Test Prep BUSINESS-ENVIRONMENT-AND-CONCEPTS Online Practice Questions and Exam Preparation

Test Prep BUSINESS-ENVIRONMENT-AND-CONCEPTS Online Questions & Answers

• Question 101:

  If demand is unit elastic:

  A. An increase in price will result in a decline in total revenue.
  B. An increase in price will result in a decline the quantity demanded that is less than the increase in price.
  C. An increase in price will result in an increase in total revenue.
  D. An increase in price will have no effect on total revenue.
  D. An increase in price will have no effect on total revenue.

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  Choice "d" is correct. If demand is unit elastic, a change in price will have no effect on total revenue. Choices "a", "b", and "c" are incorrect, per the above statement.

• Question 102:

  An increase in sales collections resulting from an increased cash discount for prompt payment would be expected to cause a (n):

  A. Increase in the operating cycle.
  B. Increase in the average collection period.
  C. Decrease in the cash conversion cycle.
  D. Increase in bad debt losses.
  C. Decrease in the cash conversion cycle.

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  Choice "c" is correct. An increase in sales collections would decrease the cash conversion cycle.

  Choice "a" is incorrect because the operating cycle (as well as the cash conversion cycle) would decrease.

  Choice "b" is incorrect, as the average collection period would decrease.

  Choice "d" is incorrect. Bad debt losses would decrease from an increase in sales collections.

• Question 103:

  When the overall price level is rising, nominal interest rates tend to be:

  A. Unaffected by changes in the price level.
  B. Falling.
  C. Rising.
  D. None of the above.
  C. Rising.

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  Choice "c" is correct. The relationship between nominal interest rates and inflation can be seen by rearranging the equation for real interest rates as follows:

  Nominal Interest Rate = Real Interest Rate + Inflation

  Thus, if real interest rates do not change, a 1% increase in the inflation rate will lead to a 1% increase in nominal interest rates.

• Question 104:

  Grey and Carr entered into a written partnership agreement to operate a hardware store. Their agreement was silent as to the duration of the partnership. Grey wishes to withdraw from the partnership. Which of the following statements is correct?

  A. Unless Carr consents to a withdrawal, Grey must apply to a court and obtain a decree allowing withdrawal.
  B. Grey may not withdraw unless Carr consents.
  C. Grey may withdraw only after notice of the proposed dissolution is given to all partnership creditors.
  D. Grey may withdraw from the partnership at any time.
  D. Grey may withdraw from the partnership at any time.

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  Choice "d" is correct.

  Rule: Where a partnership agreement does not state the duration of the partnership, the partners may withdraw at any time. The partner need not obtain consent of the other partners or of the court.

  Choices "a" and "b" are incorrect, per the above rule.

  Choice "c" is incorrect. A partner has no duty to inform creditors of his intent to withdraw in order for the withdrawal to be effective (although notice is needed to limit the partner's personal liability).

• Question 105:

  What is the effect when a foreign competitor's currency becomes weaker compared to the U.S. dollar?

  A. The foreign company will have an advantage in the U.S. market.
  B. The foreign company will be disadvantaged in the U.S. market.
  C. The fluctuation in the foreign currency's exchange rate has no effect on the U.S. company's sales or cost of goods sold.
  D. It is better for the U.S. company when the value of the U.S. dollar strengthens.
  A. The foreign company will have an advantage in the U.S. market.

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  Choice "a" is correct. As a foreign competitor's currency becomes weaker compared to the U.S. dollar, the product becomes less expensive in U.S. dollars. The less expensive product will have the advantage in the U.S. market. Choice "b" is

  incorrect. As a foreign competitor's currency becomes weaker compared to the U.S. dollar, the product becomes less expensive in U.S. dollars. The less expensive product will have the advantage in the U.S. market, not a disadvantage.

  Choice "c" is incorrect. Foreign currency exchange rates impact both sales and possibly cost of goods sold of a competing domestic company. Sales within U.S. markets will deteriorate as the currency of foreign competitors deteriorates and

  makes the domestic company's goods more expensive. As a foreign competitor's currency appreciates, sales within U.S. markets by a domestic company should also increase as goods manufactured in the U.S. become less expensive. Cost

  of goods sold may fluctuate if foreign suppliers are used.

  Choice "d" is incorrect. It is better for a U.S. company when the value of the U.S. dollar weakens, not strengthens. A weak U.S. dollar makes domestic goods relatively less expensive that imported goods.

