2B - Market Influences on Business
The price elasticity of demand for a good is 2.0, and the quantity demanded is 5,000 units. The price increases by 10%. What is the new quantity demanded? 1,000 4,000 4,500 6,000 Question #401170
4,000 The price elasticity of demand is a measure of the responsiveness of consumers to a change in a product's price; price elasticity is equal to the percentage change in quantity demanded divided by the percentage change in price. The law of demand states that there is an inverse relationship between the price and quantity demanded of a product. Therefore, given a 10% increase in price, there would be a 20% decrease in quantity demanded (2.0 = 20% ÷ 10%). The new quantity demanded would be 4,000 units [5,000 - (5,000 × 0.20)].
The following schedule presents cost data for a firm: Total Units Produced Total Cost 10 400 20 600 30 900 40 1,200 50 2,000 Diseconomies of scale start between: 10 and 20 units. 20 and 30 units. 30 and 40 units. 40 and 50 units. Question #400138
40 and 50 units. Diseconomies of scale begin where the average total cost starts going up. Total Units Produced Total Cost Average Total Cost 10 400 40 20 600 30 30 900 30 40 1,200 30 50 2,000 40
Which of the following is not a determinant of demand? Disposable income Consumer tastes and preferences The price of other goods Increase in income
Increase in income
Sovereign wealth funds (SWFs) are:
government-controlled entities that seek to attract funds from foreign countries to fund foreign direct investment in the country.
As prices decrease
consumer demand will increase up to the point of maximized marginal utility. This is the point at which consumer has no use for an item, no matter how much the price decreases
Companies will often use strategic alliances and collaborative partnerships in order to:
open up new markets, gain technology, improve manufacturing expertise, and improve supply chain efficiency
In relation to the balance of trade, all international transactions involving the purchase or sale of physical products between domestic and foreign countries are reflected in:
the trade balance in the current account.
Monopolies tend to set prices within
their elastic range
If the price of one increases causing a decrease in the quantity demanded of that product,
then the demand for the other product will fall causing a shift in the demand curve.
In perfect competition,
there are a large number of small sellers of a standardized product such that the company has no influence over price. There is easy entry and exit to the industry, and each individual firm produces a small portion of the total output. Farmers produce commodities, and commodities are a reflection of perfect price competition.
A key rationale or cause for the changing pattern of investment in agriculture by sovereign wealth funds would be:
to ensure food security in the event that crop shortages would cause export bans that might curtail their ability to import crops.
The term "mutual interdependence" relates
to the fact that the outcome of pricing decisions in an oligopoly is dependent upon the reactions of organization's rivals.
A best-cost producer can gain a competitive advantage:
by delivering a superior product at a lower price than the competition.
Two goods that are used jointly as they are consumed are
complementary goods.
Department stores, automobile manufacturers, and corporate fast-food restaurants are examples of
oligopolies.
Joan quit her job where she earned $50,000. She started a business by using $100,000 that she had just inherited instead of investing the money that could have earned 10% a year. The business had sales that equaled $250,000 the first year and expenses equal to $160,000. The economic profit for business for the first year was: $90,000. $30,000. $40,000. $80,000. Question #400134
$30,000 Economic profit equals revenue minus both explicit and implicit costs. $250,000 - $160,000 - $50,000 - ($100,000 × 10%) = $30,000.
Which of the following formulas should be used to calculate the economic rate of return on common stock?
(Dividends + Change in price) ÷ Beginning price
If there is an increase in demand,
, both equilibrium price and equilibrium quantity will increase, provided that there is excess capacity to meet the increased demand. With the increase in aggregate demand, inventory levels will fall below desired levels and firms will increase their investment in inventory, which will cause an increase in production and employment at the wholesale level. If all costs are fixed, profit will rise with increased sales; however, if costs increase, profits may fall.
