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Cima C04 Exam Question No 58

Question No 58:

All of the following statements about the monetary system are true EXCEPT which ONE?

A. Financial intermediation links net savers and net debtors.
B. In developed economies cash and notes form only a very small part of the money supply.
C. The capital market deals in long term financial assets.
D. The more liquid a financial asset is, the higher is the expected rate of return.

Answer: D

Cima C04 Exam Question No 57

Question No 57:

Which ONE of the following does NOT normally form part of the equity capital market?

A. Central bank.
B. Pension funds.
C. Retail banks.
D. Venture capitalists.

Answer: D

Cima C04 Exam Question No 56

Question No 56:

The main function of the money market is to:

A. Enable businesses and government to obtain liquidity.
B. Encourage saving.
C. Permit the efficient buying and selling of shares.
D. Deal in credit instruments of more than one year maturity.

Answer: A

Cima C04 Exam Question No 55

Question No 55:

Which ONE of the following would tend to increase the degree of monopoly power of a company?

A. The ending of one of its patents.
B. An increase in excess profits.
C. A fall in the cross price elasticity of demand for its product.
D. Diversification into a wider range of products.

Answer: C

Cima C04 Exam Question No 54

Question No 54:

The economic welfare case for governments increasing taxes on petrol to raise its real price is that?

A. Oil is a scarce resource.
B. It would reduce the imports of oil.
C. There is a large demand for petrol.
D. Petrol consumption involves external social costs.

Answer: D

Cima C04 Exam Question No 53

Question No 53:

Whenever government intervention prevents prices from reaching their equilibrium level, the
result will always include ALL of the following EXCEPT which ONE?

A. Shortages or surpluses.
B. Demand and supply not equal.
C. Reduced profits for producers.
D. Resources not allocated by price.

Answer: D

Cima C04 Exam Question No 52

Question No 52:

All of the following factors will lead to an imperfect allocation of resources EXCEPT which ONE?

A. There are some production costs that are not borne by the producer.
B. Consumers only wish to buy a limited amount of the product.
C. There are spill over benefits in consumption.
D. Consumers have limited knowledge of market prices.

Answer: B

Cima C04 Exam Question No 51

Question No 51:

Which ONE of the following is NOT a potential source of market failure?

A. External costs.
B. External benefits.
C. An unequal income distribution.
D. The existence of monopolies.

Answer: C

Cima C04 Exam Question No 50

Question No 50:

Which ONE of the following is an example of an external social cost?

A. Bad weather reducing the output of the farm sector.
B. Possible illness caused to owners of mobile phones as a result of excessive use.
C. Smoke emissions by a factory causing health problems for nearby residents.
D. Cost increases caused by rising prices of imported raw materials.

Answer: C

Cima C04 Exam Question No 49

Question No 49:

Which ONE of the following does NOT restrict the number of firms in an industry?

A. Low levels of product differentiation.
B. Significant economies of scale.
C. Barriers to entry.
D. The use of capital-intensive technology in the industry.

Answer: A

Cima C04 Exam Question No 48

Question No 48:

Which ONE of the following statements is true?

A. A legal maximum price for a good always results in a shortage of the good.
B. A price fall for a good will lead to an increase in demand for that good.
C. A price fall for a good will always lead to a contraction in supply of the good.
D. An excess supply of a good arises when a legal minimum price is set below equilibrium price.

Answer: C

Cima C04 Exam Question No 47

Question No 47:

A government may prevent horizontal mergers in an industry because?

A. By controlling sources of supply, the merged firms can prevent the entry of new firms into the industry
B. There will be a lack of synergy between the merging companies
C. The merged firms will be unable to reduce costs
D. Consumers may suffer if the merged firm achieve market dominance

Answer: D

Cima C04 Exam Question No 46

Question No 46

If the production of a good involves an external social cost, the appropriate policy for the government is to:

A. Take the industry into state ownership
B. Impose an indirect tax on the good
C. Impose a higher rate tax on the profits of the producers
D. Provide a subsidy for the consumers of the product

Answer: B

Cima C04 Exam Question No 45

Question No 45:

All of the following would shift the supply curve for a product to the right except one. Which ONE is the EXCEPTION?

A. A government subsidy
B. An improvement in production techniques
C. Lower input prices
D. An indirect tax on the product

Answer: D

Cima C04 Exam Question No 44

Question No 44:

If the government imposes a maximum price for a good that is below the equilibrium price, the resulting market shortage will be greatest when:

A. The demand is price elastic and the supply is price inelastic
B. The demand is price elastic and the supply is price elastic
C. The demand is price inelastic and the supply is price elastic
D. The demand is price inelastic and the supply is price inelastic

Answer: B

Cima C04 Exam Question No 43

Question No 43:

If the government imposed a price for a good that was above the equilibrium price, the consequence would be?

A. A contraction of demand, an increase in supply and a market surplus
B. A decrease in demand, an extension of supply and a market surplus
C. A contraction in demand, an extension in supply and a market surplus
D. A rise in supply, a fall in demand and a market shortage

Answer: C

Cima C04 Exam Question No 42

Question No 42:

If a business currently sells 10,000 units of its product each month at $10 each unit and the demand for its product has a price elasticity of -2·5, a rise in the price of the product to $11 will?

A. Raise total revenue by $7,250.
B. Reduce total revenue by $17,500.
C. Reduce total revenue by $25,000.
D. Raise total revenue by $37,500.

Answer: B

Cima C04 Exam Question No 41

Question No 41:

Which ONE of the following would lead the demand curve for a good to shift to the right?

A. A rise in consumer income where the good is a normal good.
B. A decrease in the supply of a complementary good.
C. An increase in the supply of a substitute good.
D. A fall in the price of the good.


Answer: A

Cima C04 Exam Question No 40

Question No 40:

If the demand curves for Good A shifts to the left when the price of Good B rises, we may conclude that?

A. The goods are substitutes.
B. Good A is an inferior good.
C. The goods are complements.
D. The demand for Good A is price elastic.

Answer: A

Cima C04 Exam Question No 39

Question No 39:

Which ONE of the following will produce the largest fluctuations in a market price?

A. Large shifts in supply with price elastic demand.
B. Large shifts in supply with price inelastic demand.
C. Large shifts in supply with perfectly price elastic demand.
D. Small shifts in supply with price elastic demand.

Answer: B

Cima C04 Exam Question No 38

Question No 38:

In a market economy, prices perform all of the following functions EXCEPT which ONE?

A. A means of allocating resources between competing uses.
B. A means of ensuring a fair distribution of incomes.
C. A signal to consumers.
D. A signal to producers.

Answer: B

Cima C04 Exam Question No 37

Question No 37:

Which ONE of the following will tend to make the demand for a company’s product LESS price elastic?

A. A fall in consumer incomes.
B. A rise in the price of complementary goods.
C. A fall in the number of substitute goods.
D. A lower price for the good.

Answer: C