Question 1

A company currently sells 10,000 bottles of "bright pink" nail varnish every year at $5 per bottle. If the price is reduced to $4.50 per bottle it is expected that the company will sell an extra 2,000 bottles. What is the price elasticity of demand of the nail varnish?

Accepted Answer

B

Question 2

Which of the following organizational arrangements is an example of a multinational corporation (MNC)?

Accepted Answer

A multinational corporation (MNC) is a company that has operations in multiple countries. In this case, the chain of restaurants based in Country B is signing a franchise agreement with a company that intends to open restaurants in Country A. This means that the chain of restaurants will have operations in both Country B and Country A, making it an MNC.

Question 3

The government of Country Z imposes a tariff on all imports of coal from other countries. Which THREE of the following are possible effects of this decision in Country Z? (Choose three.)

Accepted Answer

C,D,F

Question 4

A business has a short-term problem with its payments exceeding its receipts. Which TWO of the following would be appropriate for meeting this financial shortfall? (Choose two.)

Accepted Answer

A bank overdraft provides immediate access to funds to cover short-term cash flow issues. A bill of exchange can be used to delay payments, providing temporary relief for cash flow problems.

Question 5

Which THREE of the following can be used to reduce the principal-agent problem in business organizations? (Choose three.)

Accepted Answer

Requiring managers to uphold detailed disclosure and reporting practices (A), implementing a share distribution scheme (D), and requiring managers to take into account the interests of external stakeholders (E) can all help to reduce the principal-agent problem in business organizations.

Question 6

Quantitative easing, the purchase of government or private securities by the central banks from investors, is an example of:

Accepted Answer

Quantitative easing is an expansionary monetary policy where central banks buy securities to increase the money supply and encourage lending and investment.

Question 7

A business sells soft drinks at $3 a bottle and its current sales are 20,000 bottles per month. The price elasticity of demand for this product is -2. If the price is reduced to $2.70, the change in the total revenue for the business will be:

Accepted Answer

The correct answer is A.The price elasticity of demand is -2, which means that a 1% decrease in price will lead to a 2% increase in quantity demanded. If the price is reduced from $3 to $2.70, this represents a 10% decrease in price. Therefore, we can expect quantity demanded to increase by 20%.The current sales are 20,000 bottles per month, so a 20% increase in quantity demanded would lead to sales of 24,000 bottles per month. The new total revenue would be $2.70 * 24,000 = $64,800. The current total revenue is $3 * 20,000 = $60,000. Therefore, the change in total revenue would be $64,800 - $60,000 = $4,800.

Question 8

A clothes retailer has estimated a linear trend equation including trend, seasonal and cyclical components to forecast its sales for the next four quarters. Which of the following factors would generate actual sales figures that are likely to differ markedly from the forecast?

Accepted Answer

The answer of A clothes retailer has estimated a linear...

Question 9

A trade agreement that removes all import tariffs between member countries, sets up common external tariffs against non-members, but does not advance toward economic integration is called:

Accepted Answer

A customs union removes tariffs between member countries and sets common external tariffs against non-members, without further economic integration.

Question 10

Which THREE of the following constitute injections into the circular flow of income? (Choose three.)

Accepted Answer

Exports, government expenditure, and investment are all injections into the circular flow of income because they add to the total amount of spending in the economy.

Question 11

Which TWO of the following business costs are directly affected by a rise in the interest rate? (Choose two.)

Accepted Answer

The answer of Which TWO of the following business costs...

Question 12

Which of the following are the likely consequences, in the domestic economy of a country, of an increase in interest rates? 1. A rise in demand for capital goods. 2. A fall in demand for consumer goods. 3. A fall in demand for housing. 4. A rise in the exchange rate.

Accepted Answer

The answer of Which of the following are the likely...

Question 13

A business has a contractual requirement to pay a sum of $6m in a foreign currency in 12 months time. It takes out a forward foreign exchange contract for this sum. This is an example of:

Accepted Answer

The business is using a forward foreign exchange contract to lock in the exchange rate for a future transaction, which is a strategy to hedge against the risk of currency fluctuations.

Question 14

Setting a minimum wage above the equilibrium wage:

Accepted Answer

The answer of Setting a minimum wage above the equilibrium...

Question 15

Which THREE of the following businesses are more likely to fare better during a recession? (Choose three.)

Accepted Answer

Staple goods like rice (B) are essential and maintain demand during recessions. Security equipment (D) is counter-cyclical, often seeing increased demand during economic downturns. Road infrastructure (A) is often supported by government spending during recessions to stimulate the economy.

Question 16

An institution offers an 8 percent compound interest rate annually for six years, for an investment of $250,000. What is the total amount of interest that would be received over the six years?

Accepted Answer

The answer of An institution offers an 8 percent compound...

Question 17

Market price refers to:

Accepted Answer

Market price is the price determined by the interaction of demand and supply in a competitive market.

Question 18

Organizations are able to achieve more than individuals can achieve because they allow people to do which THREE of the following? (Choose three.)

Accepted Answer

Organizations enable individuals to pool resources, share skills and knowledge, and specialize in specific tasks, leading to greater collective achievements than individuals working alone.

Question 19

Which TWO of the following are positive impacts for a national economy which hosts a multinational company's (MNC) production facilities within their country? (Choose two.)

Accepted Answer

MNCs can enhance local productivity by sharing advanced processes and technologies, and their financial investments can boost economic welfare by optimizing capital allocation.

Question 20

Which of the following statements defines a diseconomy of scale?

Accepted Answer

The answer of Which of the following statements defines a...

Exam 3: BA1 - Fundamentals of Business Economics Question Tutorial