Econ Test 4

If a stock's dividend is expected to grow at a constant rate of 6 percent in the future and it has just paid a dividend of $2.50 a share, and you have an alternative investment of equal risk that will earn a 8 percent rate of return, what would you be willing to pay per share for this stock?

$132.50

Veruca sells therapeutic bath salts on the Internet. Her annual revenue is $52,000 per year, the explicit costs of her business are $14,000, and the opportunity costs of her business are $17,000 per year. What is her economic profit?

$21,000

Veruca sells therapeutic bath salts on the Internet. Her annual revenue is $52,000 per year, the explicit costs of her business are $14,000, and the opportunity costs of her business are $17,000 per year. What is her accounting profit?

$38,000

Aimee sells hand-embroidered dog apparel over the Internet. Her annual revenue is $128,000 per year, the explicit costs of her business are $42,000, and the opportunity costs of her business are $30,000. What is her economic profit?

$56,000

Harry's Hookahs incurs $700,000 per year in explicit costs and $500,000 in implicit costs. The company earns $1.4 million in revenues and has $3.7 million in net worth. Based on this information, what is the accounting profit for Harry's Hookas?

$700,000

A sole proprietorship is limited to how many owners?

1

If a corporate bond with a face value of $20,000 pays yearly coupon payments of $500, what is the coupon rate?

2.5%

Assume you and your cousin Vinny set up a partnership and your lawyer tells you that as the owners you will each face unlimited liability. What does that mean?

Each of you could stand to lose your personal wealth if the business goes bankrupt.

Which of the following is common to both tariffs and quotas?

Tariffs and quotas are both designed to reduce foreign competition faced by domestic firms

In the 1980s, Japan agreed to limit the quantity of automobiles it would export to the United States. Why did the Japanese government agree to this trade restriction?

The Japanese government feared that the alternative would be a tariff or quota on imports of Japanese automobiles imposed by the U.S. government.

If the present value equation used to calculate the price of a stock you are considering buying is "[$7 / (0.04 - 0.03)], which of the following is correct, assuming that dividends will grow at a constant rate?

The stock price is $700, the dividend growth rate is 3 percent, and the interest rate is 4 percent.

Which of the following is the best example of a tariff?

a $150 fee imposed on all imported residential air conditioners

China has developed a comparative advantage in the production of children's toys. The source of this comparative advantage is

a large supply of unskilled workers and relatively little capital.

Pakistan has developed a comparative advantage in the production of clothing. The source of its comparative advantage in this product is

a large supply of unskilled workers.

All of the following are sources of comparative advantage except

a strong foreign currency exchange rate

Anything of value owned by a person or a firm is

an asset

It is the role of ________ to transfer funds from savers to borrowers

an economy's financial system

When mortgage loans are securitized, they are

bundled together by financial institutions and sold to investors

The decline in starting new businesses

is not concentrated in one geographic area

If the ________ cost of production for two goods is different between two countries then mutually beneficial trade is possible

opportunity

Dividends are

payments by a corporation to its shareholders.

Economists believe the most persuasive argument for protectionism is to

protect infant industries

In the 1930s the United States charged an average tariff rate

that exceeded 50 percent.

Free trade refers to trade between countries

that is without restrictions.

In response to accounting scandals in 2002, the federal government passed legislation requiring among other things that auditors disclose any potential conflicts of interest. What is the name of this legislation?

the Sarbanes-Oxley Act