Business

Q: Errors in the sales forecast can be offset by similar errors in costs and income forecasts. Thus, as long as the errors are not large, sales forecast accuracy is not critical to the firm. a. True b. False

Q: In the case of cellular phones, the physical product is practically given away to gain the phone services contract. This could be because A) cellular phone companies do not view market share as a strategic goal. B) the cost of production of cellular phones is very low. C) the revenues from associated services exceed the revenues from the cellular phones. D) the margins on after-sales services for cellular phones is low. E) consumers sometimes buy a variety of services that are not associated with products.

Q: Explain what the profit-maximizing combination of resources is for the perfectly competitive firm.

Q: A typical sales forecast, though concerned with future events, will usually be based on recent historical trends and events as well as on forecasts of economic prospects. a. True b. False

Q: The ________ measures customers' satisfaction and perceptions of quality of a representative sample of America's goods and services. A) ISO 9000 B) ICE C) Net Promoter Score (NPS) D) American Customer Satisfaction Index (ACSI) E) American Price Index (API)

Q: A firmʹs demand curve for labor is equal to theA) total revenue product. B) marginal revenue product.C) marginal factor cost. D) marginal wage.

Q: If a firm has a high degree of leverage then a small change in sales results in a. an unpredictable change in expected profits b. a very small change in expected profits c. no change in expected profits d. a large change in expected profits.

Q: The argument that suggests that regulators balance the interests of firms, consumers, and legislators is calledA) the capture hypothesis.B) the creative response theory.C) the share-the-gains, share-the-pains theory. D) the theory of optimal regulation.

Q: ________ certification is considered to be an important competitive marketing tool in Europe. A) ISO 9000 B) ICE C) ACSI D) AERA E) NCME

Q: All else being equal, which of the following will lower the breakeven point of a firm? a. higher fixed costs b. lower selling price c. lower variable costs d. none of the above

Q: A network effect exists wheneverA) a firmʹs willingness to produce a particular good or service is influenced by the costs of inputs it must utilize in order to manufacture the item.B) a consumerʹs willingness to purchase a particular good or service is influenced by how many others also buy or have bought the item.C) a firmʹs willingness to purchase a particular factor of production depends on the other types of inputs it utilizes to manufacture an item.D) a consumerʹs willingness to purchase a particular good or service is influenced by the prices of other complementary or substitute items.

Q: What statement about ISO 9000 certification is true? A) It does not require a registration assessment. B) It is generally voluntary except for certain regulated products. C) It requires an annual complete assessment for recertification. D) It measures customers' satisfaction and perceptions of quality of a representative sample. E) It guarantees that a manufacturer produces a "quality" product or service.

Q: All of the following are commonly examples of variable costs for a firm except a. lease payments b. labor c. materials d. All of the above are variable costs

Q: What is driving a strong level of interest in the ISO 9000 certification? A) government regulations B) marketplace requirements C) environmental regulations D) trade tariff requirements E) protectionism restrictions

Q: Refer to the above figure. The above figure shows the cost structure of a firm producing an information product. Which curve represents average total cost?A) Any of the 3 could be ATC. B) Curve 1C) Curve 2 D) Curve 3

Q: Which of the following business decisions can be improved using breakeven analysis? a. New product decisions b. An expansion in the level of the firm's operations c. Modernization and automation projects d. An evaluation of the riskiness of operations e. Breakeven analysis can be used to improve all of the above business decisions

Q: The model of perfect competition and the model of monopolistic competition differ in thatA) perfect competition assumes many buyers and sellers while monopolistic competition assumes many buyers but few sellers.B) perfect competition assumes easy entry of new firms while there are more significant barriers to entry in monopolistic competition.C) perfect competition assumes firms make zero profits in the long run and monopolistic competition assumes firms make positive profits.D) perfect competition assumes the product is homogeneous and monopolistic competition assumes the product is differentiated.

Q: Many suppliers are adopting ISO 9000 standards because A) they can acquire the certification at no extra cost. B) governments mandate ISO certification for all product categories. C) they want to be perceived as being environmentally friendly. D) the WTO expects international suppliers to conform to ISO standards. E) their buyers require them to be ISO 9000 registered.

