Question 1

Creditors require collateral in many cases,because

Accepted Answer

A)  it helps offset the risks of lending the funds.
B)  the borrower is a low risk.
C)  the loan is small.
D)  none of the above.E) A) and B)
F) All of the above

Question 2

When economic profits are negative,accounting profits

Accepted Answer

A)  must be positive.
B)  will be negative.
C)  will equal zero.
D)  could be positive,negative or zero.E) B) and C)
F) A) and D)

Question 3

The rate of discount is best described as the rate of

Accepted Answer

A)  return on physical capital after the cost of capital has been removed.
B)  return on financial assets after an inflation adjustment has been made.
C)  interest used to derive the present values of future sums.
D)  return on financial capital that has not been adjusted for inflation.E) A) and D)
F) A) and C)

Question 4

Another term to describe the normal rate of return on capital is the

Accepted Answer

A)  fixed cost of capital.
B)  depreciation cost of capital.
C)  opportunity cost of capital.
D)  monopoly rent.E) A) and B)
F) A) and C)

Question 5

Mary and Jane are partners in a business.Their business is growing but has not yet reached the point where they can afford a new delivery truck.Jane owns an old truck that she has not been using.She decides to donate it to their business for free.

Accepted Answer

A)  This transaction (donation) involves no economic cost.
B)  This transaction involves both economic cost and accounting cost.
C)  This transaction involves economic cost but no accounting cost.
D)  This transaction involves no economic cost and no accounting cost.E) C) and D)
F) None of the above

Question 6

If all the return to a resource is economic rent,we know that

Accepted Answer

A)  the price of the resource is below its opportunity cost.
B)  the price of the resource equals its opportunity cost.
C)  the price of the resource is above its opportunity cost.
D)  the resource has no opportunity cost.E) A) and B)
F) None of the above

Question 7

If the entrepreneur is also the manager of the firm,we would expect

Accepted Answer

A)  the manager to work hard because he or she is also the residual claimant.
B)  the manager to not work hard since there is no possibility of further advancement.
C)  the firm to operate poorly because the specialization of labor is not adequate.
D)  the firm to operate poorly because the entrepreneur is not as good at managing workers as a professional manager would be.E) None of the above
F) B) and C)

Question 8

A payment for a resource above the opportunity cost of the resource is

Accepted Answer

A)  economic rent.
B)  social rent.
C)  nominal rent.
D)  real rent.E) All of the above
F) A) and C)

Question 9

The theory that there is no predictable trends in securities prices is the

Accepted Answer

A)  opportunity cost of capital.
B)  random walk theory.
C)  capital reinvestment.
D)  present value.E) A) and C)
F) A) and D)

Question 10

Which of the following is a disadvantage of the corporate form of business organization?

Accepted Answer

A)  Limited liability
B)  Limited financing
C)  Double taxation
D)  Unlimited liabilityE) A) and C)
F) B) and C)

Question 11

When accounting profits are negative,economic profits

Accepted Answer

A)  must be positive.
B)  will be negative.
C)  will equal zero.
D)  could be positive,negative or zero.E) A) and C)
F) None of the above

Question 12

If you own 500 shares of preferred stock,how many regular votes would you get to cast at the next stockholders meeting?

Accepted Answer

A)  500
B)  250
C)  1
D)  0E) C) and D)
F) None of the above

Question 13

The real rate of interest is

Accepted Answer

A)  equal to the nominal rate of interest less the anticipated rate of inflation.
B)  equal to the nominal rate of interest plus the anticipated rate of inflation.
C)  found by taking the nominal rate of interest and dividing it by the actual rate of inflation.
D)  found by taking the nominal rate of interest and adding the actual rate of inflation.E) A) and B)
F) A) and C)

Question 14

In economic terms,interest is the payment for

Accepted Answer

A)  current command over resources.
B)  producers' goods.
C)  stocks.
D)  both consumer and capital goods.E) B) and D)
F) B) and C)

Question 15

A business which is owned by two or more people is called a

Accepted Answer

A)  proprietorship.
B)  partnership.
C)  corporation.
D)  none of the above.E) A) and C)
F) A) and B)

Question 16

Exchanges of stocks take place

Accepted Answer

A)  in New York City only.
B)  in the principle financial city of each country,such as New York City for the United States and London for England.
C)  in a decentralized fashion around the world.
D)  in centralized physical locations known as stock exchanges and online through Internet brokers.E) C) and D)
F) A) and B)

