question

If financial markets are efficient, which of the following is true?

answer

All public information is rapidly reflected in stock prices, so there are no profit opportunities that can be forecast.

question

All of the following are advantages of proprietorships except

answer

all decision-making power resides with the sole proprietor

question

Former professional basketball star Michael Jordan once left basketball to play baseball. As a result, his annual dollar income dropped from the millions to the thousands. Eventually, Jordan quit baseball and returned to basketball because

answer

his economic rent was much higher in basketball and he could use his resources more efficiently.

question

According to the random walk theory of stock market pricing,

answer

there are no predictable trends in stock prices.

question

The law of diminishing marginal returns shows the relationship between

answer

inputs and outputs for a firm in the short run

question

Minimum efficient scale refers to the ________ rate of output per unit time at which long-run average costs for a particular firm are at a ________.

answer

lowest; minimum

question

A reason for economies of scale is

answer

gains from specialization

question

If the nominal rate of interest is 6 percent and the anticipated rate of inflation is 2 percent, the real rate of interest is approximately

answer

4 percent.

question

In the long run there

answer

are only variable inputs.

question

Economic rent is

answer

the amount paid for a resource over and above its opportunity cost.

question

The basic difference between a share of stock and a bond is the following:

answer

A share of stock is a legal claim on the future profits of the firm, whereas a bond is a loan to the firm and entitles the holder to receive a fixed annual coupon payment and a lump-sum payment of principal at maturity.

question

If total product is increasing at a decreasing rate, then marginal product is

answer

decreasing.

question

In the short run, if a firm continues to add workers, marginal product must begin to diminish because

answer

each worker has less capital to work with

question

The shape of the short-run cost curves are the result of

answer

the law of diminishing returns.

question

Income of a proprietorship is taxed only once as personal income, while the dividend paid out by a corporation is

answer

subject to double taxation: once as corporate profit and once as income of shareholders.

question

Economies of scale in production

answer

indicate that as a firm expands, its long-run per-unit costs fall.

question

Which of the following individuals would you expect to have a high level of economic rent, and which would you expect to have a low level of economic rent? Rank them from highest economic rent to lowest. I. Emily quit high school at age 17, and she has since worked for several years as a waitress in fast-food restaurants. II..Demetrius earned a Ph.D. in financial economics, and he is among a handful of experts who specialize in assessing the values of highly complex securities traded in bond markets. III Xin was a child prodigy on the violin, and after years of developing her skills, she is now rated among the most talented performing violinists in the world.

answer

Xin, Demetrius and Emily.

question

Which of the graphs represents the correct relationship among the cost curves?

answer

Screenshot in dropbox MC,ATC,AVC,AFC

question

When caclulating economic profits, economists take into consideration

answer

both explicit and implicit costs.

question

Which of the following statements describes a firm's long-run average cost curve?

answer

A U-shaped curve that represents the minimum unit cost of producing any given rate of output

question

The academic calendar for a university is August 15 through May 15. A professor commits to a contract that binds her to a teaching position at this university for this period. Based on this information, the short run for the professor

answer

will be the nine month period between August 15 and May 15; any time period longer than this will be long run for her.

question

Inside information

answer

is available to persons working in government agencies but cannot be used for profit-making security trades

question

An investor wishes to own a part of a company and desires preferential treatment in the distribution of dividends. The investor should purchase

answer

preferred stock.

question

The real rate of interest equals 5.0 percent and the anticipated rate of inflation is 3.0 percent. What does the nominal rate of interest equal?

answer

8.0%.

question

All of the following are advantages of proprietorships except:

answer

unlimited liability

question

If the closing price of a stock traded on a particular day is $46 per share, and the dividend paid is $2.84 per share

answer

the yield is 6.2%

question

Which of the following is not a main source of corporate funds?

answer

Loans from banks.

question

With respect to the allocation of resources, which statement is true about economic rent?

answer

Economic rent allocates resources to their highest-valued use.

question

The type of business organizations that are responsible for the greatest share of all business revenues in the U.S. are

answer

corporations.

question

The PE ratio measures

answer

the stock price divided by the earnings per share.

question

The interest rate can vary depending upon what a loan will be used for. Which of the following factors will not influence the annual interest rate?

answer

Economic costs.

question

Assume that the supply of land is perfectly inelastic as shown in the diagram. The demand for land has shifted from D1 to D2. What is the total value for economic rent after the change in demand?

answer

P2 × Q*.

question

A firm can obtain funds for investing by

answer

-selling stocks. -reinvesting profits. -selling bonds.

question

Why do some sports figures get economic rent?

answer

Their special talents cannot be replicated exactly.

question

Making stock trades based on "inside information"

answer

is illegal

question

An important difference between common stock and preferred stock is that

answer

preferred stockholders are entitled to their dividends before common stockholders.

question

Jill took $50,000 that she had in savings and started her own business. If left in investments she would have earned $5,000 this year. Jill also left a job that paid her $70,000 a year and plans on paying herself $40,000. Materials and other labor costs will be $80,000. The company is located in a building that Jill owns. She could have rented the building out for $40,000 but plans on charging the company only the insurance and mortgage payment of $20,000. What do the accounting and economic costs equal?

answer

Accounting costs = $140,000; Economic costs = $195,000

question

At the end of the year, a firm produced 10,000 laptop computers. Its total costs were $5 million, and its fixed costs were $2 million. What are the average variable costs (to the nearest dollar) of this firm?

answer

$300

question

From the perspective of the firm, what is the difference between the short run and the long run?

answer

In the short run, at least one input is fixed, while in the long run all inputs are variable.

question

When the total product function begins to increase at a decreasing rate,

answer

-marginal cost is rising. -the law of diminishing returns has set in. -marginal product is falling.

question

When marginal cost is falling

answer

marginal product must be rising

question

In the long run

answer

all factors of production are variable.

question

Why does the marginal product of labor eventually decline as more labor is used with another fixed input?

answer

The labor will have, on average, fewer units of the other inputs to combine with and the increases to total output obtained from more labor will decrease.

question

The law of diminishing marginal returns is caused by

answer

the existence of a fixed input that must be combined with increasing amounts of the variable input.

question

Suppose that a company currently employs 2,500 workers and produces 3 million units of output per month. Labor is its only variable input, and the company pays each worker the same monthly wage. The company's current total variable costs equal $3million. What are the average variable costs at this firm's current output level? What is the average product of labor? What monthly wage does the firm pay each worker?

answer

-$1.00 -1,200 -$1,200

question

At its current short-run level of production, a firm's average variable costs equal $20.00 per unit, and its average fixed costs equal $20.00 per unit. Its total costs at this production level equal $2,500. What is the firm's output level? What are its total variable costs at this output level? What are its total fixed costs?

answer

-62.50 -$1,250 -1,250.

question

The shape of the short-run cost curves are the result of

answer

the law of diminishing returns

question

The wage rate divided by marginal product equals

answer

marginal cost.

question

The short run is defined as

answer

the period of time in which at least one factor of production is fixed.

question

If a firm hires an additional worker and discovers that its total output has fallen, then it must be true that

answer

marginal product is negative

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