Q&A Hero

Q: If Japanese workers are more productive than French workers then trade between Japan and France A) can take place only if France has an absolute advantage in producing a good or service Japanese buyers want. B) cannot take place because Japanese goods and services will be less expensive than French goods and services. C) cannot take place until French workers become more productive. D) will take place so long as each country has a comparative advantage in a good or service that buyers in the other country want.

Q: Whenever a buyer and a seller agree to trade, A) the agreement is made based on absolute advantage. B) they must have identical opportunity costs in producing their respective products. C) one party will always be worse off. D) both must believe they will be made better off.

Q: Assume that Bulgaria has a comparative advantage in producing sandals and Finland imports sandals from Bulgaria. We can conclude that A) Bulgaria also has an absolute advantage in producing sandals relative to Finland. B) Bulgaria has a lower opportunity cost of producing sandals relative to Finland. C) Finland has an absolute disadvantage in producing sandals relative to Bulgaria. D) Labor costs are higher for sandal producers in Finland than in Bulgaria.

Q: Assume that China has a comparative advantage in producing corn and exports corn to Japan. We can conclude that A) China also has an absolute advantage in producing corn relative to Japan. B) China has a lower opportunity cost of producing corn relative to Japan. C) Japan has an absolute disadvantage in producing corn relative to China. D) Labor costs are higher for corn producers in Japan than in China.

Q: An economic principle that explains why countries produce different goods and services is A) absolute advantage. B) trade as a percentage of GDP. C) comparative advantage. D) NAFTA.

Q: Table 9-3CandlesSoapBryce150450Tina200450Bryce and Tina are artisans who produce homemade candles and soap. Table 9-3 lists the number of candles and bars of soap Bryce and Tina can each produce in one month.Refer to Table 9-3. Select the statement that accurately interprets the data in the table.A) Tina has a comparative advantage in making candles.B) Bryce has an absolute advantage in making soap.C) Bryce has a comparative advantage in making candles.D) Bryce has a comparative advantage in making candles and making soap.

Q: Table 9-3CandlesSoapBryce150450Tina200450Bryce and Tina are artisans who produce homemade candles and soap. Table 9-3 lists the number of candles and bars of soap Bryce and Tina can each produce in one month.Refer to Table 9-3. Select the statement that accurately interprets the data in the table.A) Tina has a comparative advantage in making soap.B) Bryce has a comparative advantage in making soap.C) Tina has a comparative advantage in making candles and making soap.D) Neither Bryce nor Tina has a comparative advantage in making soap.

Q: In the United States, partnership profits are taxed at the business level and then are taxed again as personal income in the form of dividend payments.

Q: The only type of business that faces unlimited liability is a sole proprietorship.

Q: When a business is set up as partnership, the owner of the business faces unlimited liability.

Q: In the United States, corporate profits are taxed at the corporate level and then are taxed again as personal income in the form of dividend payments.

Q: The only type of business that faces limited liability is a corporation.

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

Q: Who controls a sole proprietorship? A) owner B) stockholders C) bondholders D) employees

Q: As a business type, corporations ________ in the United States. A) earn the majority of profits B) are the most common C) are the least common D) are subject to the least amount of taxes

Q: Which type of businesses earns the majority of revenues in the United States? A) corporations B) partnerships C) sole proprietorships D) none of these

Q: A partnership is ________ type of business. A) the most common B) the least common C) the least risky D) the most profitable

Q: What is the most common type of business? A) corporation B) partnership C) sole proprietorship D) They are equally represented because of federal laws.

Q: In the United States, corporate profits are taxed A) only at the corporate level. B) only when investors receive dividends. C) at both the corporate level and when investors receive dividends. D) neither at the corporate level nor when investors receive dividends.

Q: Which of the following is an advantage of starting a new business as a corporation? A) double taxation B) ease in setting up C) low expenses of legally organizing D) greater ability to raise funds

Q: Jeremy is thinking of starting up a small business selling NASCAR memorabilia. He asks his friend, Carmen, if she'd like to join him in setting up a partnership to start the business. What is one disadvantage in joining the partnership that Carmen should consider? A) Carmen should realize that profits in the partnership will be reduced by dividend payments to shareholders. B) Carmen should realize that, as an owner of the business, she will be personally responsible for the debts of the business. C) Carmen should realize that the profits of the business will also be taxed as dividend income, so she faces the potential for double taxation of that business income. D) Carmen should realize that the Jeremy will have complete control over the business because it was his idea.

Q: Jeremy is thinking of starting up a small business selling NASCAR memorabilia. He is considering setting up his business as a corporation. What is one advantage to Jeremy of setting up his business as a corporation? A) By setting up the business as a corporation, Jeremy would not face double taxation. B) By setting up the business as a corporation, Jeremy would have the ability to share risk with shareholders. C) By setting up the business as a corporation, Jeremy would have both ownership and control over the business. D) All of the above would be advantages of setting up his business as a corporation.

Q: Which of the following is not an advantage of starting a new business as a proprietorship? A) The owner has complete control over the business. B) A proprietorship has few government rules and regulations to comply with. C) Business profits are only taxed once, not twice. D) A proprietorship can easily attain additional funding.

