Question 1

When you buy previously issued shares of Twitter stock,this transaction takes place in the

Accepted Answer

A) primary market. 
B) bond market. 
C) secondary market. 
D) bear market. 
A) primary market. 
B) bond market. 
C) secondary market. 
D) bear market.

Question 2

When Twitter sells newly issued shares of stock this is an example of

Accepted Answer

A) direct finance in a primary market. 
B) direct finance in a secondary market. 
C) indirect finance in a primary market. 
D) indirect finance in a secondary market. 
A) direct finance in a primary market. 
B) direct finance in a secondary market. 
C) indirect finance in a primary market. 
D) indirect finance in a secondary market.

Question 3

In 2002,the Enron corporation was accused of falsifying information regarding liabilities on Enron's balance sheets,thereby

Accepted Answer

A) increasing Enron's assets on the balance sheet. 
B) reducing Enron's profit on the balance sheet. 
C) increasing Enron's net worth on the balance sheet. 
D) reducing Enron's net income on the income statement. 
A) increasing Enron's assets on the balance sheet. 
B) reducing Enron's profit on the balance sheet. 
C) increasing Enron's net worth on the balance sheet. 
D) reducing Enron's net income on the income statement.

Question 4

Harry's Hookahs incurs $700,000 per year in explicit costs and $500,000 in implicit costs.The company earns $1.4 million in revenues and has $3.7 million in net worth.Based on this information,what is the accounting profit for Harry's Hookas?

Accepted Answer

A) $200,000 
B) $700,000 
C) $900,000 
D) $1.1 million 
A) $200,000 
B) $700,000 
C) $900,000 
D) $1.1 million

Question 5

Which of the following can only be sold back to the firm that issued them?

Accepted Answer

A) stocks 
B) bonds 
C) mutual funds 
D) exchange-traded funds 
A) stocks 
B) bonds 
C) mutual funds 
D) exchange-traded funds

Question 6

The only type of business that faces unlimited liability is a sole proprietorship.

Accepted Answer

A) True 
 B)False

Question 7

If a corporation goes bankrupt,bondholders have ________ on the firm's assets.

Accepted Answer

A) no claim 
B) third claim,after the IRS and stockholders, 
C) second claim,after stockholders, 
D) first claim 
A) no claim 
B) third claim,after the IRS and stockholders, 
C) second claim,after stockholders, 
D) first claim

Question 8

The owner or owners control the day-to-day activities of which of the following types of business?

Accepted Answer

A) corporations and partnerships 
B) partnerships and sole proprietorships 
C) sole proprietorships and corporations 
D) only corporations 
A) corporations and partnerships 
B) partnerships and sole proprietorships 
C) sole proprietorships and corporations 
D) only corporations

Question 9

Corporations are legally owned by their board of directors.

Accepted Answer

A) True 
 B)False

Question 10

Assume you set up a sole proprietorship and your lawyer tells you that as the owner you will face unlimited liability.What does that mean?

Accepted Answer

A) You are liable for organizing the business. 
B) You could stand to lose your personal wealth if the business goes bankrupt. 
C) There is no legal responsibility of the business in case a customer sues,as the business is legally untouchable. 
D) None of these explain what unlimited liability means. 
A) You are liable for organizing the business. 
B) You could stand to lose your personal wealth if the business goes bankrupt. 
C) There is no legal responsibility of the business in case a customer sues,as the business is legally untouchable. 
D) None of these explain what unlimited liability means.

Question 11

A firm's net income is also its accounting profit.

Accepted Answer

A) True 
 B)False

Question 12

An implicit cost is

Accepted Answer

A) a nonmonetary opportunity cost. 
B) a cost unique to sole proprietorships. 
C) a cost that involves spending money. 
D) a cost unique to corporations. 
A) a nonmonetary opportunity cost. 
B) a cost unique to sole proprietorships. 
C) a cost that involves spending money. 
D) a cost unique to corporations.

Question 13

Dividends are the interest rates paid on stocks.

