ETS MFT BUSINESS EXAM QUESTIONS AND ANSWERS
VERIFIED 100% CORRECT
A legal institution associated with an independent judiciary relying on case precedents
is called
a) common law system
b) civil law system
c) theocratic law system
d) None of the above - ANSWER A
Which of the following is not part of the accounting process?
a) Recording
b) Identifying
c) Financial decision making
d) Communicating - ANSWER C
What is the median of 26, 30, 24, 32, 32, 31, 27 and 29?
a) 32
b) 29
c) 30
d) 29.5
e) 30.5 - ANSWER D
Under the common law, the ____ must be the mirror image of the ____
a) contract, consideration.
b) contract, offer
,c) offer, acceptance
d) acceptance, offer - ANSWER D
Sue and Neal are twins. Sue invests $5,000 at 7 percent when she is 25 years old.
Neal invests $5,000 at 7 percent when he is 30 years old. Both investments compound
interest annually. Both Sue and Neal retire at age 60. Which one of the following
statements is correct assuming that neither Sue nor Neal has withdrawn any money
from their accounts?
a) Sue will have less money when she retires than Neal.
b) Neal will earn more interest on interest than Sue.
c) Neal will earn more compound interest than Sue.
d) If both Sue and Neal wait to age 70 to retire, then they will have equal amounts of
savings.
e) Sue will have more money than Neal as long as they retire at the same time -
ANSWER E
In general, the __________ difficult it is for an organization to enter an industry as a
new competitor, the __________ are the barriers to entry to this industry
a) Less; lower
b) More; lower
c) More; higher
d) Less; higher - ANSWER C
An open access good (or common property good), such as a fishery:
a) Is rival but not excludable
b) Is both rival and excludable
c) Is neither rival nor excludable
d) Is not rival but is excludable - ANSWER A
,A differentiation strategy enables a business to address the five competitive forces by
a) lessening competitive rivalry by distinguishing itself
b) having brand-loyal customers become more sensitive to prices
c) increasing economies of scale
d) serving a broader market segment - ANSWER A
Only one of the following statements is false at the long-run equilibrium for a firm in a
monopolistically competitive industry. Which one is false?
a) Price equals Average Total Cost, like a competitive firm
b) Price exceeds marginal cost, like a monopolist
c) Firms make zero economic profit, like a competitive firm
d) Firms produce at the bottom of the ATC curve, like a competitive firm - ANSWER D
Dreamland Pillow Company sells the "Old Softy" model for $20 each. One pillow
requires two pounds of raw material and one hour of direct labor to manufacture. Raw
material costs $3 per pound and direct production labor is paid $4 per hour. Fixed
supervisory costs are $2,000 per month and Dreamland rents its factory on a five-year
lease for $4,000 per month. All costs are considered costs of production.
Another firm has offered to produce "Old Softy" and sell them to Dreamland for $12
each. Dreamland cannot avoid the factory lease payments, but can avoid all labor
costs if it does not produce these pillows. Under these conditions, how many "Old
Softy" pillows must Dreamland sell to earn monthly gross profits of $1,000?
a) 417
b) 500
c) 625
d) 875. - ANSWER C
The correct ANSWER is 625 Pillows Gross Profit = Net Sales - Cost of Goods Sold
Since you are buying pillows and not manufacturing pillows your variables costs are
the cost of purchasing each pillow which is $12. Although the problem doesn't
, specifically state it, you should assume that $12 buys the whole pillow (labor and
materials). You still have to cover the cost of the lease of $4,000 but since you don't
have employees to supervise you can avoid the fixed cost of supervision. Break Even
Analysis Selling Price = 20 Variable Costs = 12
Contribution Margin per unit = 8 Contribution Margin Ratio = 8/20 = .4 or 40%
Fixed Costs = 4000 (unavoidable cost of the factory lease)
Break-Even Units = 4000/8 = 500 Units ($0.00 Gross Profit)
Break-Even Sales = 4000/.4 = $10,000 (also 500 x 20)
Desired Profit of $1,000
Fixed Costs ($1000) + Desired Profit ($4000) = $5,000
5000/8=625 Units or 5000/.4 = $12,500 in Sales
When a trial is conducted with a jury, the judge determines issues of ____ and the jury
determines questions of ____
a) evidence, law.
b) law, evidence
c) law, fact
d) fact, law - ANSWER C
The central processing unit (CPU) in a personal computer contains the
a) control unit and primary memory
b) control unit and arithmetic/logic unit
c) arithmetic/logic unit and bus
d) arithmetic/logic unit only - ANSWER B
Marketers must constantly monitor their competitors' products, prices, distribution, and
promotional efforts because the:
a) competitors may be violating the truth-in-advertising laws
b) actions of competitors may threaten the firm's monopoly position
c) actions of competitors may create an oligopoly within an industry
d) new product offerings by a competitor may require adjustments to one or more
components of the firm's marketing mix - ANSWER D
VERIFIED 100% CORRECT
A legal institution associated with an independent judiciary relying on case precedents
is called
a) common law system
b) civil law system
c) theocratic law system
d) None of the above - ANSWER A
Which of the following is not part of the accounting process?