Q: Breakeven analysis is the method of determining the point at which sales will just cover ____ costs. a. labor b. inventory c. operating d. financing

Q: ISO 9000 concerns the A) cost-effectiveness of the production of a good. B) registration and certification of a manufacturer's quality system. C) profitability of a production line. D) ability of a company's computer system to adapt to SAP, a business management software. E) marketing and promotional strategies of a firm.

Q: Which method estimates additional funds needed for a firm by projecting the assets needed for the coming and subtracting the projected liabilities spontaneously generated. a. Spontaneous method b. Additional funds needed method c. Feedback method d. Projected balance sheet method

Q: What is true of the ISO 9000 standards? A) The ISO 9000 standards apply to specific products. B) The ISO 9000s guarantee that a manufacturer produces a "quality" product or service. C) The ISO 9000 series describes eight quality system models. D) The ISO 9000 standards are a certification of the quality control system that a company has in place. E) The ISO 9000s were originally designed by the International Organization for Quality in the United States.

Q: A constant-cost industry is one in whichA) output increases lead to productivity gains.B) the marginal product of labor is constant.C) there is no change in long-run per-unit costs, even as output varies. D) each firm has a horizontal long -run average cost curve.

Q: The firm is concerned with implementing the financial plans, and with managing the feedback and adjustment process needed to ensure that the goals of the firm are met during which stage of the planning and control process a. control stage b. planning stage c. forecasting stage d. budgeting stage

Q: The American Customer Satisfaction Index (ACSI) focuses on A) differentiating a product based on its quality. B) rating a company's quality based on its leadership, strategic planning, and customer and market focus. C) the audit of a company's business processes in order to ensure quality. D) quality as perceived by product and service users. E) the creation of a quality control system that can meet published quality standards.

Q: In the above figure, at the profit-maximizing rate of production for the perfectly competitive firm profit isA) $100. B) $70. C) $30. D) $130.

Q: Which of the following countries is not officially on the metric system? A) Liberia B) Japan C) Saudi Arabia D) Mexico E) China

Q: What is the next step in the financial planning process after a firm develops a sales forecast? a. determine additional funds needed to finance operations b. determine the assets required to meet the sales target c. determine the firm's optimal capital structure d. estimate the degree of operating leverage

Q: If total costs are $50,000 when 1000 units are produced, and total costs are $50,100 when 1001 units are produced, we can conclude thatA) average variable costs are $100. B) average total costs are $100. C) average fixed costs are $100. D) marginal costs are $100.

Q: The lack of universal standards in the industrial goods market A) increases the price of raw materials. B) gives each firm a competitive edge. C) increases the level of consumer satisfaction. D) reduces the price of the final goods. E) increases the cost of doing business.

Q: JT Inc. produces gourmet frozen dinners for the airline industry. JT has fixed costs of $200,000 and variable costs of $8 per frozen dinner. The selling price per frozen dinner is $13 and JT plans to sell 150,000 frozen dinners this year. If JT sells the 150,000 frozen dinners they planned to sell what will JT's operating profit be this year? a. $1,950,000 b. $1,750,000 c. $750,000 d. $550,000 e. $1,000,000

Q: When the Dutch East India Company was founded in 1602, it raised financial capital by issuing notes of indebtedness calledA) stocks. B) bonds. C) funds. D) notes.

Q: A U.S. manufacturing firm lost a big contract in Qatar because it provided pipes that were three yards long and the specifications called for three meters. In this case, the U.S. firm failed to recognize the importance of A) ISO 9000 standards. B) U.S. manufacturing guidelines. C) the EU Product Liability Directive. D) the American Customer Satisfaction Index. E) using the metric system.

Q: NJM Incorporated is a football manufacturer. NJM has fixed operating costs of $400,000 and variable costs of $12 per football. The footballs sell for $35 each and NJM plans to sell 300,000 footballs this year. What are NJM's total operating costs for the year? a. $10,900,000 b. $4,000,000 c. $3,600,000 d. $3,200,000 e. $400,000

Q: Accounting profit will always beA) more than economic profit. B) equal to sunk costs.C) less than economic profit. D) equal to implicit costs.

