Question 1

Corporations are legally owned by their shareholders.

Accepted Answer

A) True 
 B)False

Question 2

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.

Question 3

Before its IPO,Facebook was an example of a private firm.As a private firm,Facebook was

Accepted Answer

A)  not subject to government regulations and taxation. 
B)  run by stockholders and a board of directors. 
C)  run by its founder, Mark Zuckerberg. 
D)  not legally allowed to raise funds through venture capital firms. 
A)  not subject to government regulations and taxation. 
B)  run by stockholders and a board of directors. 
C)  run by its founder, Mark Zuckerberg. 
D)  not legally allowed to raise funds through venture capital firms.

Question 4

A corporation's board of directors

Accepted Answer

A)  hire the managers of the corporation. 
B)  control the day-to-day activities of the corporation. 
C)  are personally liable for the debts of the corporation. 
D)  are the sole owners of the corporation. 
A)  hire the managers of the corporation. 
B)  control the day-to-day activities of the corporation. 
C)  are personally liable for the debts of the corporation. 
D)  are the sole owners of the corporation.

Question 5

________ is called an implicit cost,while ________ is called an explicit cost.

Accepted Answer

A)  An accounting cost; an economic cost 
B)  A nonmonetary opportunity cost; a cost that involves spending money 
C)  A production cost; a sales cost 
D)  An actual cost; a hypothetical cost 
A)  An accounting cost; an economic cost 
B)  A nonmonetary opportunity cost; a cost that involves spending money 
C)  A production cost; a sales cost 
D)  An actual cost; a hypothetical cost

Question 6

In the United States,corporate profits are taxed

Accepted Answer

A)  only at the corporate level. 
B)  only when investors receive dividends. 
C)  at both the corporate level and when investors receive dividends. 
D)  neither at the corporate level nor when investors receive dividends. 
A)  only at the corporate level. 
B)  only when investors receive dividends. 
C)  at both the corporate level and when investors receive dividends. 
D)  neither at the corporate level nor when investors receive dividends.

Question 7

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 8

Laura's Pizza Place incurs $800,000 per year in explicit costs and $100,000 in implicit costs.The restaurant earns $1.3 million in revenues and has $5 million in net worth.Based on this information,what is economic profit for Laura's Pizza Place?

Accepted Answer

A)  $200,000 
B)  $400,000 
C)  $500,000 
D)  $2.8 million 
A)  $200,000 
B)  $400,000 
C)  $500,000 
D)  $2.8 million

Question 9

Two of the firms involved in the accounting scandals of the early 2000s were

Accepted Answer

A)  Arthur Anderson and NBC. 
B)  Western Digital and General Motors. 
C)  WorldCom and Enron. 
D)  DuPont and Lehman Brothers. 
A)  Arthur Anderson and NBC. 
B)  Western Digital and General Motors. 
C)  WorldCom and Enron. 
D)  DuPont and Lehman Brothers.

Question 10

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 11

On a balance sheet,short-term debts such as accounts payable are listed as

Accepted Answer

A)  current assets. 
B)  current liabilities. 
C)  stockholder's equity. 
D)  goodwill. 
A)  current assets. 
B)  current liabilities. 
C)  stockholder's equity. 
D)  goodwill.

Question 12

What role do well functioning financial markets play in a market economy?

Accepted Answer

They allocate saved

Question 13

Seth's grandmother gave him a $50 savings bond for his birthday.The bond pays $50 at maturity,which is in five years.If the interest rate is 5%,the bond has a present value of $43.19.

Accepted Answer

A) True 
 B)False

Question 14

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 15

If a corporation retains all its profits and distributes none of the profit to owners,how can owners benefit?

