ECONOMICS
Management Accounting Review
/RCROQUE
1. If both
a.
b.
c.
d.
the supply and the demand for a good increase, the market price will
Rise only in the case of an inelastic supply function.
Fail only in the case of an inelastic supply function.
Not be predictable with only these facts.
Rise only in the case of an inelastic demand function.
2. A supply curve illustrates the relationship between
a. Price and quantity supplied
b. Price and consumer tastes
c. Price and quantity demanded
d. Supply and demand
3. As a business owner you have determined 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 will increase total revenue.
c. Increasing the price of your product will have no effect on total revenue.
d. Increasing the price of your product will increase competition.
4. Which
a.
b.
c.
d.
one of the following has an inverse relationship with the demand for money?
Aggregate income
Price levels
Interest rates
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
a.
b.
c.
d.
of the following market structures is likely to cause a surplus of a particular product?
A monopoly
A price floor
A price ceiling
A perfect market
7. A decrease in the price of a complementary good will
a. Shift the demand curve of the joint commodity to the left.
b. 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
c. The population in the market area is large
d. People spend a large share of their income on the product
9. Which
a.
b.
c.
d.
of the following has the highest price elasticity coefficient?
Milk
Macaroni and cheese
Bread
Ski Boats
10. The local video store’s business increased by 12% after the movie theater raised its prices from ₱65 to ₱70. Thus,
relative to movie theater admissions, videos are
a. Substitute goods
b. Superior goods
c. Complementary goods
d. Public goods
11. An individual receives an income of ₱3,000 per month, and spends ₱2,500. An increase in income of ₱500 per
month occurs, and the individual spends ₱2,800. The individual’s marginal propensity to save is
a.
b.
c.
d.
12. In any
a.
b.
c.
d.
0.2
0.4
0.6
0.8
competitive market, an equal increase in both demand and supply can be expected to always
Increase both price and market-clearing quantity
Decrease both price and market-clearing quantity
Increase market-clearing quantity
Increase price
13. Given the following data, what is the marginal propensity to consume?
a.
b.
c.
d.
14. Which
a.
b.
c.
d.
1.33
1.16
0.95
0.75
Level of
Disposable income
Consumption
₱40,000
₱38,000
48,000
44,000
of the following will cause a shift in the supply curve of a product?
Changes in the price of the product.
Changes in production taxes.
Changes in consumer taxes.
Changes in the number of buyers in the market.
15. When the government imposes health and safety regulations on certain products, one of the most likely results is
a. Greater consumption of the product
b. Lower prices for the product
c. Greater tax revenues for the government
d. Higher prices for the product
16. In which of the following situations would there be inelastic demand?
a. A 5% price increase results in 3% decrease in the quantity demanded.
b. A 4% price increase results in a 6% decrease in the quantity demanded.
c. A 4% price increase results in a 4% decrease in the quantity demanded.
d. A 3% price decrease results in 5% increase in the quantity demanded.
17. In a competitive market for labor in which demand is stable, if workers try to increase their wage
a. Employment must fall
b. Government must set a maximum wage below the equilibrium wage
c. Firms in the industry must become smaller
d. Product supply must decrease
18. A polluting manufacturing firm tends, from the societal viewpoint, to
a. Price its products too low
b. Produce too little output
c. Report too little profitability
d. Employ too little equity financing
19. If the government regulates a product or service in a competitive market by setting a maximum price below the
equilibrium price, what is the long-run effect?
a. A surplus
b. A decrease in demand
c. A shortage
d. No effect on the market
20. A valid reason for the government to intervene in the wholesale electrical power market would include which one
of the following?
a. A price increase that is more than expected.
b. Electricity is an essential resource and the wholesale market is not competitive.
c. The electricity distribution companies are losing money.
d. Foreign power generators have contracts with the local government at very high prices.
21. If the income elasticity of demand coefficient for a particular product is 3.00, the good is likely
a. A luxury good
b. An inferior good
c. A complementary good
d. A necessity
22. Which
a.
b.
c.
d.
one of the following would cause the demand curve for a commodity to shift to the left?
A rise in the price of a substitute product.
A rise in average household income.
A rise in the price of a complementary commodity.
A rise in the population.