Q: The U.S. Congress and businesses have been resisting conversion to the metric system because they fear A) market competition from international firms already using the metric system. B) consumer backlash and the substitution of international products. C) it will promote standardization. D) workers will not understand the system. E) it will be too costly to implement.

Q: Which of the following would generally be considered variable costs? a. Labor b. Rent c. Insurance d. Depreciation

Q: Observations of real-world situations that appear to violate a consumer optimum could be offered as evidence favoringA) utility analysis.B) bounded rationality.C) diminishing marginal utility.D) zero marginal utility at a utility-maximizing point.

Q: Buyers in country X prefer to use the older, cheaper version of Firm A's product although it is bulkier and less user-friendly. Buyers in country Y, however, prefer to use the newer, lightweight version for its new user interface. Which statement is the most accurate conclusion from the given information? A) Firm A needs to revamp its after-sales services. B) The sales of industrial goods are higher in country X than in country Y. C) The perception of quality can differ across countries. D) Country X is a highly industrialized nation. E) Country Y has a lower average income level compared to country X.

Q: Silver King Inc. is currently running at 60 percent of full capacity. The plant and equipment are currently valued $125 million and Silver King generated sales of $90 million. What is the full capacity sales of Silver King with their current assets? a. $208 million b. $150 million c. $125 million d. $144 million e. $100 million

Q: What is utility and what are its characteristics?

Q: The Global Harmonization Task Force is an international effort that is attempting to A) coordinate standards for several international industrial sectors. B) promote free trade among developing and developed nations. C) equalize wages among countries. D) increase double testing of goods and services. E) equalize the perception of quality across countries.

Q: Warsaw Incorporated is currently operating at 80% of capacity. The sales of Warsaw were $25 million this year and their net plant and equipment were valued at $100 million. Sales are expected to increase to $35 million next year. How much additional plant and equipment will Warsaw need to acquire to keep production up with the new level of sales? a. $20 million b. $15 million c. $12 million d. $10 million e. No additional plant and equipment is needed.

Q: When the consumer spends a small portion of his income on a good, demand will beA) elastic.B) unit-elastic. C) inelastic.D) elastic, unit-elastic or inelastic depending upon supply.

Q: Which statement is true of universal standards in the sale of international products? A) The idea of universal standards is being resisted in developing countries. B) Firms that adhere to universal standards find the costs to be greater than the benefits. C) The international market for industrial goods uses the imperial system as a universal standard. D) All governments mandate universal standards. E) The lack of universal standards limits the expansion of industries.

Q: Which of the following liabilities increase typically and create spontaneously generated funds as sales increase for the firm? a. Long-term debt b. Accrued wages c. Accounts receivable d. Property, plant, and equipment

Q: Suppose that the nation wide average cost of air pollution generated by a car is $1,000. Would a tax of $1,000 on every car induce people to take external costs into consideration and bring about the optimal price and output for autos? Explain.

Q: The process of total quality management (TQM) starts with A) providing all customers with technologically advanced products. B) signing trade agreements with developed countries. C) involving customers in the product development process. D) reducing the time taken for the product to reach the market. E) marketing the products at trade shows and fairs.

Q: To forecast the balance sheet, the firm must: a. Project the asset requirement for the coming period. b. Project the liabilities and equity that will be provided by normal operations. c. Estimate the additional funds needed. d. All of the above.

Q: The original impetus for Social Security was A) to provide retirement fund for all persons. B) to prevent future depressions. C) the result of social engineering by politicians. D) a proper response to the stock market crash of 1929.

Q: An important dimension of quality is how well the product A) meets the specific needs of the buyer. B) exceeds competitors' products. C) conforms to manufacturer's specifications. D) alters the marketing landscape. E) saves time and labor.

Q: Forecasting financial requirements for a firm involves determining how much money the firm will a. generate internally. b. have to raise externally. c. need during a given period. d. All of the above.

