PIPFA Intermediate Level Examination (Pakistan)

Which of the following describes the 'Law of Demand' in microeconomics?

• AConsumers buy more of a good when its price rises due to prestige value
• BAs price increases, supply increases proportionally
• CIncome increase always leads to a decrease in demand for luxury goods
• DOther factors remaining constant, price and quantity demanded are inversely related

If a 10% increase in the price of a commodity leads to a 20% decrease in its quantity demanded, what is the price elasticity of demand?

• AElasticity is -0.5, meaning demand is inelastic
• BElasticity is 0.0, meaning demand is perfectly inelastic
• CElasticity is -1.0, meaning demand is unitary elastic
• DElasticity is -2.0, meaning demand is elastic

Which of the following is a primary characteristic of a monopoly market structure?

• AA large number of buyers and sellers selling homogeneous products
• BEasy entry and exit of firms in the long run
• CMutual interdependence between a few dominant firms
• DA single seller with high barriers to entry for new competitors

Which of the following actions represents an expansionary fiscal policy?

• AThe central bank increasing the reserve requirement ratio
• BThe government increasing corporate and individual tax rates
• CThe government reducing its total public expenditure
• DThe government increasing public spending and reducing taxes

In Pakistan's GDP structure, which sector historically contributes the largest share to the total GDP?

• AMining and quarrying sector
• BAgriculture sector
• CManufacturing and industrial sector
• DServices sector

What is the primary indicator used to measure inflation in Pakistan on a monthly basis?

• AGross Domestic Product (GDP) Deflator
• BSensitive Price Indicator (SPI)
• CWholesale Price Index (WPI)
• DConsumer Price Index (CPI)

Which of the following is considered a quantitative (general) tool of monetary policy used by the State Bank of Pakistan (SBP)?

• ARationing of credit for specific sectors
• BFixing margin requirements on imports
• COpen Market Operations (OMOs)
• DMoral suasion directed at commercial bank executives

If Pakistan experiences a persistent deficit in its Balance of Payments (BOP), which of the following accounting entries directly captures the offsetting financing?

• AAn increase in foreign direct investment in the capital account
• BAn increase in workers' remittances in the current account
• CA decrease in the trade deficit of goods and services
• DA decrease in official foreign exchange reserves in the financial account

Which of the following market structures features a large number of sellers producing homogeneous products, with no individual firm able to influence the market price?

• APerfect Competition
• BMonopolistic Competition
• COligopoly
• DMonopoly

According to the Law of Diminishing Marginal Utility, as an individual consumes more units of a commodity, what happens to utility?

• ATotal utility decreases with each additional unit consumed
• BMarginal utility increases at an increasing rate
• CTotal utility increases, but marginal utility derived from each additional unit decreases
• DMarginal utility remains constant while total utility falls to zero

Public goods are distinguished from private goods by which two primary characteristics?

• AHigh cost of production and government regulation
• BRivalry in consumption and excludability
• CNon-rivalry in consumption and non-excludability
• DLimited availability and distribution through market pricing

What is the key difference between Gross Domestic Product (GDP) and Gross National Product (GNP)?

• AGDP includes indirect taxes while GNP excludes them
• BGDP includes depreciation while GNP excludes it
• CGDP is adjusted for inflation while GNP is always calculated at current prices
• DGDP measures economic output within a country's borders, while GNP includes net factor in…

When the State Bank of Pakistan (SBP) increases its policy rate (discount rate) during high inflation, what economic sequence is expected?

• ACommercial banks raise lending rates, credit expansion contracts, aggregate demand drops,…
• BCommercial banks lower deposit rates, aggregate savings fall, consumption increases, and…
• CThe value of the Pak Rupee depreciates immediately, making imports cheaper and lowering i…
• DGovernment borrowing costs decrease, leading to lower public debt and reduced fiscal defi…

According to the Sweezy model of oligopoly (Kinked Demand Curve), why do prices tend to be rigid or sticky?

• AFirms collude secretly to fix prices at a level that maximizes joint industry profits
• BGovernment price control committees strictly penalize any price adjustments
• CFirms face a perfectly elastic demand curve at all price levels
• DIf a firm raises its price, competitors will not follow, but if it lowers its price, comp…

A major devaluation of the Pakistani Rupee (PKR) is intended to improve the trade balance. According to economic theory, this policy will only succeed in the short run if which condition is met?

• AThe country's imports consist entirely of luxury consumer goods
• BThe Central Bank increases money supply proportionally to support the devaluation
• CThe sum of price elasticities of demand for exports and imports is greater than one (Mars…
• DForeign buyers agree to pay for Pakistani exports in Pak Rupees rather than foreign curre…

Which of the following is classified as a direct tax in Pakistan's tax structure?

• AFederal Excise Duty (FED)
• BSales Tax
• CCustoms Duty
• DIncome Tax

In consumer behavior theory, what does an indifference curve represent?

