Econ study guide

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What is the difference between a natural and a legal monopoly? Which is more common?

A natural monopoly is when a firm owns or controls 100 percent of a resource that is essential to the industry. A legal monopoly is a firm that has been allowed by the government to have exclusive right to provide a good or service. A natural monopoly is more common.

What is a limited partnership?

A partnership with at least one general partner AND at least one limited partner.

What does a cosigner do?

A person who takes or may experience debt

What is the difference between a stockbroker and a floor trader?

A stockbroker is not physically trading whereas the floor trader is

IPOs are often less than half the company's total stock. Why?

Because it is the first time selling stocks so they do not want to have someone having a lot of control

What school of economics did Milton Friedman belong to?

Chicago School of Economics

What is the definition of legal tender?

Coins or banknotes that must be accepted if offered in payment of a debt.

Which of the following is considered the best health indicator of American industry?

DJIA

Name three of the four characteristics most desirable for money to have.

Durability, portability, and uniformity

A cosigner is someone to whom a debt is owed.

False

A subchapter S corporation must have fewer than twenty-five shareholders

False

Andrew Carnegie was well-known for his donations to community needs.

False

Larger industries can more easily change prices.

False

Limited liability companies are ruled by a board of directors.

False

One common barrier to entry is the difficulty of attracting customers.

False

Price takers are companies who are able to control the price of their product

False

Stock exchanges first appeared in France and Austria.

False

Stockholders usually have no say in how the business is run.

False

The NYSE was the first American stock exchange.

False

The most popular business model in the United States today is the partnership

False

The most prevalent type of stock is preferred stock.

False

What is the difference between a full-bodied coin and a token coin?

Full-bodied is whenever a coin maintains an amount of gold or silver coins. Token coin contains a quantity of metal less than its face value.

What advantage of the partnership do many law and accounting firms value?

Greater retention of competent employees

What are the two main tax disadvantages of corporations?

Higher taxes and double taxation of earnings

Of the four types of competition, which is most prevalent in America today?

Imperfect competition

What economic concept is Joan Robinson best known for developing?

Imperfect competition

What two important qualities do corporations possess in the eyes of the law?

Individuality and Immorality

Which of the following is not considered to be a benefit of preferred stock

It gives the right to vote on company matters

What is currently the most reputable stock exchange in the world?

NYSE (New York Stock Exchange)

Name the four aspects that distinguish one industry from another.

Number of firms, product differences, control of price, entering/exiting the industry

Which of the following is the most well-known cartel today?

OPEC

What does a company's stock represent?

Ownership

What book of the Bible gives much advice about personal financial practices

Proverbs

What is the difference between representative money and fiat money?

Representative money can be converted into silver or gold; fiat money cannot.

The fact that spending on services constitutes the majority of US consumer spending makes which of the following important?

S&P 500

What does the abbreviation SEC stand for? Name one purpose of the organization.

Securities and Exchange Commission. Its principal function is to supervise the Securities industry.

What is a company's stock?

Shares of ownership of the company

What was America's first major legislation against monopolies?

Sherman Antitrust Act

What do investors call a collection of stocks from different individual corporations?

Stock portfolios

What was the practice of interlocking directorates? What illegal activity did this practice attempt to reproduce?

The Clayton Act of 1914. Price discrimination.

Which stock index is considered the best gauge of the health of American industry? (Do not abbreviate.)

The Standard and Poor's 500

Which of the following is not required on a check?

The account number of the maker

What is the difference between a price setter and a price taker?

The company sets the price for products from a price taker, and stockholders set the price for products from a price setter.

How do tight oligopolies and loose oligopolies differ?

Tight is an industry in which the top four top four firms account for 75% of market sales. Loose is the top four firms account for 50-75% of total sales.

A duopoly is an oligopoly of two.

True

A limited partner can lose only what he originally invested in a company.

True

Charles Dow began his stock index with one hundred companies.

True

Corporations' complex organizational structure can cause slow response to the market

True

Corporations' great size can make workers feel unimportant.

True

Imperfect competition is the most prevalent form of competition in America today.

True

Mutual funds are privately managed stock portfolios.

True

Stock markets are important to many Americans' retirement planning.

True

The NASDAQ is famous for having no trading floor.

True

The most difficult market in which to make a profit is perfect competition.

True

The stock market tape is where stock transactions are posted.

True

Which of the following was founded by Charles Dow and Edward Jones?

Wall Street Journal

What is an Initial Public Offering (IPO)?

Which markets the first public sales of a companies stock and results in the company taking on a public status.

Stockholders can be called to vote on

all of the above

According to the textbook, corporations' complex organizational structures can sometimes lead to accusations of

an inability to respond to the market.

What are mutual funds?

an investment program funded by shareholders that trades in diversified holdings and is professionally managed.

By what are modern banks authorized to exist?

charter

Which of the following most likely operate under imperfect competition?

clothing manufacturers

The largest participant in the financial market is

commercial banking

Which type of business is most open to governmental regulation?

corporation

The employees of a large textile mill decide to pool their savings and loan portions (at interest) to trustworthy fellow workers needing money for large purchases. Their organization best qualifies as what type of institution?

credit union

Which of the following is not a characteristic that distinguishes one industry from another?

form of ownership

On the continuum of market competition given in your text, which of the following is characteristic of a monopoly?

great ability to control price

The primary purpose of a stock index is to

identify trends in an industry

Joan Robinson is best known for her work on

imperfect competition

According to the text, what disadvantage often results from corporations' great size?

impersonality

Choosing an abundant item for commodity money usually leads to

inflated prices

What do economists call a general rise in prices?

inflation

What important business factor can sole proprietorships protect better than corporations can?

information

What is the term for a corporation's first sale of stock?

initial public offering (IPO)

Which of the following is not one of the three functions of money in economics?

measure of social power

What are the three functions of money?

medium of exchange, unit of account, store of value

Which of the following is always characteristic of an oligopoly?

mutual interdependence

Which of the following is not an accurate criterion for an LLC?

no more than fifty shareholders

Which of the following is a possible barrier to entry?

obtaining a patent

Explain what a trust is.

one must feel confident in that person's presence, reliability, integrity, veracity, and sincere desire to provide assistance when requested. demonstrated through nursing interventions that convey a sense of warmth and caring to the patient.

Suppose you buy 70,000 shares of a particular corporation's stock. If the company has issued a total of 280,000 shares, how much of the company do you now own?

one-fourth

It is very common to find monopolies in the area of

public utilities

The United States once had silver certificates that were redeemable for silver held in the national treasury. What type of money was this?

representative money

What is price discrimination?

selling the same good at different prices to different buyers

From an economist's point of view, what is a market?

the arrangements that people make for trading

In stock trading, what is a commission?

the fee paid for a stockbroker's services

The most popular business model in the United States today is

the sole proprietorship

Which of the following is not one of the functions of a commercial bank?

to insure valuables

What are the two primary reasons that people buy stock?

to make a profit or to receive dividend payments

Which of the following is not characteristic of imperfect competition?

undifferentiated products

Which of the following would one expect to find operating under perfect competition ?

wheat farmers


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