APSET Paper 2 Mock Test - 1 (Commerce) - AP TET MCQ

The correct answer is to Prioritize robust digital infrastructure. 

Key Points

As per the passage, "This accelerated the digital transformation amongst MNCs, prompting them to prioritize a robust digital infrastructure and online customer engagement strategies."

The correct answer is Single-source suppliers.

Key Points

As per the passage, "Global supply chain networks experienced severe disruptions due to pandemic-induced restrictions, leading to a reevaluation of supply chain models heavily reliant on single-source suppliers, particularly from countries that suffered the most from the pandemic."

The correct answer is must also be positive.

Key PointsThe Correlation Coefficient:

• To measure how closely two variables are related to one another, correlation coefficients are used.
• The correlation coefficient value always lies between -1 to +1.
• If the correlation coefficient value is positive, then there is a similar and identical relationship between the two variables.

Linear Regression:

• A variable's value can be predicted using linear regression analysis based on the value of another variable.
• The dependent variable is the one for which the value is to be forecasted.
• The independent variable is the one which is used to make a prediction about the value of the other variable.

Important Points

• If the correlation coefficient has a positive value, then the slope of the regression line must also be positive.
• If the correlation coefficient has a negative value, then the slope of the regression line must also be negative.
• This observation should make it clear that there is a connection between the slope of the least squares line and the sign of the correlation coefficient.

Key-Points

SaaS:

• SaaS is an abbreviation of Software-as-a-Service.
• Software-as-a-Service (SaaS) is a software licensing model that allows access to the software on a subscription basis using external servers.
• It is accessed through a web browser with users logging in to the system using a username and password.
• SaaS has many business applications like file sharing, email, calendars, customer retention management, and human resources.
• As the software does not live on the licensing company’s servers, there is less demand for the company to invest in new hardware.
• It is easy to implement, easy to update, and debug, and can be less costly since users pay for SaaS as they go instead of purchasing multiple software licenses for multiple computers.
• Churn rate, also known as attrition rate, is the rate at which customers stop doing business with an entity; it is a measure of the number of individuals or items moving out of a collective group over a period of time. 
• In SaaS, the average churn rate is around 5%, and a good churn rate is considered 3% or less.
• This average rate varies across different industries and businesses, so in reality, there is no such universal average churn rate. 
• It has a number of applications:
  • ​Auditing functions
  • Email services
  • Automating sign-up for products and services
  • Shared company calendars which can be used for scheduling events
  • Managing documents including file sharing and document collaboration.
• Types of software that have migrated to a SaaS model are often focused on enterprise-level services, such as human resources.
• These types of tasks are often collaborative in nature, requiring employees from various departments to share, edit, and publish material while not necessarily in the same office.

Therefore, in SaaS, the average churn rate is around 5%.

Refer to:

‘’Essar Steel, one of the largest defaulters with around Rs 44,000 crore in questionable debt, when put up for sale, elicited expressions of interest from five bidders…. parties include the Ruias, who are the original promoters of Essar Steel.’

I is correct.

‘The acquisition of Bhushan Steel by Tata Steel and of Electro­steel by Vedanta. Bhushan Steel owed its financial creditors around Rs 56,000 crore, whereas the Tata Steel bid returned Rs 35,200 crore upfront to the financial creditors, besides giving them a 12.3% stake in the company in lieu of returning the remaining debt.’

II is incorrect.

‘Between April 2014 and December 2017, recovery rates varied from nil to just above 20%, and in the case of another three, the rate ranged between 23% and 29%. The average recovery rate for all 21 banks was a pathetic 10.8%.’

III is correct.

Brainstorming:

• Brainstorming is a group activity in which teams generate some creative ideas spontaneously to solve a specific problem.
• They come up with a vast collection of ideas without any fear of criticism and draw links between them to find out the potential solution.
• At first, even if the ideas seem a bit unrealistic, they are taken into consideration.
• In brainstorming sessions, the greater the number of ideas generated there is bigger the chance of producing radical and effective solutions. 

Therefore, ‘No ideas are ever criticized’ and ‘the more radical the ideas are the better’ – are the rules of the Brainstorming decision-making process.