• Question 106:

  A member of a limited liability company may generally do all of the following, except:

  A. Transfer his membership in the company without the consent of the other members.
  B. Participate in the management of the company absent an agreement to the contrary.
  C. Have limited liability.
  D. Order office supplies for the company.
  A. Transfer his membership in the company without the consent of the other members.

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  Choice "a" is correct. The transfer of a member interest requires the consent of the other members. Members may not assign their interest without the other members' consent. Choice "b" is incorrect. Unless the members have agreed to operate as a manager managed limited liability company, all members have the power to participate in management. Choice "c" is incorrect. Members in a limited liability company all have limited personal liability. Choice "d" is incorrect. Unless otherwise agreed, members have the right to manage the every day operations of a limited liability company. This can include the ordering of office supplies.

• Question 107:

  When managing cash and short-term investments, a corporate treasurer is primarily concerned with:

  A. Maximizing rate of return.
  B. Minimizing taxes.
  C. Investing in common stock due to the dividend exclusion for federal income tax purposes.
  D. Liquidity and safety.
  D. Liquidity and safety.

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  Choice "d" is correct. When managing cash and short-term investments, a corporate treasurer is primarily concerned with liquidity and safety. Choice "a" is incorrect. The board of directors and general management would be interested in maximizing rate of return on company operations. Choices "b" and "c" are incorrect. The tax manager would be interested in minimizing taxes, and investing in common stock due to the dividend exclusion for federal income tax purposes.

• Question 108:

  Leslie, Kelly, and Blair wanted to form a business. Which of the following business entities does not require the filing of organization documents with the state?

  A. Limited partnership.
  B. Joint venture.
  C. Limited liability company.
  D. Subchapter S corporation.
  B. Joint venture.

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  Choice "b" is correct. A joint venture is like a partnership. A partnership or joint venture can be formed without filing any documents with the state. Choice "a" is incorrect. Formation of a limited partnership requires the filing of a certificate of

  limited partnership with the state.

  Choice "c" is incorrect. A limited liability company may be formed only by filing articles of organization with the state.

  Choice "d" is incorrect. A corporation, including a Subchapter S corporation, may be formed only by filing articles of incorporation with the state.

• Question 109:

  An oligopolist faces a "kinked" demand curve. This terminology indicates that:

  A. When an oligopolist lowers its price, the other firms in the oligopoly will match the price reduction, but if the oligopolist raises its price, the other firms will ignore the price change.
  B. An oligopolist faces a non-linear demand for its product, and price changes will have little effect on demand for that product.
  C. An oligopolist can sell its product at any price, but after the "saturation point," another oligopolist will lower its price and, therefore, shift the demand curve to the left.
  D. An oligopolist is similar to a monopolist, and as the quantity demanded for its product increases, the demand curve for that firm shifts to the right.
  A. When an oligopolist lowers its price, the other firms in the oligopoly will match the price reduction, but if the oligopolist raises its price, the other firms will ignore the price change.

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  Choice "a" is correct. In an oligopoly, each firm faces a "kinked" demand curve. Others will match price cuts, but ignore price increases. The "kink" is at the prevailing price. Best real world examples of oligopoly are the airline and auto

  industries.

  Choice "b" is incorrect. An oligopolist's demand curve is linear but "kinked." Above the "kink," demand is highly elastic. Below, very inelastic.

  Choice "c" is incorrect. An oligopolist cannot sell at any price. There is no "saturation point."

  Choice "d" is incorrect. A change in quantity demanded indicates a movement along the demand curve, not a shift in the curve.

• Question 110:

  During a period of high inflation, which of the following groups in society would be most likely to gain?

  A. Those with a fixed income.
  B. Those with a fixed amount of debt.
  C. Those holding a large amount of money.
  D. Workers under contract without a cost of living adjustment.
  B. Those with a fixed amount of debt.

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  Choice "b" is correct. During a period of high inflation, those with a fixed amount of debt will repay their debt with inflated dollars and are thus likely to gain. Choice "a" is incorrect. Those with a fixed income will see the purchasing power of their income erode and are thus likely to be hurt. Choice "c" is incorrect. Those holding a large amount of money will see the purchasing power of their money erode and are thus likely to be hurt. Choice "d" is incorrect. Cost of living adjustments take inflation into account, thus these individuals are likely to be unaffected.