Accepted Answer

A)  If the retained earnings are expected to create future profits, the market price of the firm's stock will increase and create a capital gain for stockholders if the stock is sold. 
B)  Shares of stock can be converted into bonds so stockholders will be able to earn coupon payments. 
C)  Owners will only benefit if some profits are paid out in the form of dividends. 
D)  Owners will benefit by changing the board of directors. 
A)  If the retained earnings are expected to create future profits, the market price of the firm's stock will increase and create a capital gain for stockholders if the stock is sold. 
B)  Shares of stock can be converted into bonds so stockholders will be able to earn coupon payments. 
C)  Owners will only benefit if some profits are paid out in the form of dividends. 
D)  Owners will benefit by changing the board of directors.

Question 16

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 17

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 18

Which of the following is an example of an implicit cost a firm might incur?

Accepted Answer

A)  the out-of-pocket expense to hire resources 
B)  taxes owed to the state and Federal governments 
C)  the rental value of the office space the company owns and uses for itself 
D)  the revenue a firm generates in using its resources 
A)  the out-of-pocket expense to hire resources 
B)  taxes owed to the state and Federal governments 
C)  the rental value of the office space the company owns and uses for itself 
D)  the revenue a firm generates in using its resources

Question 19

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 20

How can a corporation's board of directors and its managers try to reduce the principal-agent problem?

Accepted Answer

A corporation's board of directors can t

Corporations are legally owned by their shareholders.

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

Before its IPO,Facebook was an example of a private firm.As a private firm,Facebook was

A corporation's board of directors

is called an implicit cost,while is called an explicit cost.

In the United States,corporate profits are taxed

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?

Laura's Pizza Place incurs $800,000 per year in explicit costs and $100,000 in implicit costs.The restaurant earns $1.3 million in revenues and has $5 million in net worth.Based on this information,what is economic profit for Laura's Pizza Place?

Two of the firms involved in the accounting scandals of the early 2000s were

What type of business is the easiest to set up?

On a balance sheet,short-term debts such as accounts payable are listed as

What role do well functioning financial markets play in a market economy?

Seth's grandmother gave him a $50 savings bond for his birthday.The bond pays $50 at maturity,which is in five years.If the interest rate is 5%,the bond has a present value of $43.19.

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

If a corporation retains all its profits and distributes none of the profit to owners,how can owners benefit?

The interest payment on a bond is called

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

Which of the following is an example of an implicit cost a firm might incur?

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

How can a corporation's board of directors and its managers try to reduce the principal-agent problem?

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

Externalities, environmental Policy, and Public Goods

Elasticity: The Responsiveness of Demand and Supply

The Economics of Health Care

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice,taxes,and the Distribution of Income

Filters

Exam 8: Firms, the Stock Market, and Corporate Governance

Corporations are legally owned by their shareholders.

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

Before its IPO,Facebook was an example of a private firm.As a private firm,Facebook was

A corporation's board of directors

________ is called an implicit cost,while ________ is called an explicit cost.

In the United States,corporate profits are taxed

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?

Laura's Pizza Place incurs $800,000 per year in explicit costs and $100,000 in implicit costs.The restaurant earns $1.3 million in revenues and has $5 million in net worth.Based on this information,what is economic profit for Laura's Pizza Place?

Two of the firms involved in the accounting scandals of the early 2000s were

What type of business is the easiest to set up?

On a balance sheet,short-term debts such as accounts payable are listed as

What role do well functioning financial markets play in a market economy?

Seth's grandmother gave him a $50 savings bond for his birthday.The bond pays $50 at maturity,which is in five years.If the interest rate is 5%,the bond has a present value of $43.19.

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

If a corporation retains all its profits and distributes none of the profit to owners,how can owners benefit?

The interest payment on a bond is called

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

Which of the following is an example of an implicit cost a firm might incur?

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

How can a corporation's board of directors and its managers try to reduce the principal-agent problem?

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

Externalities, environmental Policy, and Public Goods

Elasticity: The Responsiveness of Demand and Supply

The Economics of Health Care

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice,taxes,and the Distribution of Income

Filters

is called an implicit cost,while is called an explicit cost.