Q: If the personal assets of the owners cannot be claimed if the business is bankrupt, the owners are said to have A) unlimited liability. B) a proprietorship type of business. C) limited liability. D) a partnership type of business.

Q: How does the owner of a corporation relate to the business? 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.

Q: On average, jobs at small firms pay ________ wages than jobs at large firms and are ________ likely to offer fringe benefits such as health insurance and retirement accounts. A) higher; more B) lower; more C) higher; less D) lower; less

Q: In a typical year, ________ new firms open in the United States. A) more than 600,000 B) more than 1 million C) less than 200,000 D) approximately 125,000

Q: How do the owners of a partnership relate to the business? A) The owners and the business are not separate legal entities. B) The owners and the business are separate legal entities. C) The assets of the owners are considered separate from the asset of the business. D) None of these describe the legal relationship of the owners to the business.

Q: Who owns a corporation? A) the board of directors B) the stockholders C) the employees D) the CEO

Q: Who controls a partnership? A) stockholders B) bondholders C) the owners D) all of these

Q: 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? 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.

Q: Which of the following statements is false? A) Corporations can issue stocks and bonds, while proprietorships cannot. B) Corporations have one owner, while proprietorships have many owners. C) Corporations face more taxes than do proprietorships. D) Proprietorships have unlimited liability while corporations have limited liability.

Q: What is the primary difference between a sole proprietorship and a partnership? A) Proprietorships have unlimited liability while partnerships have limited liability. B) Partnerships can issue stocks and bonds while proprietorships cannot. C) Partnerships have more owners than do proprietorships. D) There is no real difference between the two types of firms.

Q: Of the different types of businesses, a corporation has the ________ government rules and the ________ government regulations affecting it. A) least; least B) least; most C) most; least D) most; most

Q: Which type of business has the most government rules and regulations affecting it? A) sole proprietorship B) partnership C) corporation D) They all have the same set of rules and regulations affecting them.

Q: A corporation is A) the easiest type of business to set up. B) the least expensive type of business to set up. C) the most difficult type of business to set up. D) the least profitable type of business to set up.

Q: Anything of value owned by a person or a firm is A) an asset. B) a liability. C) wealth. D) owner's yield.

Q: What type of business is the easiest to set up? A) sole proprietorship B) partnership C) corporation D) There is no difference in the ease of establishment.

Q: Before its IPO, Facebook was an example of a private firm. As a private firm, Facebook was A) not subject to government regulations and taxation. B) run by stockholders and a board of directors. C) run by its founder, Mark Zuckerberg. D) not legally allowed to raise funds through venture capital firms.

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

Q: A firm in a market economy must do all of the following to succeed except 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) have access to sufficient funds. D) be organized as a corporation.

Q: Who controls a partnership? A) the owners B) stockholders C) bondholders D) employees

Q: Which type of businesses earns the majority of profits in the United States? A) corporations B) partnerships C) sole proprietorships D) none of these

Q: As a business type, corporations ________ in the United States. A) earn the majority of revenues B) are the most common C) are the least common D) are subject to the fewest taxes

Q: Which is the least common type of business? A) corporation B) partnership C) sole proprietorship D) impossible to determine without further information

Q: Sole proprietorships are ________ type of business. A) the most profitable B) the least common C) the most common D) the least risky

Q: Suppose you hit a progressive jackpot on a slot machine in a casino in Atlantic City and are given the choice of the following prizes:Prize 1: $150,000 to be received right away, with three additional payments of $150,000 to be received each year for the next three years.Prize 2: $500,000 to be received right away.If the interest rate is 5 percent, what is the present value of each prize?

Q: How are corporate profits taxed in the United States? A) Earnings are taxed first by state sales taxes and then as corporate profits at the Federal level. B) Earnings are taxed first as personal income then as corporate profits at the Federal level. C) Earnings are taxed first as corporate profits then as personal income after dividends are paid. D) Corporate profits are not taxed at all.

Q: With state and multistate lotteries, winners are typically given the choice between a lump sum payment today or a 20 year series of annuities. How should a winner decide which is better?

Q: Which of the following is not an advantage of starting a new business as a corporation? A) separation of ownership and business liability B) enhanced ability to raise funds C) ability to share risks D) possibility of double taxation

Q: Goodwill is listed as an asset on a firm's balance sheet.

Q: Jeremy is thinking of starting up a small business selling NASCAR memorabilia. He is considering setting up his business as a sole proprietorship. What is one disadvantage to Jeremy of setting up his business as a sole proprietorship? A) As a sole proprietor, Jeremy would be taxed twice. B) As a sole proprietor, Jeremy would not have control of the business. C) As a sole proprietor, Jeremy would face unlimited liability. D) As a sole proprietor, Jeremy would be subject to significant rules and regulations.

Q: Seth's grandmother gave him a $50 savings bond for his birthday. The bond pays $50 at maturity, which is in five years. If the interest rate is 5%, the bond has a present value of $43.19.