Q: A monopsonist that wants to hire more labor must pay more for the new labor than it is currently paying and increase the wage rate of all existing employees becauseA) the demand curve for labor is inelastic. B) of labor unions.C) the supply of labor is upward sloping. D) of competition in the labor market.

Q: What does the perception of quality depend on? A) government specifications B) the customer C) universal quality standards D) the manufacturer's specifications E) standardization

Q: Underestimating the sales in your forecast could have which of the following effects on the firm? a. The firm could acquire too many fixed assets. b. The firm would have higher costs for depreciation and storage. c. The firm could lose market share to their competitors. d. The firm would have too high of a total asset turnover.

Q: Show how the profit-maximizing rule for hiring resources is equivalent to the cost -minimizing rule.

Q: Which trend will expand demand for industrial goods and business services in Latin America? A) the increase of import tariff by 70 percent B) the adoption of Marxistsocialist policies C) the privatization of state-owned enterprises D) the increased use of labor in place of capital in production E) the decline of economic growth in Asia

Q: Refer to Trident Food Corporation. What is the financial breakeven point for Trident Foods? a. EBIT = $146,500 b. Sales = 4,800 units c. EBIT = $10,000 d. Net income = $10,000 e. EBIT = $11,400

Q: Which trend spurs demand for technologically advanced products in the world? A) an increase in the size of the global unskilled labor force B) large fiscal deficits in developed nations C) expanding economic and industrial growth in Asia D) the increase in the average age in Europe E) the opening of the Trans-Arctic route

Q: The downward sloping marginal revenue product of labor isA) the firmʹs supply of labor.B) the firmʹs short-run demand for labor. C) the firmʹs marginal cost of labor.D) another term for the marginal revenue product of labor.

Q: Refer to Trident Food Corporation. What is the operating breakeven point in sales units (Q) for Trident Foods? a. 7,500 b. 5,625 c. 6,825 d. 4,800 e. 2,700

Q: What is possibly the best indicator of a country's ability to use technology to leap several stages of economic development in a very short time? A) the quality of the educational system B) the size of the population C) the general economic environment D) the size and growth rate of the market E) the level of government regulations

Q: The behavior of regulators when trying to win approval for their actions from their entire constituency is best described by theA) capture hypothesis.B) law of increasing social well-being.C) share-the-gains, share-the-pains hypothesis. D) marginal benefit pricing hypothesis.

Q: Refer to Trident Food Corporation. What is the degree of total leverage for Trident Foods? a. 42.86 b. 10.71 c. 71.43 d. 17.86 e. 6.43

Q: If a country is in Stage 5 (the age of mass consumption) of Rostow's five-stage model of economic development, it purchases most of its highest-technology products and services from ________ suppliers. A) Stage 4 B) Stage 3 C) Stage 5 D) Stage 1 E) Stage 2

Q: Positive market feedback refers to a tendency forA) potential entrants to an oligopolistic industry to respond to entry deterrence strategies by contemplating setting their prices above prices established by firms already in the industry.B) potential entrants to an oligopolistic industry to respond to entry deterrence strategies by contemplating producing more output than the quantities produced by firms already in the industry.C) a particular product to come into favor with additional consumers because other consumers have chosen to purchase the product.D) price leaders to respond to an increase in market demand by increasing the prices of their products.

Q: Country X is most likely to be in the age of mass consumption according to Rostow's five-stage model of economic development if A) its economy is primarily driven by natural resource extraction. B) the economy is moving away from agriculture and toward manufacturing. C) the economy is driven by low-cost manufacturing. D) it is primarily a service economy. E) its economy is primarily agrarian.

Q: Refer to Trident Food Corporation. What is the degree of operating leverage for Trident Foods? a. 2.78 b. 10.71 c. 3.86 d. 3.00 e. 4.00

Q: Average variable cost for an information product wouldA) first decrease and then increase as quantity increases.B) increase constantly as quantity increases. C) decrease constantly as quantity increases. D) remain constant as quantity increases.

