Q&A Hero

Q: The quantity of good M is measured along the vertical axis, and the quantity of good N is measured along the horizontal axis. If the prices of both goods M and N declines by 50% each, then the budget lineA) shifts inward to the left by 50%. B) shifts outward to the right by 50%. C) shifts outward to the right by 100%. D) rotates clockwise by 180 degrees.

Q: Asset A has an expected return of 15% and a reward-to-variability ratio of .4. Asset B has an expected return of 20% and a reward-to-variability ratio of .3. A risk-averse investor would prefer a portfolio using the risk-free asset and ______. A. asset A B. asset B C. no risky asset D. The answer cannot be determined from the data given.

Q: What is an advantage of filing a Chapter 11 petition?A) The continuation of interest accrual on liabilitiesB) Restrictions imposed by the bankruptcy court on day-to-day transactionsC) It is less costly than filing Chapter 7.D) The opportunity to cancel unfavorable contracts

Q: Using the above table, what is the total utility of the third piece of pizza?A) 75 utils B) 0 utils C) 25 utils D) -25 utils

Q: Based on the outcomes in the following table, choose which of the statements below is (are) correct?I. The covariance of security A and security B is zero.II. The correlation coefficient between securities A and C is negative.III. The correlation coefficient between securities B and C is positive.A. I onlyB. I and II onlyC. II and III onlyD. I, II, and III

Q: Which of the following does not occur for a trustee in a Chapter 7 bankruptcy case?A) Gains and losses on the sale of assets are debited to the estate equity account.B) Unrecorded liabilities discovered by the trustee are debited to the estate equity account and credited to the liability account.C) Liquidation expenses are debited to the estate equity account.D) An income statement is prepared showing gains and losses on sale of assets.

Q: Two items which have a negative cross price elasticity of demand are referred to asA) luxury goods. B) inferior goods. C) substitutes. D) complements.

Q: Many current and retired Enron Corp. employees had their 401k retirement accounts wiped out when Enron collapsed because ________. A. they had to pay huge fines for obstruction of justice B. their 401k accounts were held outside the company C. their 401k accounts were not well diversified D. none of these options

Q: In a Chapter 7 bankruptcy case, what is the first-to-last ranking order of priority for payment? (Use the following list of claim types.)I. stockholder claimsII. unsecured priority claimsIII. secured claimsIV. unsecured nonpriority claimsA) I, II, IV, and IIIB) III, II, IV, and IC) III, I, IV, and IID) II, IV, III, and I

Q: The price elasticity of demand is theA) percentage change in quantity demanded divided by the percentage change in price. B) change in quantity demanded divided by the change in price.C) percentage change in price divided by the percentage change in quantity demanded. D) change in price divided by the change in quantity demanded.

Q: The _______ decision should take precedence over the _____ decision. A. asset allocation; stock selection B. bond selection; mutual fund selection C. stock selection; asset allocation D. stock selection; mutual fund selection

Q: Creditor committees are electedA) in all bankruptcy cases.B) in Chapter 7 cases.C) only in bankruptcy cases arising from involuntary petitions.D) in Chapter 11 cases.

Q: Buffalo in the United States almost became extinct while cattle have never been close to extinction. The difference is due toA) the greater marginal value of a buffalo relative to a head of cattle, leading to greater ʺharvestingʺ of buffalo.B) the use of private property rights on cattle and common property rights on buffalo.C) the greater marginal value of a head of cattle relative to buffalo, leading to over -hunting of buffalo.D) the differences in size between the two animals, and the effect of size differences on the costs of hunting them.

Q: Risk that can be eliminated through diversification is called ______ risk. A. unique B. firm-specific C. diversifiable D. all of these options

Q: A primary difference between voluntary and involuntary bankruptcy petitions is thatA) creditors file the petition in an involuntary filing.B) trustees are not used in an voluntary filing.C) voluntary petitions are not subject to review by the bankruptcy court.D) the debtor corporation files the petition in an involuntary filing.

Q: Rising health care spending is a problem confronting the federal government becauseA) it is the governmentʹs job to make sure everyone receives the health care they need.B) federal spending on health care has increased rapidly over the last thirty years.C) the federal-funded VA hospitals have been expanding faster than government revenues can provide for.D) the medical expenses of federal employees has been rising at a rate much faster than for non-federal workers.

