Question 1

How is economic profit calculated?

Accepted Answer

Economic profits equ

Question 2

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

Accepted Answer

A)  By setting up the business as a corporation, Jeremy would not face double taxation. 
B)  By setting up the business as a corporation, Jeremy would have the ability to share risk with shareholders. 
C)  By setting up the business as a corporation, Jeremy would have both ownership and control over the business. 
D)  All of the above would be advantages of setting up his business as a corporation. 
A)  By setting up the business as a corporation, Jeremy would not face double taxation. 
B)  By setting up the business as a corporation, Jeremy would have the ability to share risk with shareholders. 
C)  By setting up the business as a corporation, Jeremy would have both ownership and control over the business. 
D)  All of the above would be advantages of setting up his business as a corporation.

Question 3

All of the following are characteristics of stock except

Accepted Answer

A)  stock does not represent a promise to repay a fixed amount of funds. 
B)  dividends paid to owners of stock represent a firm's profits. 
C)  stock promises to repay a fixed amount to of funds to stock owners. 
D)  stock represents ownership in a firm. 
A)  stock does not represent a promise to repay a fixed amount of funds. 
B)  dividends paid to owners of stock represent a firm's profits. 
C)  stock promises to repay a fixed amount to of funds to stock owners. 
D)  stock represents ownership in a firm.

Question 4

Torrie is thinking of starting up a small business selling hand-painted wine glasses.She asks her sister,Lisette,if she'd like to join her in setting up a partnership to start the business.What is one disadvantage in joining the partnership that Lisette should consider?

Accepted Answer

A)  Lisette should realize that her profits in the partnership will always be less than Torrie's profits, since Torrie had the idea to start the business. 
B)  Lisette should realize that, as an owner of the business, she will be personally responsible for the debts of the business. 
C)  Lisette should realize that only Torrie will be allowed to own stock in the business as the founding partner. 
D)  Lisette should realize that Torrie will have complete control over the business because it was her idea. 
A)  Lisette should realize that her profits in the partnership will always be less than Torrie's profits, since Torrie had the idea to start the business. 
B)  Lisette should realize that, as an owner of the business, she will be personally responsible for the debts of the business. 
C)  Lisette should realize that only Torrie will be allowed to own stock in the business as the founding partner. 
D)  Lisette should realize that Torrie will have complete control over the business because it was her idea.

Question 5

The interest payment on a bond is called

Accepted Answer

A)  the coupon payment. 
B)  principal. 
C)  the interest rate. 
D)  the face value. 
A)  the coupon payment. 
B)  principal. 
C)  the interest rate. 
D)  the face value.

Question 6

What type of business is the easiest to set up?

Accepted Answer

A)  sole proprietorship 
B)  partnership 
C)  corporation 
D)  There is no difference in the ease of establishment. 
A)  sole proprietorship 
B)  partnership 
C)  corporation 
D)  There is no difference in the ease of establishment.

Question 7

Why might a small investor be interested in buying a mutual fund as opposed to stock in an individual company?

Accepted Answer

By buying shares in a mutual fund,small

Question 8

A firm in a market economy must do all of the following to succeed except

Accepted Answer

A)  produce the goods and services that consumers want at a lower cost than consumers themselves can produce. 
B)  organize the factors of production into a functioning, efficient unit. 
C)  have access to sufficient funds. 
D)  be organized as a corporation. 
A)  produce the goods and services that consumers want at a lower cost than consumers themselves can produce. 
B)  organize the factors of production into a functioning, efficient unit. 
C)  have access to sufficient funds. 
D)  be organized as a corporation.

Question 9

Of the different types of businesses,a ________ has the most government rules and the most government regulations affecting it.

Accepted Answer

A)  corporation 
B)  partnership 
C)  sole proprietorship 
D)  All of the above are subject to the same amount of rules and regulations. 
A)  corporation 
B)  partnership 
C)  sole proprietorship 
D)  All of the above are subject to the same amount of rules and regulations.

Question 10

The higher the default risk on a bond,the higher the interest rate will be.

Accepted Answer

A) True 
 B)False

Question 11

When Electronic Arts,the company behind the games Zuma and Plants vs.Zombies,sold stock to the public for the first time in September 1989,funds were being raised in a ________ market,and when those newly issued shares are resold to other buyers,the sales take place in a ________ market.

Accepted Answer

A)  primary; primary 
B)  primary; secondary 
C)  secondary; primary 
D)  secondary; secondary 
A)  primary; primary 
B)  primary; secondary 
C)  secondary; primary 
D)  secondary; secondary

Question 12

Donnie's Donuts incurs $450,000 per year in explicit costs and $200,000 in implicit costs.The bakery earns $800,000 in revenues and has $2 million in net worth.Based on this information,what is the accounting profit for Donnie's Donuts?

Accepted Answer

A)  $150,000 
B)  $350,000 
C)  $600,000 
D)  $1.2 million 
A)  $150,000 
B)  $350,000 
C)  $600,000 
D)  $1.2 million

Question 13

If Walmart issues $250 million in new stock to finance the renovation of their retail stores,this is an example of

Accepted Answer

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

Question 14

Mortgages issued to borrowers who fail to document that their incomes are high enough to afford their mortgage payments are known as ________ mortgages.

Accepted Answer

A)  subprime 
B)  Alt-A 
C)  gray market 
D)  reciprocal 
A)  subprime 
B)  Alt-A 
C)  gray market 
D)  reciprocal

Question 15

Which type of business has the least government rules and regulations affecting it?

