Question 1

One of the most widely followed stock indexes in the United States is the Dow Jones Industrial Average.This index represents

Accepted Answer

A)  the stock prices of 500 large U.S. firms. 
B)  an over-the-counter market. 
C)  the stock prices of more than 4,000 U.S. firms. 
D)  the stock prices of 30 large U.S. corporations. 
A)  the stock prices of 500 large U.S. firms. 
B)  an over-the-counter market. 
C)  the stock prices of more than 4,000 U.S. firms. 
D)  the stock prices of 30 large U.S. corporations.

Question 2

The Sarbanes-Oxley Act of 2002 requires that each member of the board of directors personally certify the accuracy of financial reports.

Accepted Answer

A) True 
 B)False

Question 3

A partnership is ________ type of business.

Accepted Answer

A)  the most common 
B)  the least common 
C)  the least risky 
D)  the most profitable 
A)  the most common 
B)  the least common 
C)  the least risky 
D)  the most profitable

Question 4

Traditionally,Wall Street investment banks had been organized as partnerships,but by 2000 they had converted to being publicly traded corporations.As partnerships,the principle-agent problem is ________,but as publicly traded corporations,the principal-agent problem is often ________.

Accepted Answer

A)  increased; more severe 
B)  increased; less severe 
C)  reduced; more severe 
D)  reduced; less severe 
A)  increased; more severe 
B)  increased; less severe 
C)  reduced; more severe 
D)  reduced; less severe

Question 5

In addition to requiring that CEO's personally certify the accuracy of financial statements,the Sarbanes-Oxley Act of 2002 also requires that

Accepted Answer

A)  CEO's conduct audits of their corporations themselves. 
B)  firms raise funds for expansion through the sale of bonds only, not stocks. 
C)  auditors disclose any potential conflicts of interest. 
D)  corporations issue financial statements monthly rather than quarterly. 
A)  CEO's conduct audits of their corporations themselves. 
B)  firms raise funds for expansion through the sale of bonds only, not stocks. 
C)  auditors disclose any potential conflicts of interest. 
D)  corporations issue financial statements monthly rather than quarterly.

Question 6

Accounting profit is the difference between a firm's revenue and its opportunity costs.

Accepted Answer

A) True 
 B)False

Question 7

What type of business has the potential for double taxation of profits and why?

Accepted Answer

Corporations earn profits that

Question 8

When an investor buys a corporate bond

Accepted Answer

A)  the investor becomes part owner of the corporation. 
B)  the principal of the bond is a loan to the corporation. 
C)  the interest made on the bond represents the bondholder's limited liability in the company. 
D)  the face value of the bond is equal to what the investor paid for the bond. 
A)  the investor becomes part owner of the corporation. 
B)  the principal of the bond is a loan to the corporation. 
C)  the interest made on the bond represents the bondholder's limited liability in the company. 
D)  the face value of the bond is equal to what the investor paid for the bond.

Question 9

Why do corporations want to keep the price of their stock high?

Accepted Answer

A)  A higher stock price increases the funds the firm can raise when it sells a given amount of stock. 
B)  Corporations can pay their managers lower salaries and avoid principal-agent problems when stock prices are higher. 
C)  Higher stock prices are correlated with lower expected profitability. 
D)  All of the above provide incentive for corporations to keep the price of their stock high. 
A)  A higher stock price increases the funds the firm can raise when it sells a given amount of stock. 
B)  Corporations can pay their managers lower salaries and avoid principal-agent problems when stock prices are higher. 
C)  Higher stock prices are correlated with lower expected profitability. 
D)  All of the above provide incentive for corporations to keep the price of their stock high.

Question 10

What is the difference between explicit and implicit costs?

Accepted Answer

Explicit costs are out-of-pock

Question 11

When a business is set up as partnership,the owner of the business faces unlimited liability.

Accepted Answer

A) True 
 B)False

Question 12

How has organizing a successful firm in a market economy changed over the last century?

Accepted Answer

A)  It has become easier as more and more firms discover how to do it. 
B)  As government intervention has decreased, firms now have more freedom. 
C)  There has been no change one way or the other over the last century. 
D)  It has become more difficult to organize an efficient and successful firm. 
A)  It has become easier as more and more firms discover how to do it. 
B)  As government intervention has decreased, firms now have more freedom. 
C)  There has been no change one way or the other over the last century. 
D)  It has become more difficult to organize an efficient and successful firm.

Question 13

Who selects the board of directors of a corporation?

Accepted Answer

A)  the state where the corporation is chartered 
B)  employees 
C)  stockholders 
D)  managers 
A)  the state where the corporation is chartered 
B)  employees 
C)  stockholders 
D)  managers

Question 14

Which type of businesses earns the majority of profits in the United States?