The cost data in the table below is for a firm that is selling in a perfectly competitive industry. Average Average Average Fixed Variable Total Marginal Output Cost Cost Cost Cost 1 250 80 330 330 2 125 70 195 60 3 83 65 148 55 4 63 60 123 45 5 50 67 117 95 6 42 78 120 133 7 36 91 127 169 8 31 105 136 203 9 28 122 150 258 10 25 141 166 312 If the market price for the firm's product is $133, the competitive firm would produce: 5 units at an economic profit of $80. 6 units at an economic profit of $78. 7 units at an economic profit of $83. 8 units at an economic profit of $95. Question #400122
6 units at an economic profit of $78. The firm will maximize profits at the point where marginal cost equals marginal revenue. For a perfectly competitive firm MR = P, therefore, MR = $133. Thus the firm would produce 6 units. Economic profit is defined as total revenue minus total cost. TR = ($133 × 6) = $798; TC = ATC × output = ($120 × 6) = $720. Therefore economic profit equals $78.
In which of the following situations would there be inelastic demand? A 5% price increase results in a 3% decrease in the quantity demanded A 4% price increase results in a 6% decrease in the quantity demanded A 4% price increase results in a 4% decrease in the quantity demanded A 3% price decrease results in a 5% increase in the quantity demanded
A 5% price increase results in a 3% decrease in the quantity demanded
Which of the following does not refer to diminishing marginal returns? As a farmer continues to add fertilizer, the crop output increases at a slower rate as more fertilizer is added. A firm adds more management personnel as the firm expands capacity. Eventually, the more hours a student studies per day, the less the student will learn with each additional hour. As a firm used more of a variable resource with a given amount of a fixed resource, the output added from each additional unit of the variable resource will eventually decline.
A firm adds more management personnel as the firm expands capacity
Which of the following does not describe perfect competition? Many small companies Easy entry and exit to the industry A firm can dictate price. Each firm produces a small portion of total output.
A firm can dictate price.
Which of the following is the most likely result of imposing tariffs to increase domestic employment? A long-run reallocation of workers from export industries to protected domestic industries A short-run increase in domestic employment in import industries from export industries A decrease in the tariff rates of foreign nations A decrease in consumer prices in the domestic market
A long-run reallocation of workers from export industries to protected domestic industries
Which of the following is not a determinant of price elasticity of demand? A large number of substitutes A small number of substitutes Luxury items versus necessities Price change
A small number of substitutes
Information regarding four aluminum manufacturers is as follows: Alpha Brighton Cobalt Driftwood Co. Co. Co. Co. Average production cost $60 $54 $53 $52 Mill price to domestic customers 56 49 54 49 Mill price to foreign customers 59 57 55 55 Spot aluminum price 56 56 56 56 According to international law, which of the following aluminum producers is dumping? Alpha Brighton Cobalt Driftwood
Alpha
Which of the following is not an example of price discrimination?
An airline charges $175 for 14-day advance purchase ticket round trip between New York and Chicago and charges $400 for a ticket on the same route, purchased two days before the flight.
Which of the following situations more closely represents the law of demand?
An increase in the price of SUVs causes a decrease in the quantity of SUVs demanded.
Which of the following statements about economic demand is false? Demand is the quantity of goods or services that buyers are willing and able to purchase at different prices. A demand curve is a graphical representation of how much is demanded at each price point. As prices rise, consumers will purchase more. The law of demand implies an inverse relationship between price and quantity demanded.
As prices rise, consumers will purchase more.
Which of the following is not a primary use to which of funds invested by sovereign wealth funds (SWFs) would be put? Investing in land in another country to produce staple crops for export to their country in a way designed to circumvent the workings of world commodity markets Diversifying the use of foreign exchange reserves and attempting to improve food and energy security Attempting to make investments that would allow their citizens to increase their savings rate to ensure that the citizens provide their own social safety net Acquiring technologies, brands, and resources designed to improve productivity and improve management techniques
Attempting to make investments that would allow their citizens to increase their savings rate to ensure that the citizens provide their own social safety net
Which of the following is not a characteristic of a low-cost provider?
Buyers are price-sensitive.
Which of the following is an explicit cost?
Cash expenditures to acquire resources
Which of the following pricing policies results in establishment of a price to external customers higher than the competitive price for a given industry?
