RBI for a short period of time. 21. Which of the following is broad money? a) M1 b) M2 c) M3 d) M4 Samvit Tip: As per the old monetary aggregates, M3 refers to broad money

5 22. Inflation is a) Persistent increase in general level of price b) Persistent increase in price of individual goods, services & resources c) One time increase in general level of price d) One time increase in price of individual goods, services & resources Samvit Tip: Inflation is the persistent rise in general price levels of various goods and services 23. Which of the following is not correct? a) Direct tax is proportional in nature b) An indirect tax is a progressive in nature c) A Direct tax cannot be shifted d) An indirect tax can be shifted to others Samvit Tip: Indirect tax is regressive in nature. Direct tax is progressive in nature. 24. Over the years in India cost of tax collection is a) Increases b) Decreases c) Remains unchanged d) Indeterminate Samvit Tip: Over the years, cost of tax collection in India has increased 25. The ratio of dependents to working age population is called a) Demographic dividend b) Demographic transition c) Unemployment ratio d) Dependency ratio Samvit Tip: The ratio of dependants to working age population is known as the dependency ratio 26. Special Drawing Rights was created by a) WTO b) World Bank c) IMF d) UNO Samvit Tip: Special drawing rights were created by the International Monetary Fund (IMF) 27. India is a economy a) Capitalistic b) Socialistic c) Mixed d) Federal Samvit Tip: India is a mixed economy. It takes in characteristics from both capitalism and socialism.

6 28. Which one of the following expressions is correct for marginal revenue? a) MR = AR(1-e/e) b)mr=tr/q c)mr=tr n - TR n+1 d)mr = TR/ Q Samvit Tip: Marginal revenue is the rate of change in total revenue. ( TR / Q) It is also the revenue obtained by selling one additional unit of a commodity in the market. 29. The vertical difference between TVC and TC is equal to a) MC b) AVC c) TFC d) None Samvit Tip: TC = TVC + TFC TFC = TC - TVC 30. Which of the following is a direct tax? a) Personal income tax b) Sales tax c) Service tax d) Excise duties Samvit Tip: Personal income tax is a direct tax as incidence of tax and impact of tax is on the same individual. 31. is the best indicator of economic development of any country a) Agriculture b) Transport c) Gross production d) Per-capita income Samvit Tip: Per capita income is the best indicator of economic development as it is derived by national income. Per capita income = (National income / total population) 32. The price elasticity at mid-point of a straight line on demand curve is a) = 0 b) > 1 c) < 1 d) = 1 Samvit Tip: The price elasticity of demand at the mid-point of a straight line demand curve is one. Ep = lower segment / upper segment At mid point lower segment= upper segment

7 33. If equilibrium is present in a market, then a) Quantity demanded is equal to quantity supplied b) Quantity demanded exceeds quantity supplied c) Quantity supplied exceeds quantity supplied d) The price of the product will tend to rise Samvit Tip: At equilibrium point quantity demanded will be equal to quantity supplied. There will be no shortages. 34. Which of the following is not a property of indifference curve? a) Indifference curve always touch X-axis b) Indifference curve has negative slope c) Indifference curve is convex to origin d) Indifference curves never intersect each other Samvit Tip: Indifference curve will never touch any of the axes. 35. What happens to marginal cost when average cost increases? a) Marginal cost is below average cost b) Marginal cost is above average cost c) Marginal cost is equal to average variable cost d) Marginal cost is equal to average cost Samvit Tip: When average cost is increasing, marginal cost is more than the average cost and lies above it. 36. Which of the following statement is not correct about the WTO? a) WTO came to existence on 1st January, 1995 b) WTO is main organ for implementing multilateral trade agreements c) WTO is legal entity d) WTO has lesser scope than its predecessor GATT Samvit Tip: WTO has wider scope than its predecessor GATT 37. If the price of a commodity is fixed, then every increase in its sold quantity the total revenue will and the marginal revenue will a) Increases, also increases b) Increases, remain unchanged c) Increases, decreases d) Remains fixed, increase Samvit Tip: If price (AR) remains the same, every increase in quantity sold will result in a higher TR while MR will remain the same as every additional unit sold in the market will fetch the same price.