Q: The plot of a security's excess return relative to the market's excess return is called the _______. A. efficient frontier B.security characteristic line C. capital allocation line D. capital market line

Q: A petition commencing a case against a corporate debtorA) can be filed only under Chapter 7 of the bankruptcy act.B) can be filed only under Chapter 11 of the bankruptcy act.C) can be filed under either Chapter 7 or Chapter 11 of the bankruptcy act.D) will be determined by the trustee whether it shall be Chapter 7 or Chapter 11 of the bankruptcy act.

Q: The graph which represents the distribution of income in an economy is called theA) Laffer curve. B) Lorenz curve.C) distribution curve. D) aggregate demand curve.

Q: Lear Corp. has an expected excessreturn of 8% next year. Assume Lear's beta is 1.43. If the economy booms and the stock market beats expectations by 5%, what was Lear's actual excess return? A. 7.15% B. 13% C. 15.15% D. 18.59 %

Q: A single creditorA) can never file a petition for bankruptcy.B) with a $12,300 or more secured claim may file a petition for bankruptcy.C) with a $12,300 or more unsecured claim may file a petition for bankruptcy, if there are fewer than 12 unsecured creditors.D) with a $12,300 or more unsecured claim may file a petition for bankruptcy if there are more than 12 unsecured creditors.

Q: The employees of Ajax cookies are on strike. Jane has decided not to shop at any store that is still selling Ajax cookies. This is known asA) a closed shop. B) a union shop.C) a sympathy strike. D) a secondary boycott.

Q: The portfolio with the lowest standard deviation for any risk premium is called the_______. A. CAL portfolio B. efficient frontier portfolio C. global minimum variance portfolio D. optimal risky portfolio

Q: In a liquidation under Chapter 7, the trusteeA) may not be appointed, but may only be elected.B) may not be elected, but may only be appointed.C) is responsible for converting assets to cash and distributing payments to claimants.D) is responsible for appointing a creditors' committee.

Q: Which of the following statements is true?A) A firm cannot increase quantity demand for labor when the wage rate falls without causing the product price to decline.B) A movement along the market demand curve for labor does not require a change in the product price.C) A firm can increase quantity demanded for labor when the wage rate falls without affecting the product price but the industry cannot hire more workers without causing the product price to fall.D) Both a firm and the industry can move down their demand curves for labor without causing product price to change.

Q: The efficient frontier represents a set of portfolios that A. maximize expected return for a given level of risk. B. minimize expected return for a given level of risk. C. maximize risk for a given level of return. D. None of the options.

Q: Chapter 7 bankruptcy cases differ from Chapter 11 bankruptcy cases because Chapter 7 bankruptcyA) is involuntary.B) requires a reorganization plan that is approved by the court.C) requires the debtor corporation to file a list of creditors, schedule of assets and liabilities, and work with a trustee.D) leads to full liquidation of the bankrupt company.

Q: If antitrust legislation is successful, then A) firms will produce the quantity at which marginal cost equals marginal revenue. B) most firms will be earning a positive economic profit. C) the price of each item will equal its marginal social opportunity costs. D) natural monopoly will be eliminated.

Q: In the article "Danger: High Levels of Company Stock," what is the maximum amount of your employer's stock that the author recommends you hold in your retirement account? A. 5% B. 10% C. 50% D. 90%

Q: The duties of a debtor in possession in a Chapter 11 bankruptcy case do not includeA) filing a list of creditors and schedules of assets and liabilities with the bankruptcy court.B) operating the business during the reorganization period.C) filing a reorganization plan.D) issuing an order of relief.

Q: The market structure of perfect competition exists whenA) there are a small number of interdependent firms that constitute the entire market. B) there is a single producer of a product.C) there are many producers of differentiated products. D) there are many producers of a homogeneous product.

Q: The figures below show plots of monthly excess returns for two stocks plotted against excess returns for a market index.Which stock is riskier to a nondiversified investor who puts all his money in only one of these stocks?A. Stock A is riskier.B. Stock B is riskier.C. Both stocks are equally risky.D. The answer cannot be determined from the information given.

Q: A bankruptcy petition filed by a firm's creditors isA) a Chapter 2 petition.B) a petition for liquidation.C) an involuntary petition.D) a voluntary petition.