Collusive pricing
Which of the following is an incorrect statement about a long-run cost of production? Where all inputs are variable Also known as the planning period Expanding or contracting plant capacity Concentrate on cutting costs
Concentrate on cutting costs
Which of the following determinants will not cause a change in supply? Technology The price of other goods Consumer expectations The number of sellers in the market
Consumer expectations
All other things being equal, what is the most likely impact of imposing import tariffs?
Contraction of relatively efficient industries
Which of the following is not a market influence on business? Purchasing power Inflation Unemployment Cost-of-living adjustments (COLAs)
Cost-of-living adjustments (COLAs)
Which of the following is not a direct benefit of globalization? Creation of new jobs Increasing wages for farm workers Decreased exports Strengthening manufacturing and services
Decreased exports
How does inflation distort reported income?
Depreciation is not reflective of current fixed-asset replacement costs.
Which of the following would not be a successful business strategy resulting from rebalancing due to the shifting balance of power in the international economy? Promoting the same standards of quality throughout the world while maintaining the flexibility to tailor product attributes to the customs and traditions of local markets Enhancing the use of R&D, integrating innovation, and devising new products at lower costs while developing a long-term customer focus Attempting to identify clusters of similar customers across a broad base of international markets to allow building revenue and/or profit streams that would support ongoing capital investment Engaging in specialized production for a significant number of local markets by constructing manufacturing facilities in several locations to ensure that products produced would meet local tastes and preferences
Engaging in specialized production for a significant number of local markets by constructing manufacturing facilities in several locations to ensure that products produced would meet local tastes and preferences
Price discrimination is accomplished most effectively in markets with which of the following characteristics?
Excess capacity that meets high demand at different price levels
Which of these industries reflects perfect competition? Department stores Automobile manufacturers Farming Corporate fast-food restaurants
Farming
Which of the following is not a characteristic of an oligopoly? Firms in the industry are dependent. There are a small number of large firms. Products can be standardized or differentiated. Firms engage in nonprice competition.
Firms in the industry are dependent.
Which of the following does not describe monopolistic competition? A large number of independent buyers and sellers Free entry and exit from the industry Firms make identical products Significant use of advertising to drive business
Firms make identical products
Monopolies example
For example, the electric company holds a monopoly due to the franchise provided by the government. You must purchase from the monopoly or find an alternative. There are few economically viable alternatives.
Which of the following concepts can best be used to understand oligopoly behavior? Concentration ratio Interindustry competition Game theory model Herfindahl index
Game theory model
Which of the following items represents a reduction in the balance of payment accounts for the United States? Exports of services to residents of foreign nations Loans to domestic entities by foreign commercial banks Foreign purchases of assets in the United States Imports of assets from foreign countries
Imports of assets from foreign countries
A country's currency conversion value has recently changed from 1.5 to the U.S. dollar to 1.7 to the U.S. dollar. Which of the following statements about the country is correct? Its exports are less expensive for the United States. Its currency has appreciated. Its imports of U.S. goods are more affordable. Its purchases of the U.S. dollar will cost less.
Its exports are less expensive for the United States.
Which of the following set of economic variables or factors would not be characteristic of emerging market economies? Low-cost labor and high savings rates Large currency reserves and high investment in infrastructure High debt-to-GDP (gross domestic product) ratios and decreasing trade among and between emerging market countries Significant growth in the number of middle-class consumers and improving supply-chain effectiveness
Low-cost labor and high savings rates
Which of the following is an assumption in a perfectly competitive financial market?
No single trader or traders can have a significant impact on market prices.
Which of the following is not a type of profit? Nominal profit Accounting profit Economic profit Normal profit
Nominal profit
Product demand increases and product supply decreases. Which of the following statements is correct regarding resulting market changes? Price decreases and quantity increases. Price is uncertain and quantity increases. Price increases and quantity decreases. Price increases and quantity is uncertain.
Price increases and quantity is uncertain.
Which of the following is not a characteristic of a monopoly? Strong barriers to entry Position may have come from a government action Price taker Less incentive to innovate and improve
Price taker
A company has a policy of frequently cutting prices to increase sales. Product demand is significantly elastic. What impact would this have on the company's situation?
Quantity increases proportionally more than the price declines.
