Download Microeconomics - Testbank 1 (Hubbard/O`Brien)

Microeconomics - Testbank 1 (Hubbard/O'Brien)
Chapter 7 Firms, the Stock Market, and Corporate Governance
d1) To succeed, entrepreneurs must:
A produce the goods and services that consumers want at a
) lower cost than consumers themselves can produce.
B organize the factors of production into a functioning,
) efficient unit.
C obtain access to sufficient funds.
)
D all of the above.
)
b2) To succeed, firms need to:
A produce a standardized product.
)
B obtain access to sufficient funds.
)
C produce a large amount of its product.
)
D all of the above.
)
a3) The type of business that has the fewest layers of
management is:
A a sole proprietorship.
)
B a partnership.
)
C a corporation.
)
D all types of businesses have the same number of layers
) of management.
c4) The type of business that is the most difficult to set up is:
A a sole proprietorship.
)
B a partnership.
)
C a corporation.
)
D all types of businesses are equally difficult to set up.
)
c5) The type of business that has the greatest ability to raise
funds is:
A sole proprietorship.
)
B partnership.
)
C corporation.
)
D all types of businesses have equal ability to raise funds.
)
c6) A primary difference between a sole proprietorship and a
partnership is:
A sole proprietorships have unlimited liability while
) partnerships have limited liability.
B partnerships can issue stocks and bonds while sole
) proprietorships cannot.
C partnerships have more owners than do sole
) proprietorships.
D sole proprietorships have more layers of management
) than partnerships.
a7) Sole proprietorship and a corporation differ in that:
A sole proprietorships have unlimited liability while
) corporations have limited liability.
B sole proprietorships have an easier access to funds than
) corporations.
C sole proprietorships face more taxes than corporations.
)
D sole proprietorships are more difficult to organize than
) corporations.
c8) Who controls a sole proprietorship?
A Stockholders
)
B Bondholders
)
C The owner
)
D all of these
)
b9) Who owns a corporation?
A The board of directors
)
B The stockholders
)
C The employees
)
D The CEO
)
c10 Limited liability means:
)
A the personal assets of the owners can be claimed if the
) business is bankrupt.
B only employees can have a claim on the assets of the
) business.
C the personal assets of the owners cannot be claimed if
) the business is bankrupt.
D anybody with a liability against a firm can claim only
) what their liability refers to.
d1 An advantage that a sole proprietorship form of business
1) does NOT have is:
A the owner having complete control over the business.
)
B fewer government rules and regulations to comply with.
)
C only one level of taxation.
)
D ease of attaining additional funding.
)
d1 An advantage that the corporate form of business
2) organization does NOT have is:
A separation of ownership and business liability.
)
B enhanced ability to raise funds.
)
C ability to share risks.
)
D favorable tax treatment.
)
d1 Which of the following is an advantage of starting a new
3) business as a corporation?
A Favorable tax treatment.
)
B Easy to set up.
)
C Inexpensive to legally organize.
)
D Greater ability to raise funds.
)
c14 The most common type of business in the United States is:
)
A corporations.
)
B partnerships.
)
C sole proprietorships.
)
D government firms.
)
b1 The least common type of business in the United States is:
5)
A corporations.
)
B partnerships.
)
C sole proprietorships.
)
D entrepreneurs.
)
a16 The type of businesses that earn the most revenue in the
) United States are:
A corporations.
)
B partnerships.
)
C sole proprietorships.
)
D entrepreneurs.
)
a17 The type of businesses that earn the largest percentage of
) aggregate profits in the United States are:
A corporations.
)
B partnerships.
)
C sole proprietorships.
)
D entrepreneurs.
)
d1 A corporation is operated and controlled in its day-to-day
8) activities by its:
A board of directors.
)
B stockholders.
)
C employees.
)
D management.
)
b1 A corporation is owned by its:
9)
A board of directors.
)
B stockholders.
)
C hired managers.
