Q&A Hero

Q: Managerial finance refers to analysis and management of one's investment portfolio. a. True b. False

Q: Quantity of Movies Watched per WeekMichelleʹs Total Utility per WeekRobertʹs Total Utility per Week00011001002195190327027043403405390400642035074353908445420945044010440450Refer to the above table. The marginal utility of the 2nd movie for Robert is A) 95 units of utility. B) 90 units of utility. C) 80 units of utility. D) 190 units of utility.

Q: The study of finance consists of three areas⎯financial markets, investments, and managerial finance⎯that are basically independent of each other, because you can be an expert in one area without having knowledge of the other two. a. True b. False

Q: Refer to the above figure. Demand will be inelastic when quantity is betweenA) 0 and A. B) 0 and B. C) A and B. D) B and C.

Q: The major areas included in the study of finance are information technology, investments and managerial finance. a. True b. False

Q: A method of forcing a company to internalize the total cost of production is A) to impose a tax on the company to reduce production. B) to provide a subsidy to encourage production. C) for government not to interfere in the companyʹs activities. D) to force the company to reduce the wages it pays to its employees.

Q: The major areas included in the study of finance are financial markets, investments, financial services, and managerial finance. a. True b. False

Q: The contributive standard of income distribution is met byA) setting wages according to marginal productivity. B) having a highly progressive income tax.C) having the government determine all wages.D) using local committees to determine the needs of families in the area.

Q: Most people in the United States have a thorough knowledge of finance as evidenced by their having high annual savings rate and a well-developed retirement plan. a. True b. False

Q: A practice which might force employers to use more labor than they would otherwise is referred to asA) wall propping. B) featherbedding. C) mothballing. D) yellow-dogging.

Q: Which of the following is consistent with maximizing the value of a firm? a. increasing the amount and complexity of financial data reported by the firm b. increasing the riskiness of firm c. spending large amounts of money perquisites for the managers d. following sound sustainable business practices e. None of the above

Q: Assume that a perfectly competitive firm faces a fixed wage rate of $4 and a constant per -unit cost of capital of $2. If the marginal product of labor and capital are 16 and 6, respectively, then to maximize profits the firm shouldA) use relatively more capital. B) use relatively less capital.C) increase all inputs proportionately. D) decrease all inputs proportionately.

Q: Which of the following is NOT an example of a firm becoming more of a "lean thinker" in its operations? a. simplifying financial reporting to avoid providing redundant or useless information b. developing products in the most efficient manner c. reducing scrap material being generated in the production process d. all of the above are examples of "lean thinking" e. none of the above are examples of "lean thinking"

Q: Number of WorkersTotal OutputNumber of WorkersTotal Output00694512007100024208102536209103547701010405870 Refer to the above table. Suppose the firm hires 4 workers and the price of the good sold is $4.The marginal factor cost of labor must beA) $4. B) $150. C) $3080. D) $600.

Q: Which of the following is NOT a concept that you need to understand to make rational financial decisions? a. More value is preferred to less value. b. Less risky assets are preferred to riskier assets. c. Current cash is more valuable than cash in the future. d. Discount rate is a decreasing function of risk. e. All of the above are needed.

Q: Which of the following is NOT a reason for the government to regulate a nonmonopolistic industry?A) To allow firms to achieve the profit maximizing output. B) Asymmetric information.C) To protect consumer interests.D) Market failures.

Q: Which of the following statements is not correct? a. Prior to the late 1950s and early 1960s, finance was taught primarily as a descriptive, institutional subject viewed more from the standpoint of an outsider than from that of the management of the firm. b. History has shown that the types of investments and methods used to analyze investment opportunities have changed as the attitudes of both investors and regulators have changed. c. When managerial finance emerged as a separate field of study in the early 1900s, the emphasis was on evaluation and analysis of investments because the economy was in excellent condition at the time, so most individuals had large sums of funds to invest in corporate securities. d. One of the responsibilities of the financial manager is to help determine which assets the firm should acquire and the best way to finance those assets. e. Sustainability is a long-run concept that focuses on improving the quality of life of all stakeholders, both current and future.