8 38. A discriminating monopolist will charge a higher price in the market in which the demand for its product is a) Highly elastic b) Relatively elastic c) Relatively inelastic d) Perfectly elastic Samvit Tip: A discriminating monopolist will charge a higher price in a market where demand for goods and services is relatively inelastic. 39. Fixed cost curve is normally a) Starts from the Origin b) U shaped c) Vertical d) Horizontal Samvit Tip: Total fixed cost is horizontal and parallel to the x-axis as fixed cost is the dependent on the output produced. 40. Find out value of X? No. of units MU TU X a) 30 b) 54 c) 57 d) 15 Samvit Tip: TU = = 57 units at the 2nd unit of consumption 41. What does devaluation of a currency mean? a) Decrease in the internal value of money b) Decrease in the external value of money c) Decrease both in the internal and external values of money d) None of these Samvit Tip: Devaluation of currency refers to the reduction in the external value of a country's currency through official intervention. 42. The reason for the kinked demand curve is that

9 a) The oligopolist believe that competitors will follow output increases but not output reductions b) The oligopolist believe that competitors will follow price increases but not output reductions c) The oligopolist believe that competitors will follow price cuts but not price rises d) The oligopolist believe that competitors will follow price increases but not output increases Samvit Tip: Kinked demand curve is because price cuts are followed by competitors in an oligopoly market. However price increases are not 43. 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 O Samvit Tip: A rational producer will produce in stage two of the law of variable proportions. In this stage AP is greater than MP. (MP<AP) 44. As the price of commodity increases, normally its supply a) Decreases b) Remain unchanged c) Increases d) Can t be determined Samvit Tip: The law of supply states that other things remaining constant as the price of a commodity increases, it's quantity supply also increases and vice versa. Quantity supplied has a direct relationship with price. 45. An economy achieves productive efficiency when: a) Resources are employed in their most highly valued uses b) The best resources are employed c) The total number of goods produced is greatest d) Goods and services are produced at least cost and no resources are wasted Samvit Tip: As per the PPC theory, an economy achieved production efficiency when all resources of the economy are fully employed. Resources are neither unemployed/underemployed nor are they over employed. 46. Price elasticity of demand for a product is infinite under a) Perfect competition b) Monopolistic competition c) Monopoly d) Oligopoly Samvit Tip: Price elasticity of demand is infinity under perfect competition. All units of the commodity can be sold at the same price. 47. If a firm under monopoly wants to sell more, its average revenue curve will be a line

10 a) Upward sloping b) Downward sloping c) Vertical d) Horizontal Samvit Tip: In a monopoly if the producer wants to sell more he needs to reduce the price of the commodity. Hence AR curve will be a downward sloping curve. 48. The share of which one of the following sectors has increased rapidly in recent years in the GDP of India a) Agriculture b) Industry c) Services d) All of the above Samvit Tip: The share of service sector to GDP has increased rapidly over the years in India. 49. The marginal rate of substitution as a consumer moves on indifference curve a) Increases b) Diminishes c) Remains unchanged d) Becomes zero Samvit Tip: MRS decreases as the consumer moves down an indifference curve. This is because as he consumes more of one commodity by substituting it for the other, his marginal utility goes on decreasing and his want is satisfied. Hence he substitutes lesser and lesser of the other commodity. 50. An indifference curve slopes down towards right since more of one commodity and less of another result in: a) Same satisfaction b) Greater satisfaction c) Maximum satisfaction d) Decreasing expenditure Samvit Tip: All points on an indifference curve give the consumer the same level of satisfaction. If you found this useful, let us know by sending a message to or an to info@samvitacademy.in If you are in Bangalore and would like to attend our classes for CPT or IPCC, let us know through phone or (details above) and we will ensure that you get the best from our amazingly young and brilliant faculty. We wish you the best! Our next CPT Batch starts in July and IPCC Batch starts in August in Malleshwaram and Rajajinagar Get to know our faculty

Gaurav Rajaram - All India Rank Holder in CPT. Cleared CA in his first attempt. Teaches Accounting and Direct Taxes Chinmaya Hegde - All India Rank holder in ALL 3 levels of CA!

11 Gaurav Rajaram - All India Rank Holder in CPT. Cleared CA in his first attempt. Teaches Accounting and Direct Taxes Chinmaya Hegde - All India Rank holder in ALL 3 levels of CA! Teaches Financial Management and Accounting Punarvas Jayakumar - The best teacher for Law in Bangalore and probably even the South of India. Cleared CA in his first shot although he was from a science background Kriti Goel - Amazing at Cost Accounting and Economics, she has been able to achieve tremendous results in her classes. She makes it fun and makes you love her subjects Please read our disclaimer These questions have been compiled by Samvit Academy ('we') from Online Sources who have in turn compiled the same from students memory as well from our own discussions with students who have written the examination. We cannot give any assurance that the same/similar questions appeared in the examination as it is purely based on memory. Any conclusions that you draw from the above questions and solutions are solely at your risk and we are not responsible for the same.

AT SAMVIT, WE DON T JUST HELP YOU CLEAR. WE CARE FOR YOU!

AT SAMVIT, WE DON T JUST HELP YOU CLEAR. WE CARE FOR YOU! SOLUTIONS TO THE CPT DEC 2017 EXAM ECONOMICS 1. If the price of petrol increases, the demand for automobiles decreases, then the petrol and automobiles are a) Perfect substitutes b) Substitutes c) Perfect