)
D employees.
)
c20 The board of directors of a corporation are selected by:
)
A the state where the corporation is chartered.
)
B the employees of the corporation.
)
C the stockholders of the corporation.
)
D the managers of the corporation.
)
b2 An inside director is:
1)
A the manager who directs production inside the firm.
)
B a member of a corporate board of directors who is also a
) manager of the business.
C a CEO that is selected by the corporation's board of
) directors.
D a member of a corporate board of directors who also
) works for the government.
c22 A situation where a hired manager does not have the same
) interests as the owners of the business is known as:
A a conquest and control problem.
)
B a financial problem.
)
C a principal-agent problem.
)
D a financial intermediary problem.
)
b2 One way to try to reduce the principal-agent problem is to:
3)
A threaten to liquidate the firm.
)
B link top manager salaries to the profits of the firm or the
) price of the firm's stock.
C have the CEO be a rotating position.
)
D forbid managers from owning any company stock.
)
d2 Sole proprietorships or partnerships can raise funds for
4) expansion by:
A borrowing from someone or an institution willing to
) lend the funds.
B reinvesting profit back into the business.
)
C taking on a partner or more partners.
)
D All of these are sources of funds.
)
c
2
5
)
Financial intermediaries in a market economy:
A create and print money.
)
B keep the price level stable.
)
C bring together savers and borrowers.
)
D provide safe deposits for people and businesses.
)
d2 Direct finance includes:
6)
A ownership in corporations is sold in the form of
) common stock.
B corporate bonds are sold to savers.
)
C a flow of funds from savers to firm through financial
) markets.
D all of the above.
)
b2 If the coupon rate on a newly issued bond is higher than the
7) interest rate on similar bonds, then:
A the market price of the bond will be equal to the face
) value.
B the market price of the bond will be lower than the face
) value.
C the market price of the bond will be higher than the face
) value.
D the face value of the bond will fall.
)
c28 The difference between the highest stock price and the
) lowest stock price over the previous year indicates:
A the stock's coupon yield.
)
B the stock's price-earnings ratio is.
)
C how volatile the stock's market price has been.
)
D the dividend yield.
)
d2 Liabilities are:
9)
A anything of value owned by a person or a business.
)
B anything a person or a business owes to entities outside
) the business.
C what occurs when a business is sued.
)
D what a business owes to its stockholders.
)
c30 An example of an implicit cost is:
)
A the out-of-pocket expense to hire resources.
)
B taxes owed to the state and Federal governments.
)
C opportunity costs of using the firm's own resources.
)
D the full cost of hiring workers, including fringe benefits.
)
c31 Economic profit is:
)
A gross revenue minus explicit costs.
)
B gross revenue minus implicit costs.
)
C gross revenue minus explicit and implicit costs.
)
D equal to accounting profit.
)
d3 A dollar today is more valuable than a dollar a year from
2) now because:
A the dollar today can be immediately used to buy
) something.
B a dollar a year from now will likely have less purchasing
) power because of inflation.
C the unknown future is more risky than the known
) present.
D all of the above.
)
d3 Among the differences between a share of stock and a bond
3) is:
A a stock can possibly pay dividends forever, but bonds
) have a fixed number of payments.
B differences of opinion about a stock's future may vary
) considerably but there is less difference about a bond's
future.
C the future growth of a stock is more uncertain than the
) payments of a bond.
D all of the above.
)
a34
)
What must balance on a balance sheet?
A Total assets must equal total liabilities plus equity.
)
B Revenues must equal costs.
)
C Retained earnings plus dividends paid must equal
) earnings per share.
D All of these must balance.
)
d3 Shown on a firm's income statement is a firm's:
5)
A costs.
)
B net worth.
)
C revenues.
)
D all of the above.
)
c36 Operating income is:
)
A explicit plus implicit costs.
)
B stockholders' equity.
)
C revenue minus operating expenses.
)
D net profit.
)