23. Price ceilings
a. Are illustrated by government price support programs in agriculture
b. Create prices greater than equilibrium prices
c. Create prices below equilibrium prices
d. Result in persistent surpluses
24. X and Y are substitute products. If the price of product Y increases, the immediate impact on product X is
a. Price will increase
b. Quantity demanded will increase
c. Quantity supplied will increase
d. Price, quantity demanded, and supply will increase
25. Wilson Corporation has a major competitor that produces a product that is a close substitute for Wilson’s good. If
the coefficient of cross-elasticity of demand for Wilson’s product with respect to the competitor’s product is 2.00
and the competitor decreases its price by 5%, what is the expected effect on demand for Wilson’s product?
a. A 5% increase in demand
b. A 10% increase in demand
c. A 5% decrease 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
c. An increase in product supply because of increased availability
d. That demand for the product would become completely inelastic
27. Which
a.
b.
c.
d.
of the following is not likely to affect the supply of a particular good?
Changes in government subsidies.
Changes in technology
Changes in consumer income
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
c. A decrease 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
b. Cameras and rolls of film
c. VCRs and video cassettes
d. Razors and razor blades
30. The law of diminishing marginal utility states that
a. Marginal utility will decline as a consumer acquires additional units of a specific product
b. Total utility decline as a consumer acquires additional units of a specific product
c. Declining utilities causes the demand curve to slope upward
d. Consumers’ wants will diminish with the passage of time
31. In the pharmaceutical industry where a diabetic must have insulin no matter the cost and where there is no other
substitute, the diabetic’s demand curve is best described as
a. Perfectly elastic
b. Elastic
c. Perfectly inelastic
d. Inelastic
32. Because of the existence of economies of scale, business firms may find that
a. Each additional unit of labor is less efficient than the previous unit
b. As more labor is added to a factory, increases in output will diminish in the short run
c. Increasing the size of a factory will result in lower average costs
d. Increasing the size of a factory will result in lower total costs
33. In the
a.
b.
c.
d.
long run, a firm may experience increasing returns due to
Law of diminishing returns
Opportunity costs
Comparative advantage
Economies of scale
34. The measurement of the benefit lost by using resources for a given purpose is
a. Economic efficiency
b. Opportunity costs
c. Comparative advantage
d. Absolute advantage
35. Marginal revenue is
a. Equal to price in monopolistic competition
b. The change in total revenue associated with increasing prices
c. 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
c. Firms are not allowed to enter or exit the industry
d. All inputs are variable
37. What is the main factor that differentiates the short-run cost function from the long-run cost function?
a. Nothing, the two functions are identical
b. The level of technology
c. Changes in government subsidies
d. The nature of the costs
38. If consumer confidence falls, the impact upon the economy is
a. A downturn
b. No change
c. An upturn
d. Consumer confidence does not have an impact upon the economy
39. During
a.
b.
c.
d.
the recessionary phase of a business cycle
The purchasing power of money is likely to decline rapidly
The natural rate of unemployment will increase dramatically
Potential national income will exceed actual national income
Actual national income will exceed potential national income
40. For a given level of tax collections, prices, and interest rates, a decrease in governmental purchases will result in
a(n)
a. Increase in aggregate demand
b. Increase in aggregate supply
c. Decrease in aggregate demand
d. Decrease in aggregate supply
41. In national income terms, aggregate demand is the
a. Demand for money by the community in a period of full employment
b. Total expenditure on capital goods by entrepreneurs during 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, including government and foreign expenditures,
during a given period
42. Which
a.
b.
c.
d.
one of the following would not be included in the calculation of the gross domestic product?
Purchase of a new home
An automotive worker’s wages
A doctor’s fee
Purchase of common stock
43. An upturn in economic activity is indicated by all of the following, except
a.
b.
c.
d.
44. Which
a.
b.
c.
d.
Increased housing starts
Reduction in the quantity of unemployment claims
Increase in personal travel
Reduction in the amount of luxury purchases
of the following may provide a leading indicator of a future increase in gross domestic product?
