NTA UGC NET/JRF Exam, Dec. 2020/June 2021 (Commerce) Shift-II

Total Questions: 100

41. Any planning of tax which aims at reducing tax liability in legally recognised permissible way can be termed as an instance of Tax avoidance. • Tax avoidance is reducing or negating tank liability in legally permissible ways and has legal sanction.

  1. Reciprocity and transparent
  2. Benefactory and resilient
  3. Non- discriminatory
  4. Binding and enforceable commitments
  5. Protective and benevolent
    Choose the correct answer from the option given below.
Correct Answer: (c) 1, 3 and 4 only
Solution:The principles of trade policy framework under the WTO are reciprocity and transparent, Non-discriminatory, binding and enforceable commitments.

42. The right of the consumer as enunciated under section 6 of the consumer protection Act, 1986 includes:

  1. To be protected against the marketing of goods and services which are hazardous to life and property
  2. To be assured the competitive price and low cost quality products, profits, diversity and equity
  3. To protected for multiple use of products, profits, diversity and equity
  4. To be protected for multiple use of products, profits, diversity and equity

  5. To be informed about the quality, potency, purity and price of goods or service
    Choose the correct answer from the option given below:

Correct Answer: (d) 1, 3 and 4 only
Solution:

 The rights of the consumer as enunciated under section 6 of the consumer protection Act, 1989 includes:-

• Right to be protected against the marketing of goods, products or services which are hazardous to life and property.
• Right to be assured, wherever possible, access to a variety of goods, products or services at competitive prices.
• Right to be informed about the equality, quantity, potency, purity, standard and price of goods, products or services.
• Right to be heard and to be assured that consumer's interests will receive due consideration at appropriate fora.
• Right to consumer awareness.
• Right to seek redressed against unfair trade practice or restrictive trade practices or unscrupulous exploitation of consumers.

43. Which of the following events after the balance sheet date would normally qualify as adjusting events according to AS-4 (Events after balance sheet date)?

  1. The insolvency of a customer on the balance sheet date?
  2. A decline in the market value of investments
  3. The declaration of an ordinary dividend
  4. The determination of the cost of assets purchased before the balance sheet date
    Choose the most appropriate answer from the options given below
Correct Answer: (d) 1 and 4 only
Solution:

Adjusting events according to AS-4 (Events after balance sheet date) are the insolvency of a customer on the balance sheet date and the determination of the cost of assets purchased before the balance sheet date.
AS-4 Events occurring after the balance sheet date.

44. Management Accounting information is used for which of the following distinctive purposes

  1. Measurement
  2. Control
  3. Recording transactions
  4. Alternative choices
    Choose the most appropriate answer from the option given below:
Correct Answer: (c) 1, 2 and 4 only
Solution:

Management accounting information is used for the purpose of measurement, control, Alternative choices.
• Management accounting helps the management in controlling the performance of the business, with various accounting methods like Budgetary control, cost variance etc.
• With the helps of various accounting tools like marginal costing, Break-even analysis etc. Management can finds various alternatives
• It also helps in measuring performance with standardized performance and a report of deviation from the standard performance.

45. A U-shaped long-run average cost curve is based on the assumptions that:

  1. Greater division of labour and specialisation occur to larger firms
  2. Minimum cost of production at various level of output
  3. Economies of scale prevail at small levels of output
  4. It become more difficult to manage the firm effectively as it grows bigger
  5. Diseconomies of scale prevail at larger level of output
    Choose the correct answer from the options given below
Correct Answer:  (d) 1, 3, 4 and 5 only
Solution:

A U-shaped long-run average cost curve is base on the assumptions that are:-
• Greater division of labour and specialisation occure to larger firms.
• Economics of scale prevail at small levels of output.
• It becomes more difficult to manage the firm effectively as it grows bigger.
• Diseconomics of scale prevail at large level of output.

Note:- Long run Average Cost (LAC) per unit cost incurred by a firm i.e long run total costs divided by the level of output. LAC curve is derived as an envelope tangent of all SAC curves U-Shaped curve due to the operation of law of returns to scale. Also known as envelope and planning curve.

46. Identify the necessary conditions for price discrimination:

  1. There should be imperfect competition in markets
  2. Markets must be separable
  3. Differentiated products and interdependence between firms
  4. Elasticity of demand must be different in different markets
    Choose the most appropriate answer from the option given below:
Correct Answer: (d) 1, 2 and 4 only
Solution:

The necessary conditions for price discrimination are:-
• There should be imperfect competition in market.
• Markets must be separable.
• Differentiated products and interdependence between firms.

Conditions for price Discrimination:-
• Existence of monopoly.
• Separate market.
• No contact between Buyers.
• Different elasticity of demand.
• Artificial differences between goods.
• Production of commodity to order.

47. Which of the following explains downward slope of an ordinary demand curve?

  1. Income effect of price change
  2. Substitution effect of price change
  3. Utility Maximising behaviour of consumer
  4. Risk averse behaviour of consumer
    Choose the most appropriate answer from the options given below
Correct Answer: (c) 1, 2 and 3 only
Solution:

The downward slope of an ordinary demand curve is explained by the following statements:-
• Income effect of price change.
• Substitution effect of price change.
• Utility maximising behaviour of consumer.
• Law of diminishing marginal utility.
• Size of Consumer Group.

Downward sloping demand curve-
• When the price of commodity increases, its demand decreases.
Similarly when the price of a commodity decreases its demand increases. The law of demand assumes that the other factors affecting the demand of a commodity remain the same.
Thus, the demand curve is downward sloping from left to right.

48. The reasons put forth for the control over the activities of the international banks are:

  1. These banks encourage inflation by adding stock of money through credit creation
  2. These banks some times are responsible for bank failures that mar the interest of the depositors
  3. They cause unmanageable indebtedness among the borrowing governments by charging high interest rates
  4. They do not adhere to the credit allocation policy of the host government
    Choose the most appropriate answer from options given below:
Correct Answer: (d) 1, 2, 3, 4
Solution:

The reasons put forth for the control over the activities of the international banks are:-
• These banks encourage inflation by adding stock of money supply through credit creation.
• These banks some times are responsible for bank failure that mar the interest of the depositors.
• They cause unmanageable indebtedness among the borrowing governments by charging high interest rates.
• They do not adhere to the credit allocation policy of the host government.

49. A new issue debt or shares will invariably involve floatation costs in the form of:

A. Legal fees
B. Administrative expenses
C. Brokerage
D. Underwriting
E. Risk Premium
Choose the most appropriate answer from the option given below:

Correct Answer: (c) (A), (B), (C), (D) only
Solution:

A new issue debt or shares will invariably involve floatation costs in the form of legal fees, Administrative expenses, Brokerage, underwriting, risk premium.

• Floating cost are incurred when the funds are raised. Generally, the cost of floating a debt is less than the cost of floating an equity issue.
• This may encourage a company to use debt is less than issued ordinary shares. The owner’s capital is increased by retaining the earnings no flotation cost is incurred.

50. Which of the following are the reasons for raising funds via securitization:

A. To raise capital using non-conventional sources
B. To accelerate earnings for financial reporting purposes
C. The diversify funding resources
D. The potential for reducing cost
Choose the most appropriate answer from the options given below:

Correct Answer: (b) (B), (C), (D) only
Solution:

The reasons for raising funds via securitization are:-

• To accelerate earnings for financial reporting purposes.
• To diversify funding resources.
• The potential for reducing funding cost.
Note:- Securitization is the process in which certain types of assets are pooled so that they can be packaged into interest-bearing securities. The interest and principal payments from the assets are passed through to the purchasers of the securities.