Question 1

An advantage of a partnership over a proprietorship is

Accepted Answer

A)  limited liability. 
B)  that profits are not taxed twice. 
C)  the ability to take advantage of greater specialization. 
D)  that it is easier to dissolve. 
A)  limited liability. 
B)  that profits are not taxed twice. 
C)  the ability to take advantage of greater specialization. 
D)  that it is easier to dissolve.

Question 2

A share of stock in a corporation is

Accepted Answer

A)  a guarantee to a fixed amount of income from the corporation. 
B)  a legal claim to a lump-sum payment at a specified point of time in the future. 
C)  a legal claim to a dividend, regardless of the corporation's ability to pay its interest payments. 
D)  a legal claim to a share of the company's future profits. 
A)  a guarantee to a fixed amount of income from the corporation. 
B)  a legal claim to a lump-sum payment at a specified point of time in the future. 
C)  a legal claim to a dividend, regardless of the corporation's ability to pay its interest payments. 
D)  a legal claim to a share of the company's future profits.

Question 3

When economic rent exists,

Accepted Answer

A)  the price is equal to the opportunity cost of the resources. 
B)  price is the same as the discount rate. 
C)  resources are allocated inefficiently. 
D)  resources are allocated efficiently. 
A)  the price is equal to the opportunity cost of the resources. 
B)  price is the same as the discount rate. 
C)  resources are allocated inefficiently. 
D)  resources are allocated efficiently.

Question 4

The economy's current rate of interest is 10 percent and a firm has $10,000 of owner-invested capital. Its total revenue is $5000 and the firm's explicit costs are $3500. From this we know that this firm's

Accepted Answer

A)  accounting profit is $500. 
B)  economic profit is $1,500. 
C)  accounting profit is $11,500. 
D)  economic profit is $500. 
A)  accounting profit is $500. 
B)  economic profit is $1,500. 
C)  accounting profit is $11,500. 
D)  economic profit is $500.

Question 5

Suppose that you decide to purchase either stocks or bonds of a particular corporation and you also prefer to receive some returns from the securities every year. Which should you buy - stocks or bonds? Why?

Accepted Answer

You should buy bonds because you would r

Question 6

The first economist to analyze economic rent was

Accepted Answer

A)  Henry George. 
B)  David Ricardo. 
C)  Karl Marx. 
D)  John Stuart Mill. 
A)  Henry George. 
B)  David Ricardo. 
C)  Karl Marx. 
D)  John Stuart Mill.

Question 7

David Ricardo used the example of land to demonstrate the concept of rent, as the supply of land is

Accepted Answer

A)  perfectly elastic. 
B)  relatively elastic. 
C)  perfectly inelastic. 
D)  negatively sloped. 
A)  perfectly elastic. 
B)  relatively elastic. 
C)  perfectly inelastic. 
D)  negatively sloped.

Question 8

If you own 500 shares of preferred stock, how many regular votes would you get to cast at the next stockholders meeting?

Accepted Answer

A)  500 
B)  250 
C)  1 
D)  0 
A)  500 
B)  250 
C)  1 
D)  0

Question 9

Efficient markets theory suggests that purchasing the published reports of financial analysts

Accepted Answer

A)  is likely to increase one's returns by an average of 5 percent. 
B)  is likely to increase one's returns by an average of about 3 to 5 percent. 
C)  is not likely to increase financial returns. 
D)  will increase financial returns in the first year but not in following years. 
A)  is likely to increase one's returns by an average of 5 percent. 
B)  is likely to increase one's returns by an average of about 3 to 5 percent. 
C)  is not likely to increase financial returns. 
D)  will increase financial returns in the first year but not in following years.

Question 10

Which of the following is not an advantage of a partnership?

Accepted Answer

A)  Limited liability 
B)  
A)  Limited liability 
B)

Question 11

Why are there so many more proprietorships than corporations, yet corporations account for so much more of the sales of business firms in the country?

Accepted Answer

Proprietorships are easy to form and can

Question 12

The goal of the firm is

Accepted Answer

A)  low labor turnover. 
B)  to maximize sales. 
C)  to minimize costs. 
D)  profit maximization. 
A)  low labor turnover. 
B)  to maximize sales. 
C)  to minimize costs. 
D)  profit maximization.

Question 13

Suppose the supply of ocean front property in California is perfectly inelastic. Any increases in demand for this property increases the

Accepted Answer

A)  economic rent. 
B)  opportunity cost of land owners. 
C)  present discounted value. 
D)  real interest rate. 
A)  economic rent. 
B)  opportunity cost of land owners. 
C)  present discounted value. 
D)  real interest rate.

