Choice "d" is correct. Limited partners have the right to vote on the transfer of interest and

admission of a new partner. Admission of a new partner requires unanimous consent.

Choice "a" is incorrect. A limited partner who acts as a general partner loses her limited liability

status to those she acted as a general partner towards.

Choice "b" is incorrect. Partners can freely transfer their interests in profits and losses to third

parties, but the third party cannot become a limited partner without the unanimous consent of the

other partners.

Choice "c" is incorrect. Limited partners must give 6 months notice of withdrawal in absence of an

agreement to the contrary.

Choice "c" is correct. A rise in the price of a complementary commodity would cause a shift to the

left in any demand curve (representing decrease in demand, at all price levels, for that product).

With respect to complementary goods, the demand for the primary product is directly impacted by

the demand (and hence the price changes) for the complementary goods. For instance, if the price of

gasoline goes up, the demand for cars will decrease, causing the demand curve for cars to shift left.

Choice "a" is incorrect. A rise in the price of a substitute product will make the demand curve shift to

the right.

Choice "b" is incorrect. A rise in average household income would make the demand curve shift to

the right, representing an increase in demand.

Choice "d" is incorrect. A rise in population, or a change in consumers' tastes in favor of the

commodity are also changes that may cause an increase in demand, making the demand curve shift

to the right.

Choice "c" is correct. A key assumption of perfect competition is that the firm is a "price taker," that

is, it cannot fix the price. Accordingly, it is not true that each firm can price its product above the

industry price.

Key assumptions of perfect competition include:

A. Customers are indifferent about which firm they buy from.

B. The level of a firm's output is small relative to the industry's total output.

D. There is freedom of entry into and exit out of the industry.

Choice "d" is correct. When a firm is unable to change suppliers easily, that is a factor that increases

the bargaining power of the suppliers.

Choices "a", "b", and "c" are incorrect because they all are factors that increase the bargaining power

of the customer, which are:

• Customers make up a large volume of a firm's business.

• There is much information available to customers.

• The buyers have low switching costs.

• There are a high number of alternate suppliers.

Choice "a" is correct. Under monopoly, strategic plans ignore market share and focus on profitability

from production levels that will maximize profits.

Choices "b", "c", and "d" are incorrect because they are characteristics of other types of market

structures.

Choice "c" is correct. Hedgehog should only acquire the minimum amount of hedge contracts

needed to offset the effect of known transactions.

Choice "a" is incorrect. Parallel loans represent a swap contract for hedging long-term transaction

exposure and are not specifically designed to mitigate the risk of overhedging.

Choice "b" is incorrect. Acquisition of the maximum number of hedge contracts for known and

projected transactions exposes the organization to greater risk of overhedging since projected

transactions might not materialize.

Choice "d" is incorrect. Cross hedging involves techniques related to currencies that do have hedge

instruments available to mitigate risk and are not specifically designed to avoid overhedging.

Choice "d" is correct. Product demand is more elastic when more substitutes are available.

Choice "a" is incorrect. The longer the time period, the more product demand becomes elastic

because more choices are available.

Choice "b" is incorrect. Product demand is more elastic when more substitutes are available, not

fewer substitutes.

Choice "c" is incorrect. Product demand is more inelastic when few substitutes are available.

Choice "a" is correct. Expansionary monetary policy results when the Fed increases the money

supply. Expansionary monetary policy affects the economy through the following chain of events: (1)

an increase in the money supply causes interest rates to fall, (2) falling interest rates stimulate the

desired levels of firm investment and household consumption, (3) increases in desired investment

and consumption cause an increase in aggregate demand, and (4) aggregate demand shifts to the

right causing real GDP and the price level to rise.

Choice "b" is incorrect. An increase in the money supply causes investment to increase, not decrease.

Choice "c" is incorrect. An increase in the money supply causes interest rates to decrease, not

increase, investment to increase, not decrease and aggregate demand to increase, not decrease.

Choice "d" is incorrect per above Explanation: .

Choice "c" is correct. Although commercial paper has a secondary market available, it is generally not

an active secondary market. Commercial paper is usually sold to the money markets by highly

creditworthy companies.

Choice "a" is incorrect. The maturity dates are generally less than 270 days.

Choice "b" is incorrect. Commercial paper can be sold to the money markets through a variety of

intermediaries including brokers, dealers, investment brokers, etC. It can also be sold direct from one

company to another.

Choice "d" is incorrect. The interest rate on commercial paper is below the prime rate, but generally

above the Treasury bill rate.

Choice "d" is correct. The internal rate of return (IRR) method is less reliable than the net present

value (NPV) technique when there are several alternating periods of net cash inflows and net cash

outflows or the amounts of cash flows differ significantly. The IRR is strictly a percentage measure of

return, while the NPV is an absolute measure. Due to this difference, the timing or amount of cash

flows under IRR can be misleading when compared to the NPV method.

Example: If an investment of $50 earns $100. Then, 100/50 = 200% return

If an investment of $50,000 earns $25,000 then, 25,000/50,000 = 50% return

IRR suggests it is best to invest $50 to earn $100 and a 200% return while the NPV method will

indicate a larger NPV for the $50,000 investment.

Choices "a", "b", and "c" are incorrect. These conditions do not make the IRR method less reliable

than the NPV method.