Flashcards and Answers – microeconomics chapter 6
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MC Qu. 1 A business firm with limited liability would... A business firm with limited liability would be a
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corporation
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MC Qu. 2 Most business firms in the United States are Most business firms in the United States are
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proprietorships
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MC Qu. 21 Which statement is false? Which statement is false?
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Our economy would grow faster if we shifted resources from capital goods production into consumer goods production.
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MC Qu. 3 Which statement is false? Which statement is false?
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none
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MC Qu. 18 A firm with three owners A firm with three owners
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may be a partnership
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MC Qu. 6 Which statement is false? Which statement is false?
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none
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MC Qu. 7 To increase capital we need to: To increase capital we need to:
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save more consume less
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MC Qu. 4 A corporation is owned by its A corporation is owned by its
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stockholders
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MC Qu. 5 Which one of these would not constitute a bu... Which one of these would not constitute a business investment?
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Someone buys 100 shares of Exxon-Mobil
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MC Qu. 75 If your firm had $300,000, the going rate of... If your firm had $300,000, the going rate of interest on business loans was 12 percent and your firm's expected profit rate was 17 percent, what would you do with this money?
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use it to finance your own expansion
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MC Qu. 126 Which of the following is not true? Which of the following is not true?
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Inventory investment is always positive.
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MC Qu. 24 Investment includes Investment includes
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an increase in business inventories.
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MC Qu. 9 The expected rate of profit is found by: The expected rate of profit is found by:
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Expected Profits/Money Invested
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MC Qu. 8 Investment will tend to be low when the Investment will tend to be low when the
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capacity utilization rate is low and the interest rate is high.
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MC Qu. 13 The largest sector of gross investment is The largest sector of gross investment is
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plant and equipment
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MC Qu. 129 All of the following are true except All of the following are true except
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Karl Marx said that capital is produced by the capitalist.
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MC Qu. 152 Which statement is true? Which statement is true?
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All of the statements are true
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MC Qu. 10 Which statement is true? Which statement is true?
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Only stockholders are owners of a corporation.
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MC Qu. 14 The least stable sector of GDP is The least stable sector of GDP is
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Investment Sector.
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MC Qu. 19 The only time to invest is when the expected... The only time to invest is when the expected rate of profit is __________ the interest rate.
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greater than
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MC Qu. 163 Presently, the most efficient country at pro... Presently, the most efficient country at producing goods and services is the United States. Which of the following factors of enables us to do this?
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capital
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MC Qu. 47 Which statement is true? Which statement is true?
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The higher the marginal efficiency of capital, the more likely an investment project will be carried out.
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MC Qu. 52 In the United States most business firms are In the United States most business firms are
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proprietorships
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MC Qu. 28 A sole proprietorship A sole proprietorship
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is simply an individual in business for himself or herself.
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MC Qu. 22 Benedict Arnold Corporations are loyal to "Benedict Arnold Corporations" are loyal to
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profits of their stockholders
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MC Qu. 60 An economy is enlarging its stock of capital... An economy is enlarging its stock of capital goods
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when gross investment exceeds depreciation.
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MC Qu. 27 Which statement is false? Which statement is false?
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Some partnerships raise funds by selling stock.
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MC Qu. 74 In the U.S., gross investment is ___________... In the U.S., gross investment is ___________ larger than net investment.
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always
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MC Qu. 20 Investment may be the production of Investment may be the production of
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capital goods, but not consumer goods.
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MC Qu. 30 Which one is not an investment? Which one is not an investment?
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500 shares of stock
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MC Qu. 158 By making a partnership a limited partnershi... By making a partnership a limited partnership, the partners have the following advantage of a corporation form of business
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limited liability.
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MC Qu. 147 Investment includes Investment includes
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the purchase of software by an accounting firm.
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MC Qu. 23 Which of the following is not a characterist... Which of the following is not a characteristic of sole proprietorship?
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limited liability
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MC Qu. 117 Which of the following statements about the ... Which of the following statements about the capacity utilization rate is false?
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The decreasing investment in overseas manufacturing facilities by U.S. multinational corporations has increased the significance of our capacity utilization rate.
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MC Qu. 116 The most important determinant of investment... The most important determinant of investment is
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the sales outlook.
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MC Qu. 35 Which of the following is NOT included in th... Which of the following is NOT included in the GDP accounts as a component of investment?
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The purchase of 50 shares of AT stock by an employee of AT
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MC Qu. 36 As the interest rate rises a business firm w... As the interest rate rises a business firm would
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become less inclined to invest.
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MC Qu. 127 Net investment Net investment
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plus depreciation equals gross investment.
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MC Qu. 31 A business person would most likely invest i... A business person would most likely invest if the expected profit rate were ______ and the interest rate were _____ percent.
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20; 14
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MC Qu. 37 The marginal efficiency of capital is anothe... The marginal efficiency of capital is another term for
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the expected profit rate.
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MC Qu. 40 Which statement is false? Which statement is false?
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Although foreigners have made some very visible investments in the United States, the influx of foreign investment funds has had a negligible effect on our economy.
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MC Qu. 41 Suppose you could invest $100,000 in invento... Suppose you could invest $100,000 in inventory, which you expect to be able to sell at $140,000. If you expect your total selling costs to be $20,000, your expected profit rate would be ______ percent.
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20
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MC Qu. 39 Which statement is true? Which statement is true?
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As income rises, higher levels of investment are induced.
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MC Qu. 34 Which statement is true? Which statement is true?