The consensus of economic forecasts indicates that consumer prices are likely to increase because of increases in aggregate demand. Which of the following outcomes is most likely to occur as prices increase?
Quantity of output increases if there is capacity to produce.
Falser Co. increases all of its input factors by 100%, resulting in increased output of 90%. Which of the following statements identifies the effect of this change?
Returns to scale decrease.
Which of the following is incorrect about a short-run cost of production? At least one input is fixed. A change in the amount of labor is possible. Short run must be less than two years. Short run is also referred to as the operating period.
Short run must be less than two years.
situation would it be advantageous for a country to export a manufactured product?
The country has a comparative advantage in the production of the item.
The demand curve for a product reflects which of the following? The impact of prices on the amount of product offered The willingness of producers to offer a product at alternative prices The impact that price has on the amount of a product purchased The impact that price has on the purchase amount of two related prod
The impact that price has on the amount of a product purchased
Which of the following is not a cause of modern economic globalization? Inexpensive, rapid, and reliable communication technologies The opening of world financial markets The dismantling of international tariffs The increase in state-sponsored enterprises
The increase in state-sponsored enterprises
characteristics would indicate that an item sold would have a high price elasticity of demand?
The item has many similar substitutes.
Which of the following statements is correct regarding the variety and price of products produced under monopolistic competition as compared to production under perfect competition
The monopolistically competitive industry produces a greater variety of products at a higher cost per unit.
Which statement best describes the concept of diminishing marginal utility?
The more candy bars that a person eats, the less satisfaction derived from eating an additional candy bar.
Increased demand for product A increases the demand for resources used to produce product A. What is the best explanation for the increase in the demand for resources?
The theory of derived demand is working.
Which of the following is correct in stating a similarity between firms in a perfectly competitive industry and a monopolistically competitive industry? Firms in either industry structure produce standardized products. Firms operating in either industry structure engage in non-price competition. There are no significant barriers to entry in either market structure. Firms in either market structure face a perfectly elastic demand curve.
There are no significant barriers to entry in either market structure.
Which of the following is not one of the effects of rapid technological change on nations in the global economy? There has been a dispersion of lean production methods with the combination of innovations within productive organizations. Flexible computer-aided manufacturing systems that allow for the production of custom output have been combined with systems providing mass production at a low cost to meet the tastes of ever-smaller groups. There is a high degree of global labor arbitrage as unskilled workers move to the nations with the highest degree of technological change to take advantage of the job opportunities made possible by the new technology. If immigration restrictions limit the migration of skilled workers to the countries with advanced information technology, then technology begins to migrate to the location of skilled workers.
There is a high degree of global labor arbitrage as unskilled workers move to the nations with the highest degree of technological change to take advantage of the job opportunities made possible by the new technology.
Which of the following is not one of the key objectives of supply chain management? To reduce the supplier base while developing supplier relationships To standardize parts to reduce inventory levels To ensure that internal transfer prices comply with IRS regulations To improve communications at levels of the organization to create an uninterrupted flow of materials and products
To ensure that internal transfer prices comply with IRS regulations
Which of the following is not a key objective of supply chain management? To reduce inventory levels To coordinate logistical activities To manage consumer relationships To create an uninterrupted flow of materials and products
To manage consumer relationships
The U.S. balance of trade is decreased by:
U.S. imports.
Under which of the following conditions is the supplier most able to influence or control buyers?
When the supplier does not face the threat of substitute products
For a differentiation strategy to be successful
a company must be able to supply a product that is of value to the consumer and cannot be easily duplicated.
Each of the following is an effect from opening markets to foreign investment, except: an increase in the correlation of emerging stock markets with world markets. a change in the volatility of emerging stock market returns. a decrease in local firms' cost of capital. a decrease in investment growth rates.
a decrease in investment growth rates.
In pure competition
a firm will continue to produce until marginal costs = marginal revenue; therefore, as long as marginal revenue is greater than marginal costs, the firm will continue to increase output.
When comparing a monopolistically competitive firm to an oligopolistic firm, it could be said that:
a monopolistically competitive firm has a large number of small competitors whereas an oligopolistic firm must deal with the issue of interdependence between the small number of large firms in the industry.