A reduction in the money supply
A decrease in the issuance of building permits
An increase in the timeliness of delivery by vendors
An increase in the average hours worked per week of production workers
45. Which of the following statements about leading economic indicators is not true?
a. For forecasting 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 accurate
c. The use of the index of leading indicators involves monitoring the data on a monthly basis
d. As the nature of the economy has changed, it has been necessary to revise the components of the index
of leading indicators
46. Disposable income is calculated as
a. Gross domestic product minus the capital cost allowance
b. Net domestic product minus indirect business taxes plus net income earned abroad
c. Personal income minus transfer payments
d. 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
b. Fulfilling a trade agreement
c. Contributing to economic growth
d. Fulfilling 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
b. Housing starts
c. Orders for consumer and producer goods
d. Consumer expectations
49. Government borrowing to finance large deficits increases the demand for lendable funds and
a. Increases the supply of lendable funds
b. Has no impact in interests
c. Exerts downward pressure on interest rates
d. Puts upward pressure on interest rates
50. A period of rising inflation
a. Increase the price level, which benefits those who are entitled to receive specific amounts of money
b. Enhances the positive relationship between the price level and the purchasing power of money
c. Will not be affected by contracts that include the indexing of payments
d. Increases 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 would be to
a. Decrease the rate of growth of the money supply
b. Increase both taxes and government spending
c. Decrease taxes and increase government spending
d. Increase taxes and decrease government spending
52. The money supply in a nation’s economy will decrease following
a. Open-market purchases by the nation’s central bank
b. A decrease in the discount rate
c. An increase in the reserve ratio
d. A decrease in the margin requirement
53. According to fiscal policy principles, a tax increase will
a. Increase spending and increase aggregate demand
b. Increase spending and reduce aggregate demand
c. Reduce spending and increase aggregate demand
d. Reduce spending and reduce aggregate demand
54. Which of the following instruments of monetary policy is the most important means by which the money supply is
controlled?
a. Changing the reserve ratio
b. Open-market operations
c. Manipulation of government spending
d. Changing the discount rate
55. If a government were to use only fiscal policy to stimulate the economy from a recession, it would
a. Raise consumer taxes and increase government spending
b. Lower business taxes and government spending
c. 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
57. Which of the following is a tool of monetary policy that a nation’s central bank could use to stabilize the economy
during an inflationary period?
a. Selling government securities
b. Lowering bank reserve requirements
c. Lowering bank discount rates
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 product
b. Consumption is always a multiply of savings
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 of 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 consumer 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. Frictiona unemployment rate
b. Structural unemployment rate
c. Cyclical unemployment rate
d. Full-employment unemployment rate
61. The producer price index measures
a. The price of a basket of commodities at the point of the first commercial sale
b. Price changes for all products sold by domestic producers to foreigners
c. Price changes of goods purchased for other countries
d. The price of a fixed market basket of goods and services purchased by typical urban consumers
62. Which
a.
b.
c.
d.
of the following is true about deflation?
It motivates consumers to borrow money
It motivates businesses to make investments
It results in very low interest rates
It results in economic expansion
63. Economies often experience inflation but seldom experience long period of deflation. Which of the following is
true about a deflationary economy?
a. Companies are hesitant to make investments
b. The lower prices encourage consumers to make major purchases
c. Interest rates tend to be high
d. Actual GDP is above potential GDP
64. What factors explains the difference between real and nominal interest rates?
a.
b.
c.
d.
Inflation risk
Credit risk
Default risk
Market risk
65. All of the following are true about international trade except that
a. The gains from international trade depend on specialization with comparative advantage
b. Absolute advantage without comparative advantage does not result in gains from international trade
c. Absolute advantage is defined as the ability of one nation to produce a product a relatively lower
opportunity cost than other nation
d. Where there is a reciprocal absolute advantage between two countries, specialization will make it possible
to produce more of each product
66. If the central bank of a country raises interest rates sharply, the country’s currency will most likely
a. Increase in relative value
b. Remain unchanged in value
c. Decrease in relative value
d. Decrease sharply in value at first and then return to its initial value
67. Which
a.
b.
c.
d.
one of the following groups would be the primary beneficiary of a tariff?
Domestic producers of export goods
Domestic producers of goods protected by the tariff
Domestic consumers of goods protected by the tariff
Foreign producers of goods protected by the tariff
68. In the
a.
b.
c.
d.
law of comparative advantage, the country which should produce a specific product is determined by
Opportunity costs
Profit margins
Economic order quantities
Tariffs
69. Assuming exchange rates are allowed to fluctuate freely, which one of the following factors would likely cause a
nation’s currency to appreciate on the foreign exchange market?
a. A relatively rapid rate of growth in income that stimulates imports
b. A high rate of inflation relative to other countries
c. A slower rate of growth in income than in other countries, which causes imports to lag behind exports
d. Domestic real interest rates that are lower than real interest rates abroad
70. Exchange rates are determined by
a. Each industrial country’s government
b. The International Monetary Fund
c. Supply and demand in the foreign currency market
d. Exporters and importers of manufactured goods
71. Which
a.
b.
c.
d.
of the following measures creates the most restrictive barrier to exporting to a country?
