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Economic
Q:
Federal deposit insurance has prevented the failure of depository institutions.
a. True
b. False
Q:
The owners of preferred stockA) receive preferential treatment in the payment of dividends.B) have the same voting rights as owners of common stock. C) are the original owners of the corporation.D) have the same rights as bondholders.
Q:
Mutual savings banks are owned by depositors, as are mutual S&Ls.
a. True
b. False
Q:
Another term to describe the normal rate of return on capital is theA) fixed cost of capital. B) depreciation cost of capital.C) opportunity cost of capital. D) monopoly rent.
Q:
The Federal Reserve System controls the money supply and is not a bank regulator.
a. True
b. False
Q:
The diamond-water paradox illustrates the idea that determines what consumers are willing to pay for a particular good.A) total utility B) the real-income effectC) marginal utility D) the substitution effect
Q:
Federal deposit insurance has prevented widespread bank failures and panics.
a. True
b. False
Q:
The additional utility or satisfaction that one derives from consuming one more unit of any good or service is referred to asA) total utility. B) substantive utility. C) average utility. D) marginal utility.
Q:
Demand deposits represent the largest asset category for commercial banks.
a. True
b. False
Q:
The demand for diet soft drinks (as a group) is relatively inelastic because
A) there are many of them on the market.
B) there are few substitutes.
C) the purchase of a soft drink represents a large portion of a personʹs budget.
D) none of the above.
Q:
The Federal Reserve can change the level of member bank reserves as well as reserve requirements.
a. True
b. False
Q:
Your neighbor has just planted some fragrant flowers. The wonderful scent drifts into your room and makes you happy.
A) This scent is an internal cost to you.
B) This cannot be an externality since you are enjoying the scent.
C) This is an externality since you get a benefit from your neighborʹs flowers.
D) The social cost of this activity is entirely borne by you neighbor.
Q:
An increase in the money supply does not affect the supply of loanable funds.
a. True
b. False
Q:
Which of the following is considered a contributive standard for the distribution of income?
A) rewarding workers according to their productivity
B) rewarding workers according to their needs
C) rewarding workers according to the number of their dependents
D) all of the above
Q:
The primary function of the Federal Reserve is economic stabilization through control of the level and growth of the money supply.
a. True
b. False
Q:
For a monopsonist, marginal factor cost exceeds the wage rate sinceA) more workers have to be paid the prevailing wage rate.B) the supply of labor is perfectly elastic.C) when new workers are hired the wage rate must be increased for all workers and not just for the additional workers.D) the labor demand is downward sloping.
Q:
The Federal Open Market Committee basically establishes our nation's monetary policy.
a. True
b. False
Q:
If a perfectly competitive firm is currently employing workers to the point where the value of the last workerʹs marginal product is equal to the wage rate, and the government imposes a minimum wage higher than the value of the workerʹs marginal product, we can predict thatA) the firm will pay the higher wage rate and not change the number of workers hired. B) the firm will no longer employ the marginal worker.C) the firm will increase its price.D) the firm will employ more workers.
Q:
A firm should hire workers up to the point whereA) MP = P. B) MFC = P. C) MFC = MRP. D) MP = MRP.
Q:
Depository institutions create money when they use their excess reserves to make loans or acquire new investments.
a. True
b. False
Q:
The Federal Reserve has a major influence on financial markets.
a. True
b. False
Q:
The potential for a decline in product quality due to asymmetric information is commonly referred to asA) the lemons problem. B) planned obsolescence. C) diminishing marginal product. D) the externality problem.
Q:
The primary regulator of investment companies, such as mutual funds, is the Securities and Exchange Commission (SEC).
a. True
b. False
Q:
A cartel will break down more easily ifA) there are only a few members. B) industry demand is very stable.C) market prices can be observed easily. D) there are many entrants in the industry.
Q:
With 100 percent reserve banking, little or no lending is possible.
a. True
b. False
Q:
Products such as office supplies are examples ofA) experience goods. B) simple goods.C) search goods. D) selective goods.
Q:
Goldsmiths became banks when they began to hold fractional reserves and make loans.
a. True
b. False
Q:
A good example of a monopolistic competitive industry isA) the U.S. auto industry. B) the public utility industry.C) the computer game industry. D) mining.
Q:
Banks are regulated because they provide several important services to their local and national economies.
a. True
b. False
Q:
The MR curve of a monopolist isA) downward sloping and below the demand curve. B) downsloping and identical to the demand curve. C) downsloping and above the demand curve.D) horizontal and same as the market demand curve.
Q:
The market demand curve in perfect competition is found byA) horizontally summing the supply curves of the individual firms in the industry.B) horizontally summing the demand curves of the individual consumers. C) utility maximizing behavior of the ʺrepresentative consumer.ʺD) the interaction of supply and demand at the individual firm and consumer levels.