If consumer income increases and as a result the demand for housing increases, we can conclude that housing is:
a normal good.
If average household income increases, then the housing market will experience:
a rightward shift in the demand curve. A rightward shift in the demand curve means that buyers are willing and able to purchase more of a product at all prices.
Technology is constantly changing. An improvement in production techniques that allows for a larger output for a given amount of inputs would result in:
a shift of the supply curve to the right resulting in more of the product being offered at each price.
When implicit costs are greater than zero and economic profits in an industry equal zero:
accounting profits will be greater than zero.
Income and employment tend toward an equilibrium level where:
aggregate supply equals aggregate demand and intended savings equals intended investment.
Explicit costs (accounting costs) are
all the cash expenditures that companies make to support production that is owned by others.
A profit-maximizing firm operating in a competitive market in the short run will increase output:
as long as marginal revenue is greater than marginal costs.
The law of demand states
as prices increase, consumers will purchase fewer items
Demand is the quantity of goods or services that
buyers are willing and able to purchase at various alternative prices at a given moment in time.
Variable rate loans reduce the potential interest rate risk of:
both borrowers and lenders.
Globalization involves an ongoing process
by which national and regional economies, societies, and cultures become integrated through global networks of communication and trade, which has resulted in growing connectivity and interdependence between businesses in the broader world market. Globalization often relates to the integration of national economies into the international economy through the opening of world financial markets, the dismantling of tariffs, foreign direct investment, capital flow migration, and the spread of inexpensive, reliable technology.
Merger and acquisition strategies:
can provide vertical integration that is expected to result in lower costs along the value chain of activities.
A government is most likely to reduce taxes on investments when:
capital spending is expected to be unusually low.
A transfer price is the price
charged by one unit within a larger business to another unit in that business.
The supply chain business process includes all of the following except: customer relationship management. credit terms and methodologies. customer service management. customer orders.
credit terms and methodologies.
Supply chain metrics are created to measure the performance of the supply chain. If a firm developed metrics to measure things such as fill rates and on-time delivery, we would assume that they are trying to measure:
customer service.
As price increases,
demand decreases.
A city ordinance that freezes rent prices may cause: Question #400141 - Graph
demand for rental space to exceed supply. An ordinance freezing rents below the market clearing price would create a situation where the demand for rental space would exceed the supply of rental space made available at that price (as may be seen in the accompanying graph, qd > qs at the rent control price).
A normal good is one for which
demand increases as income increases.
Firms in a monopolistically competitive industry produce
differentiated products, engage in non-price competition, and face a downward sloping demand curve. Firms in a perfectly competitive industry produce a standardized product, find non-price competition ineffective, and face a perfectly elastic demand curve. There are no significant barriers to entry in either market structure.
In monopolistic competition, firms produce
differentiated products. Products may be differentiated by features such as design, convenience, packaging, and/or brand.
Mutual interdependence means that:
each firm in an oligopolistic industry must consider the reactions of its rivals when it makes decision concerning how to price its product.
The primary sources of funds for sovereign wealth funds would be:
earnings from commodity-based exports and trade surpluses driven by the export of manufactured goods.
Firm A received an order for 110 units of specialized pieces of equipment and estimated that their cost of production would be $58,000 per unit. Then they received an order for an additional 120 units of the same equipment. Management recognized that they would need to expand plant production to be able to fulfill both orders. They estimated that their cost of production would fall to $50,000 per unit. The change in cost per unit can best be explained by:
economies of scale.
Sovereign wealth funds (SWFs) are entities
established by governments to make investments with foreign exchange reserves that are managed separately for official foreign exchange reserves managed by the country's central bank within monetary policy goals. The underlying investments are made by SWFs with the goal of making a profit.
An oligopoly means
few firms in the market, each relatively large.
The law of demand states that
here is an inverse relationship between the price of a product and the quantity demanded if the product. The higher the price, the lower the quantity demanded. This would be movement along the demand curve.
