Question 1

What are the advantages of setting up a corporation as opposed to a proprietorship or partnership?

Accepted Answer

Corporations have li

Question 2

A corporation is the type of business has ________ government rules and regulations affecting it.

Accepted Answer

A)  no 
B)  the fewest 
C)  the most 
D)  only federal 
A)  no 
B)  the fewest 
C)  the most 
D)  only federal

Question 3

The way in which a corporation is structured and the impact a corporation's structure has on the firm's behavior is referred to as

Accepted Answer

A)  corporate taxation. 
B)  structure composition theory. 
C)  structural behavior. 
D)  corporate governance. 
A)  corporate taxation. 
B)  structure composition theory. 
C)  structural behavior. 
D)  corporate governance.

Question 4

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 5

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 6

Indirect finance includes the sale by a corporation of stocks or bonds,but does not include borrowing money from a bank.

Accepted Answer

A) True 
 B)False

Question 7

A normal rate of return refers to the ________ that investors must earn on the funds they invest in a firm,expressed as a percentage of the amount invested.

Accepted Answer

A)  minimum amount 
B)  maximum amount 
C)  total amount 
D)  profit 
A)  minimum amount 
B)  maximum amount 
C)  total amount 
D)  profit

Question 8

A firm in a market economy must do all of the following to succeed except

Accepted Answer

A)  produce the goods and services that consumers want at a lower cost than consumers themselves can produce. 
B)  organize the factors of production into a functioning, efficient unit. 
C)  have access to sufficient funds. 
D)  be organized as a corporation. 
A)  produce the goods and services that consumers want at a lower cost than consumers themselves can produce. 
B)  organize the factors of production into a functioning, efficient unit. 
C)  have access to sufficient funds. 
D)  be organized as a corporation.

Question 9

The existence of ________ increases the risk of buying stock in a corporation.

Accepted Answer

A)  the principal-agent problem 
B)  corporate governance 
C)  unlimited personal liability 
D)  employee-owned corporations 
A)  the principal-agent problem 
B)  corporate governance 
C)  unlimited personal liability 
D)  employee-owned corporations

Question 10

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 11

How is a stock's price-earnings ratio found?

Accepted Answer

A)  by dividing the dividend by the closing price of the stock 
B)  by dividing the dividend by the firm's earnings per share 
C)  by dividing current market price of the stock by the firm's earnings per share 
D)  by subtracting the firm's earnings per share from the closing price of the stock 
A)  by dividing the dividend by the closing price of the stock 
B)  by dividing the dividend by the firm's earnings per share 
C)  by dividing current market price of the stock by the firm's earnings per share 
D)  by subtracting the firm's earnings per share from the closing price of the stock

Question 12

Which of the following is part of the secondary market?

Accepted Answer

A)  New York Stock Exchange 
B)  the over-the-counter market 
C)  NASDAQ 
D)  all of these 
A)  New York Stock Exchange 
B)  the over-the-counter market 
C)  NASDAQ 
D)  all of these

Question 13

In many corporations,there is "separation of ownership from control." What does this mean?

Accepted Answer

A)  The shareholders control the corporation, although the board of directors owns the corporation. 
B)  The managers of the corporation run the corporation, although the shareholders own the corporation. 
C)  The board of directors controls corporate operations, although the managers of the corporation own the corporation. 
D)  Top corporate managers only make decisions that have been approved unanimously by shareholders. 
A)  The shareholders control the corporation, although the board of directors owns the corporation. 
B)  The managers of the corporation run the corporation, although the shareholders own the corporation. 
C)  The board of directors controls corporate operations, although the managers of the corporation own the corporation. 
D)  Top corporate managers only make decisions that have been approved unanimously by shareholders.

Question 14

Included on the board of directors of Microsoft are Dina Dublon,former chief financial officer of JP Morgan Chase ,the president of Harvey Mudd college Maria M.Klawe,and the vice chairman of Bank of America Charles H.Noski.These three board members do not have a direct management role with Microsoft and are therefore referred to as

Accepted Answer

A)  inside directors. 
B)  outside directors. 
C)  competitive directors. 
D)  honorary directors. 
A)  inside directors. 
B)  outside directors. 
C)  competitive directors. 
D)  honorary directors.

Question 15

Which of the following would be considered an implicit cost of operating a business?