Q: Over the past several decades, U.S. firms have faced more competition from overseas firms. Does this have any impact on the market power of U.S. oligopoly firms?A) No, because domestic firms in oligopoly markets are always so dominant that overseas producers have little or no impact on those markets.B) No, because the United States government has effectively blocked all imports that might compete with domestic firms in oligopoly industries.C) Yes, competition from overseas firms can substantially limit domestic firmsʹ market power. D) There is no way to know.

Q: When a corporation's total liabilities are greater than the fair value of total assets, the firm isA) a distressed corporation.B) a bankrupt corporation.C) insolvent in the equity sense.D) insolvent in the bankruptcy sense.

Q: The demand curve faced by a monopolistically competitive firms isA) horizontal. B) vertical.C) downward sloping. D) unitary elastic.

Q: A project has a 50% chance of doubling your investment in 1 year and a 50% chance of losing half your money. What is the expected return on this investment project? A. 0% B. 25% C. 50% D. 75%

Q: Which of the following must approve a Chapter 11 plan?A) The organization's management and the assigned trusteeB) The assigned trustee and creditorsC) The assigned trustee and entity's stockholdersD) The bankruptcy court and the creditors

Q: A monopoly sells 5 units of output at $20. If the MR of the 6th unit is $14, then the price of the 6th unit isA) also $14. B) $17. C) greater than $20. D) $19.

Q: A project has a 60% chance of doubling your investment in 1 year and a 40% chance of losing half your money. What is the standard deviation of this investment? A. 25% B. 50% C. 62% D. 73%

Q: When the bankruptcy court grants an order for relief under Chapter 7,A) creditors may not seek payment for their claims directly from the debtor corporation.B) the reorganization plan was accepted by creditors having at least one-half of the total number of claims and the claims represent at least two-thirds of the total amount owed.C) the bankruptcy court confirms that the reorganization plan is fair and equitable to creditors.D) the court discharges the debtor except for those claims provided for in the reorganization plan.

Q: Refer to the above figure. A perfectly competitive firm that is in long -run equilibrium will be operatingA) with positive economic profits. B) at a quantity greater than point E. C) at a quantity less than point E. D) at point E.

Q: The expected return of a portfolio is 8.9%, and the risk-free rate is 3.5%. If the portfolio standard deviation is 12%, what is the reward-to-variability ratio of the portfolio?A. 0B. .45C. .74D. 1.35

Q: The year-end balance sheet and residual profit and loss sharing percentages for the Gary, Harold, and Ivan partnership on December 31, 2011, are as follows: Cash $ 60,000 Accounts payable $ 150,000 Loan to Gary 50,000 Loan from Harold 50,000 Other assets 360,000 Gary, capital (25%) 70,000 Harold, capital (25%) 80,000 Ivan, capital (50%) 120,000 Total assets $ 470,000 Total liab./equity $ 470,000 The partners agree to liquidate the business and distribute cash when it becomes available. A cash distribution plan is developed with vulnerability rankings for the Gary, Harold and Ivan partnership. After outside creditors are paid, the cash available will initially go to A) Gary in the amount of $20,000. B) Harold in the amount of $50,000. C) Harold in the amount of $70,000. D) Ivan in the amount of $40,000.

Q: The rate of production at which marginal revenue equals marginal cost isA) a point of negative profits for the firm.B) what determines the equilibrium price in the market. C) the firmʹs shutdown point.D) the point where profits are maximized.

Q: What is the standard deviation of a portfolio of two stocks given the following data: Stock A has a standard deviation of 30%. Stock B has a standard deviation of 18%. The portfolio contains 60% of stock A, and the correlation coefficient between the two stocks is -1.A. 0%B. 10.8%C. 18%D. 24%

Q: If all partners are included in the first installment of an installment liquidation, then in future installments A) cash will be distributed according to the residual profit and loss sharing ratios. B) cash should not be distributed until all non-cash assets are converted into cash. C) vulnerability rankings for each partner should be prepared. D) a cash distribution plan must be prepared so that partners will know when they will be included in cash distributions.

Q: Assume that in the short run a firm is producing 100 units of output, has average total costs of $100, and average fixed costs of $20. The firmʹs total variable cost at this output level isA) $120. B) $80. C) $8,000. D) $12,000.

Q: In partnership liquidations, what are safe payments? A) The amounts of distributions that can be made to the partners, after all creditors have been paid in full. B) The amounts of distributions that can be made to the partners with assurance that such amounts will not have to be returned to the partnership. C) The amounts of distributions that can be made to the partners, after all non-cash assets have been adjusted to fair market value. D) The amounts of distributions that can be made to the partners during the liquidation based on the partner's contributed capital return.