Q: Which of the following is LEAST likely to be an outcome of a cartel as compared to the situation before the cartel was formed?A) Cartel members charge higher prices. B) Cartel members reduce production.C) Cartel members make fewer profits.D) Cartel members do not compete with each other in pricing decisions.

Q: Which of the following is a correct statement? a. One of the tasks associated with managerial finance is the decision of when and how the firm should expand, whether the area of expansion is related to plant and equipment, existing product lines, the production of new product lines, or the purchase of a new information system to replace an obsolete system. b. As business becomes more global, U.S. companies will have a competitive advantage over their foreign counterparts because the regulatory environment in the United States is much less restrictive than in most other countries of the world. c. The purpose of much of the banking reform that took place in the 1930s was to expand the financial activities banks could undertake so that they could be more competitive internationally. d. It wasn't until the past couple of decades that the analytical tools we use today to evaluate investments were developed. Prior to the development of such tools, the concept that earnings and dividends are related to stock prices was unknown. e. All of the statements are correct.

Q: The goal of advertising is to A) pay for public broadcasting. B) differentiate a firmʹs product. C) overwhelm the buyer so they buy a firmʹs product. D) minimize cost curves for the firm.

Q: Why is it important for persons in marketing, accounting, production, and other areas in the firm to understand finance? a. Funds availability affects the firm's ability to increase inventory, change plant capacity, and so forth. b. Financial decisions are based on data provided by other functional areas of the firm; thus, it is in the best interests of such areas to provide the most optimistic information possible so that their projects seem most favorable. c. There is a good chance persons in marketing, accounting, production, and other areas will have to work in the finance area someday if they want to move up the corporate ladder. d. Payments of salaries and other expenses always pass through the finance area of the firm. e. All of the above are correct answers.

Q: If a monopoly situation arises from a perfectly competitive market, the portion of producer surplus that increases in a monopoly is transferred from the perfectly competitive marketʹs A) fixed cost. B) long-run positive economic profit.C) deadweight loss. D) consumer surplus.

Q: For a monopolist,A) marginal revenue is equal to price for all units being sold.B) marginal revenue is less than price for all units being sold except the first unit.C) marginal revenue is greater than price for all units being sold except for the first unit. D) there is no relationship between marginal revenue and price.

Q: What major factor(s) led to the U.S. economic woes which started in 2007? a. U.S. overseas military engagements. b. A decline in real estate values which resulted in increased mortgage defaults and foreclosures and a decline in financial markets. c. The European economic crisis. d. Inflation and manufacturing outsourcing. e. None of the above.

Q: Managerial finance entails making decisions about a. Investment portfolios held by individual investors. b. The regulation and deregulation of the banking industry. c. How businesses acquire and use (invest) funds. d. Which corporate stocks and bonds are mispriced in the financial markets. e. All of the above.

Q: An increase in the productivity of labor causes A) quantity supplied by each firm in a competitive industry to decrease. B) supply in a competitive industry to increase. C) the market price to increase in a competitive industry. D) the firmʹs supply curve to shift but has no effect on the industry supply curve.

Q: In a perfectly competitive industry, the industry demand curveA) must be horizontal. B) must be vertical.C) is upward sloping. D) is downward sloping.

Q: Which of the following factors is not a mandate toward globalization for many U.S. businesses? a. Improvements in transportation and shipping have lowered shipping costs worldwide. b. Political clout of consumers has tended to erode barriers designed to protect inefficient manufacturing in other countries. c. With development costs rising, firms must increase unit sales outside the United States to remain competitive. d. Firms must be able to produce where costs are lowest. e. All of the above are factors.

Q: How will knowledge in the area of investments help you in your personal life? a. To determine how much risk you are willing to take with your investment portfolio. b. To evaluate how well your investments are performing. c. To help you to select investments that always outperform the market. d. To help you to review companies when determining future growth prospects to include in your investment portfolio. e. Answers a, b, and d are correct.