Q: In which stage of Rostow's five-stage model of economic growth do highly-industrialized countries like Japan and Germany fit? A) traditional society B) preconditions to takeoff C) takeoff D) drive to maturity E) the age of mass consumption

Q: Hogan Inc. generated EBIT of $240,000 this past year using assets of $1,100,000. The interest rate on its existing long-term debt of $640,000 is 12.5 percent and the firm's tax rate is 40 percent. The firm paid a dividend of $1.27 on each of its 37,800 shares outstanding from net income of $96,000. The total book value of equity is $446,364 of which the common stock account equals $335,000. The firm's shares sell for $28.00 per share in the market. The firm forecasts a 10% increase in sales, assets, and EBIT next year, and a dividend of $1.40 per share. If the firm needs additional capital funds, it will raise 60% with debt and 40% with equity. The cost of any new debt will be 13%. Spontaneous liabilities are estimated at $15,000 for next year, representing an increase of 10% over this year. Except for spontaneous liabilities, the firm uses no other sources of current liabilities and will continue this policy in the future. What will be the cumulative AFN Hogan will need to balance its projected balance sheet using the projected balance sheet method through the first two passes? a. $5,013 b. $3,417 c. $51,156 d. $26,228 e. $54,573

Q: Products can be differentiatedA) if the buyers are homogeneous and their number increases. B) by location and by brand name.C) only by brand name. D) none of the above

Q: In which stage of Rostow's five-stage model of economic growth do industrialized economies such as Korea and the Czech Republic fit? A) preconditions to takeoff B) takeoff C) traditional society D) drive to maturity E) the age of mass consumption

Q: Carolina Vineyards is considering two alternative production methods for turning grapes into wine. One method calls for using a hand-operated press, while the other would employ a new, automated press. It has been estimated that the variable cost per bottle will amount to $2.00 using the old press and $0.50 using the new machine. If the new machine is purchased, fixed operating costs will equal $150,000, and interest charges will be $80,000. Fixed operating costs of $25,000 will be incurred if the company decides to use the old press, and interest costs will be zero because no debt will be needed. Assume that sales (in units) will be 100,000 bottles under the automated method and 75,000 units under the labor intensive method. What sales price per unit would cause Carolina to be indifferent between the two methods? a. $2.00 b. $2.20 c. $4.00 d. $4.20 e. $6.00

Q: If a monopolist were to produce in the inelastic segment of its demand curve, A) total revenue would be at a maximum.B) total revenue would be at a minimum. C) the firm would maximize profits.D) a further drop in the price will change quantity demanded less than proportionately.

Q: Musgrave Corporation has fixed operating costs of $46,000 and variable costs that are 30% of the current sales price of $2.15. At a price of $2.15, Musgrave sells 40,000 units. Musgrave can increase sales by 10,000 units by cutting its unit price from $2.15 to $1.95, but variable cost per unit won't change. Should it cut its price? a. No, EBIT decreases by $6,000. b. No, EBIT decreases by $250. c. Yes, EBIT increases by $11,500. d. Yes, EBIT increases by $8,050. e. Yes, EBIT increases by $5,050.

Q: If a constant-cost, perfectly competitive industry experiences an increase in the demand for its product, we would expectA) only the market price of the good to increase.B) both the market price and quantity supplied to increase.C) decreases in the market price, but increases in quantity supplied. D) only the quantity supplied of the product to increase.

Q: The industrialized economies in the ________ stage of Rostow's five-stage model of economic development focus more on low-cost manufacturing of a variety of consumer and some industrial goods. They buy from all categories of industrial products and services. A) traditional society B) drive to maturity C) preconditions to takeoff D) age of mass consumption E) takeoff

Q: Elephant Books sells paperback books for $7 each. The variable cost per book is $5. At current annual sales of 200,000 books, the publisher is just breaking even. It is estimated that if the authors' royalties are reduced, the variable cost per book will drop by $1. Assume authors' royalties are reduced and sales remain constant; how much more money can the publisher put into advertising (a fixed cost) and still break even? a. $600,000 b. $466,667 c. $333,333 d. $200,000 e. None of the above.

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