Commerce MCQ Quiz - Objective Question with Answer for Commerce - Download Free PDF

Key Points

• The Fiscal Responsibility and Budget Management (FRBM) Act, 2003, was enacted to bring fiscal discipline and reduce fiscal deficit.
• The FRBM Panel, led by N.K. Singh, was constituted by the Central Government to recommend a roadmap for fiscal consolidation.
• The target for fiscal deficit as a percentage of GDP to be achieved in 2022-23 was set at 2.5% as per the panel's recommendations.

Important Points

• The FRBM Act mandates the government to ensure fiscal deficit and revenue deficit targets are met within prescribed limits.
• The N.K. Singh Committee provided a roadmap to achieve fiscal consolidation and recommended fiscal deficit targets for medium-term periods.
• Fiscal deficit is defined as the difference between the total expenditure and total revenue (excluding borrowings).
• Maintaining fiscal deficit within recommended limits is critical for macroeconomic stability and reducing inflationary pressures.

The correct answer is - Mizoram

Key Points

• Cheraw
  • Cheraw is a traditional bamboo dance of the state of Mizoram.
  • It is one of the oldest dances of Mizoram and holds great cultural significance.
  • The dance involves the use of bamboo sticks, which are clapped together rhythmically while dancers move gracefully between them.
  • This dance is usually performed during festivals such as Chapchar Kut, which is celebrated in spring.
  • Cheraw symbolizes coordination, precision, and harmony, as dancers must time their movements perfectly with the bamboo clapping.

Additional Information

• Chapchar Kut Festival
  • It is one of the most significant festivals of Mizoram, celebrated in spring to mark the completion of bamboo and forest clearing for Jhum cultivation.
  • The festival features traditional dances like Cheraw, along with folk songs and cultural displays.
• Use of Bamboo in Cheraw
  • Two or more people handle the bamboo poles, clapping them together in rhythm while dancers move between them.
  • The dancers must be extremely precise to avoid being struck by the bamboo poles.
• Other Traditional Dances of Mizoram
  • Khuallam: A dance performed to welcome guests, symbolizing brotherhood and unity.
  • Chheihlam: A lively dance performed to the accompaniment of traditional songs.
• Geographical and Cultural Context
  • Mizoram is one of the Seven Sister States in northeastern India, known for its rich cultural heritage and lush green landscapes.
  • Traditional dances like Cheraw reflect the unique identity of the Mizo people and their deep connection to nature.

The correct answer is - Peak-load pricing

Key Points

• Peak-load pricing
  • This pricing strategy is used by regulated Public Utility companies to ensure efficient utilization of resources.
  • It involves charging higher prices during peak demand periods and lower prices during off-peak periods.
  • The goal is to encourage customers to shift their usage to off-peak times, reducing strain on resources during peak periods.
  • Peak-load pricing helps optimize resource allocation and prevents the need for excessive investment in infrastructure to meet peak demands.
  • Examples include electricity companies charging higher rates during evening hours when consumption is high.

Additional Information

• Tariff pricing
  • Tariff pricing refers to the structured pricing systems used in public utilities but does not focus on peak and off-peak periods.
  • It includes flat rates, block rates, or tiered pricing based on usage levels.
• Interdependent pricing
  • Used in markets with oligopolistic competition, where pricing decisions of one company influence others.
  • Not typically applicable to regulated public utilities.
• Transfer pricing
  • Refers to pricing of goods or services exchanged between divisions of the same company.
  • It is primarily used in multinational corporations to allocate costs and profits between subsidiaries.

The correct answer is - few firms producing identical products

Key Points

• Pure oligopoly
  • In pure oligopoly, the market is dominated by a few firms producing identical products.
  • The products are homogeneous, meaning there are no significant differences in quality or features among the competing firms.
  • Examples include industries producing raw materials such as steel, aluminum, or cement.
  • Price competition is typically more prevalent due to the lack of differentiation in products.
• Market structure
  • Oligopoly is characterized by a small number of sellers, which leads to interdependence among firms.
  • Each firm's decisions regarding pricing, production, and marketing can influence the strategies of other firms in the market.

Additional Information

• Other types of oligopoly
  • Imperfect oligopoly: Firms produce differentiated products, which vary in quality, branding, or features.
  • Examples include industries such as automobile manufacturing or smartphones.
• Importance of entry barriers:
  • Oligopoly markets often have high barriers to entry, such as large capital requirements or legal restrictions.
  • These barriers help maintain the dominance of existing firms and limit competition from new entrants.
• Pricing strategies:
  • Due to the interdependent nature of firms in oligopoly, pricing strategies often involve collusion or price leadership.
  • Firms may avoid aggressive competition to prevent price wars and maintain profitability.

