Question 1

Interest rates are higher the

Accepted Answer

A)  shorter the duration of the loan.
B)  greater the risk.
C)  larger the amount of the loan,holding other things constant.
D)  lower the inflation rate.

Question 2

Which of the following is the formula used for computing economic profits?

Accepted Answer

A)  economic profits = total revenue - implicit costs
B)  economic profits = total revenue - (implicit costs + explicit costs) 
C)  economic profits = total costs - total revenue
D)  economic profits = total revenue - explicit costs

Question 3

Which of the following is the most common form of a business organization?

Accepted Answer

A)  corporation
B)  partnership
C)  sole proprietorship
D)  subchapter S corporation

Question 4

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.

Question 5

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.

Question 6

The theory that there are no predictable trends in securities prices that can be used to "get rich quick" is the

Accepted Answer

A)  dartboard theory.
B)  random walk theory.
C)  Wall Street theory.
D)  inefficient market hypothesis.

Question 7

Accounting costs represent

Accepted Answer

A)  explicit costs paid by the firm.
B)  opportunity costs.
C)  both sunk and future costs.
D)  long run costs only.

Question 8

The owners of preferred stock

Accepted Answer

A)  receive preferential treatment in the payment of dividends.
B)  have the same voting rights as owners of common stock.
C)  are the original owners of the corporation.
D)  have the same rights as bondholders.

Question 9

If you want a say in the management of a corporation,you should buy

Accepted Answer

A)  common stock.
B)  preferred stock.
C)  bonds.
D)  either bonds or preferred stock.

Question 10

Which legal claim comes with voting rights?

Accepted Answer

A)  Common stock
B)  Preferred stock
C)  Bond
D)  Reinvestment

Question 11

According to efficient market theory,which of the following can best predict the stock price of a particular company tomorrow?

Accepted Answer

A)  a finance professor who knows a lot of investment theory
B)  a stock trader who has traded stocks for more than 10 years
C)  that company's employee who has inside information about the company
D)  none of the above: Everyone has an equal chance of predicting future stock prices

Question 12

Assuming a market rate of interest equal to 7 percent,what is the present value of $200 to be received one year from today?

Accepted Answer

A)  $123
B)  $156
C)  $187
D)  $210

Question 13

The three primary sources of corporate funds are

Accepted Answer

A)  banks,friends,and family.
B)  government,other corporations,and the central bank.
C)  investment banks,brokerages,and insurance companies.
D)  stocks,bonds,and reinvestment of profits.

Question 14

One advantage of a proprietorship is that

Accepted Answer

A)  it is relatively easy to raise financial capital for a proprietorship.
B)  a proprietorship is relatively easy to form and to dissolve.
C)  there are limits to the possible liabilities of the owner.
D)  depreciation rates on capital are higher.

Question 15

You own $10,000 in personal property,$2,000 in Company X stocks,$1,000 in U.S.Savings Bonds and have $500 in your checking account.If Company X goes bankrupt,the most you could lose is

Accepted Answer

A)  $13,500.
B)  $11,500.
C)  $2,000.
D)  $500.

Question 16

A payment to an owner of a resource in excess of its opportunity cost is know as

Accepted Answer

A)  real wages.
B)  economic rent.
C)  financial interest.
D)  accounting profits.

Question 17

In considering economic profit in a market economy,it is correct to say that

Accepted Answer

A)  there should never be any economic profit.
B)  economic profit will only occur,even in the short run,as a result of imperfect competition.
C)  economic profit performs an important function in allocating resources to their most highly valued uses.
D)  economic profit tends to reduce the production efficiency of the economy,leading to wasted resources.

Question 18

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.

Question 19

In which of the following ways can a corporation raise new funds for investment?
I.Issuing new shares of stock
II.Having existing stock resold between two owners

Accepted Answer

A)  I only
B)  II only
C)  Both I and II
D)  Neither I nor II

Question 20

-Refer to the above figure.Suppose demand is  D2\mathrm { D } _ { 2 }D2​  and then increases to  D3\mathrm { D } _ { 3 }D3​ 
) The change in economic rent is

Accepted Answer

A)  zero.
B)  area CIHF.
C)  area CIGO.
D)  area BJC.