The correct answer is Value-Oriented Customers.

Key Points

Value-Oriented Customers:

• They do not mind paying a high initial cost for a product if high quality and performance are associated with the product.
• They understand that their purchase is an investment that will benefit them in the long run.
• They maintain a healthy relationship with the vendors.

Additional Information
Technology-Oriented Customers:

• These customers are concerned with buying products that come equipped with the latest technology.
• They do not give much importance to cost, performance, and longevity while buying a product.
• For them being ahead in the technical aspect of the products they purchase is of utmost importance.
• These customers, too, maintain a healthy relationship with the vendors.

Cost-Oriented Customers:

• These customers are interested in the cheapest product available and are even ready to give up factors such as quality.
• There is a chance that they might blame the supplier in the event of failure of the product ignoring the fact that they purchased a low-cost product and compromised on quality. 
• Some consumers fix the problems related to the product by themselves or with the help of unauthorized personnel to save money.
• Such consumers may also be more interested in second-hand products but expect such products to perform at par with a brand new unit.
• Suppliers frequently face payment issues with such customers.

The 'marketing mix' (also known as the four Ps) is a foundation concept in marketing. The marketing mix has been defined as the "set of marketing tools that the firm uses to pursue its marketing objectives in the target market". Thus the marketing mix refers to four broad levels of marketing decision, namely: product, price, promotion, and place. The contemporary marketing mix, or the 4Ps, which has become the dominant framework for marketing management decisions, was first published in 1960. In services marketing, a modified and expanded marketing mix is used, typically comprising 7 Ps made up of the original 4 Ps plus process, people, physical environment. Occasionally service marketers will refer to eight Ps; comprising the 7 Ps plus performance.

The correct answer is A - III, B - I, C - II, D - IV.

Key Points

• Ind AS 37 - Provisions, Contingent Liabilities and Contingent Assets:
  • This standard provides guidelines on recognizing and measuring provisions (liabilities of unspecified amount or timing), contingent liabilities (potential liabilities that depend on future events) and contingent assets (potential assets that depend on future events).
  • It requires that organizations recognize a provision in the financial statements only when there is a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
• Ind AS 104 - Insurance Contracts:
  • This standard provides specifics on the recognition, measurement, presentation and disclosure of insurance contracts by any entity that issues such contracts.
  • It defines an insurance contract and requires appropriate provision for unearned premium, unexpired risks, claims, and claim settlement expenses. It also provides guidelines for profit recognition.
• Ind AS 2 - Inventories:
  • Ind AS 2 provides guidelines on how to account for inventories in the financial statements.
  • It includes principles for determining the cost of inventories and for recognizing an expense as these inventories are sold or as their value decreases.
  • The standard covers costs to be included in inventory value (like costs of purchase, costs of conversion, and other costs incurred to bring inventories to their present location and condition) and how to measure inventory (at the lower of cost and net realizable value).
  • The standard also discusses various techniques for cost determination like the FIFO (First In, First Out) and weighted average cost.
• Ind AS 19 - Employee Benefits:
  • This standard outlines how to account for various types of employee benefits, including short-term benefits (like wages and paid leave), post-employment benefits (like pensions and retirement benefits), and other long-term benefits (like long service leaves).
  • It establishes the obligation to recognize a liability when an employee has provided service, as well as the need to recognize an expense when the entity consumes the economic benefit arising from the service provided by an employee.

The most common forms of marketing researches conducted in most of the firms are the measurement of market potential and the analysis of market share. The market potential is the entire size of the market for a product at a specific time.

The concept of cognitive dissonance is relevant to study consumer's post-purchase behaviour. The theory of “cognitive dissonance” is of great importance in consumer behaviour and marketers have lots of interest in analyzing the post-purchase behaviour of consumers experienced by them.

Theory Y represents an optimistic and positive view of human nature. Herzberg used the term 'hygiene' to describe factors that cause dissatisfaction in the workplace, are extrinsic and are linked to compensation, job security, organisational politics, working conditions, quality of leadership and relationships between supervisors and subordinates.

