NTA UGC NET/JRF Exam, December 2022 (Commerce) Shift-I

Total Questions: 100

11. ‘Sales Revenue Maximization’ as an alternative objective of business firms was postulated by whom of the following?

Correct Answer: (c) W.J. Baumol
Solution:

Baumol’s Hypothesis of Sales Revenue Maximisation. According to Baumol, “maximisation of sales revenue is an alternative to profit maximisation objective”. The reason behind this objective is to clearly distinct ownership and management in large business firms. This distinction helps the managers to set their goals other than profit maximisation goal. Under this situation, managers maximise their own utility. According to Baumol, the most reasonable factor in managers utility functions maximisation of the sales revenue.

12. Which of the following statements is correct regarding the slope and the point elasticity on all the points on a rectangular hyperbola shaped demand curve of a product?

Correct Answer: (b) Slope goes on changing while point elasticity remains the same
Solution:A Rectangular hyperbola is a curve under rectangular areas are equal. When the elasticity of demand is equal to unity (ed =1) at all points of the demand curve, then the demand curve is a rectangular hyperbola. Slope goes on changing while point elasticity remains the same is the correct statement regarding the slope and the point elasticity on all the points on a rectangular hyperbola shaped demand curve of a product.

13. The current market price of a company's share is Rs. 90 and the expected dividend per share next year is Rs. 4.50. If the dividends are expected to grow at a constant rate of 8 per cent, the shareholders required rate of return is:

Correct Answer: (c) 13%
Solution:

Shareholder’s Required Return = (D₁/P₀) × 100 + G
Where, D₁ = Expected Dividend for next year
P₀ = Current market price of share
G = Growth Rate

Shareholder’s Required Return = (4.5/90 × 100) + 8
                 = 5 + 8 = 13%

14. The Kinked-shaped revenue curve of a firm relates to which one type of the market structure?

Correct Answer: (b) Oligopoly
Solution:

The Kinked-shaped revenue curve of a firm relates to oligopoly-shaped market structure. The term ‘oligopoly’ refers to a small number of producers working, either explicitly or tacitly, to restrict output and/or fix prices, in order to achieve above normal market returns.

15. ‘Value-additivity principle’ implies in which one of the following methods of capital budgeting?

Correct Answer: (b) NPV method
Solution:

 ‘Value-additivity principle’ implies in NPV method of capital budgeting. According to the value additivity principle in NPV, the value of the entire firm or a larger project is equal to the sum of all smaller NPVs of projects. In other words, the larger NPV of an investment project is the sum of all smaller NPVs. The NPV of a collection of independent projects will equal the NPV of all independent projects.

i.e. NPV (A+B) = NPV (A) + NPV (B)

16. If the risk free rate is 6 per cent, the market risk premium is 9 per cent and the beta of share is 1.54, then what is cost of equity?

Correct Answer: (d) 20%
Solution:

As per the data given in Question:
• Beta = 1.54
• Market risk premium = 9%
• Current risk-free return = 6%

Cost of equity, Ke = ?
As per the CAPM model:
Ke = Risk-free return + (Beta × Market Risk Premium)
Ke = 6 + 1.54 × 9
  = 6 + 13.86
Ke = 20% (Approx.)

17. Which averaging rate and ratios where time factors is variable and the act being performed is constant, which one of the following measures of Central Tendency is appropriate?

Correct Answer: (c) Harmonic mean
Solution:

The Harmonic Mean (HM) is defined as the reciprocal of the average of the reciprocals of the data values. It is based on all the observations, and it is rigidly defined. Harmonic mean gives less weightage to large values and large weightage to small values to balance the values correctly. In general, the harmonic mean is used when there is a necessity to give greater weight to the smaller items. It is applied in the case of times and average rates.
While averaging rates and Ratios where time factor is variable and the act being performed is constant, Harmonic Mean (HM) is appropriate measure of Central Tendency.

18. If two regression coefficients are 0.8 and 1.2 which one of the following is the value of coefficient of correlation?

Correct Answer: (a) 0.9
Solution:

19. Which one of the following statements is true?

Correct Answer: (a) For a symmetrical distribution β₁ = 0
Solution:

Following statements are true:
(i) For a symmetrical distribution β₁ = 0
(ii) Skewness is a measure of symmetry or more precisely, the lack of symmetry.
(iii) β₂ can not be negative.
(iv) Kurtosis describes the ‘fatness’ of the tails found in probability distributions.

20. Which one of the following statements is incorrect?

Correct Answer: (b) Median is always less than range.
Solution:

Following statements are correct:
(i) Algebraic sum of deviations taken from Arithmetic Mean is zero.
(ii) Standard deviation is always less than range.
(iii) The sum of the squares of deviations of a given set of observations is minimum, when taken about the arithmetic mean.