AICPA CPA-Business Exam - Topic 1 Question 75 Discussion

Actual exam question for AICPA's CPA-Business exam

Question #: 75
Topic #: 1

[All CPA-Business Questions]

In any competitive market, an equal increase in both demand and supply can be expected to always:

AIncrease both price and market-clearing quantity.

BIncrease market-clearing quantity.

CIncrease price.

DDecrease price.

Show Suggested Answer

Suggested Answer: A

Choice 'a' is correct. 7.0 percent cost of funds from retained earnings.

The cost of retained earnings is equal to the rate of return required by the firm's common shareholders (or, in effect, the return 'lost' by them when the firm chooses to fund with retained earnings). While oftentimes this rate is somewhat subjective, we are given the facts to exactly answer the question in this case. The stock is currently selling for $100/share, and the dividend is given at $7/share.

$7 / $100 = 7%

Choices 'b', 'c', and 'd' are incorrect, per the above Explanation:/calculation.

by Kiley at Oct 06, 2023, 02:14 PM

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Ellsworth

5 months ago

I’m surprised this is even a debate, isn’t it obvious?

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Melinda

5 months ago

I agree with B, just quantity changes, price stays stable.

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Moon

5 months ago

Wait, how can both demand and supply increase and not affect price?

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Kati

5 months ago

I think A is right, price should increase too.

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Merlyn

6 months ago

Definitely B, quantity will go up for sure.

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Lashawn

6 months ago

I recall that if demand increases more than supply, prices go up, but if they increase equally, the quantity increases without affecting price. So, B seems like the right choice.

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Flo

6 months ago

I feel like I might be mixing concepts here, but I thought that an equal increase in demand and supply could lead to a decrease in price? That doesn't sound right, though.

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Aliza

6 months ago

I think I practiced a similar question where the conclusion was that price remains unchanged if demand and supply shift equally. So, I might lean towards option B.

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Caprice

6 months ago

I remember studying that when both demand and supply increase equally, the market-clearing quantity definitely goes up, but I'm not sure about the price.

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Anglea

6 months ago

Easy peasy! When both demand and supply increase, the equilibrium shifts to the right, so the market-clearing quantity goes up, but the price stays the same. The answer is definitely B.

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Fletcher

6 months ago

Okay, I think I've got this. If demand and supply both increase by the same amount, the equilibrium price shouldn't change, but the equilibrium quantity will increase. So the answer is B - increase market-clearing quantity.

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Reynalda

6 months ago

Hmm, this is a tricky one. I'm a bit confused - I know that an increase in just demand or just supply would have different effects on price and quantity, but I'm not sure how they interact when both change at the same time. I'll have to think this through carefully.

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Gwen

6 months ago

I'm pretty sure this is asking about the effects of a simultaneous increase in both demand and supply in a competitive market. I think the answer is B - it will increase the market-clearing quantity, but I'm not 100% sure about the effect on price.

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Lyda

6 months ago

Hmm, I'm not totally sure about this one. I think it might be A, but I'm also considering C - Unauthorized access. I'll have to think it through carefully.

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Isabelle

6 months ago

Okay, let me think this through. The project is delivering a "modest solution" with three services, and the team is following a "bottom-up approach" to fulfill tactical requirements. Based on that, I'm going to go with C - Increased Federation.

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Laurena

6 months ago

This question seems pretty straightforward. I think the function of vBond in a Cisco SDWAN deployment is to onboard SDWAN routers into the SD-WAN overlay, so I'll go with option C.

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Eric

6 months ago

This is a good test of my understanding of corporate governance. I'll draw on my knowledge of the audit committee's role to identify the matters they should typically address.

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Bernadine

6 months ago

Hmm, I'm a bit confused by all the details in this question. I'll need to carefully break down each component and make sure I understand how they all fit together before I can solve this.

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Tora

11 months ago

Woah, this question is like a riddle wrapped in an enigma, wrapped in a toasted bagel. I'm stumped!

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Tawna

10 months ago

B) Increase market-clearing quantity.

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Annabelle

10 months ago

C) Increase price.

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Louvenia

10 months ago

C) Increase price.

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Barrett

10 months ago

B) Increase market-clearing quantity.

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Alba

10 months ago

A) Increase both price and market-clearing quantity.

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Fernanda

10 months ago

A) Increase both price and market-clearing quantity.

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Glenna

11 months ago

Haha, this is like a game of economic Tetris. I'm just going to close my eyes and pick an answer. D, let's go!

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Zita

12 months ago

Wait, wait, wait... If both demand and supply rise, won't the market-clearing quantity increase too? I'm going with B.

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Hyman

10 months ago

I'm not sure, but I think it will increase both price and market-clearing quantity.

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Douglass

10 months ago

No, I believe it will only increase market-clearing quantity.

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Eun

11 months ago

But wouldn't it also increase price?

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Clorinda

11 months ago

I think an increase in both demand and supply will increase market-clearing quantity.

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Julio

1 year ago

Okay, let's see... If both demand and supply go up, the price should increase, right? Gotta be C!

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Lavonna

11 months ago

Yeah, that makes sense. So the answer must be C, to increase price.

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Louvenia

11 months ago

I think you're right, an increase in both demand and supply should lead to an increase in price.

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Refugia

1 year ago

I agree with Reynalda, because when both demand and supply increase equally, it creates a balance that leads to an increase in both price and market-clearing quantity.

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