Accepted Answer

A)  advertising expenses 
B)  wages paid to workers 
C)  a normal rate of return for investors 
D)  any explicit cost 
A)  advertising expenses 
B)  wages paid to workers 
C)  a normal rate of return for investors 
D)  any explicit cost

Question 16

By tying the salaries of top corporate managers to the price of the corporation's stock,corporations hope to avoid

Accepted Answer

A)  corporate governance. 
B)  conflict between the CFO and the CEO. 
C)  the principal-agent problem. 
D)  paying high salaries to their managers. 
A)  corporate governance. 
B)  conflict between the CFO and the CEO. 
C)  the principal-agent problem. 
D)  paying high salaries to their managers.

Question 17

Which of the following does not take place in the direct finance market?

Accepted Answer

A)  Ownership in corporations is sold in the form of common stock. 
B)  Deposits from savers are accumulated and loans made to borrowers. 
C)  Ownership in corporations is sold in the form of preferred stock. 
D)  Corporate bonds are sold to savers. 
A)  Ownership in corporations is sold in the form of common stock. 
B)  Deposits from savers are accumulated and loans made to borrowers. 
C)  Ownership in corporations is sold in the form of preferred stock. 
D)  Corporate bonds are sold to savers.

Question 18

In a corporation,what are "inside directors" and "outside directors"?

Accepted Answer

Inside directors are members of manageme

Question 19

If you purchase a share of stock from your friend who initially purchased the stock three years ago,your purchase of the stock represents a transaction in the primary financial market

Accepted Answer

A) True 
 B)False

Question 20

What is the formula you should use to determine a bank account's future value in one year?

Accepted Answer

A)  Future value equals the present value plus the rate of interest. 
B)  Future value equals the present value minus the rate of interest. 
C)  Future value equals the present value multiplied by one plus the rate of interest in decimals. 
D)  Future value equals the present value divided by one plus the rate of interest in decimals. 
A)  Future value equals the present value plus the rate of interest. 
B)  Future value equals the present value minus the rate of interest. 
C)  Future value equals the present value multiplied by one plus the rate of interest in decimals. 
D)  Future value equals the present value divided by one plus the rate of interest in decimals.

What are the advantages of setting up a corporation as opposed to a proprietorship or partnership?

A corporation is the type of business has ________ government rules and regulations affecting it.

The way in which a corporation is structured and the impact a corporation's structure has on the firm's behavior is referred to as

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?

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

Indirect finance includes the sale by a corporation of stocks or bonds,but does not include borrowing money from a bank.

A normal rate of return refers to the ________ that investors must earn on the funds they invest in a firm,expressed as a percentage of the amount invested.

A firm in a market economy must do all of the following to succeed except

The existence of ________ increases the risk of buying stock in a corporation.

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.

How is a stock's price-earnings ratio found?

Which of the following is part of the secondary market?

In many corporations,there is "separation of ownership from control." What does this mean?

Which of the following would be considered an implicit cost of operating a business?

By tying the salaries of top corporate managers to the price of the corporation's stock,corporations hope to avoid

Which of the following does not take place in the direct finance market?

In a corporation,what are "inside directors" and "outside directors"?

If you purchase a share of stock from your friend who initially purchased the stock three years ago,your purchase of the stock represents a transaction in the primary financial market

What is the formula you should use to determine a bank account's future value in one year?

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

What are the advantages of setting up a corporation as opposed to a proprietorship or partnership?

A corporation is the type of business has ________ government rules and regulations affecting it.

The way in which a corporation is structured and the impact a corporation's structure has on the firm's behavior is referred to as

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?

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

Indirect finance includes the sale by a corporation of stocks or bonds,but does not include borrowing money from a bank.

A normal rate of return refers to the ________ that investors must earn on the funds they invest in a firm,expressed as a percentage of the amount invested.

A firm in a market economy must do all of the following to succeed except

The existence of ________ increases the risk of buying stock in a corporation.

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.

How is a stock's price-earnings ratio found?

Which of the following is part of the secondary market?

In many corporations,there is "separation of ownership from control." What does this mean?

Which of the following would be considered an implicit cost of operating a business?

By tying the salaries of top corporate managers to the price of the corporation's stock,corporations hope to avoid

Which of the following does not take place in the direct finance market?

In a corporation,what are "inside directors" and "outside directors"?

If you purchase a share of stock from your friend who initially purchased the stock three years ago,your purchase of the stock represents a transaction in the primary financial market

What is the formula you should use to determine a bank account's future value in one year?

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