Question 1

The central role of ________ in a market economy is bringing together savers and borrowers.

Accepted Answer

A)  corporations
B)  sole proprietors
C)  financial intermediaries
D)  stock exchanges

Question 2

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

Question 3

The minimum amount that investors must earn on the funds they invest in a firm,expressed as a percentage of the amount invested,is referred to as

Accepted Answer

A)  the explicit costs of production.
B)  net worth.
C)  net income.
D)  a normal rate of return.

Question 4

An explicit cost is

Accepted Answer

A)  a nonmonetary opportunity cost.
B)  a cost specifically related to government rules and regulations.
C)  a cost that involves spending money.
D)  a cost unique to corporations. C

Question 5

If a corporate bond with face value of $5,000 has an interest rate of 4 percent paid once a year for a term of 30 years,what is the size of the coupon payment?

Accepted Answer

A)  $4
B)  $200
C)  $1,250
D)  $5,000

Question 6

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.

Question 7

A firm's accounting profit is also its

Accepted Answer

A)  economic profit.
B)  income statement.
C)  net income.
D)  statement of liabilities.

Question 8

A partnership is ________ type of business.

Accepted Answer

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

Question 9

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.

Question 10

Corporate governance involves the way in which

Accepted Answer

A)  the government nationalizes corporations.
B)  the government licenses corporations.
C)  a corporation is subject to government regulations.
D)  a corporation is structured.

Question 11

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.

Question 12

If you purchase a share of stock from your friend who initially purchased the stock three years ago,your purchase of the stock represents a transaction in the secondary financial market.

Accepted Answer

A) True 
 B)False

Question 13

Mortgages issued to borrowers who fail to document that their incomes are high enough to afford their mortgage payments are known as ________ mortgages.

Accepted Answer

A)  subprime
B)  Alt-A
C)  gray market
D)  reciprocal

Question 14

How does the owner of a corporation relate to the business?

Accepted Answer

A)  The owners of the business have a separate legal distinction from the business.
B)  The owners of the business have no separate legal distinction from the business.
C)  The personal assets are part of the corporation's assets.
D)  None of these describe the legal relationship of corporate owners to the business.

Question 15

Who is the seller in a primary market and who is the seller in a secondary market?

Accepted Answer

The corporation issuing a bond...

Question 16

When a business is set up as a sole proprietorship,the owner of the business faces limited liability.

Accepted Answer

A) True 
 B)False

Question 17

A corporation is the type of business has ________ government rules and regulations affecting it.

Accepted Answer

A)  no
B)  the fewest
C)  the most
D)  only federal

Question 18

A firm's net income is also its

Accepted Answer

A)  economic profit.
B)  balance sheet.
C)  accounting profit.
D)  opportunity cost. C

Question 19

Which of the following takes place in the direct finance market?

Accepted Answer

A)  Firms borrow funds from banks.
B)  Deposits from savers are accumulated and loans made to borrowers.
C)  Ownership in corporations is sold in the form of preferred stock.
D)  Banks offer savings accounts to customers.

Question 20

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 are the implicit costs of his business?

Accepted Answer

A)  $8,000
B)  $18,000
C)  $24,000
D)  $32,000

Exam 6: Firms, the Stock Market, and Corporate Governance

The central role of ________ in a market economy is bringing together savers and borrowers.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The minimum amount that investors must earn on the funds they invest in a firm,expressed as a percentage of the amount invested,is referred to as

Correct AnswerverifiedShow Answer

An explicit cost is

Correct AnswerverifiedC

If a corporate bond with face value of $5,000 has an interest rate of 4 percent paid once a year for a term of 30 years,what is the size of the coupon payment?

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

A firm's accounting profit is also its

Correct AnswerverifiedShow Answer

A partnership is ________ type of business.

Correct AnswerverifiedB

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

Correct AnswerverifiedShow Answer

Corporate governance involves the way in which

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If you purchase a share of stock from your friend who initially purchased the stock three years ago,your purchase of the stock represents a transaction in the secondary financial market.

Correct AnswerverifiedShow Answer

Mortgages issued to borrowers who fail to document that their incomes are high enough to afford their mortgage payments are known as ________ mortgages.

Correct AnswerverifiedShow Answer

How does the owner of a corporation relate to the business?

Correct AnswerverifiedShow Answer

Who is the seller in a primary market and who is the seller in a secondary market?

Correct AnswerverifiedThe corporation issuing a bond...View AnswerShow Answer

When a business is set up as a sole proprietorship,the owner of the business faces limited liability.

Correct AnswerverifiedShow Answer

A corporation is the type of business has ________ government rules and regulations affecting it.

Correct AnswerverifiedShow Answer

A firm's net income is also its

Correct AnswerverifiedC

Which of the following takes place in the direct finance market?

Correct AnswerverifiedShow Answer

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 are the implicit costs of his business?

Correct AnswerverifiedShow Answer

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C

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B

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The corporation issuing a bond...
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C

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