Question 1

Which of the following is not an advantage of starting a new business as a proprietorship?

Accepted Answer

A)  The owner has complete control over the business. 
B)  A proprietorship has few government rules and regulations to comply with. 
C)  Business profits are only taxed once, not twice. 
D)  A proprietorship can easily attain additional funding. 
A)  The owner has complete control over the business. 
B)  A proprietorship has few government rules and regulations to comply with. 
C)  Business profits are only taxed once, not twice. 
D)  A proprietorship can easily attain additional funding.

Question 2

A firm's managers need information on the firm's revenue and costs as well as information on the value of a firm's assets and the amount of the firm's debts to answer three basic questions.Which of the following is not one of those three basic questions?

Accepted Answer

A)  what to produce? 
B)  how to produce it? 
C)  what price to charge? 
D)  where to produce? 
A)  what to produce? 
B)  how to produce it? 
C)  what price to charge? 
D)  where to produce?

Question 3

Subprime mortgages are

Accepted Answer

A)  mortgages issued to borrowers who fail to document that their incomes are high enough to afford their mortgages. 
B)  mortgages which are bundled together by financial institutions and sold to investors. 
C)  mortgages issued to borrowers with flawed credit histories. 
D)  government-backed mortgages issued by Fannie Mae and Freddie Mac. 
A)  mortgages issued to borrowers who fail to document that their incomes are high enough to afford their mortgages. 
B)  mortgages which are bundled together by financial institutions and sold to investors. 
C)  mortgages issued to borrowers with flawed credit histories. 
D)  government-backed mortgages issued by Fannie Mae and Freddie Mac.

Question 4

From the highest to the lowest,the percentage of revenues earned by businesses in the United States is represented by which of the following?

Accepted Answer

A)  sole proprietorships, partnerships, corporations 
B)  partnerships, corporations, sole proprietorships 
C)  corporations, partnerships, sole proprietorships 
D)  corporations, sole proprietorships, partnerships 
A)  sole proprietorships, partnerships, corporations 
B)  partnerships, corporations, sole proprietorships 
C)  corporations, partnerships, sole proprietorships 
D)  corporations, sole proprietorships, partnerships

Question 5

You have a bond that pays $18 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 $15 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 $22 per year. 
A)  Coupon payments on newly-issued bonds fall to $15 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 $22 per year.

Question 6

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 7

If Urban Outfitters borrows $25 million from a bank to finance the construction of a new store,this is an example of

Accepted Answer

A)  a stock market transaction. 
B)  direct finance. 
C)  a bond market transaction. 
D)  indirect finance. 
A)  a stock market transaction. 
B)  direct finance. 
C)  a bond market transaction. 
D)  indirect finance.

Question 8

In 2011,Standard & Poor's (S&P)changed its rating on U.S.Treasury bonds from ________ based on the state of the federal government's budget deficit.

Accepted Answer

A)  "A" to "D" 
B)  "A" to "AAA" 
C)  "A+" to "B+" 
D)  "AAA" to "AA+" 
A)  "A" to "D" 
B)  "A" to "AAA" 
C)  "A+" to "B+" 
D)  "AAA" to "AA+"

Question 9

As a form of business,a sole proprietorship

Accepted Answer

A)  has limited liability. 
B)  has more than one owner. 
C)  cannot issue stock. 
D)  has the most government rules and regulations affecting it. 
A)  has limited liability. 
B)  has more than one owner. 
C)  cannot issue stock. 
D)  has the most government rules and regulations affecting it.

Question 10

By tying the salaries of top corporate managers to the price of the corporation's stock,corporations hope to avoid

Accepted Answer

A)  corporate governance. 
B)  conflict between the CFO and the CEO. 
C)  the principal-agent problem. 
D)  paying high salaries to their managers. 
A)  corporate governance. 
B)  conflict between the CFO and the CEO. 
C)  the principal-agent problem. 
D)  paying high salaries to their managers.

Question 11

What is the difference between a firm's assets and its liabilities?

Accepted Answer

An asset is anything

Question 12

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 13

________ of people work at firms that have 50 or more employees.

Accepted Answer

A)  Less than 25 percent 
B)  About 50 percent 
C)  More than 70 percent 
D)  Close to 97 percent 
A)  Less than 25 percent 
B)  About 50 percent 
C)  More than 70 percent 
D)  Close to 97 percent

Question 14

Despite a shaky start, online used car seller Carvana sold all 15 million stock shares in its IPO and raised about $225 million. Initially priced at $15 per share, the stock closed at $11.10 per share at the end of the first trading day. The Phoenix-based company, known for its automated car vending machines, offers free next-day delivery to residents in 24 markets across the United States. Carvana, founded in 2012, has seen large revenue growth but has never reported a profit., losing about $93 million in 2016. The company also said in its S-1 IPO filing that it expects losses to continue in the near future.
Source: Kirsten Korosec, "Used Car Vending Machine IPO Sputters In First Day of Trading," Fortune, April 28, 2017.
-When Carvana sold stock to the public in its IPO,it did so through the New York Stock Exchange.This is an example of Carvana using ________ to raise funds.