Tariffs
Quotas
Embargoes
Exchange controls
72. When net exports are negative, there is a net flow of
a. Goods from firms in foreign countries to the domestic country
b. Money from foreign countries to the firms of the domestic country
c. Goods from the firms of the domestic country to foreign country
d. Goods and services which result in a trade surplus
73. Which
a.
b.
c.
d.
of the following factors is least likely to affect a country’s foreign currency exchange rates?
Interest rates in the country
Inflation in the country
Political stability in the country
The tax rate in the country
74. Patents
Patents
a.
b.
c.
are granted in order to encourage firms to invest in the research and development of new products.
are an example of
Vertical integration
Market concentration
Entry barriers
d. Collusion
75. The distinguishing characteristic of oligopolistic market is
a. A single 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 characteristics
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
b. Oligopoly
c. Perfect competition
d. Monopolistic competition
78. Which type of economic market structure is composed of a large number of sellers, each producing an identical
product, and with no significant barriers to entry and exit?
a. Monopoly
b. Perfect competition
c. Oligopoly
d. Monopolistic competition
79. A natural monopoly exists because
a. The firm owns natural resources
b. The firms hold patents
c. 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
b. A natural monopoly
c. Monopolistic competition
d. An oligopoly
81. Which
a.
b.
c.
d.
of the following is not a key assumption of perfect competition?
Firms sell a homogeneous product
Customers are indifferent about which firm they buy from
The level of a firm’s output is small relative to the industry’s total output
Each firm can price its product above the industry price
82. The ultimate purpose of competitor analysis is to
a. Identify the competition
b. Determine the competition’s strength and weaknesses
c. Identify the competition’s major customers
d. Understand and predict the behaviour of the competition
83. Which
a.
b.
c.
d.
of the following is not an important aspect of supply chain management?
Information technology
Accurate forecasts
Customer relations
Communications
84. Which
a.
b.
c.
d.
of the following types of organizations would more likely engage in public relations type advertising?
An airline
A toy manufacturer
A hotel chain
An electric utility company
85. Target marketing analysis involves
a. Analysing the firm’s input markets
b. Understanding and segmenting the firm’s customer markets
c. Analysing the firm’s market structure
d. Deciding on whether to offer a new product line
86. If a 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
a.
b.
c.
d.
of the following is a defining characteristic of supply chain management?
Focuses on the sharing of information with suppliers and customers.
Focuses on redesigning processes
Focuses on improving quality
Focuses on strategic alliances
88. Which
a.
b.
c.
d.
of the following is not a likely strategy for a firm in a purely competitive market?
Lean manufacturing
Supply chain management
Process reengineering
Development of a brand name
89. What is the purpose of a response profile in competitor analysis?
a. To develop an understanding of the firm’s industry
b. To analyze the firm’s strengths in relation to its competitors
c. To identify possible actions by competitors
d. To understand the nature of the firm’s major markets
90. The process of dividing all potential consumers into smaller groups of buyers with distinct needs, characteristics,
or behaviors, who might require a similar product or service mix, is called
a. Strategic planning
b. Market segmentation
c. Product positioning
d. Objective setting
1.
2.
3.
4.
5.
6.
7.
8.
9.
C
A
A
C
A
B
D
D
D
10. A
11.
12.
13.
14.
15.
16.
17.
18.
19.
B
C
D
B
D
A
A
A
C
20. B
21.
22.
23.
24.
25.
26.
27.
28.
29.
A
C
C
B
D
B
C
D
A
30. A
31.
32.
33.
34.
35.
36.
37.
38.
39.
C
C
D
B
D
D
D
A
C
40. C
41.
42.
43.
44.
45.
46.
47.
48.
49.
D
D
D
D
C
D
C
A
D
50. D
51.
52.
53.
54.
55.
56.
57.
58.
59.
D
C
D
B
D
C
A
A
A
60. B
61.
62.
63.
64.
65.
66.
67.
68.
69.
A
C
A
A
C
A
B
A
C
70. C
71.
72.
73.
74.
75.
76.
77.
78.
79.
C
A
D
C
D
A
B
B
C
80. C
81.
82.
83.
84.
85.
86.
87.
88.
89.
D
D
C
D
B
C
A
D
C
90. B