Misc MCQS

Question 1

Profitiability Ratios

Answer 1

• Return on Asses
• Gross Margin
• Operating Profit Margin

P/E ratio is a market ratio

Question 2

Basis Risk

Answer 2

Basis risk is the risk of loss from ineffective hedging activities.

Question 3

DuPont Equation

Answer 3

ROI = Net Operating Profit/Sales multipled by sales divided by total assets

Question 4

Economic Order Quanty

Answer 4

The economic order quantity model minimizes the sum of ordering and carrying costs.

Question 5

Oligopoly

Answer 5

Exits in markets or industries characterized by:

• Few sellers
• Firms sell either homogeneous product or differentiated product
• Restricted entry to the market
• Engage primarily in non price competition

Oligopolistic markets are characterized by few large competitors. Therefore, the actions of one affect others in the market.

Question 6

Monopolistic Competition

Answer 6

The model of monopolistic competition describes a common market structurein which firms have many competitors, but each one sells a slightly different product.

• Each firm makes independent decisions about price and output, based on its product, its market, and its costs of production.
• Knowledge is widely spread between participants, but it is unlikely to be perfect
• There is freedom to enter or leave the market, as there are no major barriers to entry or exit.
• A central feature of monopolistic competition is that products are differentiated
• Monopolistically competitive firms are assumed to be profit maximisersbecause firms tend to be small with entrepreneurs actively involved in managing the business.
• There are usually a large numbers of independent firms competing in the market.

Question 7

Increase Money Supply

Answer 7

• Federal Reserve reduce discount rate

Question 8

Market Clearing Quantity

Answer 8

In a competitive market, the market will always clear at the equilibrium price.

If there is an equal increase in both demand and supply, the equilibrium price may increase, decrease, or remain the same. However, there will be more units sold.