415)
The higher are a firm’s risk–corrected returns,
415)
A)
the more advantage it has in obtaining investor financing.
B)
the more difficulty it will have financing its expansion plans.
C)
the lower are its labor costs.
D)
the higher are its opportunity costs.
416)
Juanita has just started a business and is using her personal car to deliver goods. The use of her car
is an example of
416)
A)
B)
C)
D)
417)
Which of the following equations is CORRECT?
417)
A)
normal profit = accounting profit + economic profit
B)
economic profit = accounting profit – explicit costs
C)
economic profit = accounting profit – implicit costs
D)
accounting profit = total revenue – (explicit costs + implicit costs)
418)
The most common type of firm in the United States is the
418)
A)
B)
C)
D)
419)
If the rate of inflation is zero, prices are expected to remain stable, and the nominal rate of interest
is 5 percent, then the
419)
A)
investment demand schedule will shift upward.
B)
nominal rate is greater than the real rate of interest.
C)
real rate of interest is less than the nominal rate.
D)
real rate of interest is equal to the nominal rate.
420)
A portion of a worker’s earnings is rent if
420)
A)
the worker has industry–specific skills.
B)
the worker was the last person hired at the going wage rate.
C)
the worker would accept a small wage cut without quitting or working for someone else.
D)
the supply curve of labor is horizontal.
C
Explanation:
421)
Supermodel Linda Evangelista has been quoted as saying, “[I] don’t wake up for less than $10,000 a
day.” If Ms. Evangelista is paid $15,000 for her next daylong photo shoot, then
421)
A)
she is being paid $15,000 to cover her opportunity cost.
B)
she is receiving economic rent to labor equal to $5,000.
C)
the entire $15,000 would be considered economic rent to labor.
D)
the first $10,000 she receives is economic rent to labor and the next $5,000 is more economic
rent.
B
Explanation:
422)
Which of the following is the formula used for computing an accounting profit?
422)
A)
accounting profits = total costs – total revenue
B)
accounting profits = total revenue – (implicit + explicit costs)
C)
accounting profits = total revenue – explicit costs
D)
accounting profits = total revenue – implicit costs
C
Explanation:
D
Explanation:
423)
Inside information
423)
A)
applies to corporations only.
B)
applies to all forms of business.
C)
applies to proprietorships only.
D)
applies to proprietorships and partnerships only.
424)
Suppose that you decide to purchase either stocks or bonds of a particular corporation and you also prefer to
receive some returns from the securities every year. Which should you buy – stocks or bonds? Why?
425)
How can one “beat the market”?
426)
Amber has opened a coffee shop for many years on a piece of land that she has also owned. She has also made
accounting profits from the coffee shop. This year, rents in the area rose considerably, and Amber responded by
deciding to sell the land and the coffee shop to an apartment builder. How can you explain Amber’s decision to
sell her business?
427)
You have won the lottery. There are two payment options for you. The first option is a lump sum payment of
$10 million that you will receive immediately. The second option is an annual payment of $1 million for each of
the next 12 years. Assume there is no inflation. How would you make a decision between the two options?
428)
Describe and explain the three principle methods of financing used by corporations.
429)
Why is limited liability so important when firms try to raise large amounts of financial capital? How is this
advantage of a corporation tied to a disadvantage of a corporation?
430)
Discuss the advantages and disadvantages of proprietorships.
431)
If the random walk theory is correct, then is there any way to “beat the market”?
432)
“Economic rent reflects a waste of resources.” Do you agree or disagree? Explain.
433)
Which method of corporate finance is used the most? Why?
434)
“Economic profits are less than or at most equal to accounting profits.” Do you agree or disagree? Explain.
435)
What is the difference between accounting profits and economic profits? Which of the two concepts is more
appropriate for explaining decisions made by entrepreneurs? Explain.
436)
What is the main purpose of an interest payment? What major factors affect interest rates?
437)
What is the random walk theory?
438)
What are the two meanings of interest in economics?
439)
Consider an NBA superstar Kobe Bryant and one of your economics professors. Who is likely to receive more
economic rent in his/her job? Explain your answer.
440)
What is a normal rate of return?
441)
For which type of organization is unlimited liability likely to be the greater problem–proprietorships or
partnerships? Why?
442)
How is inflation related to interest rates?
443)
Why are there so many more proprietorships than corporations, yet corporations account for so much more of
the sales of business firms in the country?
444)
Do people make decisions on the basis of the nominal interest rate or the real interest rate? What is the
relationship between the two interest rates?
445)
What would happen if a corporation goes out of business?
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