ETS MAJOR FIELD TEST IN BUSINESS
QUESTIONS AND ANSWERS
In marketing research, a firm might consider using secondary data over primary data
because
a) secondary data usually cost less
b) secondary data are usually more accurate
c) primary data are usually non specific
d) primary data are likely to be outdated - Correct Answers -a) secondary data usually
cost less
In organizational decision making, managers are able to exercise the greatest degree of
discretion in the
a) enforcement of internal policies
b) settlement of legal disputes
c) restructuring of outstanding loans
d) compliance with federal regulations - Correct Answers -a) enforcement of internal
policies
The term "net working capital" refers to
(A) inventories, receivables, and current notes and investments
(B) assets divided by liabilities
(C) current assets less short-term liabilities
(D) net assets left over after subtracting cost of goods sold - Correct Answers -(C)
current assets less short-term liabilities
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.
How many pillows must Dreamland produce and sell each month to earn a monthly
gross profit of $1,000?
(A) 300
(B) 350
,(C) 600
(D) 700 - Correct Answers -(D) 700
VC = (2 lbs*$3)+$4 = $10
FC = $2,000+$4,000 = $6,000
CM per unit = $20-(VC) $10=$10
$1,000 = (units sold*$10)-$6,000
Units sold = ($1,000+$6,000)/$10 = 700 pillows
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" pillows 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 - Correct Answers -(C) 625
Dreamland VC per unit = $12
FC = $4,000
CM per unit = $20-(VC) $12=$8
(GP) $1,000 = (units sold*$8)-$4,000
Units sold = ($1,000+$4,000)/$8 = 625 pillows
Which of the following statements about a systems flowchart is true?
(A) It is used in systems design to define and describe each piece of data.
(B) It is a method of writing programs using only three basic constructs: sequence,
selection, and repetition.
(C) It documents the sequence of processing steps that take place in an information
system.
(D) It documents the logical design of an information system. - Correct Answers -(D) It
documents the logical design of an information system.
Which of the following statements about the tort of negligence is true?
,(A) It cannot be used as a basis for liability for defective products.
(B) It is a strict liability tort with no defenses.
(C) It requires proof of some intentional conduct.
(D) It requires proof of breach of a statutory or common-law duty. - Correct Answers -
(C) It requires proof of some intentional conduct.
On May 31, Company O's general ledger shows a cash balance of $5,123. The May 31
bank statement shows a balance of $4,905. Other information is available as follows:
1. A May 31 deposit of $300 does not appear on the bank statement; but a $3 service
charge does.
2. A customer's $40 insufficient funds check has been returned with the bank statement.
3. Outstanding checks of $10, $15, and $100 are identified on May
What is the correct cash balance on May 31?
(A) $4,905
(B) $5,080
(C) $5,166
(D) $5,204 - Correct Answers -(B) $5,080
Cash Balance 5,123.00
Service charge (3.00)
NSF Check from customer (40.00)
Correct cash balance 5,080.00
Within the context of the capital asset pricing model (CAPM), the risk measure known
as beta is often computed by regressing the return of the company's stock against the
(A) return on the company's bonds
(B) return on the market portfolio
(C) change in the gross domestic product
(D) change in the consumer price index - Correct Answers -(B) return on the market
portfolio
A project consists of 150 jobs. The expected completion time for each job is given in
days. The project has three critical paths with two jobs in common, J and K. In order to
finish the project one day early, the completion time should be reduced one day for
(A) each of the 150 jobs
(B) each of the jobs on the three critical paths
(C) either Job J or Job K
(D) both Job J and Job K - Correct Answers -(C) either Job J or Job K
United States-Dominican Republic-Central America Free Trade Agreement (CAFTA). -
Correct Answers -A free trade agreement between the United States and five Central
American countries and the Domini can Republic.
, Upstream vertical FDI. - Correct Answers -A type of vertical FDI in which a firm engages
in an upstream stage of the value chain in a host country.
Value chain. - Correct Answers -A series of activities used in the production of goods
and services that make a product or service more valuable.
Venture capitalist (VC). - Correct Answers -lnvestor who provides risk capital for early
stage ventures.
Vertical FDI. - Correct Answers -A type of FDI in which a firm moves upstream or
downstream at different value chain stages in a host country.
Voice-based mechanisms. - Correct Answers -Corporate governance mechanisms that
focus on shareholders' willingness to work with managers, usually through the board, by
"voicing" their concerns.
Voluntary export restraint (VER). - Correct Answers -An international agreement that
shows that exporting countries voluntarily agree to restrict their exports.
VRIO framework. - Correct Answers -The resource-based framework that focuses on
the value (V). r arity (R), imitability (1). and organizational (0) aspects of resources and
capabilities.
The Organization of the Petroleum Exporting Countries (OPEC) reduces production by
10 percent, and the growth rate of the world economy begins to escalate. How will the
simultaneous occurrence of these events affect the equilibrium price and quantity in the
world petroleum market?
(A) Price will increase, but quantity will remain unchanged.
(B) Price will increase, but quantity is indeterminate.
(C) Quantity will increase, but price is indeterminate.
(D) Both price and quantity will increase. - Correct Answers -(B) Price will increase, but
quantity is indeterminate.
Which of the following would most likely occur as a result of the United States
government's imposing tariffs on foreign steel imports?
(A) The price of steel produced in the United States would decrease.
(B) The price of imported steel in the United States would decrease. (C) Employment in
the United States steel industry would increase. (D) Government tax revenue would fall.
- Correct Answers -(C) Employment in the United States steel industry would increase.
In an economy the unemployment rate is 10 percent and the inflation rate is 1 percent.