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The most important determinant of the level of investment is the expected profit rate.
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MC Qu. 156 Which of the following is false? Which of the following is false?
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during severe recessions, inventory investment is positive.
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MC Qu. 48 Which statement is true? Which statement is true?
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The concept of opportunity cost may be applied to a firm that is considering using its own funds for an investment project.
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MC Qu. 152 Which statement is true? Which statement is true?
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All of the statements are true.
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MC Qu. 33 Investment, as the term is used in economics... Investment, as the term is used in economics, does NOT include
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the purchase of a parcel of land in order to realize future financial gains when the land is sold.
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MC Qu. 38 Investment, as the term is used in economics... Investment, as the term is used in economics, includes
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an annual increase in the inventory of unsold packages of potato chips at a convenience store
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MC Qu. 50 Last year, the XYZ manufacturing corporation... Last year, the XYZ manufacturing corporation issued $10 million in new common stock, and used $8 million of the proceeds to build a new factory. The other $2 million was used to repay bank loans, and replenish XYZ's deposits at its banks. As a result, GDP went up by
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the $8 million spent for the factory.
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MC Qu. 125 A corporation's capitalization is... A corporation's capitalization is based on
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all stockholders (both common and preferred) as well as all bondholders.
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MC Qu. 51 If a corporation goes bankrupt, its stockhol... If a corporation goes bankrupt, its stockholders will lose
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only the value of their stock.
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MC Qu. 55 Whenever the level of depreciation exceeds t... Whenever the level of depreciation exceeds the gross private domestic investment for the economy
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net investment is negative.
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MC Qu. 53 Which one of these is an investment? The pur... Which one of these is an investment? The purchase of
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a new computer system.
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MC Qu. 162 Generally, today corporations in the U.S. ar... Generally, today corporations in the U.S. are loyal to
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the stockholders
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MC Qu. 54 Which of the following is not a part of gros... Which of the following is not a part of gross private domestic investment?
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corporate stock purchased from a broker.
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MC Qu. 146 Which of the following statements is true? Which of the following statements is true?
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Nearly all of the money that flows into the stock market buys stock that has already been issued.
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MC Qu. 120 In communist countries such as North Korea a... In communist countries such as North Korea and Cuba, investment is done
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entirely by the government.
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MC Qu. 46 Most businesses would probably not undertake... Most businesses would probably not undertake investment projects for which the expected rate of profit were
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less than the going interest rate.
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MC Qu. 62 Suppose you own $175,000 worth of personal p... Suppose you own $175,000 worth of personal property, $15,000 in U.S. government bonds; a $20,000 savings account, a $50,000 CD, and $5,000 of California Edison stock. If California Edison goes bankrupt, the most you could lose is
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$5000
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MC Qu. 79 Each of these is a determinant of the level ... Each of these is a determinant of the level of I except the
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margin rate
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MC Qu. 56 A business begins a year with 4,500 office m... A business begins a year with 4,500 office machines and finishes the year with 5,500 machines while writing off the value of 750 machines as depreciation. What is the amount of net investment that this firm has undertaken during this time period?
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250 machines
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MC Qu. 121 Which of these is not investment? Which of these is not investment?
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purchase of abc by disney
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MC Qu. 73 The expected rate of profit is calculated by The expected rate of profit is calculated by
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expected profits/money invested.
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MC Qu. 115 Most businesses would probably not undertake... Most businesses would probably not undertake investment projects for which the going rate of interest were
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greater than the expected rate of profit.
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MC Qu. 57 Limited liability means that Limited liability means that
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creditors have no legal claim on the personal assets of a corporate stockholder.
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MC Qu. 59 A low rate of investment could be explained ... A low rate of investment could be explained by a
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low rate of saving and high interest rates.
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MC Qu. 151 All of the following are disadvantages of th... All of the following are disadvantages of the proprietorship form of business except
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there are fewer legal complications than any other form of business.
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MC Qu. 149 Which of these is an investment as counted i... Which of these is an investment as counted in GDP?
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an increase in inventory by IBM.
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MC Qu. 158 By making a partnership a limited partnershi... By making a partnership a limited partnership, the partners have the following advantage of a corporation form of business
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limited liabilty
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MC Qu. 119 All of the following are advantages of the p... All of the following are advantages of the proprietorship form of business except
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the proprietor can raise funds by issuing stock.
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MC Qu. 128 Which of the following might be used to acqu... Which of the following might be used to acquire capital?
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borrowing
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MC Qu. 114 The level of investment will tend to rise as... The level of investment will tend to rise as the expected rate of profit is ___________ and the interest rate is __________.
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high, low
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MC Qu. 123 A partnership A partnership
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must have more than one owner
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MC Qu. 77 During recessions, investment in plant and e... During recessions, investment in plant and equipment most likely
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goes down
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MC Qu. 124 Which of the following is false? Which of the following is false?
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a key disadvantage of incorporating is limited liability.
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MC Qu. 113 Which of the following statements is false? Which of the following statements is false?
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Nearly all of the money that flows into the stock market goes directly to the corporation issuing the stock and ends up as new plant and equipment.
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MC Qu. 159 During periods of time when a corporations i... During periods of time when a corporations is earning large returns, the increased value of the firm accrues to
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common stockholders
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MC Qu. 122 A business firm with more than one owner and... A business firm with more than one owner and unlimited liability is
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partnership
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MC Qu. 130 Which of the following statements is true? Which of the following statements is true?
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Inventory computerization has tended to lower inventory levels.