Question 17

Suppose that you open your own business and earn an accounting profit of $35,000 per year.When you started your business,you left a job that paid you a $30,000 salary annually.Also,suppose that you invested $70,000 of your own funds to start up your business.If the normal rate of return on capital is 10 percent,your economic profit is

Accepted Answer

A)  $5,000.
B)  -$5,000.
C)  $2,000.
D)  -$2,000.E) None of the above
F) A) and B)

Question 18

All of the following are characteristics of a proprietorship EXCEPT

Accepted Answer

A)  the business is owned by one individual.
B)  one person is responsible for all the debts of the firm.
C)  one person gets all of the profits.
D)  the firm can form a corporation to protect itself against the debts.E) A) and B)
F) A) and C)

Question 19

How can one "beat the market?"

Accepted Answer

Most economists feel the only ...

Question 20

Explicit costs are

Accepted Answer

A)  the opportunity costs of all resources used by the firm.
B)  the costs associated with the resources that the firm owns.
C)  actual expenditures that a firm must make.
D)  all costs associated with the short run.E) All of the above
F) A) and D)

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

When economic profits are negative,accounting profits

Correct Answer
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A payment for a resource above the opportunity cost of the resource is

Correct Answer
verified

How can one "beat the market?"

Correct Answer
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Most economists feel the only ...
View Answer

If the entrepreneur is also the manager of the firm,we would expect

Correct Answer
verified

Explicit costs are

Correct Answer
verified

Correct Answer
verified

The theory that there is no predictable trends in securities prices is the

Correct Answer
verified

Another term to describe the normal rate of return on capital is the

Correct Answer
verified

A business which is owned by two or more people is called a

Correct Answer
verified

Which of the following is a disadvantage of the corporate form of business organization?

Correct Answer
verified

Exchanges of stocks take place

Correct Answer
verified

The rate of discount is best described as the rate of

Correct Answer
verified

All of the following are characteristics of a proprietorship EXCEPT

Correct Answer
verified

Mary and Jane are partners in a business.Their business is growing but has not yet reached the point where they can afford a new delivery truck.Jane owns an old truck that she has not been using.She decides to donate it to their business for free.

Correct Answer
verified

If you own 500 shares of preferred stock,how many regular votes would you get to cast at the next stockholders meeting?

Correct Answer
verified

The real rate of interest is

Correct Answer
verified

When accounting profits are negative,economic profits

Correct Answer
verified

If all the return to a resource is economic rent,we know that

Correct Answer
verified

In economic terms,interest is the payment for

Correct Answer
verified

Creditors require collateral in many cases,because

Correct Answer
verified

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

When economic profits are negative,accounting profits

Correct AnswerverifiedShow Answer

A payment for a resource above the opportunity cost of the resource is

Correct AnswerverifiedShow Answer

How can one "beat the market?"

Correct AnswerverifiedMost economists feel the only ...View AnswerShow Answer

If the entrepreneur is also the manager of the firm,we would expect

Correct AnswerverifiedShow Answer

Explicit costs are

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The theory that there is no predictable trends in securities prices is the

Correct AnswerverifiedShow Answer

Another term to describe the normal rate of return on capital is the

Correct AnswerverifiedShow Answer

A business which is owned by two or more people is called a

Correct AnswerverifiedShow Answer

Which of the following is a disadvantage of the corporate form of business organization?

Correct AnswerverifiedShow Answer

Exchanges of stocks take place

Correct AnswerverifiedShow Answer

The rate of discount is best described as the rate of

Correct AnswerverifiedShow Answer

All of the following are characteristics of a proprietorship EXCEPT

Correct AnswerverifiedShow Answer

Mary and Jane are partners in a business.Their business is growing but has not yet reached the point where they can afford a new delivery truck.Jane owns an old truck that she has not been using.She decides to donate it to their business for free.

Correct AnswerverifiedShow Answer

If you own 500 shares of preferred stock,how many regular votes would you get to cast at the next stockholders meeting?

Correct AnswerverifiedShow Answer

The real rate of interest is

Correct AnswerverifiedShow Answer

When accounting profits are negative,economic profits

Correct AnswerverifiedShow Answer

If all the return to a resource is economic rent,we know that

Correct AnswerverifiedShow Answer

In economic terms,interest is the payment for

Correct AnswerverifiedShow Answer

Creditors require collateral in many cases,because

Correct AnswerverifiedShow Answer

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Correct Answer
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Correct Answer
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Most economists feel the only ...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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