Question 1

What do the highest stock price and the lowest stock price over the previous year indicate?

Accepted Answer

A) Add them together and divide by two to get the stock's current market price. 
B) What the stock's price-earnings ratio is 
C) How volatile the stock's market price has been 
D) They generate the dividend yield. 
A) Add them together and divide by two to get the stock's current market price. 
B) What the stock's price-earnings ratio is 
C) How volatile the stock's market price has been 
D) They generate the dividend yield.

Question 2

The owners of a ________ have a separate legal distinction from the business.

Accepted Answer

A) corporation 
B) partnership 
C) sole proprietorship 
D) All of the above are correct. 
A) corporation 
B) partnership 
C) sole proprietorship 
D) All of the above are correct.

Question 3

In the United States,partnership profits are taxed at the business level and then are taxed again as personal income in the form of dividend payments.

Accepted Answer

A) True 
 B)False

Question 4

You have a bond that pays $60 per year in coupon payments.Which of the following would result in a decrease in the price of your bond?

Accepted Answer

A) Coupon payments on newly-issued bonds fall to $40 per year. 
B) The likelihood that the firm issuing your bond will default on debt decreases. 
C) The price of a share of stock in the company rises. 
D) Coupon payments on newly-issued bonds rise to $75 per year. 
A) Coupon payments on newly-issued bonds fall to $40 per year. 
B) The likelihood that the firm issuing your bond will default on debt decreases. 
C) The price of a share of stock in the company rises. 
D) Coupon payments on newly-issued bonds rise to $75 per year.

Question 5

Scott is a manager at a pool cleaning business.He has hired 10 workers to clean pools for him and is considering what type of payment scheme he should set up for his workers.He can pay each of his workers $10 per hour to clean pools,or he can pay his workers $20 for each pool a worker cleans.(It takes 2 hours,on average,for an employee to clean a pool thoroughly.)If Scott wants to maximize the number of pools his workers clean in one day,which payment scheme should he use? Explain.

Accepted Answer

If Scott wants to maximize the number of

Question 6

Which of the following does not take place in the direct finance market?

Accepted Answer

A) Ownership in corporations is sold in the form of common stock. 
B) Deposits from savers are accumulated and loans made to borrowers. 
C) Ownership in corporations is sold in the form of preferred stock. 
D) Corporate bonds are sold to savers. 
A) Ownership in corporations is sold in the form of common stock. 
B) Deposits from savers are accumulated and loans made to borrowers. 
C) Ownership in corporations is sold in the form of preferred stock. 
D) Corporate bonds are sold to savers.

Question 7

Firms disclose financial statements in ________ and in ________.

Accepted Answer

A) periodic filings to the federal government; annual reports to shareholders 
B) daily filings to the federal government; daily reports to shareholders 
C) monthly reports to shareholders; 5-year balance statements to the board of directors 
D) weekly filings with the SEC; monthly reports to the Fed 
A) periodic filings to the federal government; annual reports to shareholders 
B) daily filings to the federal government; daily reports to shareholders 
C) monthly reports to shareholders; 5-year balance statements to the board of directors 
D) weekly filings with the SEC; monthly reports to the Fed

Question 8

Securities dealers that trade stocks and bonds outside exchanges comprise the

Accepted Answer

A) foreign exchange market. 
B) over-the-counter market. 
C) NASDAQ market. 
D) outlet market. 
A) foreign exchange market. 
B) over-the-counter market. 
C) NASDAQ market. 
D) outlet market.

Question 9

A proprietorship or partnership can raise funds for expansion in all of the following ways except

Accepted Answer

A) borrowing from someone or an institution willing to lend the funds. 
B) reinvesting profit back into the business. 
C) taking on a partner or more partners. 
D) issuing stock through financial markets. 
A) borrowing from someone or an institution willing to lend the funds. 
B) reinvesting profit back into the business. 
C) taking on a partner or more partners. 
D) issuing stock through financial markets.

Question 10

A nonmonetary opportunity cost is called a(n)________,while a cost that involves spending money is called a(n)________.

Accepted Answer

A) accounting cost; explicit cost 
B) implicit cost; explicit cost 
C) accounting profit; economic profit 
D) normal rate of return; asset 
A) accounting cost; explicit cost 
B) implicit cost; explicit cost 
C) accounting profit; economic profit 
D) normal rate of return; asset

Question 11

Which of the following would be considered an implicit cost of operating a business?

Accepted Answer

A) advertising expenses 
B) wages paid to workers 
C) a normal rate of return for investors 
D) any explicit cost 
A) advertising expenses 
B) wages paid to workers 
C) a normal rate of return for investors 
D) any explicit cost

Question 12

The profits a corporation keeps to finance future expansion are known as

Accepted Answer

A) retained earnings. 
B) preferred stock. 
C) dividends. 
D) capital gains. 
A) retained earnings. 
B) preferred stock. 
C) dividends. 
D) capital gains.

Question 13

What are the advantages of setting up a corporation as opposed to a proprietorship or partnership?

Accepted Answer

Corporations have li

Question 14

Corporations are legally owned by their shareholders.

Accepted Answer

A) True 
 B)False

Question 15

Economic profit is the difference between a firm's revenue and its opportunity costs.

Accepted Answer

A) True 
 B)False

Question 16

Who selects the board of directors of a corporation?

Accepted Answer

A) the state where the corporation is chartered 
B) employees 
C) stockholders 
D) managers 
A) the state where the corporation is chartered 
B) employees 
C) stockholders 
D) managers

Question 17

Purchasing a firm's stock in an IPO can be risky because financial information may not be fully disclosed.

