Question 1

According to the random walk theory

Accepted Answer

A)  today's stock price will be related to yesterday's stock price. 
B)  successive prices of a stock are independent of each other. 
C)  stock prices can easily be predicted for as much as 52 weeks into the future. 
D)  stock prices rise and fall in predictable cycles that correspond with the overall business cycle. 
A)  today's stock price will be related to yesterday's stock price. 
B)  successive prices of a stock are independent of each other. 
C)  stock prices can easily be predicted for as much as 52 weeks into the future. 
D)  stock prices rise and fall in predictable cycles that correspond with the overall business cycle.

Question 2

Economic rent is defined as

Accepted Answer

A)  any payment that has a contract period. 
B)  a payment to an owner of a factor that is in perfectly elastic supply. 
C)  a payment to an owner of a factor greater than the opportunity cost of utilizing the factor. 
D)  the opportunity cost or return to a productive factor such as capital. 
A)  any payment that has a contract period. 
B)  a payment to an owner of a factor that is in perfectly elastic supply. 
C)  a payment to an owner of a factor greater than the opportunity cost of utilizing the factor. 
D)  the opportunity cost or return to a productive factor such as capital.

Question 3

World-class models receive significant economic rents because

Accepted Answer

A)  their talents and abilities are in fixed supply. 
B)  there is a shortage of world-class models. 
C)  there is a surplus of world-class models. 
D)  there is no equilibrium quantity of world-class models. 
A)  their talents and abilities are in fixed supply. 
B)  there is a shortage of world-class models. 
C)  there is a surplus of world-class models. 
D)  there is no equilibrium quantity of world-class models.

Question 4

When a person buys stock in a company, that person is buying ________, but when a person buys a bond in a company, that person is ________ the company.

Accepted Answer

A)  ownership; borrowing funds from 
B)  ownership; lending funds to 
C)  debt; lending funds to 
D)  debt; borrowing funds from 
A)  ownership; borrowing funds from 
B)  ownership; lending funds to 
C)  debt; lending funds to 
D)  debt; borrowing funds from

Question 5

The theory that there is no predictable trends in securities prices is the

Accepted Answer

A)  opportunity cost of capital. 
B)  random walk theory. 
C)  capital reinvestment. 
D)  present value. 
A)  opportunity cost of capital. 
B)  random walk theory. 
C)  capital reinvestment. 
D)  present value.

Question 6

Suppose that during a given time period the implicit cost for a business was $1,000 and that the explicit cost was $5,000. Also suppose that the firm sold 1,000 units of its products at $5 per item. We can conclude that the firm's

Accepted Answer

A)  accounting profit was $5,000, and its economic profit was $0. 
B)  accounting and economic profits were both $0. 
C)  accounting profit was $0, and economic profit was $1,000. 
D)  accounting profit was $0, and economic profit was -$1,000. 
A)  accounting profit was $5,000, and its economic profit was $0. 
B)  accounting and economic profits were both $0. 
C)  accounting profit was $0, and economic profit was $1,000. 
D)  accounting profit was $0, and economic profit was -$1,000.

Question 7

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

Accepted Answer

Corporations raise funds by selling stoc

Question 8

Financial capital is

Accepted Answer

A)  the collection of stock and bond exchanges around the country. 
B)  funds used to purchase capital goods. 
C)  the foreign exchange market. 
D)  assets of financial institutions. 
A)  the collection of stock and bond exchanges around the country. 
B)  funds used to purchase capital goods. 
C)  the foreign exchange market. 
D)  assets of financial institutions.

Question 9

Consider an NBA superstar Kobe Bryant and one of your economics professors. Who is likely to receive more economic rent in his/her job? Explain your answer.

Accepted Answer

Economic rent is a payment for the use o

Question 10

Interest can be defined as

Accepted Answer

A)  the amount of funds loaned to a creditor. 
B)  the participation of a shareholder in the operations of a firm. 
C)  the return paid to owners of capital. 
D)  the return above opportunity cost paid to owners of a firm. 
A)  the amount of funds loaned to a creditor. 
B)  the participation of a shareholder in the operations of a firm. 
C)  the return paid to owners of capital. 
D)  the return above opportunity cost paid to owners of a firm.

Question 11

The more profits are reinvested into the firm, the

Accepted Answer

A)  less there is available to distribute to bondholders. 
B)  less there is available to distribute to stockholders. 
C)  more the firm will be able to raise in sales of new issues to stock. 
D)  more bonds the firm will sell in order to pay their required dividends to preferred stockholders. 
A)  less there is available to distribute to bondholders. 
B)  less there is available to distribute to stockholders. 
C)  more the firm will be able to raise in sales of new issues to stock. 
D)  more bonds the firm will sell in order to pay their required dividends to preferred stockholders.

