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BA1 CIMA Fundamentals of Business Economics Free Practice Exam Questions (2025 Updated)

Prepare effectively for your CIMA BA1 Fundamentals of Business Economics certification with our extensive collection of free, high-quality practice questions. Each question is designed to mirror the actual exam format and objectives, complete with comprehensive answers and detailed explanations. Our materials are regularly updated for 2025, ensuring you have the most current resources to build confidence and succeed on your first attempt.

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Total 468 questions

The government may wish to control horizontal mergers between firms because

A.

Firms will acquire control of their sources of supply

B.

Mergers lead to large companies and economies of scale

C.

Such mergers result in increased concentration in industries

D.

It is against consumer interests for producers to acquire control of retail outlets

All of the following are arguments for privatizing a public sector industry except which one?

A.

The profit motive will make the industry more efficient

B.

The industry will respond more to consumer wishes and preferences

C.

The industry is a natural monopoly

D.

Competition will force the industry to become more efficient

An example of forward vertical integration is

A.

The merger between Mercedes and Chrysler in the car industry

B.

A car manufacturer taking over an engine factory

C.

The Ford car company producing refrigerators

D.

A car manufacturer investing in a chain of car showrooms and dealers

Which ONE of the following would tend to make the demand for a product price inelastic?

A.

Expenditure on the product accounts for a large part of total household spending

B.

There are many close substitutes for the product

C.

The product is regarded as a luxury

D.

The price changed a short while ago

In 201X the market for a crop suffered high prices. According to cobweb theory what was likely to have happened in the following year?

A.

Price will stay high as farmers restrict supply to make extra profits

B.

Price will fall because the high price in 201X gave an incentive to farmers to plant more and flood the market with extra supply

C.

Price will fall as consumers find cheaper substitutes to the high-priced crop

D.

Price will rise further as buyers stockpile the new harvest to avoid suffering higher prices for a second year

A firm will maximize profits by producing at that level of output where

A.

average total cost is at a minimum

B.

average revenue is at a maximum

C.

the difference between total costs and total revenue is greatest

D.

the difference between average revenue and average variable cost is greatest

Which of the following provides a definition of a free good?

A.

No charge is made for it by its supplier

B.

Its provision is financed by taxation

C.

It is produced from renewable resources

D.

It is available at zero cost of production in unlimited quantities

The average price of recorded music CDs has been declining for several years. Which of the following changes in market conditions would NOT be a cause of this?

A.

Availability of new cheaper substitutes such as downloads

B.

Increased competition due to entry to the market by supermarket and internet sellers of CDs

C.

Decline in the number of CD shops due to bankruptcy and closure

D.

Growth in popularity of alternative goods such as mobile phones and video games

Globalization will have all the following effects on businesses except one. Which ONE is the exception?

A.

Access to cheaper sources of supply in emerging economies

B.

Increased competition on world markets for manufactured goods

C.

Decreased international transportation and communications costs

D.

The ability to shift production to low cost locations

Economies of scale can result from all the following except one. Which is the exception?

A.

An increase in the size of a firm's capacity and plant

B.

A bus company replacing smaller buses with larger buses

C.

A factory employing two shifts of workers rather than one shift per day

D.

Increased firm size allowing the firm to employ specialist managers

A business is selling a good with a price inelastic demand. If it decreases the supply of the good the result will be:

A.

the market price will rise, demand will contract and total revenue will rise

B.

the market price will rise, demand will contract and total revenue will fall

C.

the market price will rise, demand will decrease and total revenue will fall

D.

the market price will fall, demand will increase and total revenue will rise

When the government intervenes in the market economy to correct a market failure

A.

Economic welfare always increases

B.

The problem of government failure may result

C.

In all cases the market mechanism ceases to function

D.

The intervention always creates a surplus

Which of the following is NOT a characteristic of a pure public good?

A.

It is not possible to exclude non-payers from enjoying the good

B.

It is always provided by the state or public sector

C.

It does not get used up by more people enjoying it

D.

It has no price

Which ONE of the following statements best defines a fixed cost?

A.

A cost that will not rise from year to year

B.

A cost that rises as efficiency falls

C.

The difference between total cost and average cost

D.

A cost that stays constant as output falls

Which of the following statements that refer to the price mechanism is not true?

A.

Imperfect market information may prevent the market working efficiently

B.

Trading can only take place at equilibrium prices in a market economy

C.

A fall in the relative price of a good tends to attract consumers to buy that good instead of other goods

D.

In a market economy some essential goods may not be produced.

The market demand for a good has a price elasticity of demand of 0.4. Which of the following statements is correct?

A.

Consumer expenditure will fall as price rises

B.

Producers' incomes will rise as price falls

C.

It is a product with many close substitutes

D.

Total quantity sold will fall as price rises

Which of the following is not a consequence of a country suffering a high rate of inflation?

A.

A depreciation in its exchange rate compared to currencies from countries with lower inflation rates

B.

A high nominal rate of interest

C.

Impoverishment of households on fixed incomes

D.

Excess aggregate demand for goods and services

Which global institution is concerned with enforcing the GATT?

A.

The IMF

B.

The World Bank

C.

The World Trade Organization

D.

The G20

All of the following are features of the process of globalization except which one?

A.

Increased flows of factors of production between economies.

B.

Higher international disparities in rates of return on capital.

C.

Increasing interdependence between economies.

D.

Higher levels of trade in components and semi-finished goods.

A firm is considering a large capital investment project. It is considering delaying it in case the government introduces special tax breaks for investment that will reduce the tax the firm pays. In which stage of the trade cycle is the government least likely to reduce taxation?

A.

Recession

B.

Depression

C.

Recovery

D.

Boom

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Total 468 questions
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