Question 1

Which is the least common type of business?

Accepted Answer

A) corporation 
B) partnership 
C) sole proprietorship 
D) impossible to determine without further information 
A) corporation 
B) partnership 
C) sole proprietorship 
D) impossible to determine without further information

Question 2

Tying salaries of top managers to the profits of the firm is a way to reduce the effect of the principal-agent problem.

Accepted Answer

A) True 
 B)False

Question 3

What is shown on a firm's income statement?

Accepted Answer

A) costs 
B) profits 
C) revenues 
D) All of these are shown on a firm's income statement. 
A) costs 
B) profits 
C) revenues 
D) All of these are shown on a firm's income statement.

Question 4

Article Summary
In an effort to raise funds to cut debt,Fiat Chrysler is selling a stake in Ferrari through an initial public offering (IPO)to be valued at as much as $9.8 billion.17.2 million shares of stock in the company are to be sold,and the stock will be traded on the New York Stock Exchange under the symbol RACE.One analyst speculates that requests for shares in Ferrari may be ten times less than the number available.Including debt,Ferrari will have a value of about $12 billion,and chairman Piero Ferrari will keep a 10 percent stake in the new company and receive about €280 million in cash.Before taxes and interest,Ferrari's 2014 earnings were €389 million,with revenue of €2.8 billion.
-When Ferrari sells stock to the public in its IPO,it will do so through the New York Stock Exchange.This is an example of Ferrari raising funds through

Accepted Answer

A) reinvesting retained earnings. 
B) a financial intermediary. 
C) dividend reinvestment. 
D) a financial market. 
A) reinvesting retained earnings. 
B) a financial intermediary. 
C) dividend reinvestment. 
D) a financial market.

Question 5

Sole proprietorships are ________ type of business.

Accepted Answer

A) the most profitable 
B) the least common 
C) the most common 
D) the least risky 
A) the most profitable 
B) the least common 
C) the most common 
D) the least risky

Question 6

When Zynga,the company behind the social games CityVille and Words With Friends,sold stock to the public for the first time in December 2011,funds were being raised in a ________ market,and when those newly issued shares are resold to other buyers,the sales take place in a ________ market.

Accepted Answer

A) primary;primary 
B) primary;secondary 
C) secondary;primary 
D) secondary;secondary 
A) primary;primary 
B) primary;secondary 
C) secondary;primary 
D) secondary;secondary

Question 7

A nonmonetary opportunity cost is

Accepted Answer

A) an implicit cost. 
B) an explicit cost. 
C) a direct cost. 
D) an accounting cost. 
A) an implicit cost. 
B) an explicit cost. 
C) a direct cost. 
D) an accounting cost.

Question 8

If a dollar today will likely have more purchasing power because of inflation,then a dollar a year from now ________ a dollar today.

Accepted Answer

A) will be more valuable than 
B) will be less valuable than 
C) will have the same value as 
D) may be more valuable or less valuable than 
A) will be more valuable than 
B) will be less valuable than 
C) will have the same value as 
D) may be more valuable or less valuable than

Question 9

The interest payment on a bond is called a face value payment.

Accepted Answer

A) True 
 B)False

Question 10

With respect to business types,what does the term 'limited liability' mean?

Accepted Answer

Limited liability is a legal provision t

Question 11

How do a sole proprietorship and a corporation differ?

Accepted Answer

A) Proprietorships have unlimited liability while corporations have limited liability. 
B) Corporations can issue stocks and bonds,while proprietorships cannot. 
C) Corporations face more taxes than do proprietorships. 
D) All of these are differences between the two types of businesses. 
A) Proprietorships have unlimited liability while corporations have limited liability. 
B) Corporations can issue stocks and bonds,while proprietorships cannot. 
C) Corporations face more taxes than do proprietorships. 
D) All of these are differences between the two types of businesses.

Question 12

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 13

What is the present value of $575 in a one year if the current rate of interest is 4 percent?

