Question 1

A normal rate of return on investment is equal to

Accepted Answer

A)  accounting profit minus economic profit. 
B)  the opportunity cost of capital plus any other implicit costs. 
C)  accounting profit plus economic profit. 
D)  total revenue plus total accounting profit 
A)  accounting profit minus economic profit. 
B)  the opportunity cost of capital plus any other implicit costs. 
C)  accounting profit plus economic profit. 
D)  total revenue plus total accounting profit

Question 2

The characteristic of limited liability enables corporations to

Accepted Answer

A)  avoid taxes on some of their profits. 
B)  exist even when owners die. 
C)  raise large amounts of financial capital. 
D)  start up and dissolve easily. 
A)  avoid taxes on some of their profits. 
B)  exist even when owners die. 
C)  raise large amounts of financial capital. 
D)  start up and dissolve easily.

Question 3

The present value of $110 to be received one year from now

Accepted Answer

A)  is $110. 
B)  is $100. 
C)  is $121. 
D)  depends on the rate of discount. 
A)  is $110. 
B)  is $100. 
C)  is $121. 
D)  depends on the rate of discount.

Question 4

Pure economic rent is a payment to a resource that

Accepted Answer

A)  has a high opportunity cost. 
B)  has a perfectly inelastic supply. 
C)  has a negative opportunity cost. 
D)  has a perfectly elastic demand. 
A)  has a high opportunity cost. 
B)  has a perfectly inelastic supply. 
C)  has a negative opportunity cost. 
D)  has a perfectly elastic demand.

Question 5

An advantage of a corporation is

Accepted Answer

A)  the ability to raise large sums of financial capital. 
B)  unlimited liability on the part of shareholders. 
C)  the fact that ownership and control are never separated. 
D)  the fact that the corporation is dissolved when one of its owners dies. 
A)  the ability to raise large sums of financial capital. 
B)  unlimited liability on the part of shareholders. 
C)  the fact that ownership and control are never separated. 
D)  the fact that the corporation is dissolved when one of its owners dies.

Question 6

The most important source of financial capital for firms today is

Accepted Answer

A)  sale of bonds. 
B)  sale of new issues of stock. 
C)  trade of previously issued stock. 
D)  reinvestment of profits. 
A)  sale of bonds. 
B)  sale of new issues of stock. 
C)  trade of previously issued stock. 
D)  reinvestment of profits.

Question 7

If the interest rate is 10 percent per year, and you have $100,000 now, which of the following is closest to what your $100,000 will be worth in one year?

Accepted Answer

A)  $105,000 
B)  $110,000 
C)  $100,000 
D)  $102,000 
A)  $105,000 
B)  $110,000 
C)  $100,000 
D)  $102,000

Question 8

The most common form of business organization in the United States is the

Accepted Answer

A)  proprietorship. 
B)  partnership. 
C)  corporation. 
D)  cooperative. 
A)  proprietorship. 
B)  partnership. 
C)  corporation. 
D)  cooperative.

Question 9

Expenses that a firm does not have to pay out of pocket are

Accepted Answer

A)  wages of employees. 
B)  taxes. 
C)  implicit costs. 
D)  explicit costs. 
A)  wages of employees. 
B)  taxes. 
C)  implicit costs. 
D)  explicit costs.

Question 10

Accounting profit can be calculated as

Accepted Answer

A)  total revenue - explicit costs. 
B)  total revenue - implicit costs. 
C)  total revenue - explicit costs - implicit costs. 
D)  total revenue - fixed costs. 
A)  total revenue - explicit costs. 
B)  total revenue - implicit costs. 
C)  total revenue - explicit costs - implicit costs. 
D)  total revenue - fixed costs.

Question 11

The nominal rate of interest is 6% and the anticipated rate of inflation is 2%. What is the real rate of interest?

Accepted Answer

A)  8% 
B)  6% 
C)  4% 
D)  2% 
A)  8% 
B)  6% 
C)  4% 
D)  2%

Question 12

If a corporation fails, the last recipients of funds that may remain are

Accepted Answer

A)  preferred stockholders. 
B)  common stockholders. 
C)  bond holders. 
D)  government tax collectors. 
A)  preferred stockholders. 
B)  common stockholders. 
C)  bond holders. 
D)  government tax collectors.