• ACombinations of two goods that yield the same level of total utility to the consumer
• BThe consumer's budget constraint at different levels of income
• CThe relationship between price changes and quantity supplied of a luxury good
• DThe points of maximum output achievable with a fixed set of resources

What is a primary distinction between Classical and Keynesian economic views regarding unemployment?

• AKeynesians believe wage-price flexibility automatically restores full employment; Classic…
• BClassicals argue that market economies fail to adjust and require government deficit spen…
• CClassicals believe the economy automatically adjusts to full employment in the long run,…
• DClassicals advocate for central bank control of interest rates while Keynesians reject mo…

If the income elasticity of demand for a good is negative (less than zero), how is the good classified?

• AA luxury good
• BA normal good
• CAn inferior good
• DA Giffen good

In Pakistan, agricultural workers who lose jobs during the winter off-season represent which type of unemployment?

• AStructural unemployment
• BFrictional unemployment
• CCyclical unemployment
• DSeasonal unemployment

Under the Contract Act 1872 of Pakistan, when is a proposal (offer) considered communicated and complete?

• AWhen it comes to the knowledge of the person to whom it is made
• BAs soon as the offeror writes the offer letter and places it in the mailbox
• CWhen the offeree drafts the acceptance letter but before mailing it
• DOnly when the contract is signed in the presence of a notary public

Under the Contract Act 1872, an agreement made without consideration is void. Which of the following is a valid exception to this general rule?

• AAn oral promise made to pay a business partner a bonus out of friendship
• BAn agreement between commercial traders to supply goods for free to promote goodwill
• CA promise to pay a bribe to a public official for securing a contract
• DA promise written and registered, made on account of natural love and affection between c…

Under the Contract Act 1872, what is the primary difference between a void agreement and a voidable contract?

• AA void agreement is enforceable at law; a voidable contract is never enforceable
• BA void agreement is voidable only by a court order, while a voidable contract is void fro…
• CA void agreement is not enforceable by law from the beginning, whereas a voidable contrac…
• DA void agreement involves criminal elements, while a voidable contract involves minor civ…

If a bank manager influences a distressed borrower to accept a loan at an excessively high interest rate by exploiting the borrower's mental distress, which ground can the borrower claim to avoid the contract?

• ACoercion
• BFraud
• CMisrepresentation
• DUndue Influence

According to the Partnership Act 1932 of Pakistan, which of the following is the essential element that defines a partnership?

• AAn agreement to share profits of a business carried on by all or any of them acting for a…
• BRegistration of the partnership deed with the Registrar of Firms
• CA minimum capital contribution of PKR 100,000 by each partner
• DA written agreement signed in the presence of a magistrate

What is the legal implication of the concept of 'Mutual Agency' in a partnership firm under the Partnership Act 1932?

• AEvery partner must get approval from all other partners before buying lunch
• BThe firm is legally registered as an independent corporate entity separate from its partn…
• CPartners are prohibited from engaging in any individual business outside the firm
• DEach partner acts as both a principal and an agent of the firm, and their acts within imp…

Under the Partnership Act 1932, in which of the following circumstances must a partnership firm be compulsorily dissolved?

• ABy the retirement of a partner who holds less than 10% share in profits
• BWhen a partner files a lawsuit against a client of the firm
• CBy the happening of any event which makes it unlawful for the business of the firm to be…
• DWhen the firm fails to earn a profit for two consecutive financial years

Under the Sale of Goods Act 1930, how is a 'Condition' distinguished from a 'Warranty'?

• AA condition is an oral promise, while a warranty must always be in writing
• BA condition applies only to real estate, while a warranty applies to movable goods
• CBreach of a condition gives a right to claim damages only; breach of a warranty gives a r…
• DA condition is essential to the main purpose of the contract, the breach of which gives a…

What does the doctrine of 'Caveat Emptor' mean under the Sale of Goods Act 1930?

• ALet the buyer beware — the seller is not responsible for the buyer's bad selection unless…
• BLet the seller beware — the seller must guarantee that the goods are fit for all purposes
• CThe contract must be registered with the chambers of commerce
• DTitle of goods passes to the buyer only after full payment is received

Under the Negotiable Instruments Act 1881, which of the following is a key legal difference between a Promissory Note and a Bill of Exchange?

• AA promissory note is an order to pay, while a bill of exchange is a promise to pay
• BA promissory note requires acceptance by the drawee before payment, while a bill of excha…
• CA promissory note cannot be transferred, while a bill of exchange is freely negotiable
• DA promissory note has two primary parties (maker and payee), while a bill of exchange has…

To qualify as a 'Holder in Due Course' under the Negotiable Instruments Act 1881, which of the following conditions must be met?

• AThe holder must acquire the instrument after its maturity date
• BThe holder must acquire the instrument for free as a gift
• CThe holder must possess the instrument in good faith, for consideration, and before it be…
• DThe holder must obtain permission from the State Bank of Pakistan to cash it

In Pakistan, what is the legal status of an agreement entered into by a minor (a person under 18 years of age)?

• AIt is valid and binding if signed by the minor's guardian
• BIt is voidable at the option of the minor when they reach age of majority
• CIt is fully enforceable against the minor in commercial transactions
• DIt is void ab initio (void from the beginning) and cannot be ratified later

Which of the following describes a 'Quasi-Contract' under the Contract Act 1872?

