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CA Foundation Unit 1A: Scarcity, Choice and Opportunity Cost — practice questions

Explore 52 free Unit 1A: Scarcity, Choice and Opportunity Cost questions in CA Foundation Economics. Open each question or exercise to read its content, reference answers and available explanation.

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Unit 1A: Scarcity, Choice and Opportunity Cost questions and exercises with answers

Showing questions 1–30 of 52.

The idea that buyers, through their spending choices, ultimately decide which goods are produced and in what quantities is known as:Read the answer and worked solution →In a capitalist economy, the question 'for whom to produce' is settled mainly by an individual's:Read the answer and worked solution →A socialist economy is also commonly described by which alternative name?Read the answer and worked solution →Which feature is characteristic of a socialist economy rather than a capitalist one?Read the answer and worked solution →Which sector of a mixed economy is set up by the State mainly for the welfare of the community rather than for profit?Read the answer and worked solution →In a capitalist economy, an investor's decision on how much to invest is governed primarily by the:Read the answer and worked solution →In economics, the term 'price' of a good is best understood as its:Read the answer and worked solution →Goods such as air and sunlight, which are abundant and command no price, are termed:Read the answer and worked solution →Which one of the following is NOT listed as an element of a market?Read the answer and worked solution →In which type of market do firms buy land, labour, capital and entrepreneurship?Read the answer and worked solution →Highly perishable and bulky articles, costly to transport over long distances, typically command a:Read the answer and worked solution →Gold and silver, being high value and small bulk, are cited as examples of commodities having a:Read the answer and worked solution →The classification of markets on the basis of the time element is attributed to which economist?Read the answer and worked solution →In the very short period (market period), price is determined mainly by demand because:Read the answer and worked solution →In which Marshallian time period do ALL factors of production become variable, allowing supply to fully adjust to demand?Read the answer and worked solution →Purchasing a foreign currency contract from a bank at a future rate is an example of a transaction in the:Read the answer and worked solution →A weekly Haat Bazaar, where there are no statutory stipulations on transactions, is an example of a:Read the answer and worked solution →A market where commodities are bought and sold in bulk, typically in Business to Business (B2B) dealings, is the:Read the answer and worked solution →A market characterised by many sellers offering identical products to many buyers is:Read the answer and worked solution →Indian Railways is cited as a real-world example of which market structure?Read the answer and worked solution →A market with a few sellers selling competing products to many buyers, as in the telecom industry, is:Read the answer and worked solution →When the demand for a commodity is confined within a country's national boundaries, often due to government trade policy, the product is said to have a:Read the answer and worked solution →Which sequence lists the four phases of a typical business cycle in the order presented in the chapter?Read the answer and worked solution →The lowest turning point of a business cycle, where overall production and employment touch the bottom, is the:Read the answer and worked solution →Which of the following is NOT a feature of the expansion phase of a business cycle?Read the answer and worked solution →At the peak of the business cycle, why do input prices tend to rise sharply?Read the answer and worked solution →Depression is best characterised in the chapter as:Read the answer and worked solution →According to the chapter, the recovery process from a trough is FIRST felt in which market?Read the answer and worked solution →An economic variable that changes before real output changes, used to anticipate the direction of the economy, is a:Read the answer and worked solution →Unemployment, the consumer price index and corporate profits are cited in the chapter as examples of which type of indicator?Read the answer and worked solution →

Worked practice questions

The idea that buyers, through their spending choices, ultimately decide which goods are produced and in what quantities is known as:

  1. Collective ownership
  2. Freedom of enterprise
  3. Profit motive
  4. Consumer sovereignty
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Correct answer: D. Consumer sovereignty

1. Consumer sovereignty means consumers determine production through their purchases. 2. Under capitalism the consumer is treated as king. 3. This matches the definition of consumer sovereignty. 4. Profit motive drives producers and collective ownership is a socialist trait, so neither fits. _Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 1 Unit II "Basic Problems of an Economy and Role of Price Mechanism", p.2_

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In a capitalist economy, the question 'for whom to produce' is settled mainly by an individual's:

  1. Membership in the central planning board
  2. Buying capacity, which depends on income
  3. Equal entitlement guaranteed by the state
  4. Position in a fixed social hierarchy
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Correct answer: B. Buying capacity, which depends on income

1. Goods are produced for those who can pay for them. 2. Buying capacity rests on income from work and property owned. 3. Higher income means higher buying capacity and demand. 4. Equal state entitlement and planning boards belong to socialism, so they are ruled out. _Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 1 Unit II "Basic Problems of an Economy and Role of Price Mechanism", p.3_

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A socialist economy is also commonly described by which alternative name?

  1. Laissez-faire economy
  2. Centrally planned economy
  3. Free-market economy
  4. Profit-driven economy
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Correct answer: B. Centrally planned economy

1. In socialism resources are allocated by commands of a central planning authority. 2. Because of this it is called a command or centrally planned economy. 3. So 'centrally planned economy' is the correct alternative name. 4. Laissez-faire, free-market and profit-driven all describe capitalism, eliminating them. _Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 1 Unit II "Basic Problems of an Economy and Role of Price Mechanism", p.5_

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