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Free CPA-Business Exam Braindumps (page: 52)

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Suppose the equilibrium wage for low skilled workers in California is $6.00 an hour. If the government increases the minimum wage to $7.00 an hour, what would be the effect on the market for low skilled labor?

  1. An excess demand for labor would result.
  2. An excess supply of labor would result.
  3. The demand for labor would decrease.
  4. The supply of labor would increase.

Answer(s): B

Explanation:

Choice "b" is correct. A minimum wage that is set above the equilibrium wage will result in an excess supply (or surplus) of labor.

Choice "a" is incorrect, since the quantity demanded of labor at $7 is less than the quantity supplied, implying an excess supply not an excess demand.
Choice "c" is incorrect. An increase in the minimum wage causes a decrease in quantity demanded of labor, not a decrease in the demand (shift in demand) for labor.
Choice "d" is incorrect, per the above Explanation.



In a competitive labor market, a minimum wage that is set above the equilibrium wage will result in which of the following:

  1. A decrease in the quantity demanded of labor.
  2. An increase in the quantity supplied of labor.
  3. A decrease in total employment.
  4. All of the above.

Answer(s): D

Explanation:

Choice "d" is correct. As illustrated in the graph, a minimum wage that is set above the equilibrium wage results in a decrease in the quantity demanded of labor (falls to LD), an increase in the quantity supplied of labor (increases to LS), and a decrease in total employment (total employment falls from L* to LD).

Choices "a", "b", and "c" are incorrect. All are true, making choice "d" the only right answer.



The continual process of re-evaluating the strategic plans includes all of the following significant questions a firm should be concerned with, except:

  1. Has the firm been able to attain or maintain competitive advantage?
  2. Is the firm able to be profitable under the current strategy?
  3. Does the current strategy continue to be aligned with the established goals of the firm?
  4. Has the firm been able to adapt to the preferences of its employees?

Answer(s): D

Explanation:

Choice "d" is correct. Although the firm needs to be flexible with respect to changes in many situations and then adapt to them, the ability to adapt to the preferences of its employees is not nearly as significant to the process as the other three choices, which are crucial to the success of the strategic plan.
Choices "a", "b", and "c" are incorrect because they are all significant questions a firm should be concerned with when re-evaluating the strategic plan.



Under monopolistic competition, strategic plans focus on:

  1. Profitability from production levels that maximize profits.
  2. Maintaining the market share and being responsive to market conditions related to sales price.
  3. Maintaining the market share and planning for enhanced product differentiation.
  4. Maintaining the market share, ensuring product differentiation, and adapting to price changes or required changes in production volume.

Answer(s): C

Explanation:

Choice "c" is correct. Under monopolistic competition, strategic plans include maintaining the market share (as with pure competition), but they also likely include plans for enhanced product differentiation and allocation of resources to advertising, product research, etc.
Choices "a", "b", and "d" are incorrect because they are characteristics of other types of market structures.






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