Question 1

In a partnership of two people

Accepted Answer

A)  each person has 50 percent liability. 
B)  it is more difficult to specialize with two persons than with one. 
C)  each person has unlimited liability. 
D)  the law releases each partner from legal liabilities. 
A)  each person has 50 percent liability. 
B)  it is more difficult to specialize with two persons than with one. 
C)  each person has unlimited liability. 
D)  the law releases each partner from legal liabilities.

Question 2

Suppose you own $15,000 of personal property, $5,000 of stock in ABC Corporation, a $1,000 certificate of deposit, and $10,000 of government bonds. If ABC goes bankrupt, the most you could lose is

Accepted Answer

A)  $31,000. 
B)  $26,000. 
C)  $15,000. 
D)  $5,000. 
A)  $31,000. 
B)  $26,000. 
C)  $15,000. 
D)  $5,000.

Question 3

Economic profits equal

Accepted Answer

A)  accounting profits. 
B)  accounting profits less economic rents. 
C)  total revenue less the opportunity costs of all factors of production. 
D)  accounting profits plus the owner's labor opportunity costs. 
A)  accounting profits. 
B)  accounting profits less economic rents. 
C)  total revenue less the opportunity costs of all factors of production. 
D)  accounting profits plus the owner's labor opportunity costs.

Question 4

The concept of economic rent is associated with the economist

Accepted Answer

A)  Adam Smith. 
B)  Karl Marx. 
C)  David Ricardo. 
D)  John Maynard Keynes. 
A)  Adam Smith. 
B)  Karl Marx. 
C)  David Ricardo. 
D)  John Maynard Keynes.

Question 5

The opportunity cost of owner-provided labor is the

Accepted Answer

A)  wage rate paid to the owner. 
B)  explicit part of the wage rate paid to the owner. 
C)  salary the owner could have made if she worked at her best alternative job. 
D)  profit after all of the bills have been paid. 
A)  wage rate paid to the owner. 
B)  explicit part of the wage rate paid to the owner. 
C)  salary the owner could have made if she worked at her best alternative job. 
D)  profit after all of the bills have been paid.

Question 6

The greater the risk of nonrepayment of a loan, other things being equal

Accepted Answer

A)  the longer is the repayment term. 
B)  the lower is the charged loan fees. 
C)  the higher is the rate of interest. 
D)  the smaller is the amount of collateral that is used. 
A)  the longer is the repayment term. 
B)  the lower is the charged loan fees. 
C)  the higher is the rate of interest. 
D)  the smaller is the amount of collateral that is used.

Question 7

Economic profit can be calculated as

Accepted Answer

A)  total revenue - explicit costs. 
B)  total revenue - implicit costs. 
C)  total revenue - explicit costs - implicit costs. 
D)  total revenue - fixed costs. 
A)  total revenue - explicit costs. 
B)  total revenue - implicit costs. 
C)  total revenue - explicit costs - implicit costs. 
D)  total revenue - fixed costs.

Question 8

Economic rent is a concept that can be applied

Accepted Answer

A)  only to land, as that is the only resource that is in limited supply. 
B)  only to land and natural talent. 
C)  to any factor of production that is fixed in supply. 
D)  to any resource or factor of production that has a supply curve with a positive (upward) slope. 
A)  only to land, as that is the only resource that is in limited supply. 
B)  only to land and natural talent. 
C)  to any factor of production that is fixed in supply. 
D)  to any resource or factor of production that has a supply curve with a positive (upward) slope.

Question 9

If, as an entrepreneur, I am earning accounting profits of $75,000 per year and the opportunity cost of my time is $60,000

Accepted Answer

A)  I am earning economic profits of $15,000. 
B)  I am earning economic profits of $75,000. 
C)  I should close my business. 
D)  I am in a long-run equilibrium position. 
A)  I am earning economic profits of $15,000. 
B)  I am earning economic profits of $75,000. 
C)  I should close my business. 
D)  I am in a long-run equilibrium position.

Question 10

Interest is paid to

Accepted Answer

A)  all holders of stock. 
B)  individuals who own gold. 
C)  owners of capital. 
D)  borrowers of funds. 
A)  all holders of stock. 
B)  individuals who own gold. 
C)  owners of capital. 
D)  borrowers of funds.

Question 11

A shareholder in a corporation

Accepted Answer

A)  may not sell his or her share of ownership in the business without the business dissolving. 
B)  can earn interest, but not dividends, from the profits of the business. 
C)  is a part owner of the business. 
D)  is personally liable for the debts of the corporation. 
A)  may not sell his or her share of ownership in the business without the business dissolving. 
B)  can earn interest, but not dividends, from the profits of the business. 
C)  is a part owner of the business. 
D)  is personally liable for the debts of the corporation.