About Consumer Protection Act:

• The act aimed at protecting the consumer from exploitation in the hands of manufacturers.
• This act provides for the establishment of Consumer Protection Forums at the district level, Consumer dispute redressal Commission at the state level and National Consumer Dispute Redressal Commission at a national level.
• The pecuniary limit for the district level authority is less than Rs. 20 lakh, from Rs. 20 lakh to 1 crore for state-level that more than 1 crore for a national commission.
• The consumer can appeal against the decision of a lower redressal authority to a higher authority.
• In 2019 a new Consumer protection act was introduced that provided for the establishment of the Central Consumer Protection Authority, widened the definition of consumer, increased the pecuniary limits, etc.

Thus, the Consumer Protection Act was introduced in 24th December, 1986.

The correct answer is Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of assertion (A).

Key PointsPrepaid Expenses

• Future expenses that are paid in advance are known as prepaid expenses.
• Prepaid expenses are first recognised as an asset on the balance sheet.
• The sum is recorded as an expense after the assets' benefits are realised over time.
• Example of Prepaid Expenses: Insurance is an excellent example of a prepaid expense, as it is customarily paid for in advance. If a company pays ₹12,000 for an insurance policy that covers the next 12 months, then it would record a current asset of ₹12,000 at the time of payment to represent this prepaid amount. In each month of the 12-month policy, the company would recognise an expense of ₹1,000 and draw down the prepaid asset by this same amount.

Liquid Assets:

• Liquid assets are those that can be quickly converted into cash.
• While assets are valuable belongings that can be turned to cash, not all of them can be sold for cash immediately or without incurring a loss.
• Cash, Bank balance, Accounts receivable, Treasury bills, notes, and bonds are some examples of liquid assets

Important Points Assertion (A): Prepaid expenses are not considered as liquid assets.

• The assertion is True as prepaid expenses are not considered liquid assets
  

Reason (R): Prepaid expenses cannot be converted into cash.

• The Reason (R) is also true & correctly explains the assertion (A) as prepaid expenses and income tax receivables, cannot be sold for cash, which is why they are not considered liquid assets.
• They are recorded as Other current assets, as prepaid expenses are the expenses that have been paid in advance before they are even due for payment. An obligation that is met in advance is an asset for the company,

The correct answer is Highly inelastic

Key Points

• This means that the demand for necessities (such as food, water, and shelter) does not change significantly, even if there is a change in their price.
• This is because these goods are essential for survival and are typically not optional purchases.
• Consumers will continue to purchase these goods even if their prices increase, although they may reduce their consumption of them slightly.
• On the other hand, the demand for luxury items is usually elastic, meaning that a change in their price will lead to a more significant change in the quantity demanded. 

Hence, the correct answer is Highly Inelastic.

Line and Staff Managers:

• Line managers usually have the final responsibility for achieving the organization's goals as they have the authority to direct the work of subordinates.
• Staff managers have the responsibility of helping and advising line managers in achieving organizational goals.
• HR managers perform staff functions.
• HR managers assist line managers in the decision-making process of an organization like recruiting, selecting, training, and compensating.
• Managing people, in a broader context, is every manager’s business and successful organizations generally combine the experience of line managers with the experience of HR specialists while utilizing the talents of employees to their greatest potential.
• HR managers have to win the hearts of employees working together with line managers and deliver results in a cost-effective manner.
• HR managers as indicated earlier are assuming a greater role in top management planning and decision making a trend that indicates the growing realization among executives that HRM can make significant contributions to the success of an organization.

Therefore, statement (A) is incorrect, but (R) is correct.

The correct answer is An employee compares his or her job's input-outcomes ratio with that of relevant others and then takes steps to correct any inequity.