Q: When Super Stuff Corporation produces 5,000 units, total costs equal $150,000 and total variable costs equal $75,000. At this level of output, what is Super Stuffʹs average fixed cost?A) $75,000 B) $30 C) $225,000 D) $15

Q: Which of the following is NOT one of the several new areas that managerial finance expanded to focus on in the 1980s? a. The dramatic increase in both the use of computers for analysis and the electronic transfer of information. b. The decreased importance of global markets and business operations c. The deregulation of financial institutions and the resulting trend toward large, broadly diversified financial services companies. d. Innovations in the financial products offered to investors e. Inflation and its effects on business decisions

Q: Suppose someone offered to give you $1,000,000 five years in the future and the anticipated interest rate is 5 percent. The present value of this offer would be worth approximatelyA) $784,000. B) $500,000. C) $1,050,000. D) $286,000

Q: A basic knowledge of finance will help you with your personal investments by helping you understand a. how to accurately predict changes in the short term interest rates. b. how to determine the optimal dividend policy for each firm. c. how to determine which technology is most likely to be accepted by consumers. d. how to review companies and industries to determine their prospects for future growth and the risk inherent in those companies and industries. e. how to predict the growth in sales for the firm.

Q: The double taxation of corporate profit in the United States refers to the fact thatA) tax rates on partnerships are very high. B) depreciation is not a deductible expense.C) corporate profit is first taxed and then any dividends paid are subject to personal income tax.D) proprietorships are not subject to any tax on earnings.

Q: Which of the following statements are true? a. The value of any investment is based on the cash flows it is expected to generate in the future. b. Investors are not generally risk averse. c. Uncertain cash flows are preferred to certain cash flows. d. All of the above are true. e. None of the above are true.

Q: Suppose the price of pizza is $2 and the consumer optimum is reached when MU/P = 3. Tomʹs preferences for pizza are shown in the above table. How many slices will Tom buy?A) 1 slice B) 2 slices C) 3 slices D) 4 slices

Q: Which of the following is NOT one of the most important trends in managerial finance from the 1990s that continued into the twenty-first century? a. Regulatory attitude of government b. Ongoing adaptation of electronic technology c. Focus on corporate liquidity d. Continued globalization of business e. All of the above

Q: Quantity of Movies Watched per WeekMichelleʹs Total Utility per WeekRobertʹs Total Utility per Week00011001002195190327027043403405390400642035074353908445420945044010440450Refer to the above table. The marginal utility of the 7th movie for Michelle isA) 15 units of utility. B) 20 units of utility.C) 35 units of utility. D) 435 units of utility.

Q: Which of the following are NOT factors that have made the trend toward globalization mandatory for many businesses? a. Lower trade barriers b. Demand for high-quality, low-cost products c. Increased volatility of exchange rates for foreign currency d. Increased development costs e. Improvements in transportation and communications.

Q: Refer to the above figure. Demand will be unit -elastic when quantity is betweenA) 0 and A. B) 0 and B. C) A and B. D) B and C.

Q: Worldwide Inc., a large conglomerate, has decided to acquire another firm. Analysts are forecasting a period (2 years) of extraordinary growth (20 percent), followed by another 2 years of unusual growth (10 percent), and finally a normal (sustainable) growth rate of 6 percent annually. If the last dividend was D0 = $1.00 per share and the required return is 8 percent, what should the market price be today? a. $93.70 b. $76 c. $99.66 d. $98.57 e. $68.87

Q: If external costs are included and added to a firmʹs private costs, thenA) the demand curve will shift to the right. B) the demand curve will shift to the left.C) the supply curve will shift to the right. D) the supply curve will shift to the left.

Q: The contributive standard (merit standard) for distributing income implies that A) income should be distributed equally. B) income should be distributed according to need. C) income should be distributed according to the marginal productivity of workers. D) a transfer should be contributed to an individual above his or her contribution to net output.

Q: A union requirement that a fireman has to be hired to work in a diesel locomotive would be an example ofA) work expansion. B) featherbedding.C) work requirements. D) work stabilization.