Q: Jeremy is thinking of starting up a small business selling NASCAR memorabilia. He is considering setting up his business as a sole proprietorship. What is one advantage to Jeremy of setting up his business as a sole proprietorship? A) As a sole proprietor, Jeremy would face limited liability. B) As a sole proprietor, Jeremy would have the ability to share risk with shareholders. C) As a sole proprietor, Jeremy would have both ownership and control over the business. D) All of the above would be advantages of setting up his business as a sole proprietorship.

Q: Net worth and stockholders' equity are both equal to the difference between assets and liabilities.

Q: Which of the following is an advantage of starting a new business as a proprietorship? A) The owner has limited personal liability. B) A proprietorship has few government rules and regulations to comply with. C) Business profits are not taxed. D) A proprietorship can easily attain additional funding.

Q: Roderick received a $100 savings bond for his graduation. The bond pays $100 at maturity, which is in five years. If the interest rate is 6%, the bond has a present value of $90.09.

Q: What does limited liability mean? A) The owners of the business are personally responsible for paying expenses incurred by the business. 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.

Q: How much is a bond that pays $20 in coupon payments for 4 years and $1,000 at the end of the fourth year worth if the interest rate is 5%? A) $822.70 B) $893.62 C) $1,070.92 D) $1,080

Q: The owners of a ________ have a separate legal distinction from the business. A) corporation B) partnership C) sole proprietorship D) All of the above are correct.

Q: The price of a financial asset should be equal to A) the face value of the asset. B) the present value of the sum of the coupon payments and the interest rate. C) the face value of the asset divided by the interest rate. D) the present value of payments to be received from owning that asset.

Q: Eighty-five percent of all firms employ ________ workers. A) only one or two B) fewer than 20 C) 50 or more D) over 100

Q: On a balance sheet A) total assets must equal total liabilities plus equity. B) total assets plus equity must equal total liabilities. C) total assets plus total liabilities must equal zero. D) total assets plus total liabilities plus equity must equal zero.

Q: In a typical year, ________ of new jobs are created by small firms. A) less than 5 percent B) 10 percent C) 40 percent D) 75 percent

Q: If a stock's dividend is expected to grow at a constant rate of eight percent in the future and it has just paid a dividend of $1.25 a share, and you have an alternative investment of equal risk that will earn a 12 percent rate of return, what would you be willing to pay per share for this stock? A) $31.25 B) $1.40 C) $1.25 D) $1.12

Q: How does the owner of a sole proprietorship relate to the business? A) The owner and the business are separate legal entities. B) The owner and the business are not separate legal entities. C) The assets of the owner are considered separate from the asset of the business. D) None of these describe the legal relationship of the owner to the business.

Q: If you own a $1,000 face value bond with one year remaining to maturity and a 3 percent coupon rate and new bonds are paying 14 percent, what is the most you can get for your old bond? A) $903.51 B) $997.19 C) $1,000 D) $1,140

Q: A corporation is owned by its A) board of directors. B) stockholders. C) employees. D) CEO.

Q: What is the present value of $888 in a one year if the current rate of interest is five percent? A) $4,440 B) $845.71 C) $177.60 D) none of these

Q: Who controls a sole proprietorship? A) stockholders B) bondholders C) the owner D) all of these

Q: The present value of $475 received 3 years in the future would be calculated as which of the following when the interest rate is 6 percent? A) 475/(1.6)3 B) 475/(1.06)3 C) 475 1.6 3 D) 3.06/475

Q: Assume you set up a sole proprietorship and your lawyer tells you that as the owner, you could stand to lose your personal wealth if the business goes bankrupt. This means a sole proprietorship A) faces limited liability. B) faces unlimited liability. C) has little chance of succeeding. D) is not a good type of business to set up.

Q: If you want to know the present value of a future payment received in one year, what formula can you use? A) Present value equals future payment times the current market rate of interest. B) Present value equals future payment divided by one plus the rate of interest. C) Present value equals one plus the rate of interest in decimals divided by future payment. D) Present value equals future payments times one plus the rate of interest.

Q: How do a sole proprietorship and a corporation differ? A) Proprietorships have unlimited liability while corporations have limited liability. B) Corporations can issue stocks and bonds, while proprietorships cannot. C) Corporations face more taxes than do proprietorships. D) All of these are differences between the two types of businesses.

Q: What is the formula you should use to determine a bank account's future value in one year? A) Future value equals the present value plus the rate of interest. B) Future value equals the present value minus the rate of interest. C) Future value equals the present value multiplied by one plus the rate of interest in decimals. D) Future value equals the present value divided by one plus the rate of interest in decimals.

Q: As a form of business, a partnership A) has limited liability. B) has only one owner. C) cannot issue stock. D) has the most government rules and regulations affecting it.

Q: Why is a dollar today more valuable than a dollar a year from now? 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 riskier than the known present. D) all of these

Q: Which type of business has the least government rules and regulations affecting it? A) sole proprietorship B) partnership C) corporation D) They all have the same set of rules and regulations affecting them.

Q: The value you give today to money you will receive in the future is called the future payment's A) time-sensitive value. B) future value. C) present value. D) historical value.

Q: A corporation is the type of business has ________ government rules and regulations affecting it. A) no B) the fewest C) the most D) only federal