Accepted Answer

A)  indirect finance 
B)  direct finance 
C)  bonds 
D)  corporate governance 
A)  indirect finance 
B)  direct finance 
C)  bonds 
D)  corporate governance

Question 15

In 2002,the Enron Corporation was accused of falsifying information regarding liabilities on Enron's balance sheets,thereby

Accepted Answer

A)  increasing Enron's assets on the balance sheet. 
B)  reducing Enron's profit on the balance sheet. 
C)  increasing Enron's net worth on the balance sheet. 
D)  reducing Enron's net income on the income statement. 
A)  increasing Enron's assets on the balance sheet. 
B)  reducing Enron's profit on the balance sheet. 
C)  increasing Enron's net worth on the balance sheet. 
D)  reducing Enron's net income on the income statement.

Question 16

A cost that involves spending money is

Accepted Answer

A)  an implicit cost. 
B)  an explicit cost. 
C)  an opportunity cost. 
D)  an indirect cost. 
A)  an implicit cost. 
B)  an explicit cost. 
C)  an opportunity cost. 
D)  an indirect cost.

Question 17

Jake sells Star Wars memorabilia on eBay.His annual revenue is $42,000 per year,the explicit costs of his business are $10,000,and the opportunity costs of his business are $18,000 per year.What is his economic profit?

Accepted Answer

A)  $14,000 
B)  $24,000 
C)  $32,000 
D)  $34,000 
A)  $14,000 
B)  $24,000 
C)  $32,000 
D)  $34,000

Question 18

Information in a firm's financial statements

Accepted Answer

A)  helps the firm's managers make decisions. 
B)  assists investors who are considering buying the firm's stock. 
C)  guide resource allocation in the economy. 
D)  all of the above 
A)  helps the firm's managers make decisions. 
B)  assists investors who are considering buying the firm's stock. 
C)  guide resource allocation in the economy. 
D)  all of the above

Question 19

Implicit costs are ________ and explicit costs are ________.

Accepted Answer

A)  nonmonetary costs; also nonmonetary costs 
B)  nonmonetary costs; costs that involve spending money 
C)  costs that involve spending money; nonmonetary costs 
D)  costs that involve spending money; also costs that involve spending money 
A)  nonmonetary costs; also nonmonetary costs 
B)  nonmonetary costs; costs that involve spending money 
C)  costs that involve spending money; nonmonetary costs 
D)  costs that involve spending money; also costs that involve spending money

Question 20

Which of the following statements is false?

Accepted Answer

A)  Corporations can issue stocks and bonds, while proprietorships cannot. 
B)  Corporations have one owner, while proprietorships have many owners. 
C)  Corporations face more taxes than do proprietorships. 
D)  Proprietorships have unlimited liability while corporations have limited liability. 
A)  Corporations can issue stocks and bonds, while proprietorships cannot. 
B)  Corporations have one owner, while proprietorships have many owners. 
C)  Corporations face more taxes than do proprietorships. 
D)  Proprietorships have unlimited liability while corporations have limited liability.

Which of the following is not an advantage of starting a new business as a proprietorship?

A firm's managers need information on the firm's revenue and costs as well as information on the value of a firm's assets and the amount of the firm's debts to answer three basic questions.Which of the following is not one of those three basic questions?

Subprime mortgages are

From the highest to the lowest,the percentage of revenues earned by businesses in the United States is represented by which of the following?

You have a bond that pays $18 per year in coupon payments.Which of the following would result in a decrease in the price of your bond?

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

If Urban Outfitters borrows $25 million from a bank to finance the construction of a new store,this is an example of

In 2011,Standard & Poor's (S&P)changed its rating on U.S.Treasury bonds from ________ based on the state of the federal government's budget deficit.

As a form of business,a sole proprietorship

By tying the salaries of top corporate managers to the price of the corporation's stock,corporations hope to avoid

What is the difference between a firm's assets and its liabilities?

________ of people work at firms that have 50 or more employees.

In 2002,the Enron Corporation was accused of falsifying information regarding liabilities on Enron's balance sheets,thereby

A cost that involves spending money is

Jake sells Star Wars memorabilia on eBay.His annual revenue is $42,000 per year,the explicit costs of his business are $10,000,and the opportunity costs of his business are $18,000 per year.What is his economic profit?

Information in a firm's financial statements

Implicit costs are and explicit costs are .

Which of the following statements is false?

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

Which of the following is not an advantage of starting a new business as a proprietorship?

A firm's managers need information on the firm's revenue and costs as well as information on the value of a firm's assets and the amount of the firm's debts to answer three basic questions.Which of the following is not one of those three basic questions?

Subprime mortgages are

From the highest to the lowest,the percentage of revenues earned by businesses in the United States is represented by which of the following?

You have a bond that pays $18 per year in coupon payments.Which of the following would result in a decrease in the price of your bond?

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

If Urban Outfitters borrows $25 million from a bank to finance the construction of a new store,this is an example of

In 2011,Standard & Poor's (S&P)changed its rating on U.S.Treasury bonds from ________ based on the state of the federal government's budget deficit.

As a form of business,a sole proprietorship

By tying the salaries of top corporate managers to the price of the corporation's stock,corporations hope to avoid

What is the difference between a firm's assets and its liabilities?

________ of people work at firms that have 50 or more employees.

In 2002,the Enron Corporation was accused of falsifying information regarding liabilities on Enron's balance sheets,thereby

A cost that involves spending money is

Jake sells Star Wars memorabilia on eBay.His annual revenue is $42,000 per year,the explicit costs of his business are $10,000,and the opportunity costs of his business are $18,000 per year.What is his economic profit?

Information in a firm's financial statements

Implicit costs are ________ and explicit costs are ________.

Which of the following statements is false?

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

Implicit costs are and explicit costs are .