Question 12

Economic rent serves

Accepted Answer

A)  a descriptive function by making some wealthier than others, but serves no allocative function. 
B)  an allocative function by guiding available supplies to the most efficient use. 
C)  only to make the rich richer and the poor poorer. 
D)  no useful function in a modern economy. 
A)  a descriptive function by making some wealthier than others, but serves no allocative function. 
B)  an allocative function by guiding available supplies to the most efficient use. 
C)  only to make the rich richer and the poor poorer. 
D)  no useful function in a modern economy.

Question 13

A firm is making zero economic profits. From this, we know that

Accepted Answer

A)  the firm is going to go out of business. 
B)  implicit costs are zero. 
C)  the firm is going to stay in business, but will not be able to attract new financial capital. 
D)  the firm will stay in business since it is covering all relevant opportunity costs. 
A)  the firm is going to go out of business. 
B)  implicit costs are zero. 
C)  the firm is going to stay in business, but will not be able to attract new financial capital. 
D)  the firm will stay in business since it is covering all relevant opportunity costs.

Question 14

A legal claim to a part of a corporation's future profits is called

Accepted Answer

A)  a bond. 
B)  a share of stock. 
C)  a dividend. 
D)  a financial debt. 
A)  a bond. 
B)  a share of stock. 
C)  a dividend. 
D)  a financial debt.

Question 15

The majority of business revenues earned in the United States are earned by

Accepted Answer

A)  proprietorships. 
B)  corporations. 
C)  partnerships. 
D)  cooperatives. 
A)  proprietorships. 
B)  corporations. 
C)  partnerships. 
D)  cooperatives.

Question 16

A business which is owned by two or more people is called a

Accepted Answer

A)  proprietorship. 
B)  partnership. 
C)  corporation. 
D)  none of the above. 
A)  proprietorship. 
B)  partnership. 
C)  corporation. 
D)  none of the above.

Question 17

Accounting profits are typically

Accepted Answer

A)  greater than economic profits because accounting profits do not include explicit costs. 
B)  greater than economic profits because accounting profits do not include implicit costs. 
C)  smaller than economic profits because accounting profits do not include explicit costs. 
D)  equal to economic profits in the long run. 
A)  greater than economic profits because accounting profits do not include explicit costs. 
B)  greater than economic profits because accounting profits do not include implicit costs. 
C)  smaller than economic profits because accounting profits do not include explicit costs. 
D)  equal to economic profits in the long run.

Question 18

In analyzing land rent, David Ricardo constructed a model based on

Accepted Answer

A)  perfectly elastic demand for land. 
B)  a perfectly elastic supply of land. 
C)  land being available in infinite quantities. 
D)  the supply of land being perfectly inelastic. 
A)  perfectly elastic demand for land. 
B)  a perfectly elastic supply of land. 
C)  land being available in infinite quantities. 
D)  the supply of land being perfectly inelastic.

Question 19

A long-term loan that is given to a firm is known as a

Accepted Answer

A)  share of stock. 
B)  bond. 
C)  dividend. 
D)  random walk. 
A)  share of stock. 
B)  bond. 
C)  dividend. 
D)  random walk.

Question 20

A portion of a worker's earnings is economic rent if the worker

Accepted Answer

A)  has skills that make him more productive than an unskilled worker. 
B)  would accept a small reduction in pay without quitting. 
C)  was the last person hired at the going wage rate. 
D)  has been on the job for at least a year. 
A)  has skills that make him more productive than an unskilled worker. 
B)  would accept a small reduction in pay without quitting. 
C)  was the last person hired at the going wage rate. 
D)  has been on the job for at least a year.

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

In a partnership of two people

Suppose you own $15,000 of personal property, $5,000 of stock in ABC Corporation, a $1,000 certificate of deposit, and $10,000 of government bonds. If ABC goes bankrupt, the most you could lose is

Economic profits equal

The concept of economic rent is associated with the economist

The opportunity cost of owner-provided labor is the

The greater the risk of nonrepayment of a loan, other things being equal

Economic profit can be calculated as

Economic rent is a concept that can be applied

If, as an entrepreneur, I am earning accounting profits of $75,000 per year and the opportunity cost of my time is $60,000

Interest is paid to

A shareholder in a corporation

Economic rent serves

A firm is making zero economic profits. From this, we know that

A legal claim to a part of a corporation's future profits is called

The majority of business revenues earned in the United States are earned by

A business which is owned by two or more people is called a

Accounting profits are typically

In analyzing land rent, David Ricardo constructed a model based on

A long-term loan that is given to a firm is known as a

A portion of a worker's earnings is economic rent if the worker

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

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