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

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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) Exam

CMA Foundation Paper 4, Fundamentals of Business Economics and Management (FBEM), is an objective/MCQ paper under ICMAI Syllabus 2022. It covers Section A: Fundamentals of Business Economics (70%) and Section B: Fundamentals of Management (30%), carrying 100 marks in a two-hour offline exam with no negative marking.

Assessment

Question count not published by the exam provider

Time Limit

2 hours (120 minutes)

Passing Score

40% in the paper and 50% aggregate across the four Foundation papers

Exam Fee

Covered by the combined ICMAI CMA Foundation course registration fee; no separate Paper 4 fee is published (The Institute of Cost Accountants of India (ICMAI))

CMA Foundation Paper 4 (FBEM) Exam Content Outline

15%

Fundamentals of Business Economics - Basic Concepts

Basic concepts of economics, utility, wealth, theory of demand and elasticity, supply and market equilibrium, theory of production, cost analysis, and factors (means) of production.

20%

Forms of Market

Pricing of products and services under perfect competition, monopoly, duopoly, oligopoly and monopolistic competition, including price discrimination and firm equilibrium conditions.

20%

Money and Banking

Definition, types and functions of money, commercial and central banking, RBI functions, credit creation, credit-control tools such as CRR, SLR, repo rate and open market operations, money market, and inflation.

15%

Economic and Business Environment

PESTEL and VUCA frameworks, micro and macro environment, national income aggregates (GDP, GNP, NNP, per capita income), and India's economic reforms (LPG - liberalisation, privatisation, globalisation).

30%

Fundamentals of Management

Concept and nature of management, functions of management (planning, organising, staffing, directing, controlling), principles of Fayol and Taylor, motivation and leadership theories, delegation, coordination, and decision-making.

How to Pass the CMA Foundation Paper 4 (FBEM) Exam

What You Need to Know

  • Passing score: 40% in the paper and 50% aggregate across the four Foundation papers
  • Assessment: Question count not published by the exam provider
  • Time limit: 2 hours (120 minutes)
  • Exam fee: Covered by the combined ICMAI CMA Foundation course registration fee; no separate Paper 4 fee is published

Keys to Passing

  • Work through all 100 available questions
  • Review every answer and explanation
  • Track weak areas and revisit them
  • Use our AI tutor for tough concepts

CMA Foundation Paper 4 (FBEM) Study Tips from Top Performers

1Allocate time by section weight: economics is 70% of the paper, so prioritise demand, elasticity, market forms, and banking.
2Practise numerical MCQs on price, income and cross elasticity, since these recur in ICMAI model papers.
3Memorise the credit-control tools (CRR, SLR, repo rate, open market operations) and which way they move to control inflation.
4Learn the five management functions in order (planning, organising, staffing, directing, controlling) and match each to its purpose.
5Tag motivation and leadership theories to their authors (Maslow, Herzberg, McGregor, Fayol, Taylor) to avoid mix-ups.
6Because there is no negative marking, attempt every question and eliminate obviously wrong options first.

Frequently Asked Questions

What is the exam pattern for CMA Foundation Paper 4 (FBEM)?

Under ICMAI Syllabus 2022, Paper 4 is an offline objective paper carrying 100 marks in two hours. ICMAI model question papers present it as 50 multiple-choice questions of 2 marks each, and there is no negative marking.

Is there negative marking in CMA Foundation Paper 4?

No. The CMA Foundation level under ICMAI Syllabus 2022 is fully objective and does not apply negative marking, so candidates should attempt every multiple-choice question.

What are the sections and weightings in CMA Foundation Paper 4?

Paper 4 has two sections. Section A, Fundamentals of Business Economics, carries 70% and Section B, Fundamentals of Management, carries 30%. Within Section A, forms of market and money and banking carry 20% each, while basic concepts and the economic and business environment carry 15% each.

What marks do I need to pass CMA Foundation Paper 4?

ICMAI requires at least 40% in each individual paper and a 50% aggregate across all four Foundation papers to clear the Foundation level. Paper 4 is not assessed in isolation for the overall result.

Who conducts the CMA Foundation Paper 4 exam?

The Institute of Cost Accountants of India (ICMAI) sets and conducts the CMA Foundation examination, including Paper 4 on Fundamentals of Business Economics and Management, at its examination centres.

What topics are covered in Fundamentals of Business Economics?

Section A covers basic economic concepts, theory of demand and elasticity, supply and market equilibrium, production and cost, forms of market, money and banking, national income, and India's economic reforms.

What is the eligibility for CMA Foundation Paper 4?

Candidates must have passed Class 10 and Senior Secondary (10+2) or an equivalent recognised examination, and must register for the ICMAI CMA Foundation course before sitting Paper 4.

How is study time best allocated for Paper 4?

Because Section A carries 70% and Section B carries 30%, most candidates devote roughly 70% of their preparation to business economics and 30% to fundamentals of management.