Key Points Equity Theory:

• The equity theory proposes that employees compare their job's input-outcomes ratio with that of relevant others and then take steps to correct any perceived inequity.
• The equity theory is a motivation theory that seeks to explain how individuals are motivated to maintain a balance between the inputs they bring to a job (e.g. effort, skill, experience) and the outcomes they receive from that job (e.g. salary, recognition, benefits).
• According to the theory, individuals compare their input-output ratio with that of others who are seen as relevant and use this comparison to evaluate the fairness of their job situation.
• If an employee perceives that their input-output ratio is lower than that of others in similar positions, they may feel under-rewarded and become demotivated. In contrast, if an employee perceives that their input-output ratio is higher than that of others in similar positions, they may feel over-rewarded and become complacent.
• To restore equity, the employee may take steps such as adjusting their inputs (e.g. reducing effort), seeking a change in outcomes (e.g. requesting a raise), or changing the comparison level (e.g. comparing themselves to a different group of employees).
• The equity theory highlights the importance of perceived fairness in the workplace and suggests that employees are motivated not just by the absolute level of rewards, but also by the perceived fairness of those rewards relative to others in similar positions.

The correct answer is Rapid-penetration strategy.

 Key Points

Rapid-penetration Strategy:

• The term that best fits the definition provided is "penetration pricing". Penetration pricing is a pricing strategy in which a company sets a low price for a new product or service with the goal of attracting a large number of customers quickly and gaining a foothold in the market.
• Under a penetration pricing strategy, the company may initially sell the product at a loss or a low profit margin in order to gain market share and establish the product's reputation.
• The company may also spend heavily on advertising and promotions to create awareness and generate interest in the new product.
• The idea behind penetration pricing is that by setting a low price, the company can attract a large number of price-sensitive customers who are willing to try the product.
• Once the product has gained traction in the market, the company can gradually raise the price or introduce new features to increase profitability.

 Additional Information 

Slow penetration strategy: This is a pricing strategy in which a company sets a relatively low price for a new product or service in order to gradually gain market share over time. Unlike penetration pricing, which involves setting a very low price initially, slow penetration pricing involves setting a price that is competitive but still allows the company to earn a profit. Over time, the company may adjust the price as it gains more market share and establishes its brand.

Rapid skimming: This is a pricing strategy in which a company sets a high price for a new product or service in order to maximize profits in the early stages of the product's lifecycle. This strategy is often used for products or services that are innovative or unique, and for which there is limited competition. The goal is to attract customers who are willing to pay a premium for the product or service, and then gradually lower the price as competitors enter the market.

Slow skimming: This is a pricing strategy in which a company sets a high price for a new product or service but takes a slow approach to lowering the price over time. This strategy is often used for products or services that are not easily replicated by competitors, and for which the company has a strong competitive advantage. The goal is to maximize profits over the long-term by maintaining a premium price point and a loyal customer base.

Hence, the correct answer is Rapid-penetration Strategy.

The correct answer is all determinants of demand, other than own price of the commodity, remain constant

Key Points

•  The law of demand states that all else being equal, as the price of a commodity or service increases, the quantity demanded will decrease, and vice versa. This is also known as the inverse relationship between price and quantity demanded.
• This law is based on the assumption of "ceteris paribus", which means "all else being equal" in Latin. This assumption allows us to focus on the relationship between price and quantity demanded while ignoring other factors that could complicate the analysis.
• The other factors that could affect demand include income levels, prices of substitute goods, prices of complementary goods, expectations about future prices, demographic factors, and consumer tastes and preferences.
• For example, if we were trying to understand how the demand for apples changes when the price of apples changes, we'd have to assume that the consumers' incomes, the price of other fruits, consumer preferences for apples, etc., all remain constant or else those changes could impact the demand as well.
• Thus, the law of demand holds true when all determinants of demand, other than its own price, remain constant.

Important Points Here are some additional insights related to the law of demand:

• The law of demand is represented graphically with the demand curve, which slopes downwards from left to right. This graphical representation visually shows the inverse relationship between the price of a good or service and the quantity demanded.
• The law of demand is essentially a reflection of the consumer behavior of rational self-interest. When the price of goods rises, consumers tend to buy less because they are trying to get the most utility (satisfaction or need fulfillment) out of their limited budget, and vice versa.
• In certain cases, demand doesn't obey the law of demand. These are called Giffen goods and Veblen goods. In the case of Giffen goods (named after economist Robert Giffen), when price rises, people consume more - these tend to be inferior goods, for example, staple foods like bread or rice in very poor countries. Veblen goods (named after economist Thorstein Veblen) are luxury goods, where higher prices actually make the goods more desirable, encouraging more consumption.
• The law of demand also plays a crucial role in market equilibrium. It helps set the market price by interacting with the law of supply, and the point where the demand and supply curves meet is considered the market equilibrium.
• The concept of elasticity is closely linked to the law of demand. Price elasticity of demand measures the responsiveness of the quantity demanded to a change in the price. Some goods are highly elastic, meaning that a small price change can have a big impact on demand, while others are inelastic, meaning that demand doesn't change much when the price does.
• The law of demand is a fundamental principle of economics that helps businesses, governments, and individuals understand market dynamics, set prices, and predict responses to changes in price. However, it's important to remember that this law is a simplification of complex real-world phenomena and may not always apply due to other external factors and changing preferences.