Exam 8: Rents, profits, and the Financial Environment of Business

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

Correct Answer
verified

The three primary sources of corporate funds are

Correct Answer
verified

Correct Answer
verified

In which of the following ways can a corporation raise new funds for investment? I.Issuing new shares of stock II.Having existing stock resold between two owners

Correct Answer
verified

Which of the following is the formula used for computing economic profits?

Correct Answer
verified

You own $10,000 in personal property,$2,000 in Company X stocks,$1,000 in U.S.Savings Bonds and have $500 in your checking account.If Company X goes bankrupt,the most you could lose is

Correct Answer
verified

The owners of preferred stock

Correct Answer
verified

The owners of a corporation are

Correct Answer
verified

One advantage of a proprietorship is that

Correct Answer
verified

According to efficient market theory,which of the following can best predict the stock price of a particular company tomorrow?

Correct Answer
verified

Accounting costs represent

Correct Answer
verified

A payment to an owner of a resource in excess of its opportunity cost is know as

Correct Answer
verified

Interest rates are higher the

Correct Answer
verified

In considering economic profit in a market economy,it is correct to say that

Correct Answer
verified

Assuming a market rate of interest equal to 7 percent,what is the present value of $200 to be received one year from today?

Correct Answer
verified

Which of the following is the most common form of a business organization?

Correct Answer
verified

If you want a say in the management of a corporation,you should buy

Correct Answer
verified

The theory that there are no predictable trends in securities prices that can be used to "get rich quick" is the

Correct Answer
verified

Which legal claim comes with voting rights?

Correct Answer
verified

Economic rent is a concept that can be applied

Correct Answer
verified

Exam 8: Rents, profits, and the Financial Environment of Business

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

Correct AnswerverifiedShow Answer

The three primary sources of corporate funds are

Correct AnswerverifiedShow Answer

-Refer to the above figure.Suppose demand is D2\mathrm { D } _ { 2 }D2​ and then increases to D3\mathrm { D } _ { 3 }D3​ ) The change in economic rent is

Correct AnswerverifiedShow Answer

In which of the following ways can a corporation raise new funds for investment? I.Issuing new shares of stock II.Having existing stock resold between two owners

Correct AnswerverifiedShow Answer

Which of the following is the formula used for computing economic profits?

Correct AnswerverifiedShow Answer

You own $10,000 in personal property,$2,000 in Company X stocks,$1,000 in U.S.Savings Bonds and have $500 in your checking account.If Company X goes bankrupt,the most you could lose is

Correct AnswerverifiedShow Answer

The owners of preferred stock

Correct AnswerverifiedShow Answer

The owners of a corporation are

Correct AnswerverifiedShow Answer

One advantage of a proprietorship is that

Correct AnswerverifiedShow Answer

According to efficient market theory,which of the following can best predict the stock price of a particular company tomorrow?

Correct AnswerverifiedShow Answer

Accounting costs represent

Correct AnswerverifiedShow Answer

A payment to an owner of a resource in excess of its opportunity cost is know as

Correct AnswerverifiedShow Answer

Interest rates are higher the

Correct AnswerverifiedShow Answer

In considering economic profit in a market economy,it is correct to say that

Correct AnswerverifiedShow Answer

Assuming a market rate of interest equal to 7 percent,what is the present value of $200 to be received one year from today?

Correct AnswerverifiedShow Answer

Which of the following is the most common form of a business organization?

Correct AnswerverifiedShow Answer

If you want a say in the management of a corporation,you should buy

Correct AnswerverifiedShow Answer

The theory that there are no predictable trends in securities prices that can be used to "get rich quick" is the

Correct AnswerverifiedShow Answer

Which legal claim comes with voting rights?

Correct AnswerverifiedShow Answer

Economic rent is a concept that can be applied

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified