CPAR CPA REVIEW SCHOOL OF THE PHILIPPINES Marila MAS 8700-Econ MANAGEMENT ADVISORY SERVICES i : ECONOMICS ply ard the demand for a good increase, the market price will ‘a. Rise only in the case of an inelastic supply function. Fall only in the case of an inelastic supply function. c. Not be predictable with only these facts. d._ Rise only in the case of an inelastic dervand function. 1. If both the supy 2. Asupply curve illustrates the relationship between : a "Phe ‘and quantity supplied ¢. Price and quantity demanded b. Price and consumer tastes d. Supply and demand 3, As a business owner you have determinec that the demand for your product is inelastic. Based upon this assessment you understand that ‘a. Increasing the price of your product will increase total revenue b. Decreasing the price of your product wil! increase total revenue c. Increasing the price of your product will have no effect on total revenue d. Increasing the price of your product wi! increase competition 4. Which one of the folowing has an inverse relationship with the demand for money? a. Aggregate income c. Interest rates b. Price levels d. Flow of funds 5. An improvement in technology that in turn leads to improved worker productivity would most likely result in a. A shift to the right in the supply curve and a lowering of the price of the output. b. A shift to the left in the supply curve and a lowering of the price of the output. c.An increase in the price of the output if demand is unchanged. d. Wage increases. 6. Which of the following market features is likely to cause a surplus of a particular product? a. Amonopoly c. Aprice ceiling b. Aprice floor d. A perfect market 7. A decrease in the price of a complementary dood will a. shift the demend curve of the joint commodity to the left . increase the price paid for a substitute good c.. shift the supply curve of the joint commodity to the right d._ shift the demand curve of the joint commodity to the right 8. Demand for a product tends to be price inelastic if a, the product is considered a luxury item b. few good complements for the product are available the population in the market area is large . people spend a large share of their income on the product 9. Which of the following has the highest price elasticity coefficient? 2. Milk c. Bread b. Macaroni and cheese d. Ski boats 10, The local video store's business increased by 12% after the movie theater raised its prices from P65 to P70. Thus, relative to movie theater admissions, videos are 2. substitute gocds c. complementary goods superior goods d. public goodski 10 MAB H700 Boon EOONOMICH pees 2 AN Hivlivi tial fecolyee an ineamies uf 141,000 per month, and spends P2,500. An increase in ul i WHE AE PROD por imi oer ita, abl thes individual spends P2,000. The individual's marginal Popernalty bi iave ty aus howd 606 4. 08 V2 U1 aly Conpolitive Harker, any exjiial hi tease in both demand and supply can be expected to caluwaty AI reams Dall pate all niarkot clearing quantity dev tena Ball pric ancl market eating quantity + lvctyoe athe earthy quantity Ah My reane patie VAC Given the following dala, what ts the marginal propensity to consume? Level of Disposable income Consumption 0,000 38,000 : 4,000, 4,000 ata bo Lo 60.95 d. 0.75 14. Which of the follnving will cause a shit In the supply curve of a product? 4. Changes 1 the price of the product, ©, Changes in consumer taxes, Changes i production taxes 4. Changes in the number of buyers in the market 1. When the govevament imposes health and safety regulations on certain products, one of the most tkely results js 4. Oieater ConUMPLION OF the product ©. greater tax revenues for the government blower prions for the product . higher prices for the product 16. In whict of the following situations would thore be inelastic demand? AS pricy inctestse results In 3% decrease in the quantity demanded. bo AY price Creme results In a 66 decrease in the quantity demanded. 4A Be price ncreanse resaty in a 4% decrease in the quantity demanded. Ae price dlecrese results In $6 Incraase in the quantity demanded, 12. To 4 competitive market for labor in which demand is stable, if workers try to increase their wave a. employment im b. government must set a maximuny wage below the equilibrium wage 6. fis in the indtustey must become smaller de product supply must decrease: 4 fall 18. A polluting manutacturing firm tends, from the societal viewpoint, to 2. puke ifs profucts too low report too little profitability Db. proxtuce too little output 4. employ too little equity financing 19. TT the government regulates. a product oF service ina competitive market by setting a manimunt price below the equilibviuim price, what is the long-run effect? a. Asuiplus & Ashortage : : bo Adecrense in demand 4d, No effect on the market A valid reason fv the government to intervere in the wholesale electrical power market would Inelacte which ante oF the folhowving & APNE inerestse that is move than expected, be Electricity is an essesthal resource and the wholesale market is not competitive. ctriity disttbution ampantes are lasing money, @ pavon power generators have contracts with the lecal government at very high prices,MAS 8700-Econ ECONOMICS Page 3 of, 10 a. 1d coefficient for a particular product is 3.00, the good Is likely noe CTR complementary good d. Anecessity b. An inferior good 1e demand curve for a commodity to shift to the left? 22, Which one of the following would cause th ‘a. Arise in the price of a substitute product b. Arise in average household income. €. Arise in the price of a complementary commodity. . Arise in the population. 23, Price ceilings ‘a. are illustrated by government price support programs in agriculture b. create prices greater than equilibrium prices . create prices below equilibrium prices d._result in persistent surpluses X and Y are substitute products. If the price of product ¥ increases, the immediate Impact on 24. product X is a. price will increase c. quantity supplied will Increase b. quantity demanded will increased. price, quantity demanded, and supply will increase competitor that produces a product that is a close substitute ient of cross-elasticity of demand for Wilson's product with petitor decreases its price by 5%, what 25. Wilson Corporation has a major for Wilson’s good. If the coeffici respect to the competitor's product is 2.00 and the com; is the expected effect on demand for Wilson's product? a. A'5% increase in demand c. A5% decrease in demand b, A 10% increase in demand d. A 10% decrease in demand 26. If a group of consumers decide to boycott a particular product, the expected result would be a. An increase in the product price to make up lost revenue b. A decrease in the demand for the product An increase in product supply because of increased availability &. That demand for the product would become completely inelastic 27. Which of the following is not likely to affect tre supply of a particular good? ‘2. Changes in government subsidies. c. Changes in consumer income b. Changes in technology d. Changes in production costs 28. If a product's demand is elastic and there is a decrease in price, the effect will be a. a decrease in total revenue b. No change in total revenue . Adecrease in total revenue and the demand curve shifts to the left d. An increase in total revenue 29. All of the following are complementary goods except a. margarine and butter cc. VCRs and video cassettes b. Cameras and rolls of film d. Razors and razor blades 30. The ie Of diminishing marginal utility states that & Marginal utility will decine as a consuirer acquires additional units of a specific product By Toa Utility decline as a consumer acquires additional units of a specific product & ining utilities causes the demand ‘curve to slope upward . Consumers’ wants will diminish with the passage of time 3: ne pharmaceutical industry where a diabetic must have insulin no matter the cost and acre i no other substitute, the diabetic’s demand curve is best described as & Pale lastic c. Perfectly inelastic i d. InelasticMAS 8700-Econ ECONOMics Pingo 4 of 10 32. Because ofthe existence of economies of scale, business fms may fd that ach additional unt of labor's less efficient than the previous ur i Brana cndéed toe factory, merenses i Outout wil ini in the short ru c._ Increasing the size of a factory will result in lower average costs G._Increasing the size of a factory will result in lower total costs irm may experience increasing returns due to eee ea ee eaneT ¢. Comparative advantage ishing returns 5: Oppertunty ot &. Economies of sole 34. The measurement of the benefit lost by using resources for a given purpose is ‘a. Economic efficiency . Comparative advantage b. Opportunity costs d. Absolute advantage 35, Marginal revenue is : ‘a. Equal to price in monopolistic competition b. The change in total revenue associated with increasing prices . Greater than price in pure competition d. The change in total revenue associated with producing and selling one more unit 36. In microeconomics, the distinguishing characteristic of the long run on the supply side is that ‘a. Only supply factors determine price and output b. Only demand factors determine price and output Firms are not allowed to enter or exit the industry d. All inputs are variable 37. What is the main factor that dif‘erentiates tre short-run cost function from the long-run cost. function? @. Nothing, the two functions are identica c. Changes in government subsidies b, The level of technology. d. The nature of the costs 38. If consumer confidence falls, the impact upon the economy is @. A downturn Anupturn b. No change d. Consumer confidence does not have an impact upon the ‘economy: 39. During the recessionary phase of a business =ycle a. The purchasing povier of money is likely to decline rapidly b. The natural rate of unemployment will increase dramatically ©. Potential national income will exceed actual national income d. Actual national income will exceed potential national income 40. For a given level of tax collections, prices, and interest rates, a decrease in govern purchases will result in a(n) : : mental 2. Increase in aggregate demand Decrease in te demand b. Increase in aggregate supply d. Decrease in areas supply 41. In national income terms, aggregate demanc is the 7 a. Demand for money by the community in a Period of full employment b. Total expenditure on capital goods by entrepreneurs Guring a period of full employment c. Demand that is needed if a country’s economy is to operate at optimum level and the level of investment is to be raised : d. Total expenditures on consumer goods and investment, includir govern: foreign expenditures, during a given period 7 — 42. Which one of the following would not be included in the calculation of the gross domects product? a. Purchase of a new home c. A doctor's fee b. An automotive worker's wages d, Purchase of common stockMas 8700-Econ ECONOMICS Page 5 of 10 4g, An uptum in economic activity is indicated by all of the following, except a. Increased housing starts b. Reduction in the quantity of unemployment claims c._ Increase in personal travel d. Reduction in the amount of luxury purchases 44, Which of the folloviing may provide a leading indicator of a future increase in gross domestic product? ‘a. A reduction in the money supply b, decrease in the ssuance of building permits ©. An increase in the timeliness of delivery by vendors d._An increase in the average hours worked per week of production workers . e% \dicators is not true? Which one of the following statements about leading economic in "For forecastirg purposes, several variables are monitored and weighted-average is referred to as the index of leading indicators : b. The index of leading indicators has historically been very accural The use of the index of leading indicators involves monitoring the data on a monthly basis tn d. As the nature of the economy has changed, it has been necessary to revise the ‘components of the index of leading indicators 45. a. « 46. Disposable income is calculated as a. Gross domestic product minus the capita! cost allowance b. Net domestic product minus indirect business taxes plus net income earned abroad Personal income minus transfer payments 4. Personal income minus personal taxes 47. The primary reason for allowing legal immigration into industrial nations is the immigrants’ potential for a. Reducing a trade deficit ¢. Contributing to economic growth b. Fulfling a trae agreement . Fulfiling a political agreement 48. Some economic indicators lead the economy into a recovery or recession, and some lag it. An example of a lagging indicator is ‘a. Chronic unemployment ©. Orders for consumer and producer goods b. Housing starts d. Consumer expectations 48. Government borrowing to finance large defic ts increases the demand for lendable funds and 2. Increases the supply of lendable funds —_¢. Exerts downward pressure on interest . rates 5. Has no impact on interests d. Puts upward pressure on interest rates 50. A period of rising inflation @. Increases the price level, which i it ee ich benefits those who are entitled to receive specific b. Enhance: ic i = the positive relationship between the price level and the purchasing power of & wi oto Oflscted by contracts that include the indexing of payments . 65 the Price level, which is negatively related to the purchasing power of money 51. The most effective fiscal Polity Program to help reduce demand-pull inflation woul 7 Decrease the rate of growth of the money supply : | 7 Increase both taxes and government spending : Decrease taxes and increase government spending _. d+ Increase taxes and decrease government spendingPage 6 of 10 MAS 8700-Econ ECONOMICS 's following 1e money supply in @ nation’s economy will decrease Tene at purchases by the nalons central bank bi Adecrease in the discount rate An increase in the reserve ratio G._Adecrease in the margin requirement il 53, According to fiscal policy principles, a tax increase wi Se increase spending and increase aggregate demand Increase spending and reduce aggregate demand C._ Reduce spending and increase aggregate demand Reduce spending and reduce aggregate demand i: lowing instruments of monetary policy Is the most important means i controlled? the renahag re exerve ra00 «. Manipulation of government spending b. Open-market operations d. Changing the discount rate a recession, it If a government were to.use only fiscal policy to stimulate the economy from by which 54, Which of the fol 5, would ’a._ Raise consumer taxes and increase government spending b. Lower business taxes and government spending cc. Increase the money supply and increase government spending d._ Lower consumer taxes and increase government spending 56, The national budget deficit is the a. total accumulation of the national government's surpluses and deficits b. Excess national and local spending over their revenues c. Amount by which the national government's expenditures exceed its revenues in a given year d. Amount by which liabilities exceed assets on the national government's balance sheet. Which of the following is a tool of monetary policy that a nation’s central bank could use to 57. stabilize the ‘economy during an inflationary period? a. Selling government securities c. Lowering bank discount rates b. Lowering bank reserve requirements d. Encouraging higher tax rates 58. Economists and economic policy makers are interested in the multiplier effect because the multiplier explains why a. A-small change in investment can have a much larger impact on gross domestic juct b. Consumption is always a multiple of savings ° aa c. The money supply increases when deposits in the banking system increase d. The velocity of money is less than one 59. Assume that the Congress passes a tax bill that provides for a “rebate” to taxpayers. One the goals of the rebate is a. Increase consumer disposable income and expand the economy : : b. Increase consumer disposable and contract the economy c. Decrease cons umer disposable income and expand the economy d. Increase consumer disposable income and contract the economy 60. The rate of unemployment caused by changes in the composition of unemployment opportunities over time is referred to as the ‘a. Frictional unemployment rate c. Cyclical unemployment rate b. Structural unemployment rate d. Full-employment unemployment rate 61. The producer price index measures ; a, The price of a basket of commodities at the point ofthe first commercial sale b. Price changes for all products sold by domestic producers to foreigners c._ Price changes of goods purchased for other countriesMAS 8700-Econ ECONOMICS: Page 7 of 10 The price of a fixed market basket of goods and services purchased by typical urban "consumers bout deflation? stent c. It results in very low interest rates to borrow money ae d. Tt results in economic expansion 62. Which of the following i ke investments ‘a. It motivates consume! b. It motivates businesses to mal Jes often experience inflation but seldom experience long period of deflation. Which of oa ecotolowing is true about a deflationary economy? the following is t si to make investments 2 on ool to make major purchases b. The lower prices encourage consumers & Interest rates tend to be high d. Actual GDP is above potential GDP jominal interest rates? i and ni |. What factors explains the difference between: real - a, Inflation risk b. Credit risk c, Default risk d. Market risk | trade except that \d on specialization with comparative advantage 65. All of the following are true about international vantage does not result in gains from the gains from international trade depen absolute advantage without comparetive a international trade absolute advantage is defined as the ability of one nation to produce product a relatively lower opportunity cost than other nation : Where there is a reciprocal absolute advantage between two countries, specialization will make it possible to produce more of each product a, b. Gi d. 66. If the central bank of a country raises interest rates sharply, the country’s currency will most likely . &. increase in relative value b. remain unchanged in value . decrease in relative value d, decrease sharply in value at first and then return to its initial value 67; Which one of the following groups would be the primary beneficiary of a tariff? a. Domestic producers of export goods b. Domestic producers of goods protected by the tariff c. Domestic consumers of goods protected by the tariff d. Foreign producers of goods protected by the tariff 98. In the law of comparative advantage, the country which should produce a specific product is determined by @. Opportunity costs CE ‘ : b. Profit margins ee order quantities 69, Assuming exchange rates are allow: ; : ed to fluctuate freely, which one of the foll would ely Cause @ nation’s currency to appreciate on the foreign exchange market? © BA relatively rapid rate of arowth in income that stimulates imports ba high rate of inflation relative to other countries A slower rate of in i ports Aju sat growth in income than in other countries, which causes imports to lag . ae Domestic real interést rates that are lower than real interest rates abroad 70. Exchange rates are determined by : . Each industrial country’s government The International Monetary Fund Supply and demand in the foreign currency market TS and Importers of manufactured goods aogoPage 8 of 10 MAS 8700-Econ ECONOMICS i ie untry? 