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

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

• Question 191:

  If consumption is $70b, investment $50b, government spending $20b, exports $7b, and imports $5b, what is GDP?

  A. $152b.
  B. $138b.
  C. $140b.
  D. $142b.
  D. $142b.

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  Choice "d" is correct. By the expenditure approach to measuring GDP, GDP equals: Consumption + Investment + Government Spending + Exports - Imports. Thus, GDP = 70 + 50 + 20 + 7 - 5 = 142b.

• Question 192:

  The kinked demand curve is associated with:

  A. The analysis of agricultural markets.
  B. The analysis of monopolistic competition.
  C. The analysis of pure competition.
  D. The analysis of oligopoly.
  D. The analysis of oligopoly.

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  Choice "d" is correct. The demand curve for any individual oligopolist is kinked sharply downward. This occurs because, in oligopoly market conditions, the other firms in the market will match any price reduction so they do not lose market

  share but will not match any price increase of an individual firm.

  Therefore, for the individual firm attempting to raise its prices beyond equilibrium, consumers will quickly buy from other firms in the market and demand will drop off sharply creating a kinked demand curve.

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

• Question 193:

  Eugene Entrepreneur developed his waste collections and disposal business from one truck 20 years ago to a fleet of 2,000 trucks serving an entire region today. Gene is looking to retire and knows that he cannot find a suitable buyer for the entire business. Gene has developed a series of short range plans with his senior management group that include generous bonuses, funded in part by deferred repair and maintenance expenses and prior earnings, sales of business segments where possible or transfers of assets to the counties and municipalities that had engaged the waste collection and disposal service. Gene has frozen all new capital investment. The mission that Eugene Entrepreneur has mapped out for his company can best be described as:

  A. Build.
  B. Hold.
  C. Harvest.
  D. Sunset.
  C. Harvest.

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  Choice "c" is correct. Eugene Entrepreneur has mapped out a harvest mission for his company. As Gene retires and pulls assets and value from the company, he is clearly taking a short-term view toward reaping immediate benefit. Choice "a"

  is incorrect. A "build" mission anticipates that the business is positioned to expand markets or market share and is characterized by a long-term view that promotes investment. Choice "b" is incorrect. A "hold" mission contemplates that the

  business is trying to hold on to current market share and is characterized by appropriate investment and competitive positioning.

  Choice "d" is incorrect. The term "sunset" mission is a distracter.

• Question 194:

  A general partnership must:

  A. Pay federal income tax.
  B. Have two or more partners.
  C. Have written articles of partnership.
  D. Provide for apportionment of liability for partnership debts.
  B. Have two or more partners.

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  Choice "b" is correct. A partnership is an organization of two or more persons who carry on a business for a profit.

  Choice "a" is incorrect. Partnerships do not pay federal income taxes; the partners report their shares of the partnership's income on their individual returns.

  Choice "c" is incorrect. A partnership agreement need not be in writing.

  Choice "d" is incorrect. If the partnership agreement is silent on the apportionment of liability for partnership debts, state law or the Uniform Partnership Act will cover the omission.

• Question 195:

  The movement along the demand curve from one price-quantity combination to another is called a(n):

  A. Change in demand.
  B. Shift in the demand curve.
  C. Change in the quantity demanded.
  D. Increase in demand.
  C. Change in the quantity demanded.

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  Choice "c" is correct. References to the change in quantity demanded refer to a single demand curve, which is downward sloping to the right.

  

  Changes in the quantity demanded result from changes in price.

  Choices "a", "b", and "d" are incorrect. All refer to changes in the demand curve itself, like an outward shift from curve D - D to D1 - D1.

  

• Question 196:

  In inventory management, the safety stock will tend to increase if the:

  A. Carrying cost increases.
  B. Cost of running out of stock decreases.
  C. Variability of lead-time increases.
  D. Fixed order cost decreases.
  C. Variability of lead-time increases.

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  Choice "c" is correct. If lead times became more variable, the amount of safety stock needed to reduce the risk of stock outs will increase.

  Choice "a" is incorrect. A high carrying cost would decrease safety stock.

  Choice "b" is incorrect. A lower stockout cost would decrease safety stock.

  Choice "d" is incorrect. If order costs decrease, then inventory will be ordered more frequently and less safety stock will be needed.

• Question 197:

  Assume the following facts about Martin Corporation:

  A. 5.5 percent.
  B. 7.0 percent.
  C. 5.1 percent.
  D. 8.5 percent.

  C. 5.1 percent.

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  Choice "c" is correct. 5.1 percent current net cost of debt.

  The fact pattern states that debt can be currently secured at 150 basis points above the Treasury bond rate. A basis point is equal to 1/100 of 1% (1% of 1%).

  Applying the decimals, it's:

  150 basis points x 1/100 of 1% (or .0001)

  this yields .015 or 1.5%

  Add the additional basis points converted to percentage (1.5%) to the Treasury bond rate of 7% to arrive at the pre-tax debt cost of 8.5%. Apply 1 - tax rate to arrive at the current net cost of debt as follows:

  

• Question 198:

  Which of the following is not necessary to create an express partnership?

  A. Execution of a written partnership agreement.
  B. Agreement to share ownership of the partnership.
  C. Intention to conduct a business for profit.
  D. Intention to create a relationship recognized as a partnership.
  A. Execution of a written partnership agreement.

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  Choice "a" is correct. A written partnership agreement, while certainly desirable, is not usually necessary to form a valid partnership; partnership agreements are not normally subject to the statute of frauds. Choice "b" is incorrect. A

  partnership is an association of two or more persons who agree to carry on as co-owners of a business for profit. Thus, an agreement to share ownership of the partnership is a requirement for creating an express partnership.

  Choice "c" is incorrect. A partnership is an association of two or more persons who agree to carry on as co-owners of a business for profit. Thus, an intent to carry on a business for a profit is a requirement for creating an express partnership.

  Choice "d" is incorrect. A partnership is an association of two or more persons who agree to carry on as co-owners of a business for profit. The intent to create a business relationship recognized as a partnership is a requirement for creating

  an express partnership.

• Question 199:

  Cobb, Inc., a partner in TLC Partnership, assigns its partnership interest to Bean, who is not made a partner. After the assignment, Bean asserts the rights to:

  I. Participate in the management of TLC.

  II.

  Cobb's share of TLC's partnership profits. Bean is correct as to which of these rights?

  A. I only.
  B. II only.
  C. I and II.
  D. Neither I nor II.
  I. Participate in the management of TLC. II. Cobb's share of TLC's partnership profits. Bean is correct as to which of these rights?
  B. II only.

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  Choice "b" is correct.

  Rule: The assignee of a partner's interest in the partnership does not thereby become a partner absent the unanimous consent of the other partners. Thus, the assignee has no right to participate in the management of the partnership and has

  only a right to receive the assignor's share of the partnership profits.

  Choices "a", "c", and "d" are incorrect, per the above rules.

• Question 200:

  A partner's interest in specific partnership property is:

  

  A. Option A
  B. Option B
  C. Option C
  D. Option D
  D. Option D

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  Choice "d" is correct. No - No.

  Rule: A partner's interest in specific partnership property is neither assignable to the partner's individual creditors nor is it subject to attachment by the partner's individual creditors.

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