41. In which one of the following modes of entry into foreign market are risk and profit potential the highest?

  • Option : B
  • Explanation : Three of the strategies for entry into foreign markets — contracts, joint ventures and direct foreign investments — present greater challenges when faced with different goals: social welfare for the developing country and profits for the firm. These market entry strategies may affect multiple market participants and provide the opportunity for a differing risk/reward ratio. The profit potential of each entry mode depends on characteristics of the market to which the strategy is applied.
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42. Cost plus pricing is considered appropriate for which combination of the following?
(i) Product Tailoring
(ii) Public Utility Pricing
(iii) Refusal Pricing
(iv) Monopoly Pricing
Choose the correct answer from the code given below:

  • Option : D
  • Explanation : Cost-Plus Pricing: With cost-plus pricing, the seller’s costs are determined (usually during a project or after a project is completed), and then a specified dollar, amount or percentage of the cost is added to the seller’s cost to establish the price. Costplus pricing and competition-based pricing are in fact the most common bases for pricing services. When production cost are difficult to predict, cost-plus pricing is appropriate. Projects involving custom-made equipment and commercial construction are often priced using this technique. The government frequently uses such cost-based pricing in granting defense contracts. One pitfall for the buyer is that the seller may increase costs to establish a larger profit base. Furthermore, some costs, such as overhead, may be difficult to determine. In periods of rapid inflation, cost-plus pricing is popular, especially when the producer must use raw materials that are fluctuating in price. In industries in which cost-plus pricing is common and sellers have similar costs, price competition may not be especially intense.
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43. Which one of the following is not the function of the Reserve Bank of India?

  • Option : C
  • Explanation : The main functions of the RBI are:
    (i) To maintain monetary stability so that the business and economic life can deliver welfare gains of a properly functioning mixed economy;
    (ii) To maintain financial stability and ensure sound financial institutions so that monetary stability can be safely pursued and economic units can conduct their business with confidence;
    (iii) To maintain stable payments systems so that financial transactions can be safely and efficiently executed;
    (iv) To promote the development of the financial infrastructure in terms of markets and systems, and to enable it to operate efficiently, that is, to play a leading role in developing a sound financial system so that it can discharge its regulatory function efficiently;
    (v) To ensure that credit allocation by the financial system broadly reflects the national economic priorities and societal concerns; and
    (vi) To regulate the overall volume of money and credit in the economy, with a view to ensuring a reasonable degree of price stability.
    Roles of RBI
    The roles that the RBI plays in the Indian banking and financial system relate to
    (i) Note issuing authority,
    (ii) Government banker.
    (iii) Bankers’ bank.
    (iv) Supervising authority,
    (v) Exchange control authority.
    (vi) Promoter of the financial system and
    (vii) Regulator of money and credit.
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45. Given below are two statements, one labelled as Assertion (A) and the other labelled as Reason (R). Read the statements and choose the correct answer using the code given below.
Assertion (A): The multilateral trading system is an attempt by governments to make the business environment stable and predictable.
Reason (R): Promising not to raise trade barriers can be as important as lowering one, because the promise gives businesses a clearer view of their future market opportunities.

  • Option : B
  • Explanation : Predictability and Stability: Predictability and stability are important objectives of the multilateral regulation of trade. The multilateral trading system is an attempt by governments to make the business environment stable and predictable as sometimes, promissing not to raise a trade barrier can be as important as lowering one, because the promise gives businesses a clearer view of their future opportunities. With stability and predictablility, investment is encouraged, employment opportunities are generated and consumers can fully enjoy the benefits of competition.
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