Q:
Bank panics can cause an economic recession.
a. True
b. False
Q:
Fractional reserves mean that banks maintain less than 100 percent of customer deposits in liquid assets, or reserves.
a. True
b. False
Q:
Which of the following statements is correct?A) The demand curve of the perfectly competitive industry is elastic as are the demand curves facing the individual firms.B) The market demand curve of perfect competition is inelastic because the individual consumers are buying a homogeneous product.C) The market demand curve of the perfectly competitive industry is downward sloping while the demand curve of an individual firm is horizontal with a height equal to the product price.D) The market demand curve of the perfectly competitive industry is downward sloping, so the demand curves of the individual firms are also downward sloping.
Q:
A mutual fund that invests primarily in short-term, low risk securities like commercial paper and Treasury bills are called ____ mutual funds.
a. value
b. growth
c. money market
d. indexed
Q:
QTFCTVCTC0$90$ 0$ 901902511529032122390421324906415459095185Refer to the above table. What is MC when output rises from 0 unit to 1 unit?A) $0 B) $25 C) $90 D) $115
Q:
Which of the following is not a benefit associated with financial intermediaries?
a. reduced costs
b. fund indivisibility
c. financial flexibility
d. diversification of risk
Q:
A difference between a share of stock in a corporation and a corporate bond is that
A) the share of stock is a legal claim while the bond is not.
B) the bond owner has voting rights within the corporation whereas the stockholder does not.
C) the bond owner is entitled to receive a fixed annual coupon payment plus a lump -sum payment at the bondʹs maturity date, whereas the stockholder is entitled to a share of future profits.
D) stocks are issued in return for funds that are lent to the corporation.
Q:
Which of the following is not a major provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010?
a. New organizations to protect and inform consumers will be created
b. greater transparency for trading exotic securities will be required
c. stockholders will be permitted to have a say on corporate governance, including executive compensation, through nonbinding votes
d. Fannie Mae and Freddie Mac will be liquidated
Q:
Economists also refer to the normal rate of return on investment asA) a residual cost. B) the opportunity cost of capital.C) the equity kicker. D) the fixed cost of entrepreneurship.
Q:
All financial markets are physical locations in which parties meet to exchange financial assets.
a. True
b. False
Q:
The total utility of water isA) lower than the total and marginal utility of diamonds.B) lower than the total utility of diamonds, but the marginal utility is higher.C) higher than the total utility of diamonds, but the marginal utility of diamonds is higher. D) the same as the total utility of diamonds, but the marginal utilities are the same.
Q:
A prospectus is a document describing a new security issue and the issuing company.
a. True
b. False
Q:
Marginal utilityA) at first rises and then declines as a person consumes more of a good or service. B) can be thought of as being the equivalent to total utility.C) equals the total satisfaction from consumption of goods and services.D) is stable, but then as a person consumes more of a good or service, has a propensity to increase.
Q:
The largest segment of the U.S. debt market is represented by the bond markets, where government, corporate, and foreign bonds are traded.
a. True
b. False
Q:
Which of the following goods is most likely to have the lowest price elasticity?A) Movie tickets B) DVD rentals C) Gasoline D) Pasta
Q:
A best efforts arrangement is an agreement for the sale of securities in which the investment bank guarantees the sale by purchasing the securities from the issuer, thus agreeing to bear any risks involved in the transaction.
a. True
b. False
Q:
An externality refers to the idea that
A) explicit costs differ from implicit costs.
B) decision-makers do not internalize all the costs.
C) we cannot do anything that does not affect other people.
D) private and internal costs differ.
Q:
The primary function of the money markets is to provide liquidity to businesses, governments, and individuals so that they can meet their short-term needs for cash.
a. True
b. False
Q:
If we were to pay everyone exactly the same incomeA) there would be a large amount of economic growth.B) there would be no incentive to invest in human capital.C) more people would seek an education. D) productivity would increase.
Q:
A monopsonist in the labor market has
A) a perfectly elastic labor supply.
B) a decreasing average variable cost.
C) an upward sloping labor supply curve.
D) a downward sloping marginal revenue product curve.
Q:
Informational efficiency generally exists when the financial markets have a large number of participants in search of the most profitable investments.
a. True
b. False
Q:
Profit maximization occurs whereA) each factor is used up to the point where its marginal revenue product is equal to its marginal factor cost.B) each factor is used up to the point where its marginal physical product is equal to its marginal factor cost.C) average variable cost equals marginal cost.D) average variable cost equals average total cost.
Q:
Market efficiency refers only to the speed at which financial transactions occur.
a. True
b. False
Q:
The primary role of financial markets is to help bring together borrowers and savers by facilitating the flow of funds from individuals and businesses that have surplus funds to individuals, businesses, and governments that have needs for funds in excess of their income.
a. True
b. False
Q:
If MFC > MRPL, the firm shouldA) hire more workers. B) lower wages.C) get rid of some capital. D) reduce the number of workers.