Accepted Answer

A)  sole proprietorship 
B)  partnership 
C)  corporation 
D)  They all have the same set of rules and regulations affecting them. 
A)  sole proprietorship 
B)  partnership 
C)  corporation 
D)  They all have the same set of rules and regulations affecting them.

Question 16

Which of the following is a solution to the principal-agent problem?

Accepted Answer

A)  threaten to liquidate the firm 
B)  link top manager salaries to the profits of the firm or the price of the firm's stock 
C)  have the CEO be a rotating position 
D)  forbid managers from owning any company stock 
A)  threaten to liquidate the firm 
B)  link top manager salaries to the profits of the firm or the price of the firm's stock 
C)  have the CEO be a rotating position 
D)  forbid managers from owning any company stock

Question 17

What is the central role of financial intermediaries in a market economy?

Accepted Answer

A)  the creation and printing of money 
B)  keeping the price level stable 
C)  bringing together savers and borrowers 
D)  providing safe deposit boxes for people and businesses 
A)  the creation and printing of money 
B)  keeping the price level stable 
C)  bringing together savers and borrowers 
D)  providing safe deposit boxes for people and businesses

Question 18

When you buy newly-issued shares of Snap stock,this transaction takes place in the

Accepted Answer

A)  primary market. 
B)  bond market. 
C)  secondary market. 
D)  bear market. 
A)  primary market. 
B)  bond market. 
C)  secondary market. 
D)  bear market.

Question 19

Veruca sells therapeutic bath salts on the Internet.Her annual revenue is $52,000 per year,the explicit costs of her business are $14,000,and the opportunity costs of her business are $17,000 per year.What is her economic profit?

Accepted Answer

A)  $14,000 
B)  $21,000 
C)  $31,000 
D)  $38,000 
A)  $14,000 
B)  $21,000 
C)  $31,000 
D)  $38,000

Question 20

Who controls a sole proprietorship?

Accepted Answer

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

How is economic profit calculated?

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

All of the following are characteristics of stock except

Torrie is thinking of starting up a small business selling hand-painted wine glasses.She asks her sister,Lisette,if she'd like to join her in setting up a partnership to start the business.What is one disadvantage in joining the partnership that Lisette should consider?

The interest payment on a bond is called

What type of business is the easiest to set up?

Why might a small investor be interested in buying a mutual fund as opposed to stock in an individual company?

A firm in a market economy must do all of the following to succeed except

Of the different types of businesses,a ________ has the most government rules and the most government regulations affecting it.

The higher the default risk on a bond,the higher the interest rate will be.

When Electronic Arts,the company behind the games Zuma and Plants vs.Zombies,sold stock to the public for the first time in September 1989,funds were being raised in a market,and when those newly issued shares are resold to other buyers,the sales take place in a market.

Donnie's Donuts incurs $450,000 per year in explicit costs and $200,000 in implicit costs.The bakery earns $800,000 in revenues and has $2 million in net worth.Based on this information,what is the accounting profit for Donnie's Donuts?

If Walmart issues $250 million in new stock to finance the renovation of their retail stores,this is an example of

Mortgages issued to borrowers who fail to document that their incomes are high enough to afford their mortgage payments are known as ________ mortgages.

Which type of business has the least government rules and regulations affecting it?

Which of the following is a solution to the principal-agent problem?

What is the central role of financial intermediaries in a market economy?

When you buy newly-issued shares of Snap stock,this transaction takes place in the

Veruca sells therapeutic bath salts on the Internet.Her annual revenue is $52,000 per year,the explicit costs of her business are $14,000,and the opportunity costs of her business are $17,000 per year.What is her economic profit?

Who controls a sole proprietorship?

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

How is economic profit calculated?

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

All of the following are characteristics of stock except

Torrie is thinking of starting up a small business selling hand-painted wine glasses.She asks her sister,Lisette,if she'd like to join her in setting up a partnership to start the business.What is one disadvantage in joining the partnership that Lisette should consider?

The interest payment on a bond is called

What type of business is the easiest to set up?

Why might a small investor be interested in buying a mutual fund as opposed to stock in an individual company?

A firm in a market economy must do all of the following to succeed except

Of the different types of businesses,a ________ has the most government rules and the most government regulations affecting it.

The higher the default risk on a bond,the higher the interest rate will be.

When Electronic Arts,the company behind the games Zuma and Plants vs.Zombies,sold stock to the public for the first time in September 1989,funds were being raised in a ________ market,and when those newly issued shares are resold to other buyers,the sales take place in a ________ market.

Donnie's Donuts incurs $450,000 per year in explicit costs and $200,000 in implicit costs.The bakery earns $800,000 in revenues and has $2 million in net worth.Based on this information,what is the accounting profit for Donnie's Donuts?

If Walmart issues $250 million in new stock to finance the renovation of their retail stores,this is an example of

Mortgages issued to borrowers who fail to document that their incomes are high enough to afford their mortgage payments are known as ________ mortgages.

Which type of business has the least government rules and regulations affecting it?

Which of the following is a solution to the principal-agent problem?

What is the central role of financial intermediaries in a market economy?

When you buy newly-issued shares of Snap stock,this transaction takes place in the

Veruca sells therapeutic bath salts on the Internet.Her annual revenue is $52,000 per year,the explicit costs of her business are $14,000,and the opportunity costs of her business are $17,000 per year.What is her economic profit?

Who controls a sole proprietorship?

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

When Electronic Arts,the company behind the games Zuma and Plants vs.Zombies,sold stock to the public for the first time in September 1989,funds were being raised in a market,and when those newly issued shares are resold to other buyers,the sales take place in a market.