Accepted Answer

A)  corporations 
B)  partnerships 
C)  sole proprietorships 
D)  none of these 
A)  corporations 
B)  partnerships 
C)  sole proprietorships 
D)  none of these

Question 15

The only type of business that faces unlimited liability is a sole proprietorship.

Accepted Answer

A) True 
 B)False

Question 16

How do a sole proprietorship and a corporation differ?

Accepted Answer

A)  Proprietorships have unlimited liability while corporations have limited liability. 
B)  Corporations can issue stocks and bonds, while proprietorships cannot. 
C)  Corporations face more taxes than do proprietorships. 
D)  All of these are differences between the two types of businesses. 
A)  Proprietorships have unlimited liability while corporations have limited liability. 
B)  Corporations can issue stocks and bonds, while proprietorships cannot. 
C)  Corporations face more taxes than do proprietorships. 
D)  All of these are differences between the two types of businesses.

Question 17

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 18

Dividends are

Accepted Answer

A)  financial securities which represent ownership in a corporation. 
B)  the yearly payments associated with bonds. 
C)  the interest rate paid on shares of stock. 
D)  payments by a corporation to its shareholders. 
A)  financial securities which represent ownership in a corporation. 
B)  the yearly payments associated with bonds. 
C)  the interest rate paid on shares of stock. 
D)  payments by a corporation to its shareholders.

Question 19

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 20

What do the highest stock price and the lowest stock price over the previous year indicate?

Accepted Answer

A)  Add them together and divide by two to get the stock's current market price. 
B)  what the stock's price-earnings ratio is 
C)  how volatile the stock's market price has been 
D)  They generate the dividend yield. 
A)  Add them together and divide by two to get the stock's current market price. 
B)  what the stock's price-earnings ratio is 
C)  how volatile the stock's market price has been 
D)  They generate the dividend yield.

One of the most widely followed stock indexes in the United States is the Dow Jones Industrial Average.This index represents

The Sarbanes-Oxley Act of 2002 requires that each member of the board of directors personally certify the accuracy of financial reports.

A partnership is ________ type of business.

Traditionally,Wall Street investment banks had been organized as partnerships,but by 2000 they had converted to being publicly traded corporations.As partnerships,the principle-agent problem is ,but as publicly traded corporations,the principal-agent problem is often .

In addition to requiring that CEO's personally certify the accuracy of financial statements,the Sarbanes-Oxley Act of 2002 also requires that

Accounting profit is the difference between a firm's revenue and its opportunity costs.

What type of business has the potential for double taxation of profits and why?

When an investor buys a corporate bond

Why do corporations want to keep the price of their stock high?

What is the difference between explicit and implicit costs?

When a business is set up as partnership,the owner of the business faces unlimited liability.

How has organizing a successful firm in a market economy changed over the last century?

Who selects the board of directors of a corporation?

Which type of businesses earns the majority of profits in the United States?

The only type of business that faces unlimited liability is a sole proprietorship.

How do a sole proprietorship and a corporation differ?

What is the most common type of business?

Dividends are

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

What do the highest stock price and the lowest stock price over the previous year indicate?

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

One of the most widely followed stock indexes in the United States is the Dow Jones Industrial Average.This index represents

The Sarbanes-Oxley Act of 2002 requires that each member of the board of directors personally certify the accuracy of financial reports.

A partnership is ________ type of business.

Traditionally,Wall Street investment banks had been organized as partnerships,but by 2000 they had converted to being publicly traded corporations.As partnerships,the principle-agent problem is ________,but as publicly traded corporations,the principal-agent problem is often ________.

In addition to requiring that CEO's personally certify the accuracy of financial statements,the Sarbanes-Oxley Act of 2002 also requires that

Accounting profit is the difference between a firm's revenue and its opportunity costs.

What type of business has the potential for double taxation of profits and why?

When an investor buys a corporate bond

Why do corporations want to keep the price of their stock high?

What is the difference between explicit and implicit costs?

When a business is set up as partnership,the owner of the business faces unlimited liability.

How has organizing a successful firm in a market economy changed over the last century?

Who selects the board of directors of a corporation?

Which type of businesses earns the majority of profits in the United States?

The only type of business that faces unlimited liability is a sole proprietorship.

How do a sole proprietorship and a corporation differ?

What is the most common type of business?

Dividends are

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

What do the highest stock price and the lowest stock price over the previous year indicate?

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

Traditionally,Wall Street investment banks had been organized as partnerships,but by 2000 they had converted to being publicly traded corporations.As partnerships,the principle-agent problem is ,but as publicly traded corporations,the principal-agent problem is often .