Q:
When a firm issues new equity, market pressure applies first to the new shares issued and then to existing shares. Subsequent to the new issue, the value of the new shares will rise to the equilibrium price of the old shares.
a. True
b. False
Q:
The two most important rationales for government intervention in non -monopolistic markets areA) market failure and asymmetric information.B) substandard products and job creation for public employees.C) job creation and income maintenance. D) unfair pricing and usury.
Q:
A member in a cartel can earn more profits byA) charging a slightly lower price and raising production. B) producing less than the agreed rate.C) selling less than the agreed amount. D) none of the above.
Q:
In general, when a firm decides to raise capital there are stage I and stage II decisions. Stage I decisions include the amount to be raised and the type of security to be issued. Once the type of security is chosen this is a decision that cannot be changed in stage II.
a. True
b. False
Q:
Advertising intended to induce a consumer to discover a previously unknown taste or preference isA) persuasive advertising. B) informational advertising.C) direct advertising. D) mass marketing advertising.
Q:
Investment bankers are not really like commercial "bankers" in the sense of taking deposits and issuing loans; rather, they help firms issue securities in the secondary market and their activities are limited to raising new equity capital.
a. True
b. False
Q:
Monopolistic competition is characterized byA) relative ease of entry into the market. B) a standard, undifferentiated product. C) persistent long-run economic profits.D) production at minimum average cost in the long run.
Q:
The cost of meeting SEC and possible additional state reporting requirements regarding disclosure of certain financial information about the firm, the danger of losing control, and the possibility of an inactive market or low stock price are all potential disadvantages of going public.
a. True
b. False
Q:
PriceQuantity$191118121713161415151416Given the data in the above table, the marginal revenue curveA) lies below the demand curve. B) lies above the demand curve. C) intersects the demand curve. D) is equal to the demand curve.
Q:
Going public establishes a true market value for the firm and ensures that a liquid market will always exist for the firm's shares.
a. True
b. False
Q:
Under perfect competition, the demand curve facing the firm is determined by
A) the intersection of the industry demand and supply curves.
B) the tastes and preferences of consumers.
C) utility maximizing behavior on the part of consumers.
D) the willingness of the firm to supply the good.
Q:
The market value of the Japanese stock markets exceeds the market value of the major exchanges in the United States.
a. True
b. False
Q:
Which of the following statements is correct about the demand curve of the perfectly competitive industry?A) The demand curve of the perfectly competitive industry is horizontal as are the demand curves facing the individual firms.B) The market demand curve of perfect competition is vertical because the individual consumers are buying a homogeneous product.C) The market demand curve of the perfectly competitive industry is downward sloping while the demand curve facing an individual firm is horizontal.D) The market demand curve of the perfectly competitive industry is downward sloping, so the demand curves of the individual firms are also downward sloping.
Q:
On average, stock markets in emerging economies have grown much more rapidly than stock markets in developed economies during the past decade.
a. True
b. False
Q:
QTFCTVCTC0$90$ 0$ 901902511529032122390421324906415459095185Refer to the above table. What is AVC at an output of 2 units?A) $7 B) $16 C) $45 D) $61
Q:
After a new issue is brought to market it is the marginal investor who determines the price at which the stock will trade.
a. True
b. False
Q:
In which of the following ways can a corporation raise new funds for investment?I. Issuing new shares of stockII. Having existing stock resold between two ownersA) I only B) II only C) Both I and II D) Neither I nor II
Q:
The percentage of flotation costs associated with a new equity issue is usually quite high for small issues as a consequence of certain fixed costs which must be incurred regardless of the issue size.
a. True
b. False
Q:
One reason investment bankers form syndicates is to spread the risk of potential losses.
a. True
b. False
Q:
Implicit costs areA) the costs of using factors that a producer hires or rents.B) the opportunity costs of using factors that a producer does not buy or hire but already owns.C) costs that are taken into consideration by accountants.D) costs that are variable in the short run and fixed in the long run.
Q:
When stock in a closely held corporation is offered to the public for the first time the transaction is called "going public" and the market for such stock is called the initial public offering, or IPO, market.
a. True
b. False
Q:
The law of demand is derived under the assumption ofA) constant prices.B) constant real incomes.C) constant consumer tastes and preferences.D) constant marginal utility.
Q:
The OTC market is a physical exchange, much like the New York Stock Exchange, where securities dealers provide trading in unlisted securities.
a. True
b. False
Q:
Kathleen eats three TV dinners. The third TV dinner makes Kathleen sick. This means that for KathleenA) the third TV dinner has little utility.B) the third TV dinner has negative utility.C) the opportunity cost of TV dinners is high. D) TV dinners must be inexpensive.