| 2008 CFA Level 2 － Mock Exam 2 （PM）模考试题 Q4 (part 1 - Part 6)
Question 4 Joseph
Glass, CFA, is a consultant who provides advisory services to large
manufacturing companies. Glass has been retained by ABCO, a leading
manufacturer of widgets for automobiles in the United States.
ABCO has hired Glass to evaluate the possibility of expanding their
current base of operations by building an additional facility in South America.
Management of ABCO has identified an increase in demand for widgets in
South America over the past decade, and any new manufacturing facility
would produce goods to satisfy that void and would be distributed and
sold across South America. Glass is not familiar with the current economic climate in South America,
but is aware that several governments have attempted to encourage
economic development in their countries through the enactment of
pro-business legislation. Two of these countries, Venezuela and Peru,
both have the reputations of being “friendly” to foreign economic
investment within their borders. The two countries share some
similarities: both, until the past twenty years, were primarily
agricultural economies with little industrial development. Also, both
countries can offer a relatively low-cost labor force, although their
workers in general, are not highly skilled. The government of Peru
has declared that protecting the country’s environment is of utmost
importance, and has established a regulatory body that oversees any
environmental concerns that may arise as the country becomes more
industrialized. Fairly stringent regulations have already been put into
place in order to ensure that going forward, the operating practices of
manufacturers within their country’s borders will be in balance with
the government’s concern for their county’s natural resources.
Regulations cover areas of concern such as air emissions, water
conservation and the use of sustainable resources. Glass advised ABCO
that a cost-benefit analysis must be performed to accurately determine
both the direct and indirect costs of compliance with the regulations. The
Venezuelan government has taken steps to ensure that it can carefully
manage the development of its country’s emerging economy, and to ensure
that a competitive market is maintained. A regulatory agency was
established five years ago to provide guidance for any new
manufacturing concern seeking to operate in Venezuela.
The head of the agency is Juan Santos, the former CEO of one of the
first modernized manufacturing facilities in the country. During his
tenure as head of the agency, he has demonstrated his ability to render
decisions that attempt to simultaneously satisfy legislators, industry
participants, and consumers. Glass is impressed by Santos’ work so far, but realizes that over the past five years, Venezuela has experienced a period of relatively slow economic development. Glass believes that Santos’ skills will truly be put to the test in the upcoming years of the anticipated economic expansion. Glass
acknowledges the need for governmental regulation of industry, but
recognizes that there always are offsetting costs, both short-term and
long-term of such controls. Based upon his knowledge of events that
have occurred in the United States
over the past thirty years, Glass recommends that ABCO continue to
carefully monitor economic developments in both countries even after a
site for a new manufacturing facility is selected. Part 1) Should
ABCO build a new facility in either of the two countries, it is almost
a certainty that they would be the low-cost producer of widgets, with
the capacity to satisfy nearly all demand in the region. A natural
monopolist operating in an unregulated industry will produce at the
point where: A) marginal costs equal marginal revenue. B) average costs equal marginal revenue. C) average costs equal average revenue. D) the marginal cost curve intersects the demand schedule.
Part 2) The social regulation policies enacted by the government of Peru would least likely to cause which of the following outcomes? A) Higher costs of production. B) A disproportionately higher compliance expense for larger firms rather than smaller firms. C) Higher prices for the end consumer. D) Attempts by industry participants to avoid compliance through creative response.
Part 3) If ABCO were to build its new facility in Peru,
compliance with the country’s regulatory policies will increase the
price of their product by approximately ten percent. Some consumers may
respond by not replacing the widgets in their automobiles as frequently
as before, which will cause decreased fuel efficiency. This unintended
effect of regulation is an example of: A) the capture hypothesis. B) a creative response. C) a feedback effect. D) the share-the-gains, share-the-pains theory.
Part 4) The appointment of Santos, an industry “insider”, to head the regulatory agency in Venezuela has the potential to cause a reaction predicted by which of the following theories of regulatory behavior? A) Rate-of-return regulation. B) Share-the-gains, share-the-pains theory. C) The capture hypothesis. D) Cost-of-service regulation.
Part 5) Santos, as the head of the main regulatory body in Venezuela, must decide how to manage the effects of an unanticipated sharp increase in the cost of electricity. Santos
proposed regulation that will allow manufacturers to pass on the
increased costs at scheduled intervals over a five year period. This
approach is an example of: A) rate of return regulation. B) cost-of-service regulation. C) share-the-gains, share-the-pains theory. D) social regulation. Part 6) Both Peru and Venezuela
have increased the level of governmental regulation as the countries
have become more industrialized. A major argument in opposition of
heavy regulation contends that the removal of governmental-imposed
barriers to entry will actually lead to more competitive markets, and
is referred to as: A) deregulation. B) the market share test. C) the theory of contestable markets. D) the theory of relevant markets.
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发表于 2008-8-6 12:11
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