Accepted Answer

A) True 
 B)False

Question 18

Abercrombie & Fitch wants to raise $8 million to finance the construction of a new store,and the company wishes to raise the funds through direct finance.Which of the following methods could it use?

Accepted Answer

A) It could sell $8 million in bonds. 
B) It could borrow $8 million from a bank. 
C) It could issue $8 million in stocks. 
D) It could choose either A or C. 
A) It could sell $8 million in bonds. 
B) It could borrow $8 million from a bank. 
C) It could issue $8 million in stocks. 
D) It could choose either A or C.

Question 19

Jeremy is thinking of starting up a small business selling NASCAR memorabilia.He asks his friend,Carmen,if she'd like to join him in setting up a partnership to start the business.What is one disadvantage in joining the partnership that Carmen should consider?

Accepted Answer

A) Carmen should realize that profits in the partnership will be reduced by dividend payments to shareholders. 
B) Carmen should realize that, as an owner of the business, she will be personally responsible for the debts of the business. 
C) Carmen should realize that the profits of the business will also be taxed as dividend income, so she faces the potential for double taxation of that business income. 
D) Carmen should realize that the Jeremy will have complete control over the business because it was his idea. 
A) Carmen should realize that profits in the partnership will be reduced by dividend payments to shareholders. 
B) Carmen should realize that, as an owner of the business, she will be personally responsible for the debts of the business. 
C) Carmen should realize that the profits of the business will also be taxed as dividend income, so she faces the potential for double taxation of that business income. 
D) Carmen should realize that the Jeremy will have complete control over the business because it was his idea.

Question 20

Before its IPO,Facebook was an example of a private firm.As a private firm,Facebook was

Accepted Answer

A) not subject to government regulations and taxation. 
B) run by stockholders and a board of directors. 
C) run by its founder, Mark Zuckerberg. 
D) not legally allowed to raise funds through venture capital firms. 
A) not subject to government regulations and taxation. 
B) run by stockholders and a board of directors. 
C) run by its founder, Mark Zuckerberg. 
D) not legally allowed to raise funds through venture capital firms.

What do the highest stock price and the lowest stock price over the previous year indicate?

The owners of a ________ have a separate legal distinction from the business.

In the United States,partnership profits are taxed at the business level and then are taxed again as personal income in the form of dividend payments.

You have a bond that pays $60 per year in coupon payments.Which of the following would result in a decrease in the price of your bond?

Which of the following does not take place in the direct finance market?

Firms disclose financial statements in and in .

Securities dealers that trade stocks and bonds outside exchanges comprise the

A proprietorship or partnership can raise funds for expansion in all of the following ways except

A nonmonetary opportunity cost is called a(n),while a cost that involves spending money is called a(n).

Which of the following would be considered an implicit cost of operating a business?

The profits a corporation keeps to finance future expansion are known as

What are the advantages of setting up a corporation as opposed to a proprietorship or partnership?

Corporations are legally owned by their shareholders.

Economic profit is the difference between a firm's revenue and its opportunity costs.

Who selects the board of directors of a corporation?

Purchasing a firm's stock in an IPO can be risky because financial information may not be fully disclosed.

Abercrombie & Fitch wants to raise $8 million to finance the construction of a new store,and the company wishes to raise the funds through direct finance.Which of the following methods could it use?

Jeremy is thinking of starting up a small business selling NASCAR memorabilia.He asks his friend,Carmen,if she'd like to join him in setting up a partnership to start the business.What is one disadvantage in joining the partnership that Carmen should consider?

Before its IPO,Facebook was an example of a private firm.As a private firm,Facebook was

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Consumer Choice and Elasticity

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

Filters

Exam 6: Firms, the Stock Market, and Corporate Governance

What do the highest stock price and the lowest stock price over the previous year indicate?

The owners of a ________ have a separate legal distinction from the business.

In the United States,partnership profits are taxed at the business level and then are taxed again as personal income in the form of dividend payments.

You have a bond that pays $60 per year in coupon payments.Which of the following would result in a decrease in the price of your bond?

Which of the following does not take place in the direct finance market?

Firms disclose financial statements in ________ and in ________.

Securities dealers that trade stocks and bonds outside exchanges comprise the

A proprietorship or partnership can raise funds for expansion in all of the following ways except

A nonmonetary opportunity cost is called a(n)________,while a cost that involves spending money is called a(n)________.

Which of the following would be considered an implicit cost of operating a business?

The profits a corporation keeps to finance future expansion are known as

What are the advantages of setting up a corporation as opposed to a proprietorship or partnership?

Corporations are legally owned by their shareholders.

Economic profit is the difference between a firm's revenue and its opportunity costs.

Who selects the board of directors of a corporation?

Purchasing a firm's stock in an IPO can be risky because financial information may not be fully disclosed.

Abercrombie & Fitch wants to raise $8 million to finance the construction of a new store,and the company wishes to raise the funds through direct finance.Which of the following methods could it use?

Jeremy is thinking of starting up a small business selling NASCAR memorabilia.He asks his friend,Carmen,if she'd like to join him in setting up a partnership to start the business.What is one disadvantage in joining the partnership that Carmen should consider?

Before its IPO,Facebook was an example of a private firm.As a private firm,Facebook was

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Consumer Choice and Elasticity

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

Filters

Firms disclose financial statements in and in .

A nonmonetary opportunity cost is called a(n),while a cost that involves spending money is called a(n).