Q: Which of the following is a correct expression concerning the formula for the standard deviation of returns of a two-asset portfolio where the correlation coefficient is positive? A. σ2rp < (W12σ12 + W22σ22) B. σ2rp = (W12σ12 + W22σ22) C. σ2rp = (W12σ12 - W22σ22) D. σ2rp > (W12σ12 + W22σ22)

Q: Ajax Corporation has recently finished building a new factory. They moved into the factory a month ago and found that it is the perfect size given the amount they want to produce. Ajax is operating in theA) production time. B) corporation time.C) long run. D) short run.

Q: What is the proper disposition of a partnership loan that was made from a partner who has a debit balance in the capital account? A) The loan is ignored in liquidation. B) The loan is offset against the debit balance in the capital account. C) The loan is charged off to the capital accounts of all the partners in their profit and loss sharing ratios. D) The loan is held for payment after all other capital accounts are covered.

Q: You are considering adding a new security to your portfolio. To decide whether you should add the security, you need to know the security's: I. Expected return II. Standard deviation III. Correlation with your portfolio A. I only B. I and II only C. I and III only D. I, II, and III

Q: When economic profits are negative, accounting profitsA) must be positive. B) will be negative.C) will equal zero. D) could be positive, negative or zero.

Q: Que, Rae, and Sye are in the process of liquidating their partnership. Sye has agreed to accept the inventory, which has a fair value of $60,000, as part of her settlement. A balance sheet and the residual profit and loss sharing percentages are as follows: Cash $ 248,000 Accounts payable $ 180,000 Inventory 100,000 Que, capital (40%) 98,000 Plant assets 280,000 Rae, capital (40%) 175,000 Sye, capital (20%) 175,000 Total assets $ 628,000 Total liab./equity $ 628,000 If the partners then distribute the available cash using a safe payments schedule, Sye will receive A) $ 41,000 cash. B) $ 51,000 cash. C) $107,000 cash. D) $175,000 cash.

Q: As you lengthen the time horizon of your investment period and decide to invest for multiple years, you will find that: I. The average risk per year may be smaller over longer investment horizons. II. The overall risk of your investment will compound over time. III. Your overall risk on the investment will fall. A. I only B. I and II only C. III only D. I, II, and III

Q: The quantities of Good M are plotted on the vertical axis while the quantities of Good N are plotted on the horizontal axis. The prices of both M and N fall. The intercepts of the budget line would A) decline along both axes. B) rise on the vertical axis and also rise on the horizontal axis. C) rise on the horizontal axis but stay unchanged on the vertical axis. D) rise on the vertical axis but stay unchanged along the horizontal axis.

Q: Use the following information to answer the question(s) below.Lola, Melvin, and Nettie are in the process of liquidating their partnership. Since it may take several months to convert the other assets into cash, the partners agree to distribute all available cash immediately, except for $12,000 that is set aside for contingent expenses. The balance sheet and residual profit and loss sharing percentages are as follows:Cash $ 500,000 Accounts payable $ 225,000Other assets 225,000 Lola, capital (20%) 168,000Melvin, capital (30%) 270,000Nettie, capital (50%) 62,000Total assets $ 725,000 Total liab./equity $ 725,000Using a safe payment schedule, how much cash should Lola receive in the first distribution?A) $ 81,000B) $ 98,000C) $168,600D) $202,500

Q: A portfolio of stocks fluctuates when the Treasury yields change. Since this risk cannot be eliminated through diversification, it is called __________. A. firm-specific risk B. systematic risk C. unique risk D. none of the options

Q: Using the above table, what is the maximum number of slices of pizza a rational consumer would buy?A) 4 B) 3 C) 2 D) 1

Q: Investing in two assets with a correlation coefficient of 1 will reduce which kind of risk? A. market risk B. unique risk C. unsystematic risk D. none of these options (With a correlation of 1, no risk will be reduced.)

Q: Two items which have a positive cross price elasticity of demand are referred to asA) luxury goods. B) inferior goods. C) substitutes. D) complements.