Accepted Answer

A) $410.71 
B) $552.88 
C) $598 
D) $805 
A) $410.71 
B) $552.88 
C) $598 
D) $805

Question 14

In the eyes of the law,a corporation is a legal "person," separate from its owners.Explain what this means.

Accepted Answer

This means that the firm is a separate l

Question 15

Define a corporation.

Accepted Answer

A corporation is a legal form

Question 16

In the United States,partnership profits are taxed at the business level and then are taxed again as personal income in the form of dividend payments.

Accepted Answer

A) True 
 B)False

Question 17

All of the following are characteristics of stock except

Accepted Answer

A) stock does not represent a promise to repay a fixed amount of funds. 
B) dividends paid to owners of stock represent a firm's profits. 
C) stock promises to repay a fixed amount to of funds to stock owners. 
D) stock represents ownership in a firm. 
A) stock does not represent a promise to repay a fixed amount of funds. 
B) dividends paid to owners of stock represent a firm's profits. 
C) stock promises to repay a fixed amount to of funds to stock owners. 
D) stock represents ownership in a firm.

Question 18

If the personal assets of the owners can be claimed if the business is bankrupt,the owners are said to have

Accepted Answer

A) unlimited liability. 
B) a corporation type of business. 
C) limited liability. 
D) separation of ownership from control. 
A) unlimited liability. 
B) a corporation type of business. 
C) limited liability. 
D) separation of ownership from control.

Question 19

Before its IPO,Facebook was an example of a private firm.As a private firm,Facebook was

Accepted Answer

A) not subject to government regulations and taxation. 
B) run by stockholders and a board of directors. 
C) run by its founder,Mark Zuckerberg. 
D) not legally allowed to raise funds through venture capital firms. 
A) not subject to government regulations and taxation. 
B) run by stockholders and a board of directors. 
C) run by its founder,Mark Zuckerberg. 
D) not legally allowed to raise funds through venture capital firms.

Question 20

Generally with bond ratings,the lower the rating,the ________ the interest rate an investor will receive and the ________ the the risk that the issuer of the bond will default.

Accepted Answer

A) higher;higher 
B) higher;lower 
C) lower;higher 
D) lower;lower 
A) higher;higher 
B) higher;lower 
C) lower;higher 
D) lower;lower

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

Which is the least common type of business?

Tying salaries of top managers to the profits of the firm is a way to reduce the effect of the principal-agent problem.

What is shown on a firm's income statement?

Sole proprietorships are ________ type of business.

When Zynga,the company behind the social games CityVille and Words With Friends,sold stock to the public for the first time in December 2011,funds were being raised in a ________ market,and when those newly issued shares are resold to other buyers,the sales take place in a ________ market.

A nonmonetary opportunity cost is

If a dollar today will likely have more purchasing power because of inflation,then a dollar a year from now ________ a dollar today.

The interest payment on a bond is called a face value payment.

With respect to business types,what does the term 'limited liability' mean?

How do a sole proprietorship and a corporation differ?

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

What is the present value of $575 in a one year if the current rate of interest is 4 percent?

In the eyes of the law,a corporation is a legal "person," separate from its owners.Explain what this means.

Define a corporation.

In the United States,partnership profits are taxed at the business level and then are taxed again as personal income in the form of dividend payments.

All of the following are characteristics of stock except

If the personal assets of the owners can be claimed if the business is bankrupt,the owners are said to have

Before its IPO,Facebook was an example of a private firm.As a private firm,Facebook was

Generally with bond ratings,the lower the rating,the ________ the interest rate an investor will receive and the ________ the the risk that the issuer of the bond will default.

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

When Zynga,the company behind the social games CityVille and Words With Friends,sold stock to the public for the first time in December 2011,funds were being raised in a market,and when those newly issued shares are resold to other buyers,the sales take place in a market.

Generally with bond ratings,the lower the rating,the the interest rate an investor will receive and the the the risk that the issuer of the bond will default.