Question 13

Normal rate of return is

Accepted Answer

A)  accounting profit. 
B)  an explicit cost. 
C)  economic profit. 
D)  the amount that must be paid to obtain investment in a business. 
A)  accounting profit. 
B)  an explicit cost. 
C)  economic profit. 
D)  the amount that must be paid to obtain investment in a business.

Question 14

Describe and explain the three principle methods of financing used by corporations.

Accepted Answer

Corporations raise funds by selling stoc

Question 15

The owners of preferred stock

Accepted Answer

A)  receive preferential treatment in the payment of dividends. 
B)  have the same voting rights as owners of common stock. 
C)  are the original owners of the corporation. 
D)  have the same rights as bondholders. 
A)  receive preferential treatment in the payment of dividends. 
B)  have the same voting rights as owners of common stock. 
C)  are the original owners of the corporation. 
D)  have the same rights as bondholders.

Question 16

The three primary sources of corporate funds are

Accepted Answer

A)  banks, friends, and family. 
B)  government, other corporations, and the central bank. 
C)  investment banks, brokerages, and insurance companies. 
D)  stocks, bonds, and reinvestment of profits. 
A)  banks, friends, and family. 
B)  government, other corporations, and the central bank. 
C)  investment banks, brokerages, and insurance companies. 
D)  stocks, bonds, and reinvestment of profits.

Question 17

The funds used to purchase capital goods are called

Accepted Answer

A)  investment. 
B)  savings. 
C)  financial capital. 
D)  dividends and interest. 
A)  investment. 
B)  savings. 
C)  financial capital. 
D)  dividends and interest.

Question 18

If the interest rate is 10 percent per year, and you have $100,000 now, which of the following is closest to what your $100,000 will be worth in four years?

Accepted Answer

A)  $175,000 
B)  $125,000 
C)  $146,000 
D)  $190,000 
A)  $175,000 
B)  $125,000 
C)  $146,000 
D)  $190,000

Question 19

Most businesses in the United States are ________, and the type of business organization that accounts for the LEAST amount of total revenues is ________.

Accepted Answer

A)  proprietorships; partnerships 
B)  corporations; proprietorships 
C)  proprietorships; proprietorships 
D)  corporations; partnerships 
A)  proprietorships; partnerships 
B)  corporations; proprietorships 
C)  proprietorships; proprietorships 
D)  corporations; partnerships

Question 20

By definition, a proprietorship is

Accepted Answer

A)  owned by many shareholders. 
B)  a large manufacturing concern. 
C)  owned by a single individual. 
D)  managed by a large group called the "board of directors." 
A)  owned by many shareholders. 
B)  a large manufacturing concern. 
C)  owned by a single individual. 
D)  managed by a large group called the "board of directors."

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

A normal rate of return on investment is equal to

The characteristic of limited liability enables corporations to

The present value of $110 to be received one year from now

Pure economic rent is a payment to a resource that

An advantage of a corporation is

The most important source of financial capital for firms today is

If the interest rate is 10 percent per year, and you have $100,000 now, which of the following is closest to what your $100,000 will be worth in one year?

The most common form of business organization in the United States is the

Expenses that a firm does not have to pay out of pocket are

Accounting profit can be calculated as

The nominal rate of interest is 6% and the anticipated rate of inflation is 2%. What is the real rate of interest?

If a corporation fails, the last recipients of funds that may remain are

Normal rate of return is

Describe and explain the three principle methods of financing used by corporations.

The owners of preferred stock

The three primary sources of corporate funds are

The funds used to purchase capital goods are called

If the interest rate is 10 percent per year, and you have $100,000 now, which of the following is closest to what your $100,000 will be worth in four years?

Most businesses in the United States are ________, and the type of business organization that accounts for the LEAST amount of total revenues is ________.

By definition, a proprietorship is

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

Filters

Most businesses in the United States are , and the type of business organization that accounts for the LEAST amount of total revenues is .