An appropriate fiscal policy in this phase of the business cycle would be to
QUESTIONS AND ANSWERS
In marketing research, a firm might consider using secondary data over primary data
because
a) secondary data usually cost less
b) secondary data are usually more accurate
c) primary data are usually non specific
d) primary data are likely to be outdated - Correct Answers -a) secondary data usually
cost less
In organizational decision making, managers are able to exercise the greatest degree of
discretion in the
a) enforcement of internal policies
b) settlement of legal disputes
c) restructuring of outstanding loans
d) compliance with federal regulations - Correct Answers -a) enforcement of internal
policies
The term "net working capital" refers to
(A) inventories, receivables, and current notes and investments
(B) assets divided by liabilities
(C) current assets less short-term liabilities
(D) net assets left over after subtracting cost of goods sold - Correct Answers -(C)
current assets less short-term liabilities
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.
How many pillows must Dreamland produce and sell each month to earn a monthly
gross profit of $1,000?
(A) 300
(B) 350
,(C) 600
(D) 700 - Correct Answers -(D) 700
VC = (2 lbs*$3)+$4 = $10
FC = $2,000+$4,000 = $6,000
CM per unit = $20-(VC) $10=$10
$1,000 = (units sold*$10)-$6,000
Units sold = ($1,000+$6,000)/$10 = 700 pillows
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" pillows 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 - Correct Answers -(C) 625
Dreamland VC per unit = $12
FC = $4,000
CM per unit = $20-(VC) $12=$8
(GP) $1,000 = (units sold*$8)-$4,000
Units sold = ($1,000+$4,000)/$8 = 625 pillows
Which of the following statements about a systems flowchart is true?
(A) It is used in systems design to define and describe each piece of data.
(B) It is a method of writing programs using only three basic constructs: sequence,
selection, and repetition.
(C) It documents the sequence of processing steps that take place in an information
system.
(D) It documents the logical design of an information system. - Correct Answers -(D) It
documents the logical design of an information system.
Which of the following statements about the tort of negligence is true?
,(A) It cannot be used as a basis for liability for defective products.
(B) It is a strict liability tort with no defenses.
(C) It requires proof of some intentional conduct.
(D) It requires proof of breach of a statutory or common-law duty. - Correct Answers -
(C) It requires proof of some intentional conduct.
On May 31, Company O's general ledger shows a cash balance of $5,123. The May 31
bank statement shows a balance of $4,905. Other information is available as follows:
1. A May 31 deposit of $300 does not appear on the bank statement; but a $3 service
charge does.
2. A customer's $40 insufficient funds check has been returned with the bank statement.
3. Outstanding checks of $10, $15, and $100 are identified on May
What is the correct cash balance on May 31?
(A) $4,905
(B) $5,080
(C) $5,166
(D) $5,204 - Correct Answers -(B) $5,080
Cash Balance 5,123.00
Service charge (3.00)
NSF Check from customer (40.00)
Correct cash balance 5,080.00
Within the context of the capital asset pricing model (CAPM), the risk measure known
as beta is often computed by regressing the return of the company's stock against the
(A) return on the company's bonds
(B) return on the market portfolio
(C) change in the gross domestic product
(D) change in the consumer price index - Correct Answers -(B) return on the market
portfolio
A project consists of 150 jobs. The expected completion time for each job is given in
days. The project has three critical paths with two jobs in common, J and K. In order to
finish the project one day early, the completion time should be reduced one day for
(A) each of the 150 jobs
(B) each of the jobs on the three critical paths
(C) either Job J or Job K
(D) both Job J and Job K - Correct Answers -(C) either Job J or Job K
United States-Dominican Republic-Central America Free Trade Agreement (CAFTA). -
Correct Answers -A free trade agreement between the United States and five Central
American countries and the Domini can Republic.
, Upstream vertical FDI. - Correct Answers -A type of vertical FDI in which a firm engages
in an upstream stage of the value chain in a host country.
Value chain. - Correct Answers -A series of activities used in the production of goods
and services that make a product or service more valuable.
Venture capitalist (VC). - Correct Answers -lnvestor who provides risk capital for early
stage ventures.
Vertical FDI. - Correct Answers -A type of FDI in which a firm moves upstream or
downstream at different value chain stages in a host country.
Voice-based mechanisms. - Correct Answers -Corporate governance mechanisms that
focus on shareholders' willingness to work with managers, usually through the board, by
"voicing" their concerns.
Voluntary export restraint (VER). - Correct Answers -An international agreement that
shows that exporting countries voluntarily agree to restrict their exports.
VRIO framework. - Correct Answers -The resource-based framework that focuses on
the value (V). r arity (R), imitability (1). and organizational (0) aspects of resources and
capabilities.
The Organization of the Petroleum Exporting Countries (OPEC) reduces production by
10 percent, and the growth rate of the world economy begins to escalate. How will the
simultaneous occurrence of these events affect the equilibrium price and quantity in the
world petroleum market?
(A) Price will increase, but quantity will remain unchanged.
(B) Price will increase, but quantity is indeterminate.
(C) Quantity will increase, but price is indeterminate.
(D) Both price and quantity will increase. - Correct Answers -(B) Price will increase, but
quantity is indeterminate.
Which of the following would most likely occur as a result of the United States
government's imposing tariffs on foreign steel imports?
(A) The price of steel produced in the United States would decrease.
(B) The price of imported steel in the United States would decrease. (C) Employment in
the United States steel industry would increase. (D) Government tax revenue would fall.
- Correct Answers -(C) Employment in the United States steel industry would increase.
In an economy the unemployment rate is 10 percent and the inflation rate is 1 percent.
An appropriate fiscal policy in this phase of the business cycle would be to
