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100+ Free CMA Foundation Paper 4 (FBEM) Practice Questions

CMA Foundation Paper 4: Fundamentals of Business Economics and Management practice questions are available now; exam metadata is being verified.

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Key Facts: CMA Foundation Paper 4 (FBEM) Exam

100

Total Marks

ICMAI Syllabus 2022

2 hrs

Exam Duration

ICMAI Syllabus 2022

70:30

Economics : Management

ICMAI Paper 4 Syllabus

MCQ

Objective Format

ICMAI Model Question Papers

No

Negative Marking

ICMAI Foundation Pattern

40% / 50%

Paper / Aggregate Pass

ICMAI Passing Criteria

CMA Foundation Paper 4 (FBEM) is a 100-mark, two-hour offline objective paper set by ICMAI under Syllabus 2022. Section A, Fundamentals of Business Economics, carries 70% and covers basic concepts (15%), forms of market (20%), money and banking (20%), and economic and business environment (15%). Section B, Fundamentals of Management, carries 30%. The paper is fully MCQ with no negative marking. To pass, candidates need at least 40% in the paper and 50% aggregate across all four Foundation papers.

Sample CMA Foundation Paper 4 (FBEM) Practice Questions

Try these sample questions to test your CMA Foundation Paper 4 (FBEM) exam readiness. Each question includes a detailed explanation. Start the interactive quiz above for the full 100+ question experience with AI tutoring.

1In economics, the term 'utility' refers to:
A.The usefulness of a commodity in a moral or social sense
B.The market price charged for a commodity
C.The total revenue earned from selling a commodity
D.The want-satisfying power of a commodity or service
Explanation: Utility is the want-satisfying power of a good or service — the capacity of a commodity to satisfy a human want. It is subjective and ethically neutral, so a good can have utility even if it is harmful.
2According to the Law of Demand, other things remaining constant, when the price of a normal good falls, its quantity demanded:
A.Falls
B.First rises then falls
C.Remains unchanged
D.Rises
Explanation: The Law of Demand states an inverse relationship between price and quantity demanded, ceteris paribus. A fall in price increases quantity demanded due to the substitution and income effects, giving the demand curve its downward slope.
3If the price of wine rises by 20% and the price elasticity of demand for wine is -0.6, the quantity demanded will:
A.Fall by 12%
B.Fall by 20%
C.Rise by 12%
D.Fall by 0.6%
Explanation: Percentage change in quantity demanded equals elasticity times percentage change in price: -0.6 × 20% = -12%. The negative sign shows the inverse price-quantity relationship, so quantity demanded falls by 12%.
4A demand curve that is a horizontal straight line parallel to the X-axis represents demand that is:
A.Perfectly inelastic
B.Unitary elastic
C.Perfectly elastic
D.Relatively inelastic
Explanation: A horizontal demand curve indicates perfectly elastic demand, where elasticity equals infinity. At the given price consumers will buy any quantity, but any price rise drops quantity demanded to zero — typical of a perfectly competitive firm's product.
5Cross elasticity of demand between two goods is positive. The two goods are:
A.Complementary goods
B.Giffen goods
C.Unrelated goods
D.Substitute goods
Explanation: Positive cross elasticity means a rise in the price of one good increases the demand for the other, which is the behaviour of substitutes such as tea and coffee. Consumers switch to the relatively cheaper alternative.
6For an inferior good, the income elasticity of demand is:
A.Positive
B.Equal to one
C.Zero
D.Negative
Explanation: Income elasticity of demand for an inferior good is negative: as consumer income rises, demand for the inferior good falls because consumers shift to superior substitutes. Coarse grains versus finer cereals is a classic example.
7The Law of Diminishing Marginal Utility states that as a consumer consumes more units of a commodity, the marginal utility derived from each successive unit:
A.Increases
B.Remains constant
C.Decreases
D.Becomes infinite
Explanation: The Law of Diminishing Marginal Utility says that as consumption of a good increases, the additional satisfaction from each extra unit declines. This explains the downward-sloping demand curve and why consumers pay less for additional units.
8A consumer is in equilibrium under the indifference curve approach when:
A.The budget line is tangent to the highest attainable indifference curve
B.Marginal utility of money is zero
C.The indifference curve crosses the budget line
D.Total utility is minimum
Explanation: Consumer equilibrium occurs where the budget line is tangent to the highest attainable indifference curve, so the marginal rate of substitution equals the price ratio. At this point the consumer maximises satisfaction within the given income.
9Which of the following is NOT a determinant of demand for a normal good?
A.Price of the good
B.Income of the consumer
C.Prices of related goods
D.Cost of production of the good
Explanation: Demand is governed by price of the good, consumer income, prices of related goods, tastes, and expectations. Cost of production affects supply, not demand directly, so it is not a determinant of demand.
10The price of a burger rises from Rs. 12 to Rs. 20 and daily sales fall from 300 to 200 units. Using the percentage method, the price elasticity of demand is approximately:
A.0.50
B.0.83
C.1.20
D.2.00
Explanation: Percentage change in quantity = (100/300) = 33.33%; percentage change in price = (8/12) = 66.67%. Elasticity = 33.33 / 66.67 = 0.50, so demand is inelastic in this range.

About the CMA Foundation Paper 4 (FBEM) Practice Questions

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