Question 1

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

Accepted Answer

A) double taxation 
B) ease in setting up 
C) limited liability 
D) greater ability to raise funds 
A) double taxation 
B) ease in setting up 
C) limited liability 
D) greater ability to raise funds

Question 2

Stocks represent partial ownership of a firm.

Accepted Answer

A) True 
 B)False

Question 3

Economists refer to the conflict between the interests of shareholders and the interests of top management as

Accepted Answer

A) a stock-equity problem. 
B) a liability problem. 
C) a principal-agent problem. 
D) a financial intermediary problem. 
A) a stock-equity problem. 
B) a liability problem. 
C) a principal-agent problem. 
D) a financial intermediary problem.

Question 4

If a corporation's retained earnings are expected to create future profits,the market price of the firm's stock will ________ and create a ________ for stockholders if the stock is sold.

Accepted Answer

A) increase;capital gain 
B) decrease;capital gain 
C) increase;loss of wealth 
D) decrease;loss of wealth 
A) increase;capital gain 
B) decrease;capital gain 
C) increase;loss of wealth 
D) decrease;loss of wealth

Question 5

The ________ a corporation keeps to finance future expansion are known as retained earnings.

Accepted Answer

A) profits 
B) stock 
C) dividends 
D) bonds 
A) profits 
B) stock 
C) dividends 
D) bonds

Question 6

During 2007,many "subprime" and "Alt-A" borrowers began to default on their mortgages.Describe "subprime" and "Alt-A" borrowers.

Accepted Answer

"Subprime" borrowers are borrowers whose

Question 7

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 8

How can a sole proprietorship raise funds needed for firm expansion?

Accepted Answer

By retaining earning

Question 9

Seth's grandmother gave him a $50 savings bond for his birthday.The bond pays $50 at maturity,which is in five years.If the interest rate is 5%,the bond has a present value of $43.19.

Accepted Answer

A) True 
 B)False

Question 10

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 11

How much is a bond that pays $40 in coupon payments for 2 years and $1,000 at the end of the fourth year worth if the interest rate is 4%?

Accepted Answer

A) $844.56 
B) $924.56 
C) $1,000 
D) $1,123.2 
A) $844.56 
B) $924.56 
C) $1,000 
D) $1,123.2

Question 12

From the highest percentage to the lowest percentage,the percentage of revenues earned by businesses in the United States is represented by which of the following?

Accepted Answer

A) sole proprietorships,partnerships,corporations 
B) partnerships,corporations,sole proprietorships 
C) corporations,partnerships,sole proprietorships 
D) corporations,sole proprietorships,partnerships 
A) sole proprietorships,partnerships,corporations 
B) partnerships,corporations,sole proprietorships 
C) corporations,partnerships,sole proprietorships 
D) corporations,sole proprietorships,partnerships

Question 13

As a business type,corporations ________ in the United States.

Accepted Answer

A) earn the majority of revenues 
B) are the most common 
C) are the least common 
D) are subject to the fewest taxes 
A) earn the majority of revenues 
B) are the most common 
C) are the least common 
D) are subject to the fewest taxes

Question 14

In which types of business do owners have unlimited personal liability and in which do owners have limited personal liability?

Accepted Answer

Sole proprietorships and partn

Question 15

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 16

Small savers who only have enough money to buy a few individual financial assets can use ________ to diversify.

Accepted Answer

A) one company's stock 
B) one company's bonds 
C) Treasury securities 
D) mutual funds 
A) one company's stock 
B) one company's bonds 
C) Treasury securities 
D) mutual funds

Question 17

Aimee sells hand-embroidered dog apparel over the Internet.Her annual revenue is $128,000 per year,the explicit costs of her business are $42,000,and the opportunity costs of her business are $30,000.What is her accounting profit?

Accepted Answer

A) $12,000 
B) $56,000 
C) $86,000 
D) $98,000 
A) $12,000 
B) $56,000 
C) $86,000 
D) $98,000

Question 18

Owners of a corporation ________ through dividend payments on shares of that firm's stock.

Accepted Answer

A) retain earnings of the firm 
B) issue bonds for the firm 
C) share in the profits of the firm 
D) indirectly finance the firm 
A) retain earnings of the firm 
B) issue bonds for the firm 
C) share in the profits of the firm 
D) indirectly finance the firm

Question 19

How are corporate profits taxed in the United States?

Accepted Answer

A) Earnings are taxed first by state sales taxes and then as corporate profits at the Federal level. 
B) Earnings are taxed first as personal income then as corporate profits at the Federal level. 
C) Earnings are taxed first as corporate profits then as personal income after dividends are paid. 
D) Corporate profits are not taxed at all. 
A) Earnings are taxed first by state sales taxes and then as corporate profits at the Federal level. 
B) Earnings are taxed first as personal income then as corporate profits at the Federal level. 
C) Earnings are taxed first as corporate profits then as personal income after dividends are paid. 
D) Corporate profits are not taxed at all.

Question 20

If you want to know the present value of $5,000 received in one year,and the interest rate is 2 percent,what formula can you use?

Accepted Answer

A) Present value equals $5,000 times 0.02. 
B) Present value equals $5,000 divided by 1.02 
C) Present value equals 1.02 divided by $5,000. 
D) Present value equals $5,000 times 1.02. 
A) Present value equals $5,000 times 0.02. 
B) Present value equals $5,000 divided by 1.02 
C) Present value equals 1.02 divided by $5,000. 
D) Present value equals $5,000 times 1.02.

Exam 8: Firms,the Stock Market,and Corporate Governance

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

Stocks represent partial ownership of a firm.

Economists refer to the conflict between the interests of shareholders and the interests of top management as

If a corporation's retained earnings are expected to create future profits,the market price of the firm's stock will ________ and create a ________ for stockholders if the stock is sold.

The ________ a corporation keeps to finance future expansion are known as retained earnings.

During 2007,many "subprime" and "Alt-A" borrowers began to default on their mortgages.Describe "subprime" and "Alt-A" borrowers.

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

How can a sole proprietorship raise funds needed for firm expansion?

Seth's grandmother gave him a $50 savings bond for his birthday.The bond pays $50 at maturity,which is in five years.If the interest rate is 5%,the bond has a present value of $43.19.

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

How much is a bond that pays $40 in coupon payments for 2 years and $1,000 at the end of the fourth year worth if the interest rate is 4%?

From the highest percentage to the lowest percentage,the percentage of revenues earned by businesses in the United States is represented by which of the following?

As a business type,corporations ________ in the United States.

In which types of business do owners have unlimited personal liability and in which do owners have limited personal liability?

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?

Small savers who only have enough money to buy a few individual financial assets can use ________ to diversify.

Aimee sells hand-embroidered dog apparel over the Internet.Her annual revenue is $128,000 per year,the explicit costs of her business are $42,000,and the opportunity costs of her business are $30,000.What is her accounting profit?

Owners of a corporation ________ through dividend payments on shares of that firm's stock.

How are corporate profits taxed in the United States?

If you want to know the present value of $5,000 received in one year,and the interest rate is 2 percent,what formula can you use?

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

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money,banks,and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

If a corporation's retained earnings are expected to create future profits,the market price of the firm's stock will and create a for stockholders if the stock is sold.