Question 1

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

Accepted Answer

A) double taxation 
B) ease in setting up 
C) low expenses of legally organizing 
D) greater ability to raise funds 
A) double taxation 
B) ease in setting up 
C) low expenses of legally organizing 
D) greater ability to raise funds

Question 2

Suppose you hit a progressive jackpot on a slot machine in a casino in Atlantic City and are given the choice of the following prizes:
Prize 1: $150,000 to be received right away,with three additional payments of $150,000 to be received each year for the next three years.
Prize 2: $500,000 to be received right away.
If the interest rate is 5 percent,what is the present value of each prize?

Accepted Answer

Prize 1:Present value = $150,0

Question 3

In which types of business do owners have unlimited personal liability and in which do owners have limited personal liability?

Accepted Answer

Sole proprietorships and partn

Question 4

Who is the seller in a primary market and who is the seller in a secondary market?

Accepted Answer

The corporation issuing a bond

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 is the most common type of business?

Accepted Answer

A) corporation 
B) partnership 
C) sole proprietorship 
D) They are equally represented because of Federal laws. 
A) corporation 
B) partnership 
C) sole proprietorship 
D) They are equally represented because of Federal laws.

Question 7

What can be done to deal with 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 8

What are earnings per share equal to?

Accepted Answer

A) the last dividend payment made 
B) total dividend payments plus retained earnings divided by outstanding stock shares 
C) the amount by which the stock's market price has increased in the last year 
D) revenues divided by the number of stockholders 
A) the last dividend payment made 
B) total dividend payments plus retained earnings divided by outstanding stock shares 
C) the amount by which the stock's market price has increased in the last year 
D) revenues divided by the number of stockholders

Question 9

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 10

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 11

Traditionally,Wall Street investment banks had been organized as partnerships,but by 2000 they had converted to being publicly traded companies.As partnerships,the principal-agent problem is ________ because there is ________ separation of ownership from control.

Accepted Answer

A) reduced; much 
B) reduced; little 
C) increased; much 
D) increased; little 
A) reduced; much 
B) reduced; little 
C) increased; much 
D) increased; little

Question 12

When Potbelly sold stock to the public in its IPO,it did so through the NASDAQ market.This was an example of Potbelly raising funds through

Accepted Answer

A) reinvesting retained earnings. 
B) a financial intermediary. 
C) dividend reinvestment. 
D) a financial market. 
A) reinvesting retained earnings. 
B) a financial intermediary. 
C) dividend reinvestment. 
D) a financial market.

Question 13

A corporation is owned by its

Accepted Answer

A) board of directors. 
B) stockholders. 
C) employees. 
D) CEO. 
A) board of directors. 
B) stockholders. 
C) employees. 
D) CEO.

Question 14

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

Accepted Answer

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

Question 15

A bond is a financial security that represents

Accepted Answer

A) ownership in a corporation. 
B) the portion of profits paid to shareholders. 
C) the interest rate paid on a share of stock. 
D) a promise to repay a fixed amount of funds. 
A) ownership in a corporation. 
B) the portion of profits paid to shareholders. 
C) the interest rate paid on a share of stock. 
D) a promise to repay a fixed amount of funds.

Question 16

Which of the following takes place in the direct finance market?

Accepted Answer

A) Firms borrow funds from banks. 
B) Deposits from savers are accumulated and loans made to borrowers. 
C) Ownership in corporations is sold in the form of preferred stock. 
D) Banks offer savings accounts to customers. 
A) Firms borrow funds from banks. 
B) Deposits from savers are accumulated and loans made to borrowers. 
C) Ownership in corporations is sold in the form of preferred stock. 
D) Banks offer savings accounts to customers.

Question 17

Roderick received a $100 savings bond for his graduation.The bond pays $100 at maturity,which is in five years.If the interest rate is 6%,the bond has a present value of $90.09.

Accepted Answer

A) True 
 B)False

Question 18

What does limited liability mean?

Accepted Answer

A) The owners of the business are personally responsible for paying expenses incurred by the business. 
B) Only employees can have a claim on the assets of the business. 
C) The personal assets of the owners cannot be claimed if the business is bankrupt. 
D) Anybody with a liability against a firm can claim only what their liability refers to. 
A) The owners of the business are personally responsible for paying expenses incurred by the business. 
B) Only employees can have a claim on the assets of the business. 
C) The personal assets of the owners cannot be claimed if the business is bankrupt. 
D) Anybody with a liability against a firm can claim only what their liability refers to.

Question 19

What was the source of the problems encountered by many financial firms during the late 2000s?

Accepted Answer

The primary source of the problems was t

Question 20

Which of the following would explain why economic profit might be less than accounting profit?

Accepted Answer

A) A firm's net income is less than its accounting profit. 
B) A firm has only explicit costs. 
C) A firm's net income is greater than its accounting profit. 
D) A firm has implicit costs as well as explicit costs. 
A) A firm's net income is less than its accounting profit. 
B) A firm has only explicit costs. 
C) A firm's net income is greater than its accounting profit. 
D) A firm has implicit costs as well as explicit costs.

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

In which types of business do owners have unlimited personal liability and in which do owners have limited personal liability?

Who is the seller in a primary market and who is the seller in a secondary market?

The interest payment on a bond is called

What is the most common type of business?

What can be done to deal with the principal-agent problem?

What are earnings per share equal to?

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?

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?

Traditionally,Wall Street investment banks had been organized as partnerships,but by 2000 they had converted to being publicly traded companies.As partnerships,the principal-agent problem is because there is separation of ownership from control.

When Potbelly sold stock to the public in its IPO,it did so through the NASDAQ market.This was an example of Potbelly raising funds through

A corporation is owned by its

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

A bond is a financial security that represents

Which of the following takes place in the direct finance market?

Roderick received a $100 savings bond for his graduation.The bond pays $100 at maturity,which is in five years.If the interest rate is 6%,the bond has a present value of $90.09.

What does limited liability mean?

What was the source of the problems encountered by many financial firms during the late 2000s?

Which of the following would explain why economic profit might be less than accounting profit?

Economics: Foundations and Models

Trade-Offs,comparative Advantage,and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

The Economics of Health Care

Comparative Advantage and the Gains From International Trade

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

Exam 6: Firms,the Stock Market,and Corporate Governance

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

In which types of business do owners have unlimited personal liability and in which do owners have limited personal liability?

Who is the seller in a primary market and who is the seller in a secondary market?

The interest payment on a bond is called

What is the most common type of business?

What can be done to deal with the principal-agent problem?

What are earnings per share equal to?

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?

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?

Traditionally,Wall Street investment banks had been organized as partnerships,but by 2000 they had converted to being publicly traded companies.As partnerships,the principal-agent problem is ________ because there is ________ separation of ownership from control.

When Potbelly sold stock to the public in its IPO,it did so through the NASDAQ market.This was an example of Potbelly raising funds through

A corporation is owned by its

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

A bond is a financial security that represents

Which of the following takes place in the direct finance market?

Roderick received a $100 savings bond for his graduation.The bond pays $100 at maturity,which is in five years.If the interest rate is 6%,the bond has a present value of $90.09.

What does limited liability mean?

What was the source of the problems encountered by many financial firms during the late 2000s?

Which of the following would explain why economic profit might be less than accounting profit?

Economics: Foundations and Models

Trade-Offs,comparative Advantage,and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

The Economics of Health Care

Comparative Advantage and the Gains From International Trade

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

Traditionally,Wall Street investment banks had been organized as partnerships,but by 2000 they had converted to being publicly traded companies.As partnerships,the principal-agent problem is because there is separation of ownership from control.