The correct answer is statement I and II

Key Points

•  Perfect Competition: It refers to that market structure in which there are large number of selling firms who sell homogeneous products to large number of buyers.
• Fixed Cost is also known as supplementary cost and general cost, which is incurred by firm at the time of production and it remains fixed in short run irrespective of volume of output.
• Variable Cost is also known as prime cost and it varies according to the volume of output.
• Total Cost is sum total of fixed and variable cost.
• Average Fixed Cost has the shape of rectangular hyperbola and it is calculated by dividing TFC with Units.

Important Points 

Statement I: Under perfect competition, an increase in fixed cost results in an upward shift in AFC and ATC, and there is no effect on AVC and MC.

• Average Variable Cost has U shape in long run .Due to law of increasing returns it declines at initial point and when a firm attains its full capacity it becomes constant and then again due to law of diminishing returns it starts increasing.
• Marginal Cost refers to the additional cost which arises due to extra unit production.
• In case of Perfect Competition, when Fixed cost (like increase in rent etc.) increases then automatically it brings changes in AFC and ATC. (No effect on MC).
• Diagrammatic Representation of impact of Fixed Cost:
•  

Hence, Statement I is correct.

Statement II: Under perfect competition, an increase in variable cost results in leftward shift in AFC, ATC and MC.

• Under Perfect Competition increase in variable cost (like Raw material etc.) will lead to leftward (upward) shift in Average fixed cost, Average total cost as well as Marginal cost.

Note: Both Fixed and Variable cost affects the Marginal cost of production only in that case when there is existence of variable cost.

Hence, Statement II is correct.

Note: In case of Perfect competition, increase in fixed cost results in upward shifting of AFC and ATC without having any effect on MC, whereas increase in Variable Cost will have impact on Average Cost and MC.

Hence, the correct answer is Statement I and Statement II.

Additional Information

 When Variable Cost increases, it will result into upward shift in average cost curves as well as marginal cost due to which market production cost will rise and causing contraction in supply.

According to D. Katz, morale has four dimensions are: 

• Job satisfaction
• Satisfaction with wages and promotional opportunities,
• Identification with the company
• Pride in the workgroup.

The assertion is correct. International business has grown in more recent years at a faster pace than global production. The reason is given that growth through trade has increased, but growth through foreign direct investment has not is incorrect. The increasing inflow of FDI in recent years has also brought growth in the economy.

The correct answer is 3.5%.

Key PointsReal rate of interest:

The real rate of interest is the interest rate adjusted for inflation. It represents the rate at which the purchasing power of an investment increases. In other words, it is the rate of return on an investment after accounting for the impact of inflation.

The formula for calculating the real rate of interest is as follows:

Real rate of interest = Nominal rate of interest - Inflation rate

For example, if the nominal interest rate on a savings account is 4%, and the inflation rate is 2%, the real rate of interest would be:

Real rate of interest = 4% - 2% = 2%

This means that the investor is earning a real rate of return of 2% on their investment after accounting for inflation 

The real rate of interest is the nominal rate of interest minus the inflation rate.

Therefore, the real rate of interest in this scenario would be:

Real rate of interest = Nominal rate of interest - Inflation rate
Real rate of interest = 6.5% - 3.0%
Real rate of interest = 3.5%

So the real rate of interest in this scenario is 3.5%.

