The Institute of Company Secretaries of India 2006 CS Foundation , - Basic Economics & Business Environment - Question Paper

CS Foundation Examination, June 2006
Basic Economics & Business Environment

Roll No…………………
Time allowed: three hours
Maximum marks: 100
Total number of questions: eight


PART – A
(Answer ques. No.1 which is compulsory and any 3 of the rest from this part.)

1.
(a) State, with reasons in brief, whether the subsequent statements are actual or false
(i) The slope of indifference curve shows marginal rate of substitution.
(ii) At equilibrium of a firm under perfect competition, AR will be equal to MR.
(iii) “Economics is the science of option making.” Definition provided by Samuelson.
(iv) Negative balance of trade does not indicate negative balance of payments.
(v) National income is the aggregative money value of all final goods and services produced in the
country over a period of time, usually 1 year.
(3 marks each)

(b) Distinguish ranging from any 2 of the following:
(i) ‘Cardinal approach of utility analyses and ‘ordinal approach of utility analyses.
(ii) ‘Returns to a factor’ and ‘returns to scale’.
(iii) ‘Micro economics’ and ‘macro economics’.
(5 marks each)

2.
(a) What do you understand by the concept of ‘demand function’? (3 marks)

(b) A consumer buys 50 units of a commodity at Rs.4 per unit. When its price falls by 25%, its demand
rises to 100 units. obtain out price elasticity of demand. (6 marks)

(c) “Product differentiation and selling expenses form the foundation of monopolistic competition.”
discuss. (8 marks)

3.
(a) Write short notes on any 2 of the following:
(i) Marginal rate of tech. substitution
(ii) Iso–cost lines
(iii) Ridge lines.
(4 marks each)

(b)
(i) Fill-up the blanks in the subsequent table: (4 marks)
Agricultural Output with Fixed Land and Variable Units of Labour



Labour (Units) Total Output Average Output Marginal Output
(Tonnes) (Tonnes) (Tonnes)
1 8 8 ....
2 20 .... 12
3 36 12 ....
4 .... 12 12
5 55 .... 7
6 60 .... 5
7 .... .... 0

(ii) Narrate few aspects relating to supply of Labour in a country. (4 marks)

4.
(a) What is meant by ‘credit control’? elaborate its main categories? discuss bank rate as a leading
Instrument of credit control. (8 marks)

(b) What do you understand by ‘consumption function’? State different factors that determine consumption
function. (7 marks)

5.
(a) Briefly discuss any 2 of the subsequent concepts: (4 marks)
(i) Reflation
(ii) Hyper-inflation
(iii) Deflation.

(b) State and discuss ‘comparative cost advantage theory’ of international trade as propounded by David Ricardo. (7 marks)


PART - B

(Answer ANY 2 ques. from this part.)


6.
(a) “Business environment of a firm is the totality of external circumstances which it faces and over which it
has little or no control.” Comment. (7 marks)

(b) Explain briefly any 2 of the following: (4 marks each)
(i) Concept of X-inefficiency
(ii) Social goods
(iii) State regulation
(iii) Industrial sickness.

7.
(a) What do you mean by the term ‘dualism’? How far is it applicable to Indian economy? (7 marks)

(b) Medium and large scale industries, financial institutions and other business establishments are important
segments of mixed economy like India. Comment. (8 marks)

OR
Quality of life of Indian population is related to its size and employment level. Comment.
8.
(a) Write a note on different reforms that have been introduced in the Indian financial sector in latest years. (7 marks)

(b) Comment on any 2 of the following: (4 marks each)
(i) Liberalisation is the encouragement of direct foreign investment and technology.
(ii) Infrastructure, by their very nature, tends to be commercially non-viable.
(iii) A subsidy is a negative tax.
(iii) Foreign trade of a country is believed to be a major contributor to its economic growth.

Earning:   Approval pending.