Question 1

The fundamental goal of a firm or a business is to

Accepted Answer

A)  produce the largest number of output units possible. 
B)  employ labor in the most socially responsible manner possible. 
C)  organize the factors of production and take risks. 
D)  earn the highest possible returns. 
A)  produce the largest number of output units possible. 
B)  employ labor in the most socially responsible manner possible. 
C)  organize the factors of production and take risks. 
D)  earn the highest possible returns.

Question 2

Which is the best example of a firm's implicit costs?

Accepted Answer

A)  wages 
B)  the opportunity cost of owner-provided labor 
C)  rent 
D)  taxes 
A)  wages 
B)  the opportunity cost of owner-provided labor 
C)  rent 
D)  taxes

Question 3

The value of a future amount expressed in today's dollars is

Accepted Answer

A)  the interest rate. 
B)  present value. 
C)  the discount rate. 
D)  the inflation rate. 
A)  the interest rate. 
B)  present value. 
C)  the discount rate. 
D)  the inflation rate.

Question 4

The present value of $100 to be received one year from now

Accepted Answer

A)  is $100. 
B)  is $110. 
C)  is $90. 
D)  cannot be determined without knowing the interest rate. 
A)  is $100. 
B)  is $110. 
C)  is $90. 
D)  cannot be determined without knowing the interest rate.

Question 5

When a firm uses profits to purchase new capital equipment, it is engaging in

Accepted Answer

A)  tax evasion. 
B)  balance sheet accounting. 
C)  reinvestment. 
D)  the most risky way the firm can obtain investment funds. 
A)  tax evasion. 
B)  balance sheet accounting. 
C)  reinvestment. 
D)  the most risky way the firm can obtain investment funds.

Question 6

Often single-owner proprietorships seem more profitable than they really are. The reason for this is that

Accepted Answer

A)  they receive special tax benefits compared to corporations. 
B)  they use different accounting procedures. 
C)  they often fail to consider the opportunity cost of the labor provided by the owner. 
D)  they are not allowed to deduct depreciation expense. 
A)  they receive special tax benefits compared to corporations. 
B)  they use different accounting procedures. 
C)  they often fail to consider the opportunity cost of the labor provided by the owner. 
D)  they are not allowed to deduct depreciation expense.

Question 7

Which of the following equations is CORRECT?

Accepted Answer

A)  accounting profit = total revenue - (explicit costs + implicit costs) 
B)  normal profit = accounting profit + economic profit 
C)  economic profit = accounting profit - implicit costs 
D)  economic profit = accounting profit - explicit costs 
A)  accounting profit = total revenue - (explicit costs + implicit costs) 
B)  normal profit = accounting profit + economic profit 
C)  economic profit = accounting profit - implicit costs 
D)  economic profit = accounting profit - explicit costs

Question 8

Bonnie is debating whether to take a job as a professional therapist or a florist. She will earn $40,000 a year as a therapist or $30,000 a year as a florist. If she chooses to be a therapist, the opportunity cost is

Accepted Answer

A)  $40,000. 
B)  $30,000. 
C)  $10,000. 
D)  unable to determine. 
A)  $40,000. 
B)  $30,000. 
C)  $10,000. 
D)  unable to determine.

Question 9

When a resource has a perfectly elastic supply curve

Accepted Answer

A)  the amount of economic rent for the resource is determined by its supply. 
B)  the amount of economic rent for this resource is determined by demand for the resource. 
C)  there is no economic rent being earned by this resource. 
D)  the entire payment received by this resource is economic rent. 
A)  the amount of economic rent for the resource is determined by its supply. 
B)  the amount of economic rent for this resource is determined by demand for the resource. 
C)  there is no economic rent being earned by this resource. 
D)  the entire payment received by this resource is economic rent.

Question 10

-Refer to the above figure. Which panel is consistent with Ricardo's view on the supply of land?

Accepted Answer

A)  Panel A 
B)  Panel B 
C)  Panel C 
D)  Panel D 
A)  Panel A 
B)  Panel B 
C)  Panel C 
D)  Panel D

Question 11

If the interest rate is 10 percent per year, and you have $100,000 now, which of the following is closest to what your $100,000 will be worth in one year?

Accepted Answer

A)  $105,000 
B)  $110,000 
C)  $100,000 
D)  $102,000 
A)  $105,000 
B)  $110,000 
C)  $100,000 
D)  $102,000

Question 12

Most businesses in the United States are ________, and the type of business organization that accounts for the LEAST amount of total revenues is ________.