Question 14

Exchanges of stocks take place

Accepted Answer

A)  in New York City only. 
B)  in the principle financial city of each country, such as New York City for the United States and London for England. 
C)  in a decentralized fashion around the world. 
D)  in centralized physical locations known as stock exchanges and online through Internet brokers. 
A)  in New York City only. 
B)  in the principle financial city of each country, such as New York City for the United States and London for England. 
C)  in a decentralized fashion around the world. 
D)  in centralized physical locations known as stock exchanges and online through Internet brokers.

Question 15

According to Ricardo's explanation of land rent, what happens when the demand for land increases?

Accepted Answer

A)  The supply curve shifts to the right just enough to keep the price per acre constant. 
B)  Revenues to owners of land increase but economic rent declines. 
C)  The amount of economic rent stays constant, constrained by a perfectly inelastic supply curve. 
D)  Both revenues to owners of land and economic rent increase. 
A)  The supply curve shifts to the right just enough to keep the price per acre constant. 
B)  Revenues to owners of land increase but economic rent declines. 
C)  The amount of economic rent stays constant, constrained by a perfectly inelastic supply curve. 
D)  Both revenues to owners of land and economic rent increase.

Question 16

The greater is the risk of non-repayment of a loan, the

Accepted Answer

A)  higher is the expected rate of interest. 
B)  longer is the expected time to repay the loan. 
C)  lower is the handling charges for the loan. 
D)  lower is the expected rate of interest. 
A)  higher is the expected rate of interest. 
B)  longer is the expected time to repay the loan. 
C)  lower is the handling charges for the loan. 
D)  lower is the expected rate of interest.

Question 17

Which is the best example of a firm's implicit costs?

Accepted Answer

A)  Wages 
B)  The opportunity cost of owner-provided labor 
C)  Rent 
D)  Taxes 
A)  Wages 
B)  The opportunity cost of owner-provided labor 
C)  Rent 
D)  Taxes

Question 18

Which of the following is a disadvantage of the corporate form of business organization?

Accepted Answer

A)  Limited liability 
B)  Limited financing 
C)  Double taxation 
D)  Unlimited liability 
A)  Limited liability 
B)  Limited financing 
C)  Double taxation 
D)  Unlimited liability

Question 19

Economists also refer to the normal rate of return on investment as

Accepted Answer

A)  a residual cost. 
B)  the opportunity cost of capital. 
C)  the equity kicker. 
D)  the fixed cost of entrepreneurship. 
A)  a residual cost. 
B)  the opportunity cost of capital. 
C)  the equity kicker. 
D)  the fixed cost of entrepreneurship.

Question 20

A legal claim to a percentage of a company's future profits and assets is known as a

Accepted Answer

A)  share of stock. 
B)  bond. 
C)  dividend. 
D)  random walk. 
A)  share of stock. 
B)  bond. 
C)  dividend. 
D)  random walk.

Exam 21: Rents, Profits, and the Financial Environment of Business

An advantage of a partnership over a proprietorship is

A share of stock in a corporation is

When economic rent exists,

The economy's current rate of interest is 10 percent and a firm has $10,000 of owner-invested capital. Its total revenue is $5000 and the firm's explicit costs are $3500. From this we know that this firm's

Suppose that you decide to purchase either stocks or bonds of a particular corporation and you also prefer to receive some returns from the securities every year. Which should you buy - stocks or bonds? Why?

The first economist to analyze economic rent was

David Ricardo used the example of land to demonstrate the concept of rent, as the supply of land is

If you own 500 shares of preferred stock, how many regular votes would you get to cast at the next stockholders meeting?

Efficient markets theory suggests that purchasing the published reports of financial analysts

Which of the following is not an advantage of a partnership?

Why are there so many more proprietorships than corporations, yet corporations account for so much more of the sales of business firms in the country?

The goal of the firm is

Suppose the supply of ocean front property in California is perfectly inelastic. Any increases in demand for this property increases the

Exchanges of stocks take place

According to Ricardo's explanation of land rent, what happens when the demand for land increases?

The greater is the risk of non-repayment of a loan, the

Which is the best example of a firm's implicit costs?

Which of the following is a disadvantage of the corporate form of business organization?

Economists also refer to the normal rate of return on investment as

A legal claim to a percentage of a company's future profits and assets is known as a

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money, Banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Demand and Supply Elasticity

Consumer Choice

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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