Q: In the employment of any resource, a firm shouldA) equate marginal revenue product with the cost of the additional resource.B) hire each input unit that adds more to revenue than it adds to costs.C) hire each input unit provided its marginal physical product is greater than zero.D) A and B are both correct.

Q: Number of WorkersTotal OutputNumber of WorkersTotal Output00694512007100024208102536209103547701010405870 Refer to the above table. Suppose the price of the good sold is $3 and the marginal factor cost of labor is $300, how many units of labor will the firm hire?A) 4. B) 5. C) 6. D) 3.

Q: The main rationale for government regulatory functions is A) to regulate for-profit institutions. B) to make sure that firms are maximizing profits. C) to expand the scope of the government. D) to protect consumer interests.

Q: The success of a cartel rests uponA) inducing all members to limit their combined output and charge the same price.B) inducing all members to differentiate their products and charge different prices. C) making exit from the cartel as nearly costless as possible.D) discouraging some firms in the market from joining.

Q: The goal of advertising is toA) increase the price elasticity of demand for the firmʹs product. B) reduce the price elasticity of demand for the firmʹs product. C) increase the standardization of the industry.D) encourage firms to enter into the industry.

Q: The portion of consumer surplus that would have existed in a perfectly competitive market but is unobtainable by anyone in society under a monopoly is known asA) monopoly profits.B) an unattainable surplus. C) a deadweight loss. D) an external cost.

Q: When considering marginal revenue for the monopolist, which of the following is FALSE?A) To sell more of a particular product, given the industry demand curve, the monopoly firm must lower the price.B) An essential point for the monopolist, marginal revenue is always less than price.C) Marginal revenue is always less than price because price must be reduced on all units to sell more.D) The more the monopolist wants to sell, the higher the price it has to charge in order to make more profits.

Q: Factors that cause the short-run supply curve to change are factors that affectA) demand. B) fixed costs.C) variable costs. D) the market but not the individual firm.

Q: For a firm in a perfectly competitive industry, the demand curve for its own product is A) downward sloping. B) vertical. C) always above the marginal revenue curve. D) the same as the marginal revenue curve.

Q: Average fixed costs willA) rise as output rises. B) fall then rise as output rises.C) rise then fall as output rises. D) fall as output rises.

Q: If the interest rate is 10 percent per year, and you have $100,000 now, which of the following is closest to what your $100,000 will be worth in four years?A) $175,000 B) $125,000 C) $146,000D) $190,000

Q: Corporations have a separation and control problem becauseA) owners and managers frequently have different incentives. B) most of the profits are reinvested.C) the shareholders control the firm.D) taxes are paid only by the board of directors.

Q: When an individualʹs purchasing power changes due to a change in the price of a good or service, this is referred to asA) marginal effect. B) real-income effect. C) substitution effect. D) utility effect.

Q: Quantity of Movies Watched per WeekMichelleʹs Total Utility per WeekRobertʹs Total Utility per Week00011001002195190327027043403405390400642035074353908445420945044010440450Refer to the above table. The marginal utility of the 5th movie for Michelle isA) 40 units of utility. B) 50 units of utility.C) 60 units of utility. D) 390 units of utility.

Q: Refer to the above figure. Demand will be elastic when quantity is betweenA) 0 and A. B) 0 and B. C) A and B. D) B and C.

Q: Which of the following is NOT a possible solution to the problem of pollution? A) Subsidizing the costs of production of activities that generate pollution B) Converting a resource that is communally owned into a privately owned resource C) Regulating the quantity of pollution that can be generated D) Imposing a pollution tax on producers

Q: One productivity standard for income distribution stated in the text isA) income distribution should be based on contribution to societyʹs total output.B) tax payments are higher for higher income people. C) poor people pay too much in taxes.D) the poor should contribute more to society.

Q: Featherbedding means thatA) company management receives a cut from the collected union wages. B) employers are force to hire apprentices.C) employers are forced to hire more workers than they want to. D) a union can join a sympathy strike.