The correct answer is 'option 2'

The three pillars of APEC are:

1. Trade and Investment Liberalization
2. Business Facilitation
3. Economic and Technical Cooperation (ECOTECH)

Therefore, the correct answer is 'a, b and c'

Additional Information

The 21 APEC member economies jointly work towards the realization of free and open trade and investment in the Asia-Pacific by 2020 and the establishment of a greater regional community to address the economic and social dimensions of development, a commitment made in 1994 known as the Bogor Goals.

The Three Pillars of APEC's agenda focus on:

1. Trade and Investment Liberalization

• APEC members take actions to reduce tariff and non-tariff barriers to trade and investment that boost job creation, incomes, and growth. Collaboration is guided by APEC's Regional Economic Integration agenda and includes the advancement of bilateral and regional trade agreements and the long-term goal of a Free Trade Area of the Asia-Pacific (FTAAP).

2. Business Facilitation

• APEC members pursue measures to in the region and open new economic opportunities including for small firms, women, and youth. APEC's Structural Reform agenda supports the development and harmonization of policies that improve market access and efficiency and uphold public interest such as the safeguarding of health and safety.

3. Economic and Technical Cooperation (ECOTECH)

• ECOTECH builds the technical capacity of APEC's diverse members to promote trade, investment, and robust, secure, and sustainable economic growth that widely benefits the region's people.
• Priorities include strengthening anti-corruption, cross-border education and skills training, emergency preparedness, energy security, environmental protection, defence against pandemics and infrastructure development, among others.

The correct answer is 5 lakhs.

​Key Points

• To safeguard small investors from high-risk products, market regulator Sebi made a steep hike in the minimum investment size for any equity derivative product to Rs 5 lakh from Rs 2 lakh.
• It has been decided that the minimum lot size of an equity derivative contract could be increased to Rs 5 lakh.
• For stock derivatives, the lot size (in units of underlying) would be fixed as a multiple of 25, provided the lot size is not less than 50.

Additional Information

• SEBI stands for Securities and Exchange Board of India.
• The Securities and Exchange Board of India is the regulatory body for the securities and commodity market in India under the jurisdiction of the Ministry of Finance, Government of India.
• The headquarters of SEBI is in Mumbai.
• The Chairperson of SEBI is Ajay Tyagi., 

The correct answer is ​Buttle's Model.

Key Points

Buttle's Model:

• The Customer Relationship Management (CRM) value chain model is a model that shows firms how to build and implement CRM strategies.
• It was created in the year 2004 by Francis Buttle.
• This model's major goal is to connect an organization's internal and external processes in order to provide value for customers while making a profit. In addition, the concept can be used in both B2B (Business to Business) and B2C (Business to Customer) companies.

Additional Information

IDIC Model:

• The Peppers and Rogers Group created the IDIC model as a basic framework for adopting CRM in a range of settings.
• It was developed in the year 2004.
• IDIC stands for identify, differentiate, interact, and customize, which are the four steps of CRM deployment.

Payne's Model:

• The Five Forces CRM model was developed by Adrian Payne and Pennie Frow.
• Payne & Frow’s Five-Step Process Model ensures that the customer experience is consistent across all departments.

The correct match is (a) - (ii), (b) - (iv), (c) - (i), (d) - (iii).

Section 4 of the Indian Contract Act 1872 states that "The communication of a proposal is complete when it comes to the knowledge of the person to whom it is made. The communication of an acceptance is complete-as against the proposer, when it is put in a course of transmission to him so as to be out of the power of the acceptor; as against the acceptor when it comes to the knowledge of the proposer.

Scalability refers to the ability of a CRM application to handle a large amount of customer data in an efficient manner.

• Scalability is an application’s ability to accommodate rising resource demand gracefully, without a noticeable loss in quality of service (QoS).
• One of the first steps in migrating to a new solution is to know the scalability of the proposed application.
• In short, scalability is the ability of software to accommodate the data of a large number of consumers.​
• Flexibility and Elasticity refer to the ability of CRM applications to adapt themselves to changes in consumer data. For example, CRM users outgrow in numbers from x to y over a period of t years. If the existing CRM system does not have a provision for adding y users, it would fail.
• Usability refers to the ease in terms of the use of the CRM application. An unnecessarily complex application will confuse the seller, as well as the consumer and, might lead to a long gestation period.