All of the following statements on market equilibrium are true, except: market equilibrium is where supply meets demand. if there is a decrease in demand, equilibrium quantity and equilibrium price will fall. if there is an increase in demand, equilibrium price and equilibrium quantity will increase. if there is a decrease in supply, equilibrium quantity falls and equilibrium price also falls.
if there is a decrease in supply, equilibrium quantity falls and equilibrium price also falls.
Factors that create a shift in the demand curve include
income, prices of related goods, number of buyers, preferences, and expectation of future prices. Since housing is a normal good, an increase in average household income will cause an increase in the demand for housing.
Suppose that a monopolist calculates that at the current level of sales and output, marginal costs is $3 and marginal revenue is $5. Under these conditions, profits could be increased by:
increasing output and decreasing price. The monopoly can increase profits by increasing output and decreasing price as long as MR > MC (marginal revenue is greater than marginal costs). The firm will maximize profits by continuing to the point where at the given output MC = MR.
inA shift in the supply curve to the right
indicates that a larger quantity of the product is supplied at each price. Things that shift the supply curve are technology, prices of resources, expectation of future prices, number of sellers, taxes and other government restriction or subsidies.
In an oligopoly, firms are
interdependent on their competition. There are usually a small number of relatively large firms. The firms engage in competition through differentiation, as opposed to price.
One of the changes that has occurred as a result of recent globalization has been a shifting pattern in foreign direct investment (FDI). The current pattern of FDI may be described as having:
investment flow from emerging market economies to other emerging market economies and more developed economies, as many of these emerging economies capture an increasing amount of foreign exchange earnings either from the sale of raw materials or rising trade surpluses from the export of manufactured goods.
When dealing with supply chain management, one of the key differences between traditional manufacturing and demand management within the supply chain:
is that products are pulled through the production process in response to specific customer needs.
Characteristics of monopolies
little to no competition (strong barriers to entry such as economies of scale, legal barriers such as patents, control of existing resources), government oversight, and little incentive to improve or innovate when a monopoly is held.
Variable rate loans can be used to reduce the risk associated with changes in interest rates during the term of the loan. The greatest level of risk relates to ________ loans.
long-term
Tariffs are essentially taxes or duties placed
on an imported good or service by a domestic government, making domestic goods cheaper and imported goods more expensive
Predatory pricing means
lowering prices to such an extent as to drive competitors out of business.
In monopolistic competition, the goal of product differentiation and advertising is to:
make the firm's demand curve less elastic so that consumers are less responsive to changes in price.
In the short-run, average variable cost for a firm is rising; therefore: average variable cost is below average fixed cost. average fixed cost is constant. average total cost is at a minimum. marginal cost is above average variable cost.
marginal cost is above average variable cost.
Arranging credit terms and methodologies is an
objective, not a process.
Dual pricing is a practice
of setting different prices for a product dependent on the currency used to buy it. It often is used to set lower-than-normal prices to gain access to a particular foreign market.
Supply chain sustainability includes all of the following except: economic stability. environmental impact. political impact. stakeholder interest.
political impact.
Supply is the quantity that
producers are willing and able to offer for sale at alternative prices at a given moment in time.
All of the following are implicit costs except: opportunity costs. potential wages earned. purchasing new equipment. investments never taken.
purchasing new equipment.
The primary objective of variable interest rate loans is to:
reduce the impact of rate changes on both parties.
Economies of scale are the
reduction in average total cost of production when a firm expands plant production. In this instance, the firm expanded plant production, thus achieving economies of scale, which lead to the reduction in average per unit cost.
The law of diminishing returns does not hold that: output will first increase at an increasing rate. at some point output may become negative. resources are variable. units are variable.
resources are variable
A firm that earns a normal profit (zero economic profit) has
revenue equal to total cost (explicit plus implicit costs). Economic profit is generally lower (never higher) than accounting profit due to the fact that implicit costs are included in the calculation of in economic profits.
Supply chain sustainability includes
social responsibility, economic stability, health and safety, stakeholder interests, and environmental impact.
The supply curve shifts (a change in demand) when there are changes in other supply determinants such as
technology, the prices of resources, the expectation of future prices, the number of sellers, and in taxes and other government restriction or subsidies.
