PTD7

Question 1

A group of firms that conspires to make price and output decisions for a product or service is called
an oligopoly.
a cartel.
price leadership.
monopoly.

Answer 1

This Answer is Correct
A cartel is a group of firms that conspire to make price and output decisions for a product or service; it is overt collusion and illegal in the U.S. A prime example is OPEC, which meets regularly to set output quotas for oil for member oil-exporting countries.

Question 2

Which of the following types of bonds is most likely to maintain a constant market value?
Zero-coupon.
Floating-rate.
Callable.
Convertible.

Answer 2

This Answer is Correct
This answer is correct. A bond with a floating rate will generally hold a steady market value because its value will not change due to changes in prevailing interest rates.

Question 3

Which of the following strategies would the Federal Reserve most likely pursue under an expansionary policy?
Purchase federal securities and lower the discount rate.
Reduce the reserve requirement while raising the discount rate.
Raise the reserve requirement and lower the discount rate.
Raise the reserve requirement and raise the discount rate.

Answer 3

Purchase federal securities and lower the discount rate.

This Answer is Correct
Through its exercise of monetary policy, the Federal Reserve (the Fed) can take actions intended to expand or contract the economy. An expansionary policy would serve to increase spending, demand, employment, and other economic measures. By purchasing federal securities (through its Open Market Committee), the Fed would put more cash into the economy by providing cash to the selling investors (e.g., banks, etc.). Increasing cash (the money supply) typically serves to stimulate the economy. In addition, lowering the discount rate (the interest rate the Fed charges for short-term loans to banks) would reduce the cost of borrowing by banks, thus increasing their ability to make loans for consumption and investment purposes.

Question 4

Which one of the following is least likely to be useful in deciding in which country an entity should operate?
The economic system.
The entity's strategy.
An industry analysis.
The economic market structure.

Answer 4

This Answer is Correct
An entity’s strategy is least likely to be useful in deciding in which country an entity should operate. It is more likely that an entity’s strategy will have to be adapted to the country in which it decides to operate. That decision would be based on the economic system of alternative country locations and an analysis of the macro-environmental and industry characteristics of these alternative locations.

Question 5

At the end of September a company has outstanding accounts receivable of $350 on third-quarter credit sales, composed as follows:

Month Credit sales Still outstanding at the

end of September
July $600 $100
August 900 170
September 500 80

The percentage of receivables in the 31-to-60-day age group at the end of September is

21. 43%
22. 57%
23. 57%
24. 43%

Answer 5

48.57
This Answer is Correct
This answer is correct. Receivables on August sales still outstanding at the end of September are in the 31-to-60-day age group. As a proportion of total receivables, the 31-to-60-day age group represents 170 ÷ 350 = 48.57%.

Question 6

Which of the following issues is least likely to be relevant to the study of macroeconomics?
Business cycles.
Aggregate supply.
Elasticity of demand.
Inflation and deflation.

Answer 6

This Answer is Correct
Elasticity of demand is the issue that is least likely to be studied in macroeconomics, as it is concerned with the effects of a change in price on the demand for an individual good or service and not with the activity or outcome of an entire economy.

Question 7

An increase in the market supply of beef would result in a(n)
Increase in the price of beef.
Decrease in the demand for beef.
Increase in the price of pork.
Increase in the quantity of beef demanded.

Answer 7

Increase in the quantity of beef demanded.
This Answer is Correct
This answer is correct. An increase in supply of beef would result in a lower equilibrium price and therefore increase the demand for beef.

Question 8

Return on investment can be increased by
Increasing operating assets.
Decreasing operating assets.
Decreasing revenues.
Both decreasing revnues and decreasing operating assets.

Answer 8

Decreasing operating assets.

This Answer is Correct
If operating assets decrease (the denominator in ROI), then ROI would decrease.

Question 9

Consider the following statements:

I. LANs use dedicated lines.

II. WANs use dedicated lines.

Both I and II are true.
I is true, but II is not.
II is true, but I is not.
Neither I nor II is true.

Answer 9

I is true, but II is not

LANs use dedicated lines, but WANs use public or shared lines. Hence, I is true, but II is not.