Question 1

When a business is set up as a partnership,the owners of the business face limited liability.

Accepted Answer

A) True 
 B)False

Question 2

Tying the salaries of top managers to the firm's stock price or to the profitability of the firm allows a firm's board of directors to

Accepted Answer

A)  increase asymmetric information. 
B)  reduce the principal-agent problem. 
C)  eliminate moral hazard. 
D)  avoid disclosing financial statements to investors. 
A)  increase asymmetric information. 
B)  reduce the principal-agent problem. 
C)  eliminate moral hazard. 
D)  avoid disclosing financial statements to investors.

Question 3

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

Accepted Answer

A)  shipping expenses 
B)  Social Security contributions for employees 
C)  the resale value of delivery vans the company owns and uses for its deliveries 
D)  interest payments on a loan 
A)  shipping expenses 
B)  Social Security contributions for employees 
C)  the resale value of delivery vans the company owns and uses for its deliveries 
D)  interest payments on a loan

Question 4

Jeremy is thinking of starting up a small business selling NASCAR memorabilia.He is considering setting up his business as a sole proprietorship.What is one disadvantage to Jeremy of setting up his business as a sole proprietorship?

Accepted Answer

A)  As a sole proprietor, Jeremy would be taxed twice. 
B)  As a sole proprietor, Jeremy would not have control of the business. 
C)  As a sole proprietor, Jeremy would face unlimited liability. 
D)  As a sole proprietor, Jeremy would be subject to significant rules and regulations. 
A)  As a sole proprietor, Jeremy would be taxed twice. 
B)  As a sole proprietor, Jeremy would not have control of the business. 
C)  As a sole proprietor, Jeremy would face unlimited liability. 
D)  As a sole proprietor, Jeremy would be subject to significant rules and regulations.

Question 5

All of the following take place in the direct finance market except

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 6

If a corporate bond with face value of $8,000 has an interest rate of 4 percent paid once a year for a term of 30 years,what is the size of the coupon payment?

Accepted Answer

A)  $320 
B)  $2,000 
C)  $8,000 
D)  $9,600 
A)  $320 
B)  $2,000 
C)  $8,000 
D)  $9,600

Question 7

Explicit costs are nonmonetary costs.

Accepted Answer

A) True 
 B)False

Question 8

Who controls a partnership?

Accepted Answer

A)  the owners 
B)  stockholders 
C)  bondholders 
D)  employees 
A)  the owners 
B)  stockholders 
C)  bondholders 
D)  employees

Question 9

A decrease in liabilities will reduce a firm's accounting profit.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following is an advantage of starting a new business as a sole proprietorship?

Accepted Answer

A)  The owner has limited personal liability. 
B)  A sole proprietorship has few government rules and regulations to comply with. 
C)  Business profits are not taxed. 
D)  A sole proprietorship can easily attain additional funding. 
A)  The owner has limited personal liability. 
B)  A sole proprietorship has few government rules and regulations to comply with. 
C)  Business profits are not taxed. 
D)  A sole proprietorship can easily attain additional funding.

Question 11

If a corporation goes bankrupt,who among the following has first claim on the firm's assets?

Accepted Answer

A)  stockholders 
B)  the state where the corporation was chartered 
C)  employees 
D)  bondholders 
A)  stockholders 
B)  the state where the corporation was chartered 
C)  employees 
D)  bondholders

Question 12

A sole proprietorship is the type of business that has ________ government rules and regulations affecting it.

Accepted Answer

A)  no 
B)  the fewest 
C)  the most 
D)  only federal 
A)  no 
B)  the fewest 
C)  the most 
D)  only federal

Question 13

Mortgages issued to borrowers whose credit histories include failures to make payments on bills are known as ________ mortgages.

Accepted Answer

A)  catastrophic 
B)  variable rate 
C)  subprime 
D)  Alt-A 
A)  catastrophic 
B)  variable rate 
C)  subprime 
D)  Alt-A

Question 14

Gross revenue minus explicit costs equals

Accepted Answer

A)  accounting profit. 
B)  economic profit. 
C)  opportunity cost. 
D)  implicit cost. 
A)  accounting profit. 
B)  economic profit. 
C)  opportunity cost. 
D)  implicit cost.

Question 15

The principal-agent problem is

Accepted Answer

A)  often more severe for partnerships than for corporations. 
B)  often less severe for partnerships than for corporations. 
C)  severe for corporations but nonexistent for partnerships. 
D)  most severe for sole proprietorships. 
A)  often more severe for partnerships than for corporations. 
B)  often less severe for partnerships than for corporations. 
C)  severe for corporations but nonexistent for partnerships. 
D)  most severe for sole proprietorships.