Q: In a perfectly competitive labor market, the least -cost combination rule for resource useA) requires that resources be used in combinations such that marginal products are equal.B) requires that the marginal physical product per dollar spent for each resource is equalized. C) assures the firm an economic profit.D) assures the firm a normal profit.

Q: Number of WorkersTotal OutputNumber of WorkersTotal Output00694512007100024208102536209103547701010405870 Refer to the above table. Suppose the firm hires 5 workers and the price of the good sold is $3.The marginal factor cost of labor must beA) $3. B) $100. C) $300. D) $900.

Q: Credence goods are particularly susceptible to the lemons problem becauseA) they have qualities that are difficult for producers to fully assess. B) they have qualities that are difficult for consumers to fully assess.C) creative responses among producers create volatility in market supply. D) creative responses among consumers create volatility in market demand.

Q: A cartel is a form ofA) collusion. B) vertical merger.C) noncooperative competition. D) negative sum game.

Q: When you see a preview of a coming movie at the movie theater, this isA) informational advertising. B) direct market advertising. C) indirect market advertising. D) persuasive advertising.

Q: Deadweight loss is A) the amount of taxes that consumers and monopolists pay. B) the loss of output when a perfectly competitive firm becomes a monopolist. C) a loss of benefit to consumers in a monopoly that no one else in society can obtain. D) the price that consumers pay for a product in excess of the average cost of producing it.

Q: Which of the following statements about a monopolist is FALSE? A) A pure monopolist is the sole supplier of one product, good, or service. B) The monopolist faces a demand curve for the entire market for that good. C) A pure monopolist is not the same as a perfect competitor. D) The monopolist faces the industry demand curve, which is upward sloping.

Q: The short-run industry supply curve slopes up becauseA) the firms eventually experience diseconomies of scale.B) the law of diminishing marginal product applies in the short run. C) wages increase as the industry increases output.D) the higher price is needed to get more firms to enter the industry.

Q: For a firm in a perfectly competitive industry, the demand curve for its own product isA) horizontal. B) vertical.C) upward sloping. D) downward sloping.

Q: As a firm increases the level of output that it produces, short-run average fixed costA) rises and then falls.B) remains constant since fixed costs are constant.C) decreases.D) decreases up to a particular level of output and then increases.

Q: If the interest rate is 10 percent per year, and you have $100,000 now, which of the following is closest to what your $100,000 will be worth in three years?A) $155,000 B) $115,000 C) $120,000 D) $133,000

Q: The owners of a corporation areA) the employees of the firm. B) the shareholders.C) completely in control of the firm. D) taxed only once.

Q: The idea that people will substitute cheaper commodities for more expensive commodities is calledA) the marginal effect. B) the real-income effect. C) the substitution effect. D) the utility effect.

Q: Quantity of Movies Watched per WeekMichelleʹs Total Utility per WeekRobertʹs Total Utility per Week00011001002195190327027043403405390400642035074353908445420945044010440450Refer to the above table. The marginal utility of the 6th movie for Michelle isA) 25 units of utility. B) 30 units of utility.C) 35 units of utility. D) 40 units of utility.

Q: When the price of a pound of apples is $1.00, 7500 pounds of apples are demanded. When the price of a pound of apples decreases to $0.80, 10,000 pounds of apples are demanded. In this price range the demand for apples isA) elastic. B) inelastic.C) unit elastic. D) perfectly elastic.

Q: ʺPrivate costs are borne by individuals while social costs are borne by society.ʺ Do you agree or disagree? Why?

Q: The productivity standard for the distribution of income can be thought of asA) rewarding people according to their ability to produce useful goods. B) benefiting only the least productive worker.C) proving that egalitarians are correct. D) rewarding only the wealthy.

Q: Research indicates that on average, state government unions haveA) raised wages to 20 percent above nonunionized government workers.B) raised wages 25 to 30 percent above nonunionized private-sector and government workers.C) raised wages about 100 percent above similar workers in the nonunion private sector. D) have not significantly raised wages above similar workers in the nonunion sector.