Q: Use the following information to answer the question(s) below.On June 30, 2011, the Able, Baker, and Charlie partnership had the following fiscal year-end balance sheet:Cash $ 8,000 Accounts payable $ 14,000Accounts receivable 12,000 Loan from Charlie 10,000Inventory 28,000 Able, capital (20%) 28,000Plant assets-net 24,000 Baker, capital (20%) 20,000Loan to Able 12,000 Charlie,capital (60%) 12,000Total assets $ 84,000 Total liab./equity $ 84,000The percentages shown are the residual profit and loss sharing ratios. The partners dissolved the partnership on July 1, 2011, and began the liquidation process. During July the following events occurred:* Receivables of $6,000 were collected.* All inventory was sold for $8,000.* All available cash was distributed on July 31, except for$4,000 that was set aside for contingent expenses.How much cash would Able receive from the cash that is available for distribution on July 31? (Assume a safe payments schedule is used.)A) $ 0B) $ 800C) $2,400D) $4,000

Q: Investing in two assets with a correlation coefficient of -.5 will reduce what kind of risk? A. market risk B. nondiversifiable risk C. systematic risk D. unique risk

Q: Price elasticity of demand is the responsiveness of A) the quantity demanded to a change in price. B) demand to a change in supply.C) demand to a change in income.D) demand for a good to a change in the demand for another good.

Q: What is the most likely correlation coefficient between a stock-index mutual fund and the S&P 500? A. -1 B. 0 C. 1 D. .5

Q: Common property isA) property that has mineral or oil deposits.B) a resource that everyone is free to use as much as they want. C) property owned by a group such as a club.D) property that has little economic value.

Q: Which of the following correlation coefficients will produce the most diversification benefits? A. -.6 B. -.9 C. 0 D. .4

Q: The impact of technological change in the health -care area has been to A) increase both the quality of health care and the monetary costs of health care. B) increase the monetary costs of health care and decrease the quality of health care. C) decrease the monetary costs of health care while decreasing the quality of health care. D) increase longevity but decrease quality of life.

Q: Which of the following correlation coefficients will produce the least diversification benefit? A. -.6 B. -.3 C. 0 D. .8

Q: The Lorenz curve showsA) the demand for jobs. B) the supply of jobs.C) the elasticity of jobs. D) the distribution of income.

Q: If you want to know the portfolio standard deviation for a three-stock portfolio, you will have to ______. A. calculate two covariances and one trivariance B. calculate only two covariances C. calculate three covariances D. average the variances of the individual stocks

Q: If conditions produce a debit balance in a partner's capital account when liquidation losses are allocated, then A) the partner receives further allocations of liquidation losses, but not gains. B) the partner receives further allocations of liquidation gains, but not losses. C) the partner is no longer obligated to partnership creditors. D) the partner has an obligation of personal net assets to the other partners.

Q: A jurisdictional dispute is aA) strike by a union in sympathy with another unionʹs strike or cause.B) dispute involving two or more unions over which should have control of a particular jurisdiction.C) business enterprise in which employees must belong to the union before they can be hired and must remain in the union after they are hired.D) legal environment in which businesses may hire nonunion members conditional on their joining the union by some specified date after employment begins.

Q: Decreasing the number of stocks in a portfolio from 50 to 10 would likely ________________. A. increase the systematic risk of the portfolio B. increase the unsystematic risk of the portfolio C. increase the return of the portfolio D. decrease the variation in returns the investor faces in any one year

Q: A simple partnership liquidation requires A) periodic payments to creditors and partners determined by a safe payments schedule. B) partnership assets to be converted into cash with full payment made to all outside creditors before remaining cash is distributed to partners. C) only creditors to be paid in an orderly manner. D) periodic payments to partners as cash becomes available.

Q: What has been the impact of the widespread adoption of automated teller machines (ATMs) on the demand for bank tellers?A) The demand for tellers has increased.B) The demand for bank tellers has become more inelastic.C) The demand for bank tellers has become more elastic.D) There has been no change because the ATMs and the employees provide completely different services.

Q: The stock is ______ riskier than the typical stock.A. 32%B. 15.44%C. 12%D. 38%

Q: In partnership liquidation, how are partner salary allocations treated? A) Salary allocations take precedence over creditor payments. B) Salary allocations take precedence over amounts due to partners with respect to their capital interests, but not profits. C) Salary allocations take precedence over amounts due to partners with respect to their capital profits, but not capital interests. D) Salary allocations are disregarded.

Q: The idea behind antitrust legislation is toA) promote competition in the market. B) justify deregulation of industries. C) implement contestable markets. D) create larger firms.