71. Which of the following measures creates the most restrictive barrier to exportng es Laat a. Tariffs b. Quotas c. Embargoes d. Exchai there is a net flow of 72. When net exports are negative, a. Goods ‘rom firms in foreign countries to the domestic country finns of the domestic country b. Money from foreign countries to the Goods from the firms of the domestic country to foreign country d._ Goods and services which result in a trade surplus 73. Which of the following factors is least likely to affect a country’s foreign curre rates? bility in the country ‘a. Interest rates in the country c. Political stat b. Inflation in the country d. The tax rate in the country 4, Patents are granted in order to encourage firms to invest in the research and dev new products. Patents are an example of : a. Vertical integration c. Entry barriers b,_- market concentration d. Collusion ency exchange lopment of 75. The distinguishing characteristic of oligopolistic market is a. Asingle seller of a homogeneous product with no close substitutes b. A single seller of a heterogeneous product with no close substitutes c._Lack of entry and exit barriers in the industry d, Mutual interdependence of firm pricing and output decisions 76. Economic markets that are characterized by monopolistic competition have all of the following characteristic except a. One seller of the product b. Economies or diseconomies of scale c. Advertising d. Heterogeneous products 77. Which type of economic market structure is characterized by a few large sellers of a product or service, engaging primarily in nonprice competition? a. Monopoly c. Perfect competition b. Oligopoly d. Monopolistic competition 78. Which type of economic market structure s composed of a lar : 0 ge number of sellers, each Producing an identical product, and with no significant barriers to entry and exit? . a. Monopoly c. Oligopoly b. Perfect competition d. Monopolistic competition 79. A natural monopoly exists because a. The firm owns natural resources b. The firms hold patents © Economic and technical conditions permit only one efficient supplier : : d. The government is the only supplier 80. A market with many independent firms, low barriers to entry, and product differentiation is best classified as a. a monopoly ©. Monopolistic iti b. a natural monopoly: d. an aligopoly SS 81. Which of the following is not a key assumption of perfect competition? a. Firms sell a homogeneous product : b. Customers are indifferent about which firm they buy from c._ The level of a firm's output is small reletive to the industry’s total output d._ Each firm can price its procluct above the industry pricemas 8700-Econ ECONOMICS Page 9 of 19 ‘82, The ultimate purpose of competitor analysis Is to . Identify the competition determine the competiton’s strength and weaknesses identify the competition's major customers 4G. understand and predict the behavior of the competition 7 2 following is not an important aspect of supply chain management! 83 Wi fermation technology c, Customer relations Accurate forecasts d. Communications Which of the following types of organizations would more likely engage in public relations type .dvertising? ananting c. Ahotel chain b. a toy manufacturer d. An electric utility company 85: Target marketing analysis involves ‘a. Analyzing the firm's input markets b. Understanding and segmenting the firm's customer markets Analyzing the firm's market structure d. Deciding on whether to offer a new product line Ifa firm’s customers are businesses, market segmentation might be performed along all of the following dimensions, except a. Industry b. Location c. Lifestyle d. Size 87. Which of the following is a defining characteristic of supply chain management? 2. Focuses cn the sharing of information with suppliers and customers. b. Focuses on redesigning processes C. Focuses on improving quality d. Focuses on strategic alliances 86. 88. “Which of the following is not a likely strategy for a firm in a Purely competitive market? 7 Lean manufac ring Process reengineering ._ Supply chain management d. Development of a brand name b. To analyze the firm’s stren ion to it yze the f iaths in relation to its coy C_ To identify possible actions by competitors oS ¢: To understand the nature of the frm’s major markets 90. ere of dividing all Needs, characteristics, called aa a. Strategic Plan air Market segmentavon Ft cea Peta ; ing 91. Which of the follow lowing measures of hes it | unemployment wi i 7 erent when tring to precict the future state of the may —o. Cyc anemone ©. Frictional unemployment . Overall unemployment 92. An oligopoi “kinked” ry ligopo! ra none reed oman one This terminology indicates that - licton| a fat Price, the other firms in the oligoy ic W te oloools rae ts pce the other fre al eee es ee 5. An oligopolist = faces a nonline: it t effect on demand for that py ar demand for its product, and price changes will have littleMAS 8700-Econ ECONOMICS Page 10 of 10 % ” another . An oligopolst can setts product at any price, but after the “saturation point” 2 lgopoist wil loner its price and, therefore, shift the demand curve to the let epelars nave no effect on the demand curve, and an oligapotistcan shape the curve to optimize ts own efficiency lowing best describes the steps involved in performing competitor analysis? 93, Which ofthe fol ind using it to predict the competitor's '2.. Gathering information about the competitor ar behavior . Determining the type of market structure and the number of competitors Assessing the general environment anc determining how that affects competition 4. Assessing the market structure to predict when new competitors will enter the market 31D [ét. A [7i. c | 81. 3, Geo a [ea D C72 A 82. tee 3D 73._D [83 [ac 23.0 [Sa ae res : lola >lo|>la|>|> ‘end - —-m-