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AICPA Exam CPA-Business 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:

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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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Tora
9 days ago
Woah, this question is like a riddle wrapped in an enigma, wrapped in a toasted bagel. I'm stumped!
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Glenna
12 days 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
20 days 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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Clorinda
8 days ago
I think an increase in both demand and supply will increase market-clearing quantity.
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Julio
29 days ago
Okay, let's see... If both demand and supply go up, the price should increase, right? Gotta be C!
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Refugia
1 months 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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Novella
1 months ago
Hmm, an equal increase in both demand and supply? Sounds like a tricky one. I'm going to think this through carefully.
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Alexia
3 days ago
C) Increase price.
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Maryann
9 days ago
I think that makes sense, if both demand and supply increase equally.
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Thora
11 days ago
A) Increase both price and market-clearing quantity.
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Hyman
1 months ago
I disagree, I believe it will only increase market-clearing quantity.
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Reynalda
1 months ago
I think an equal increase in both demand and supply will increase both price and market-clearing quantity.
upvoted 0 times
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