The correct answer is - Monopolistic

Key Points

• Monopolistic competition
  • Under monopolistic competition, a firm exercises some control over the price of its product.
  • Firms in this market structure produce similar but differentiated products, allowing them to influence pricing to some extent.
  • Examples include industries like restaurants, clothing, and cosmetics, where branding and product differentiation play a key role.
• Pricing strategy
  • Firms often use strategies such as advertising, branding, and quality differentiation to justify their pricing.
  • Unlike perfect competition, where prices are determined purely by market forces, monopolistic competition offers firms the ability to set prices based on perceived value.

Additional Information

• Other market structures
  • Perfect competition
    • Under perfect competition, firms are price takers and have no control over the price.
    • Products are homogeneous, and buyers have complete information, leading to a single market price.
  • Monopoly
    • In a monopoly, a single firm has complete control over the price due to the absence of competition.
    • Examples include utilities like electricity or water in specific regions.
  • Oligopoly
    • In oligopoly, a few dominant firms have significant influence over the market price.
    • Pricing decisions are often influenced by the actions of competitors, leading to strategic behavior.
• Key differences
  • Monopolistic competition allows for limited control over pricing, unlike perfect competition.
  • Product differentiation and branding are key features distinguishing it from other market structures.

The correct answer is Capital Goods.

• Capital goods:- Goods that are bought not for meeting the immediate need of the consumer but for producing other goods

Key Points

• Capital goods:- Goods that are bought not for meeting the immediate need of the consumer but for producing other goods
• Final goods:- These are those which are used for:
  • Personal consumption (like bread purchased by consumer household), or
  •  Investment or capital formation (like building, machinery purchased by a firm)
• Intermediate goods:- These are those, which are used for:
  •   Further processing (like sugar used for making sweets), or
  •   Resale in the same year (If car purchased by a car dealer for resale).
• Consumption goods:- Those goods which satisfy the wants of consumers directly.

The correct answer is A few sellers, many buyers.

Key Points

• Oligopoly is a commodity market that occurs when there are a small number of firms producing a homogenous commodity.
• A few sellers, many buyers is the basic character of Oligopoly.
• In a market situation in which there are only a few firms in the industry producing either the homogeneous product or maybe having product differentiation in a given line of production is termed oligopoly.
• The special case of oligopoly where there are exactly two sellers is termed duopoly.
• Economic, legal, and technological factors can contribute to the formation and maintenance, or dissolution, of oligopolies.
• It is difficult to enter an oligopoly industry and compete as a small start-up company.

Additional Information

• Monopoly: In the market structure where there is only one seller in the market who controls the entire market supply.
• Monopsony: It is the market situation in which there is only one single buyer of the product in the market.

The correct answer is retail inflation.

Key Points

• As it is commonly called, consumer price index or (CPI) is an index measuring retail inflation in the economy by collecting the change in prices of most common goods and services.
• CPI is calculated for a fixed list of items, including food, housing, apparel, transportation, electronics, medical care, education, etc. 
• This also provides insights into how much a consumer can spend on par with the price change.
• CPI is different from WPI, or Wholesale Price Index, which measures inflation at the wholesale level.

Additional Information

• Gross Domestic Product (GDP):
  • ​It is the sum total of the value of all final commodities and services produced within the geographical boundary of a country during a given period of time.
  • GNP = GDP + Net Factor Income Abroad (NFIA)
  • GNP = GDP + Export - Import
• Net National Product (NNP)
  • NNP = GNP - Depreciation
• Forex
  • Forex is basically foreign exchange market.
  • It is a global marketplace for exchanging national currencies against one another.​​

The correct answer is Global Depository Receipt(GDR).

• ​GDRs are equity instruments issued abroad by authorized overseas corporate bodies against the share/bonds of Indian companies held with nominated domestic custodian banks.
  • A GDR may represent one or more shares of the issuing companies.
  • A holder of a GDR can, at any time convert it into the number of shares that it represents.
  • GDRs can be denominated either in dollars or Euros and are commonly listed on European Stock Exchanges.
  • GDRs are for foreign companies who want to invest in Indian Companies.

Additional Information

• Special Drawing Rights:
  • SDRs are the instrument of the International Monetary Fund which helps the member country in the time of economic crisis.
• Indian Depository Receipts:
  • Indian Depository Receipts are issued to Indian Investors who want to invest in foreign companies without registering themselves in the foreign stock exchanges.

The correct answer is the Tertiary sector.

Key Points

• The tertiary sector doesn't produce any goods. 
• Tertiary sector:
  • The tertiary sector is known as the service sector.
  • It provides useful services for the primary and secondary sectors.
  • It is a well-organized sector and uses modern-day logistics techniques to perform its functions.
  • Banking, insurance trade, and communications, etc comes under this sector.

​​Additional Information

• Primary sector:
  • It is known as the agricultural and allied sectors.
  • This sector supplies raw materials for goods and services.
  • It is an unorganized sector and uses traditional techniques.
  • This sector uses natural resources like forestry and fishing, mining, and oil and gas.
• Secondary sector: 
  • It is known as the manufacturing sector.
  • This sector converts one good into another by creating more utility from it.
  • It is an organized sector and uses better methods of production.
  • It includes large firms, multinational corporations, manufacturing units, and small-scale units.

