AICPA CPA-Business Exam - Topic 2 Question 71 Discussion

Actual exam question for AICPA's CPA-Business exam

Question #: 71
Topic #: 2

[All CPA-Business Questions]

A basic determinant of the elasticity of demand for a normal good is the:

ALength of time producers have to respond to market changes.

BNumber of substitutes available for the product.

CNumber of sellers of the product.

DNumber of complements available for the product.

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 Whitley at Jul 05, 2023, 02:42 AM

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Arlean

3 months ago

Surprised that complements aren't a bigger factor here!

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Tequila

3 months ago

Totally with you on B! Substitutes are key for demand elasticity.

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Owen

4 months ago

Wait, are we sure it’s not C? More sellers could change things too.

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Yuki

4 months ago

I think A is also important, time matters for demand shifts.

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Alexis

4 months ago

Definitely B, more substitutes mean more elasticity!

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Yun

4 months ago

I thought complements could play a role too, but I don’t think they directly determine elasticity for a normal good. It’s probably more about substitutes.

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Chauncey

4 months ago

I feel like the number of sellers might not be the main factor here. I think it’s more about consumer choices and substitutes, but I could be wrong.

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Elizabeth

5 months ago

I’m not entirely sure, but I remember something about how the length of time affects elasticity. It might be related to how quickly consumers can find alternatives.

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Pauline

5 months ago

I think the number of substitutes available for the product is really important for elasticity. It makes sense that if there are more substitutes, demand would be more elastic.

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Corinne

5 months ago

I'm pretty confident I know the key attributes of custom reports, so I'll carefully read through the options and select the 3 that apply.

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Alpha

5 months ago

This looks like a straightforward true/false question. I'll carefully read the prompt and think through the key points before selecting my answer.

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Tijuana

5 months ago

This seems like a straightforward question about tax systems. I'll focus on the key details - the tax is based on income over a certain threshold, and the rate increases as income rises. That sounds like a progressive tax system to me.

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Mariann

5 months ago

It's tough to recall specifics, but I keep thinking about the role of CCMA in the multicast communication. Option C might be the right one.

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Cheryll

5 months ago

Okay, I've got this. The hub needs to have an OSPF priority greater than 1 to become the designated router. Option D is the correct answer.

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Aileen

9 months ago

Substitute goods are the name of the game when it comes to elasticity. B) is the winner, no doubt. Now, where's the free lunch option on this exam?

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Josephine

8 months ago

D) Number of complements available for the product.

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Cheryll

8 months ago

I agree, substitutes really impact the elasticity of demand.

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Santos

9 months ago

B) Number of substitutes available for the product.

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Florencia

10 months ago

B) all the way. The number of substitutes is the key factor here. Elasticity is all about how sensitive demand is to changes in price.

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Elmira

8 months ago

D) Number of complements available for the product.

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Sharen

8 months ago

C) Number of sellers of the product.

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Ciara

8 months ago

B) Number of substitutes available for the product.

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Melissia

9 months ago

A) Length of time producers have to respond to market changes.

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Bettina

9 months ago

D) Number of complements available for the product.

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Elza

10 months ago

A) Length of time producers have to respond to market changes.

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Eulah

10 months ago

B) Number of substitutes available for the product.

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Catina

10 months ago

Hah, C) Number of sellers? As if the number of sellers would affect the elasticity of demand. This is an economics exam, not a business competition!

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Monte

10 months ago

B) Number of substitutes available for the product.

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Jamika

10 months ago

A) Length of time producers have to respond to market changes.

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Lucia

10 months ago

I was torn between B and D, but I think B is the correct answer. The availability of substitutes is a fundamental determinant of elasticity.

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Allene

11 months ago

But what about the length of time producers have to respond to market changes? Doesn't that also affect elasticity?

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Chanel

11 months ago

I agree with Gaynell, because if there are many substitutes, consumers can easily switch to other options.

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Celeste

11 months ago

B) Number of substitutes available for the product. That's a no-brainer! The more alternatives a consumer has, the more elastic the demand for the original product.

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