Quantitative Analysis For Business (C723)

Correct Answer

B. Changes in income will shift the demand curve, and changes in the market price of the good will result in a movement along the curve.

Explanation

The law of demand states that when the price of a good changes, the quantity demanded changes as well, but this is represented as a movement along the demand curve. However, when factors like income change, this leads to a shift in the entire demand curve itself. An increase in income typically leads to an increase in demand for normal goods, while a decrease in income leads to a decrease in demand. The market price of a good, on the other hand, only causes movement along the demand curve.

Why other options are wrong

A. Changes in expectations will shift the demand curve, and changes in income will result in a movement along the curve.

This is incorrect because income changes actually shift the demand curve, not cause movement along it. Additionally, changes in expectations typically shift the demand curve as well, rather than cause a movement along it.

C. Changes in the number of buyers in a market will shift the demand curve, and changes in the price of a complement good will result in a movement along the curve.

While it is true that changes in the number of buyers or the price of a complement good shift the demand curve, changes in the price of the good itself lead to movement along the demand curve, not shifts. This answer incorrectly mixes the concepts of price-induced movement along the curve and non-price factors that shift the curve.

D. Changes in the price of a substitute good will shift the demand curve, and changes in tastes and preferences will result in a movement along the curve.

This is incorrect. Changes in tastes and preferences actually shift the demand curve, not cause movement along it. Similarly, the price of a substitute good leads to a shift in the demand curve, not movement along it.

Correct Answer

A. A combination of pay forms, plans, policies, and practices

Explanation

A Total Rewards Strategy is a comprehensive approach that includes not only base salary and cash bonuses but also non-monetary rewards such as benefits, work-life balance, recognition programs, career development opportunities, and a positive work environment. It aims to attract, retain, and motivate employees by offering a holistic package of rewards that addresses their diverse needs and expectations.

Why other options are wrong

B. Only non-monetary benefits like vacation days

A Total Rewards Strategy is not limited to non-monetary benefits like vacation days. While non-monetary rewards are a part of the strategy, it also includes monetary compensation, health benefits, and other incentives, making it more comprehensive.

C. A single type of reward for all employees

A Total Rewards Strategy tailors rewards to different employee needs and preferences, rather than offering a single type of reward for everyone. The strategy aims to address various motivational factors and job satisfaction levels through a diverse range of rewards.

D. Only cash bonuses and salary increases

While cash bonuses and salary increases are important components of a Total Rewards Strategy, the strategy also includes non-monetary rewards, benefits, and recognition programs. A well-rounded Total Rewards Strategy goes beyond just monetary compensation.

Correct Answer

B. For each unit of work they produce

Explanation

Piece rate systems reward employees based on the number of units of work they produce, rather than by the amount of time they spend on the job. This system incentivizes efficiency and productivity, as employees are paid a set amount for each unit of output, encouraging them to work faster and more effectively.

Why other options are wrong

A. For their overall annual performance

Piece rate systems are not based on annual performance. Instead, they reward employees for the immediate quantity of work produced, typically on a per-piece or per-task basis.

C. For their attendance and punctuality

Attendance and punctuality are typically rewarded through other systems, such as attendance bonuses or recognition programs, but are not the focus of piece rate systems.

D. For completing training programs

Piece rate systems are not designed to reward training completion. They focus on rewarding tangible work output, not educational or developmental milestones.

Correct Answer

C. A reward or benefit, not paid for by the organization, that the employee experiences due to their job location.

Explanation

Positive location externalities refer to the non-monetary benefits or rewards that employees receive due to the specific location of their job, which are not provided directly by the employer. These benefits can include things like better quality of life, proximity to desirable amenities, or access to networking opportunities. These externalities are not directly related to the employer's compensation package but arise because of the location itself.

Why other options are wrong

A. A type of bonus given to employees based on their performance in a specific area

This option is incorrect because it describes performance-based bonuses, which are different from location-based externalities. Positive location externalities are not tied to individual performance but to the benefits of the job's location.

B. A financial incentive provided by the organization for working in a specific location

This option is incorrect because it describes a financial incentive, whereas positive location externalities are typically non-monetary rewards or benefits related to the location, not something provided by the organization directly.

D. A mandatory benefit that all employees must receive regardless of location

This option is incorrect because positive location externalities are not mandatory benefits. They are informal advantages that arise from the job location itself, not something required by the organization.

Correct Answer

A. Only poorly maintained cars being available for sale

Explanation

Adverse selection occurs in markets where one party has more information than the other. In the used car market, sellers typically know more about the condition of their cars than buyers. As a result, buyers are hesitant to pay high prices due to the risk of buying a lemon (a poorly maintained car). This leads sellers of well-maintained cars to withdraw from the market, leaving mostly poorly maintained cars available for sale. The result is that only lower-quality cars remain in the market.