The tangible goods are physical goods that can be touched, seen, and compared before making a purchase.

Shopping Goods:

• A tangible product for which consumers want to compare quality, price, and perhaps style in several stores before making a purchase is considered a shopping good.
• These products need search efforts and special visits to central markets, there are not urgent purchases and buyers can postpone buying according to their convenience.
• They need not have numerous retail outlets. Buyers want to shop around and select goods after comparing quality, terms, style, price, services and so on.
• Examples of shopping goods are furniture, jewelry, fashion goods, appliances, automobiles.
• As fewer retailers are required and retail stores typically buy shopping goods in large quantities, it is common for manufacturers to use shorts channels of distribution. Usually, they sell directly to retailers.

Therefore, Shopping Goods are tangible goods for which a consumer wants to compare quality, price, and perhaps style in several stores before making a purchase.

1) Convenience Goods:

• Convenience goods are items consumers buy often and easily without putting much thought into them.
• These include newspapers, magazines, most grocery items, and petrol.
• Since consumers have a good sense of how much these items cost, they don't consider their price unless it falls outside their expectations.

2) Speciality Goods:

• Goods that have unique characteristics or features for which consumers will be willing to make a special purchasing effort are known as Speciality Goods.
• Example: Luxury watches and cars, high-fashion clothing, professional camera lens, etc. 

3) Unsought Goods:

• Goods about which consumers don't usually have the knowledge or are not that interested in knowing of is known as Unsought goods.
• Example: Funeral plans, disability insurance, accident, and life insurance, etc.

The correct answer is right

Key Points

• In the case of a normal good, demand increases as the income grow.
• That is an increase in income shifts the demand curve to the right.

• The reason for this is that with a higher salary, people can afford to buy more of any given good.
• And since people have unlimited wants, more is generally considered better.
• By contrast, in the case of an inferior good, demand decreases as income grows.
• That means an increase in income shifts the demand curve to the left.
• This holds for goods that are usually replaced as income grows.

Important Points

Since the question does not clarify the goods, you may consider them normal goods. 

Statement I: On every point on the straight-line demand curve, the point elasticities are all equal 

Statement II: On every point on the rectangular hyperbola shaped demand curve, the point elasticities are not equal 

Both the above statements are incorrect.

The explanation for Statement I:

ELASTICITY AND DEMAND SLOPE: The slope of a straight-line demand curve, one with a constant slope, has constantly changing elasticity. It includes all five elasticity alternatives--perfectly elastic, relatively elastic, unit elastic, relatively inelastic, and perfectly inelastic. No two points on a straight-line demand curve have the same elasticity.

The explanation for Statement II:

Rectangular hyperbola is a curve under which all rectangular areas are equal. When the elasticity of demand is equal to unity (ed = 1) at all points of the demand curve, then the demand curve is a rectangular hyperbola.

The correct answer is unplanned decumulation of inventory.

Key Points

• Inventories are the unused raw materials or unfinished goods and unsold goods, that a firm carries from a year to the next year.
• Change in inventories may be planned or unplanned.
• An unexpected decrease in the stock of goods due to the rise in sales is called unplanned decumulation of inventory.

​Additional Information 

• An unexpected increase in the stock of goods due to a fall in sales is called the unplanned accumulation of inventories.
• The planned accumulation of inventories based on the anticipated sales for a particular period or year is called planned accumulation of inventories.
• Similarly, the planned decumulation of inventories based on the anticipated sales for a particular period or year is called planned decumulation of inventories.
• Final inventory is calculated as:
  • Final Inventory = Opening Inventory + Production - Sale.

The correct answer is Ministry of Finance.

• The Economic Survey of the country is prepared by the Economics Division of the Department of Economic Affairs which is a part of the Finance Ministry.

Key Points

• The survey is documented under the supervision and guidance of the chief economic adviser and is released only after the approval of the finance minister.
• The Economic Survey is an annual document released by the ministry of finance.
• It reviews the economic development in the nation in the previous financial year by providing detailed statistical data of all industrial sectors.

Additional Information

• Economic Survey, presented in the Parliament ahead of the Union Budget, is the Ministry of Finance’s flagship document.
• The Economic Survey detailed information about the Indian economy over the past year. The Economic Survey also offers glimpses into the current state of the economy, and occasional insights into the economic outlook.
• Although the Constitution does not bind the government to present the Economic Survey, over the years, it has become common practice for every government to present the Economic Survey before the Union Budget.
• The Economic Survey is prepared under the guidance of the Chief Economic Advisor and is presented in both the houses of Parliament, a day before the announcement of the Union Budget.

Important Points

• Interestingly, former Chief Economic Advisor Arvind Subramanian in 2018 had for the first time released the document in pink colour.
• The idea was to support women who suffer violence and to push for more gender equality. Not just the colour of the document, he revamped the whole document by making it more interesting with quotes and additional information.
• This was the first time that the Economic Survey used data generated by GST Network and the Indian Railways to see the flow of goods and people across states within India.