Accepted Answer

A) True 
 B)False

Question 14

Gross revenue minus explicit costs equals

Accepted Answer

A) accounting profit. 
B) economic profit. 
C) opportunity cost. 
D) implicit cost. 
A) accounting profit. 
B) economic profit. 
C) opportunity cost. 
D) implicit cost.

Question 15

What is a primary market?

Accepted Answer

A) a market where primary inputs like steel are sold 
B) a market where you can sell any bonds you own as a private investor 
C) a market where newly issued claims are sold to initial buyers by the borrowing firm 
D) a market where you can sell any stocks you own as a private investor 
A) a market where primary inputs like steel are sold 
B) a market where you can sell any bonds you own as a private investor 
C) a market where newly issued claims are sold to initial buyers by the borrowing firm 
D) a market where you can sell any stocks you own as a private investor

Question 16

A corporation's management

Accepted Answer

A) owns the corporation. 
B) hires the board of directors. 
C) is liable for the corporation's debts. 
D) operates and controls a corporation in its day-to-day activities. 
A) owns the corporation. 
B) hires the board of directors. 
C) is liable for the corporation's debts. 
D) operates and controls a corporation in its day-to-day activities.

Question 17

Which type of business is the most difficult to set up?

Accepted Answer

A) sole proprietorship 
B) partnership 
C) corporation 
D) There is no difference in the difficulty of establishment. 
A) sole proprietorship 
B) partnership 
C) corporation 
D) There is no difference in the difficulty of establishment.

Question 18

Who selects the board of directors of a corporation?

Accepted Answer

A) the state where the corporation is chartered 
B) employees 
C) stockholders 
D) managers 
A) the state where the corporation is chartered 
B) employees 
C) stockholders 
D) managers

Question 19

In August 2011,Standard & Poor's (S&P)changed its rating on U.S.Treasury bonds from "AAA" to "AA+" based on the state of the federal government's budget deficit.This was the ________ a rating agency had given Treasury bonds less than a rating of "AAA."

Accepted Answer

A) first time ever 
B) second time since the year 2000 
C) first time since the Great Depression 
D) fifth time in history 
A) first time ever 
B) second time since the year 2000 
C) first time since the Great Depression 
D) fifth time in history

Question 20

Gross revenue minus explicit and implicit costs is equal to

Accepted Answer

A) accounting profit. 
B) opportunity cost. 
C) economic profit. 
D) net worth. 
A) accounting profit. 
B) opportunity cost. 
C) economic profit. 
D) net worth.

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

When you buy previously issued shares of Twitter stock,this transaction takes place in the

When Twitter sells newly issued shares of stock this is an example of

In 2002,the Enron corporation was accused of falsifying information regarding liabilities on Enron's balance sheets,thereby

Harry's Hookahs incurs $700,000 per year in explicit costs and $500,000 in implicit costs.The company earns $1.4 million in revenues and has $3.7 million in net worth.Based on this information,what is the accounting profit for Harry's Hookas?

Which of the following can only be sold back to the firm that issued them?

The only type of business that faces unlimited liability is a sole proprietorship.

If a corporation goes bankrupt,bondholders have ________ on the firm's assets.

The owner or owners control the day-to-day activities of which of the following types of business?

Corporations are legally owned by their board of directors.

Assume you set up a sole proprietorship and your lawyer tells you that as the owner you will face unlimited liability.What does that mean?

A firm's net income is also its accounting profit.

An implicit cost is

Dividends are the interest rates paid on stocks.

Gross revenue minus explicit costs equals

What is a primary market?

A corporation's management

Which type of business is the most difficult to set up?

Who selects the board of directors of a corporation?

In August 2011,Standard & Poor's (S&P)changed its rating on U.S.Treasury bonds from "AAA" to "AA+" based on the state of the federal government's budget deficit.This was the ________ a rating agency had given Treasury bonds less than a rating of "AAA."

Gross revenue minus explicit and implicit costs is equal to

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

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