Why other options are wrong

B. Sellers of poorly maintained cars admitting that their cars are poorly maintained

This is not typical of adverse selection. In fact, sellers of poorly maintained cars are likely to hide or downplay the defects of their cars to avoid a lower price. Admitting that a car is poorly maintained would not benefit the seller.

C. A lower price for poorly maintained cars

While it may seem logical that poorly maintained cars would be priced lower, the presence of adverse selection actually leads to a situation where the market price for all cars drops. This is because buyers are uncertain about the quality of the cars available, which lowers the overall price, but not necessarily just for poorly maintained cars.

D. A higher price for cars

Adverse selection typically leads to a market where prices are driven down due to uncertainty about the quality of the cars being sold. Since buyers are wary of purchasing a lemon, they are less willing to pay high prices, resulting in lower overall prices rather than higher prices.

Correct Answer

A. Minimum wage

Explanation

The minimum wage law is a classic example of a price floor. It sets a minimum wage level that employers must pay workers, and if it is set above the equilibrium wage rate, it creates a surplus of labor, meaning more people are willing to work at the higher wage, but employers may hire fewer workers due to the higher wage costs.

Why other options are wrong

B. Rent control

Rent control is an example of a price ceiling, not a price floor. It sets a maximum price (rent) that landlords can charge, rather than a minimum price. Rent control typically leads to shortages, not surpluses.

C. Automotive warranties

This option is incorrect because automotive warranties are not related to price floors. Warranties relate to the terms of consumer protection and do not set minimum prices in a market.

D. Mandatory service contracts

This is also incorrect because mandatory service contracts do not set minimum prices in the market. They are more about the terms of service agreements between consumers and service providers, not about establishing price floors.

Correct Answer

A. When new and existing employees are paid similarly

Explanation

Pay compression occurs when there is little to no difference in pay between employees who have different levels of experience, skills, or tenure within the company. This often happens when new employees are hired at pay rates similar to those of more experienced employees, leading to dissatisfaction and potential morale issues. Pay compression can result from inadequate pay structure adjustments or from market conditions where salary levels do not reflect the experience and contribution of long-tenured employees.

Why other options are wrong

B. When bonuses are given to all employees equally

This option is incorrect because pay compression specifically refers to salary disparities, not bonuses. Pay compression deals with base salaries and the lack of differentiation based on experience or skill levels.

C. When pay rates are reduced for all employees

This option is incorrect because pay compression is not about pay cuts. It is about the lack of differentiation in pay for employees with different levels of experience or tenure, which can result in similarly paid employees despite different contributions or backgrounds.

D. When salaries are adjusted based on inflation

This option is incorrect because pay compression is unrelated to inflation adjustments. While inflation adjustments affect salary increases, pay compression specifically refers to situations where pay differences between employees with different levels of experience or tenure are minimal, which does not necessarily have to do with inflation.

Correct Answer

B. As a result of a hard freeze, the price of cherries increases.

Explanation

Microeconomics focuses on the behavior of individuals, households, and firms in making decisions about resource allocation. The scenario where the price of cherries increases due to a hard freeze is a microeconomic issue, as it involves the price determination of a specific good in a market. Microeconomics deals with the supply and demand of individual products and services.

Why other options are wrong

A. The Federal Reserve responds to an increase in inflation by changing the interest rate.

This scenario pertains to macroeconomics because it involves a central bank's response to inflation, which affects the entire economy. Macroeconomics focuses on broader economic factors like inflation, unemployment, and national output.

C. An economist compares the gross domestic product between the United States and China.

This is a macroeconomic topic, as it deals with the comparison of the gross domestic product (GDP) of entire countries. Macroeconomics studies the overall performance of national economies.

D. The government changes the tax policy to boost economic growth in the United States.

This is another macroeconomic issue, as it involves government policy affecting the entire economy. Macroeconomics includes the study of government policies and their impact on national economic growth.

Correct Answer

D. It can be in the form of intellectual discoveries.

Explanation

In economics, capital refers to assets used for the production of goods and services. It is not limited to physical objects like machinery or money. Intellectual discoveries, such as patents or innovations, are also considered capital because they can generate income or facilitate production processes. Capital encompasses both physical and intangible assets that aid in the creation of wealth.

Why other options are wrong

A. It is in the form of cash.

While cash is important for transactions, it is not considered capital in economic terms. Capital refers to productive assets, such as equipment, buildings, or intellectual property, rather than liquid assets like cash.

B. It must be in the form of physical objects.

Capital does not have to be a physical object. In modern economics, intellectual capital, such as software, ideas, and patents, is a key form of capital that drives innovation and productivity.

C. It is reliant on a natural resource.

Capital is distinct from natural resources. Natural resources, like land or raw materials, are classified as land in economics, whereas capital refers to human-made tools, machines, or intellectual assets used to produce goods and services.