a) Recording
b) Identifying
c) Financial decision making
d) Communicating - ANSWER C
What is the median of 26, 30, 24, 32, 32, 31, 27 and 29?
a) 32
b) 29
c) 30
d) 29.5
e) 30.5 - ANSWER D
Under the common law, the ____ must be the mirror image of the ____
a) contract, consideration.
b) contract, offer
,c) offer, acceptance
d) acceptance, offer - ANSWER D
Sue and Neal are twins. Sue invests $5,000 at 7 percent when she is 25 years old.
Neal invests $5,000 at 7 percent when he is 30 years old. Both investments compound
interest annually. Both Sue and Neal retire at age 60. Which one of the following
statements is correct assuming that neither Sue nor Neal has withdrawn any money
from their accounts?
a) Sue will have less money when she retires than Neal.
b) Neal will earn more interest on interest than Sue.
c) Neal will earn more compound interest than Sue.
d) If both Sue and Neal wait to age 70 to retire, then they will have equal amounts of
savings.
e) Sue will have more money than Neal as long as they retire at the same time -
ANSWER E
In general, the __________ difficult it is for an organization to enter an industry as a
new competitor, the __________ are the barriers to entry to this industry
a) Less; lower
b) More; lower
c) More; higher
d) Less; higher - ANSWER C
An open access good (or common property good), such as a fishery:
a) Is rival but not excludable
b) Is both rival and excludable
c) Is neither rival nor excludable
d) Is not rival but is excludable - ANSWER A
,A differentiation strategy enables a business to address the five competitive forces by
a) lessening competitive rivalry by distinguishing itself
b) having brand-loyal customers become more sensitive to prices
c) increasing economies of scale
d) serving a broader market segment - ANSWER A
Only one of the following statements is false at the long-run equilibrium for a firm in a
monopolistically competitive industry. Which one is false?
a) Price equals Average Total Cost, like a competitive firm
b) Price exceeds marginal cost, like a monopolist
c) Firms make zero economic profit, like a competitive firm
d) Firms produce at the bottom of the ATC curve, like a competitive firm - ANSWER D
Dreamland Pillow Company sells the "Old Softy" model for $20 each. One pillow
requires two pounds of raw material and one hour of direct labor to manufacture. Raw
material costs $3 per pound and direct production labor is paid $4 per hour. Fixed
supervisory costs are $2,000 per month and Dreamland rents its factory on a five-year
lease for $4,000 per month. All costs are considered costs of production.
Another firm has offered to produce "Old Softy" and sell them to Dreamland for $12
each. Dreamland cannot avoid the factory lease payments, but can avoid all labor
costs if it does not produce these pillows. Under these conditions, how many "Old
Softy" pillows must Dreamland sell to earn monthly gross profits of $1,000?
a) 417
b) 500
c) 625
d) 875. - ANSWER C
The correct ANSWER is 625 Pillows Gross Profit = Net Sales - Cost of Goods Sold
Since you are buying pillows and not manufacturing pillows your variables costs are
the cost of purchasing each pillow which is $12. Although the problem doesn't
, specifically state it, you should assume that $12 buys the whole pillow (labor and
materials). You still have to cover the cost of the lease of $4,000 but since you don't
have employees to supervise you can avoid the fixed cost of supervision. Break Even
Analysis Selling Price = 20 Variable Costs = 12
Contribution Margin per unit = 8 Contribution Margin Ratio = 8/20 = .4 or 40%
Fixed Costs = 4000 (unavoidable cost of the factory lease)
Break-Even Units = 4000/8 = 500 Units ($0.00 Gross Profit)
Break-Even Sales = 4000/.4 = $10,000 (also 500 x 20)
Desired Profit of $1,000
Fixed Costs ($1000) + Desired Profit ($4000) = $5,000
5000/8=625 Units or 5000/.4 = $12,500 in Sales
When a trial is conducted with a jury, the judge determines issues of ____ and the jury
determines questions of ____
a) evidence, law.
b) law, evidence
c) law, fact
d) fact, law - ANSWER C
The central processing unit (CPU) in a personal computer contains the
a) control unit and primary memory
b) control unit and arithmetic/logic unit
c) arithmetic/logic unit and bus
d) arithmetic/logic unit only - ANSWER B
Marketers must constantly monitor their competitors' products, prices, distribution, and
promotional efforts because the:
a) competitors may be violating the truth-in-advertising laws
b) actions of competitors may threaten the firm's monopoly position
c) actions of competitors may create an oligopoly within an industry
d) new product offerings by a competitor may require adjustments to one or more
components of the firm's marketing mix - ANSWER D