The law of diminishing marginal returns states
that as a firm adds additional units of a variable resource to a fixed resource, output (marginal product) will first increase at an increasing rate, then it will then increase at a decreasing rate, and at some point may become negative.
The average-marginal rule states
that when the marginal magnitude is above the average magnitude, the average magnitude rises; therefore, since average variable cost is rising, marginal cost must be higher than average variable cost.
Consumer expectations do not change
the amount manufacturers are willing to supply. A change in supply is caused by a change in one of the supply determinants other than the price of the good.
If a company strives to be the low-cost provider within the industry, this means that:
the company may underprice the competition and attract the buyers in a large enough volume in order to obtain satisfactory profits.
The following transactions were noted for an economy whose currency is denominated in pesetas (Pta). Amount in Pesetas Imports of goods 20,300 Exports of goods 15,760 Domestic purchases of assets in foreign countries 6,300 Foreign purchases of assets in the country 1,400 Net investment income (3,700) Gifts received from abroad (net transfers) 1,240 When calculating the current account balance for this economy: the current account has a surplus of Pta 7,000. the capital account has a surplus of Pta 4,000. the capital account has a deficit of Pta 7,700. the current account has a deficit of Pta 7,000. Question #400094
the current account has a deficit of Pta 7,000. The balance of trade is calculated by subtracting merchandise imports from merchandise exports (15,760 Ptas. - 20,300 Ptas.) which shows a balance of trade deficit of 4,540 Ptas. The negative net investment income (3,700 Ptas.) is added to this balance, and it would be reduced by the positive inflow of transfers (1,240 Ptas.) leaving a current account deficit balance of 7,000 Ptas. The two accounts dealing with the purchase of assets are part of the capital account and therefore are not relevant for this calculation. If there were any exports or imports or services, they would have been included in the calculation.
Differentiation strategies can be successful when:
the differentiating product attribute cannot be easily copied.
Primary benefits of globalization for companies would include all of the following except: the growing ability to capture the benefits of global labor arbitrage created as new technologies have allowed production to be shifted geographically to take advantage of low-cost labor. the increased demand for raw materials and infrastructure development that has dramatically increased the demand for many nonrenewable resources. increasing capital flows that transfer savings from countries where the marginal product of capital is low to those where it is high, resulting in increasing world output. the recipients of foreign direct investment now having access to new research, technology, and skills.
the increased demand for raw materials and infrastructure development that has dramatically increased the demand for many nonrenewable resources.
If a loan agreement contains a fixed rate of interest and market interest rates rise,
the lender loses and the borrower benefits. A reduction in market interest rates produces the opposite effect.
A niche (focus) strategy based on differentiation can be attractive if:
the market has distinctive buyer groups who have specific needs in product attributes or have different uses for the product
Globalization suggests that firms need to take a serious look at the variety of implications of globalization for business strategies. Among the major factors that need to be considered are:
the need for scenario planning, which causes the firm to look at a number of different future possibilities for the firm under varying conditions of high uncertainty.
Implicit costs (economic costs) are
the opportunity costs of using the resources provided by the owner of the firm. They represent the earnings that these resources could have received had they been used in their next best alternative use.
having a variable interest rate tied to some identifiable market rate would reduce
the potential for significant losses or gains by both parties.
All other things being equal, movement along a supply curve occurs if:
the price for the product increases or decreases.
Examples of supply determinants are
the price of the resources needed to produce the product, technology, taxes and subsidies, prices of other goods, future price expectations, and the number of sellers in the market.
Suppliers have more power when:
the product they are supplying is differentiated from other products, substitute products are not available, few companies produce the same product, and the purchasing industry is not an important customer to the supplying industry.
If the price for a product increases and the demand curve for a second product shifts to the left, then:
the products are substitutes.
Globalization is a process by which nations of the world become integrated through global networks of communication. Its current success is tied to a number of socioeconomic effects, with one of the key effects being:
the relatively large labor force in emerging markets and declining birth rates that have historically been associated with dynamic positive economic change.
When there is equilibrium in a monopolistically competitive industry, a firm:
will operate inefficiently with price greater than marginal revenue.