Question 16

Assume that you set up a sole proprietorship and your lawyer tells you that as the owner,you could stand to lose your personal wealth if the business goes bankrupt.This means that a sole proprietorship

Accepted Answer

A)  faces limited liability. 
B)  faces unlimited liability. 
C)  has little chance of succeeding. 
D)  is not a good type of business to set up. 
A)  faces limited liability. 
B)  faces unlimited liability. 
C)  has little chance of succeeding. 
D)  is not a good type of business to set up.

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

________ is called an implicit cost,while ________ is called an explicit cost.

Accepted Answer

A)  An accounting cost; an economic cost 
B)  A nonmonetary opportunity cost; a cost that involves spending money 
C)  A production cost; a sales cost 
D)  An actual cost; a hypothetical cost 
A)  An accounting cost; an economic cost 
B)  A nonmonetary opportunity cost; a cost that involves spending money 
C)  A production cost; a sales cost 
D)  An actual cost; a hypothetical cost

Question 19

Most app developers have adopted the business model of

Accepted Answer

A)  charging a small fee for their apps to be downloaded. 
B)  allowing their apps to be downloaded and used for free, while trying to still earn money from users. 
C)  charging a between $1.99 and $2.99 for their apps to be downloaded. 
D)  allowing their apps to be downloaded to one device for free, but charging a high price for the apps to be downloaded to additional devices. 
A)  charging a small fee for their apps to be downloaded. 
B)  allowing their apps to be downloaded and used for free, while trying to still earn money from users. 
C)  charging a between $1.99 and $2.99 for their apps to be downloaded. 
D)  allowing their apps to be downloaded to one device for free, but charging a high price for the apps to be downloaded to additional devices.

Question 20

If a corporate bond with face value of $1,000 has an interest rate of eight percent paid once a year for a term of 30 years,what is the size of the annual coupon payment?

Accepted Answer

A)  $1,000 
B)  $300 
C)  $80 
D)  $8 
A)  $1,000 
B)  $300 
C)  $80 
D)  $8

When a business is set up as a partnership,the owners of the business face limited liability.

Tying the salaries of top managers to the firm's stock price or to the profitability of the firm allows a firm's board of directors to

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

Jeremy is thinking of starting up a small business selling NASCAR memorabilia.He is considering setting up his business as a sole proprietorship.What is one disadvantage to Jeremy of setting up his business as a sole proprietorship?

All of the following take place in the direct finance market except

If a corporate bond with face value of $8,000 has an interest rate of 4 percent paid once a year for a term of 30 years,what is the size of the coupon payment?

Explicit costs are nonmonetary costs.

Who controls a partnership?

A decrease in liabilities will reduce a firm's accounting profit.

Which of the following is an advantage of starting a new business as a sole proprietorship?

If a corporation goes bankrupt,who among the following has first claim on the firm's assets?

A sole proprietorship is the type of business that has ________ government rules and regulations affecting it.

Mortgages issued to borrowers whose credit histories include failures to make payments on bills are known as ________ mortgages.

Gross revenue minus explicit costs equals

The principal-agent problem is

Assume that you set up a sole proprietorship and your lawyer tells you that as the owner,you could stand to lose your personal wealth if the business goes bankrupt.This means that a sole proprietorship

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

is called an implicit cost,while is called an explicit cost.

Most app developers have adopted the business model of

If a corporate bond with face value of $1,000 has an interest rate of eight percent paid once a year for a term of 30 years,what is the size of the annual coupon payment?

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

When a business is set up as a partnership,the owners of the business face limited liability.

Tying the salaries of top managers to the firm's stock price or to the profitability of the firm allows a firm's board of directors to

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

Jeremy is thinking of starting up a small business selling NASCAR memorabilia.He is considering setting up his business as a sole proprietorship.What is one disadvantage to Jeremy of setting up his business as a sole proprietorship?

All of the following take place in the direct finance market except

If a corporate bond with face value of $8,000 has an interest rate of 4 percent paid once a year for a term of 30 years,what is the size of the coupon payment?

Explicit costs are nonmonetary costs.

Who controls a partnership?

A decrease in liabilities will reduce a firm's accounting profit.

Which of the following is an advantage of starting a new business as a sole proprietorship?

If a corporation goes bankrupt,who among the following has first claim on the firm's assets?

A sole proprietorship is the type of business that has ________ government rules and regulations affecting it.

Mortgages issued to borrowers whose credit histories include failures to make payments on bills are known as ________ mortgages.

Gross revenue minus explicit costs equals

The principal-agent problem is

Assume that you set up a sole proprietorship and your lawyer tells you that as the owner,you could stand to lose your personal wealth if the business goes bankrupt.This means that a sole proprietorship

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

________ is called an implicit cost,while ________ is called an explicit cost.

Most app developers have adopted the business model of

If a corporate bond with face value of $1,000 has an interest rate of eight percent paid once a year for a term of 30 years,what is the size of the annual coupon payment?

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

is called an implicit cost,while is called an explicit cost.