CPA Business Environment and Concepts (BEC) : CPA Business Environment and Concepts (BEC)
Study concepts, example questions & explanations for CPA Business Environment and Concepts (BEC)
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Example Questions
Example Question #11 : Economic Markets
In the long run, a firm may experience increasing returns due to:
The principle of substitution
Comparative advantage
Economies of scale
Law of diminishing returns
Economies of scale
Economies of scale is the process by which the cost to produce something decreases with increased production and scale.
Example Question #1 : Market Structure
Which of the following segments of the economy will be least affected by the business cycle?
Residential construction industry
Commercial construction industry
Healthcare industry
Machinery and equipment industry
Healthcare industry
Healthcare services are part of an industry that has an inelastic demand. Regardless of the status of the economy, consumers will always have the same need for healthcare service.
Example Question #1 : Market Structure
Elasticity of demand or supply is:
A measure of how flexible the firm is with respect to responding to the needs of consumers
A measure of how sensitive the demand for or supply of a product is to a change in its price
A measure of how flexible the demand or supply of a product is when preferences change
A measure of how well a firm's strategic plan is able to adapt to changes in demand or supply
A measure of how sensitive the demand for or supply of a product is to a change in its price
Elasticity of demand or supply is a measure of how sensitive the demand for or the supply of a product is to a change in its price.
Example Question #2 : Market Structure
Frictional unemployment refers to unemployment resulting from:
The skills of workers do not correspond to the skills demanded by employers
A recession
Seasonal decreases in demand for labor
The time needed to match qualified job seekers with available jobs
The time needed to match qualified job seekers with available jobs
Frictional unemployment arises from workers routinely changing jobs or from workers being temporarily laid off.
Example Question #2 : Market Structure
During a period of high inflation, which of the following groups in society would be most likely to gain?
Those with a fixed amount of debt
Those holding a large amount of money
Workers under contract without a cost of living adjustment
Those with a fixed income
Those with a fixed amount of debt
During a period of high inflation, those with a fixed amount of debt will repay their debt with inflated dollars and are thus likely to gain.
Example Question #6 : Market Structure
There are ___ methods of measuring GDP, and _____ is not a method of measuring GDP.
2, Output
3, Income
3, Expenditure
2, Expenditure
2, Expenditure
There are 2 methods of measuring GDP, expenditure, and income approaches. There is no GDP measuring method known as the Output approach.
Example Question #1 : Economic Concepts & Analysis
Which of the following methods may the Federal Reserve use to reduce inflationary pressures?
Increase the money supply
Decrease reserve requirements
Decrease the target interest rate
Increase margin requirements
Increase margin requirements
The Fed can increase margin requirements as a means to decrease the economy's money supply. This is a viable contractionary monetary policy used by the Fed to lower the economy's price level.
Example Question #2 : Economic Concepts & Analysis
Which of the following individuals would be most hurt by an unanticipated increase in inflation?
A borrower whose debt has a fixed interest rate
A retiree living on a fixed income
A union worker whose contract includes a provision for regular cost of living adjustments
A saver whose savings was placed in a variable rate savings account
A retiree living on a fixed income
A retiree living on fixed income would be hurt because the retiree's income would not increase to offset the negative effects of inflation.
Example Question #3 : Economic Concepts & Analysis
If the Federal Reserve raises the discount rate, which of the following effects is likely to occur?
Fixed interest rates on mortgages will decrease
Short term interest rates will likely increase
Consumer spending will increase
Corporate profits will increase
Short term interest rates will likely increase
Declines in the money supply lead to an increase in interest rates.
Example Question #3 : Economic Concepts & Analysis
Under which of the following conditions is the supplier most able to influence or control buyers?
When the supplier's products are not differentiated
When the industry is controlled by a large number of companies
When the purchasing industry is an important customer to the supplying industry
When the supplier does not face the threat of substitute products
When the supplier does not face the threat of substitute products
When there are few good substitutes for a supplier's product, the supplier has market power.
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