• AA relation resembling those created by contract, imposed by law to prevent unjust enrichm…
• BAn agreement made electronically via email or websites without physical signatures
• CA contract that is only half-completed by one of the performing parties
• DA contract entered into under threat of physical violence

Under the Contract Act 1872, when is a contingent contract to do or not to do anything on the happening of an uncertain future event enforceable?

• AImmediately upon signing the agreement
• BOnly when that event has happened
• CIf the event becomes impossible to happen
• DWhen both parties agree to waive the contingency clause

If a contract contains a clause stating that a party must pay a fixed sum of PKR 500,000 in case of breach, what is the court's approach under Section 74 of the Contract Act 1872?

• AThe court must award the exact amount of PKR 500,000 as punitive damages without proof of…
• BThe court will declare the entire contract void because penalty clauses are illegal in Pa…
• CThe court will award reasonable compensation not exceeding the specified amount of PKR 50…
• DThe court will ignore the clause and calculate damages based solely on market value

Under the Partnership Act 1932, which of the following is a statutory duty of every partner, which cannot be excluded by agreement?

• AThe duty to attend board meetings of competing companies
• BThe duty to contribute equal capital to the firm
• CThe duty to draw a monthly salary from the firm's profits
• DThe duty to carry on the business of the firm to the greatest common advantage and to be…

Under the Sale of Goods Act 1930, in which of the following scenarios can an unpaid seller exercise the right of 'Stoppage in Transit'?

• AWhen the buyer becomes insolvent and the goods are in the possession of a carrier (middle…
• BWhen the seller simply changes their mind before the carrier arrives at the destination
• CWhen the buyer refuses to pay for previous purchases that were sold on credit
• DOnly if the goods are perishable and are about to spoil

What is the legal effect of a 'Special Crossing' on a check under the Negotiable Instruments Act 1881?

• AThe check can only be cashed at the counter of the clearing house
• BThe paying banker must pay the amount of the check only to the specific banker named in t…
• CThe check becomes non-negotiable and cannot be transferred further
• DThe check must be paid in foreign currency only

Which of the following acts falls OUTSIDE the 'Implied Authority' of a partner under Section 19 of the Partnership Act 1932?

• APurchasing goods of a kind used in the ordinary business of the firm
• BEngaging servants or employees for the business of the firm
• CSubmitting a dispute relating to the business of the firm to arbitration
• DReceiving payments of debts due to the firm and issuing receipts

Under the law of agency (Contract Act 1872), what is the responsibility of an agent who appoints a sub-agent without having the authority to do so?

• AThe principal becomes directly liable to the sub-agent for their remuneration
• BThe sub-agent is not responsible for any acts, and the principal bears all losses
• CThe contract of agency is automatically dissolved
• DThe agent is responsible for the acts of the sub-agent both to the principal and to third…

Which of the following cost items is classified as a 'Prime Cost' in a manufacturing firm?

• ADirect Materials and Direct Labor
• BDirect Labor and Factory Overheads
• CFactory Overheads and Administrative Expenses
• DIndirect Materials and Selling Expenses

A company has an annual demand of 20,000 units. The ordering cost is PKR 2,000 per order, and the carrying cost is PKR 100 per unit per annum. What is the Economic Order Quantity (EOQ)?

• A400 units
• B894 units
• C283 units
• D800 units

In a period of rising prices (inflation), which inventory valuation method results in the highest closing inventory value and the lowest Cost of Goods Sold (COGS)?

• AWeighted Average Cost method
• BLIFO (Last-In, First-Out) method
• CFIFO (First-In, First-Out) method
• DSimple Average Cost method

A worker is paid under the Halsey Premium Plan. The standard time for a job is 10 hours, and the hourly rate is PKR 200. If the worker completes the job in 8 hours, what is their total earnings?

• APKR 1,600
• BPKR 2,000
• CPKR 1,700
• DPKR 1,800

If a factory pays its workers an overtime premium of 50% above the basic wage rate for rush orders requested by a specific customer, how should this overtime premium be accounted for?

• ACharged directly to the specific job as direct labor cost
• BTreated as factory overhead and distributed across all jobs
• CCharged to the administrative expense account for the month
• DWritten off directly to the profit and loss statement as an abnormal loss

A company's actual factory overheads are PKR 620,000. Overheads were applied at a predetermined rate of PKR 15 per machine hour. Actual machine hours worked were 40,000. What is the under- or over-applied factory overhead?

• APKR 20,000 under-applied
• BPKR 20,000 over-applied
• CPKR 600,000 under-applied
• DPKR 600,000 over-applied

Using the High-Low method, a company analyzes electricity costs. At 5,000 machine hours, cost is PKR 150,000. At 8,000 machine hours, cost is PKR 210,000. What is the variable cost per machine hour?

• APKR 30 per hour
• BPKR 26.25 per hour
• CPKR 20 per hour
• DPKR 25 per hour