Accepted Answer

A)  proprietorships; partnerships 
B)  corporations; proprietorships 
C)  proprietorships; proprietorships 
D)  corporations; partnerships 
A)  proprietorships; partnerships 
B)  corporations; proprietorships 
C)  proprietorships; proprietorships 
D)  corporations; partnerships

Question 13

Suppose Jon Stewart of the "Daily Show" makes an annual income of $2,000,000. If he quit his television job and went into producing he could make $400,000 per year. Jon Stewart's annual economic rent to labor is

Accepted Answer

A)  $1,400,000. 
B)  $2,000,000. 
C)  $400,000. 
D)  $1,600,000. 
A)  $1,400,000. 
B)  $2,000,000. 
C)  $400,000. 
D)  $1,600,000.

Question 14

Normal rate of return is

Accepted Answer

A)  accounting profit. 
B)  an explicit cost. 
C)  economic profit. 
D)  the amount that must be paid to obtain investment in a business. 
A)  accounting profit. 
B)  an explicit cost. 
C)  economic profit. 
D)  the amount that must be paid to obtain investment in a business.

Question 15

Which legal claim comes with the most preferential treatment in the payment of dividends?

Accepted Answer

A)  common stock 
B)  preferred stock 
C)  bond 
D)  reinvestment 
A)  common stock 
B)  preferred stock 
C)  bond 
D)  reinvestment

Question 16

If the bank advertises 6 percent annual interest rate on a one-year certificate of deposit and you anticipate the rate of inflation to rise to 3 percent during the year, then the real rate of interest on the certificate of deposit is

Accepted Answer

A)  9 percent. 
B)  6 percent. 
C)  3 percent. 
D)  2 percent. 
A)  9 percent. 
B)  6 percent. 
C)  3 percent. 
D)  2 percent.

Question 17

Which of the following is NOT a characteristic of a corporation?

Accepted Answer

A)  limited liability for shareholders 
B)  double taxation 
C)  separation of ownership problems 
D)  limited ability to raise capital funds 
A)  limited liability for shareholders 
B)  double taxation 
C)  separation of ownership problems 
D)  limited ability to raise capital funds

Question 18

The British economist most often associated with the issue of economic rent for land was

Accepted Answer

A)  John Maynard Keynes. 
B)  Jeremy Bentham. 
C)  A. W. Phillips. 
D)  David Ricardo. 
A)  John Maynard Keynes. 
B)  Jeremy Bentham. 
C)  A. W. Phillips. 
D)  David Ricardo.

Question 19

If a corporation fails, the last recipients of funds that may remain are

Accepted Answer

A)  preferred stockholders. 
B)  common stockholders. 
C)  bond holders. 
D)  government tax collectors. 
A)  preferred stockholders. 
B)  common stockholders. 
C)  bond holders. 
D)  government tax collectors.

Question 20

The owners of a corporation are

Accepted Answer

A)  the employees of the firm. 
B)  the shareholders. 
C)  completely in control of the firm. 
D)  taxed only once. 
A)  the employees of the firm. 
B)  the shareholders. 
C)  completely in control of the firm. 
D)  taxed only once.

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

The fundamental goal of a firm or a business is to

Which is the best example of a firm's implicit costs?

The value of a future amount expressed in today's dollars is

The present value of $100 to be received one year from now

When a firm uses profits to purchase new capital equipment, it is engaging in

Often single-owner proprietorships seem more profitable than they really are. The reason for this is that

Which of the following equations is CORRECT?

Bonnie is debating whether to take a job as a professional therapist or a florist. She will earn $40,000 a year as a therapist or $30,000 a year as a florist. If she chooses to be a therapist, the opportunity cost is

When a resource has a perfectly elastic supply curve

-Refer to the above figure. Which panel is consistent with Ricardo's view on the supply of land?

If the interest rate is 10 percent per year, and you have $100,000 now, which of the following is closest to what your $100,000 will be worth in one year?

Most businesses in the United States are ________, and the type of business organization that accounts for the LEAST amount of total revenues is ________.

Suppose Jon Stewart of the "Daily Show" makes an annual income of $2,000,000. If he quit his television job and went into producing he could make $400,000 per year. Jon Stewart's annual economic rent to labor is

Normal rate of return is

Which legal claim comes with the most preferential treatment in the payment of dividends?

If the bank advertises 6 percent annual interest rate on a one-year certificate of deposit and you anticipate the rate of inflation to rise to 3 percent during the year, then the real rate of interest on the certificate of deposit is

Which of the following is NOT a characteristic of a corporation?

The British economist most often associated with the issue of economic rent for land was

If a corporation fails, the last recipients of funds that may remain are

The owners of a corporation are

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

Most businesses in the United States are , and the type of business organization that accounts for the LEAST amount of total revenues is .