Question 12

In a partnership, legal responsibility for all debts is

Accepted Answer

A)  shared by the partners. 
B)  passed to the shareholders. 
C)  paid by the principle owner. 
D)  handled by the bondholders. 
A)  shared by the partners. 
B)  passed to the shareholders. 
C)  paid by the principle owner. 
D)  handled by the bondholders.

Question 13

When economic profits are zero, accounting profits

Accepted Answer

A)  must be positive. 
B)  will be negative. 
C)  will equal zero. 
D)  could be positive, negative or zero. 
A)  must be positive. 
B)  will be negative. 
C)  will equal zero. 
D)  could be positive, negative or zero.

Question 14

Information that is NOT available to the general public about what is happening in a corporation is

Accepted Answer

A)  opportunity benefit. 
B)  limited liability. 
C)  economic rent. 
D)  inside information. 
A)  opportunity benefit. 
B)  limited liability. 
C)  economic rent. 
D)  inside information.

Question 15

An advantage of the proprietorship as a form of business organization is

Accepted Answer

A)  its limited liability. 
B)  its limited access to capital, thus reducing the possible size of debt. 
C)  that it is easy to form. 
D)  that it can sell bonds to the public. 
A)  its limited liability. 
B)  its limited access to capital, thus reducing the possible size of debt. 
C)  that it is easy to form. 
D)  that it can sell bonds to the public.

Question 16

"Economic profits are less than or at most equal to accounting profits." Do you agree or disagree? Explain.

Accepted Answer

Agree. Economic profits are accounting p

Question 17

-Refer to the above figure. At demand curve D2, price equals ________ and economic rent equals ________.

Accepted Answer

A)  OF; KHG 
B)  OF; FHGO 
C)  OE; EKGO 
D)  OE; KHG 
A)  OF; KHG 
B)  OF; FHGO 
C)  OE; EKGO 
D)  OE; KHG

Question 18

An advantage of the corporate form of business organization is

Accepted Answer

A)  unlimited liability. 
B)  easier access to capital. 
C)  that profits are taxed only on one level. 
D)  government supervision of its activities. 
A)  unlimited liability. 
B)  easier access to capital. 
C)  that profits are taxed only on one level. 
D)  government supervision of its activities.

Question 19

When economic rent exists

Accepted Answer

A)  the price is equal to the opportunity cost of the resources. 
B)  price is the same as the discount rate. 
C)  resources are allocated inefficiently. 
D)  resources are allocated efficiently. 
A)  the price is equal to the opportunity cost of the resources. 
B)  price is the same as the discount rate. 
C)  resources are allocated inefficiently. 
D)  resources are allocated efficiently.

Question 20

The economy's current rate of interest is 10 percent and a firm has $10,000 of owner-invested capital. Its total revenue is $5,000 and the firm's explicit costs are $3,000. From this we know that this firm's

Accepted Answer

A)  accounting profit is $500. 
B)  economic profit is $2,000. 
C)  accounting profit is $12,000. 
D)  economic profit is $1,000. 
A)  accounting profit is $500. 
B)  economic profit is $2,000. 
C)  accounting profit is $12,000. 
D)  economic profit is $1,000.

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

According to the random walk theory

Economic rent is defined as

World-class models receive significant economic rents because

When a person buys stock in a company, that person is buying ________, but when a person buys a bond in a company, that person is ________ the company.

The theory that there is no predictable trends in securities prices is the

Suppose that during a given time period the implicit cost for a business was $1,000 and that the explicit cost was $5,000. Also suppose that the firm sold 1,000 units of its products at $5 per item. We can conclude that the firm's

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

Financial capital is

Consider an NBA superstar Kobe Bryant and one of your economics professors. Who is likely to receive more economic rent in his/her job? Explain your answer.

Interest can be defined as

The more profits are reinvested into the firm, the

In a partnership, legal responsibility for all debts is

When economic profits are zero, accounting profits

Information that is NOT available to the general public about what is happening in a corporation is

An advantage of the proprietorship as a form of business organization is

"Economic profits are less than or at most equal to accounting profits." Do you agree or disagree? Explain.

-Refer to the above figure. At demand curve D2, price equals ________ and economic rent equals ________.

An advantage of the corporate form of business organization is

When economic rent exists

The economy's current rate of interest is 10 percent and a firm has $10,000 of owner-invested capital. Its total revenue is $5,000 and the firm's explicit costs are $3,000. From this we know that this firm's

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

When a person buys stock in a company, that person is buying , but when a person buys a bond in a company, that person is the company.

-Refer to the above figure. At demand curve D2, price equals and economic rent equals .