Econ Test 2
To maximize profit, a perfectly competitive firm..
should produce the quantity of output that results in the greatest difference between total revenue and total cost
If a corporate bond with face value of $5,000 has an interest rate of 4 percent paid once a year for a term of 30 years, what is the size of the coupon payment?
$200
If a corporate bond with a face value of $2,000 pays yearly coupon of $50, what is the coupon rate?
2.5%
Assume you set up a sole proprietorship and your lawyer tells you that as the owner you will face unlimited liability. What does that mean?
You could stand to lose your personal wealth if the business goes bankrupt
Economies of scale occur when..
a firm's long-run average fall as it increases the quantity of output it produces
The delivery of first-class mail by the U.S. Postal Service is an example of what?
a monopoly
What is the economic short run?
a period in which at least one of the firm's inputs is fixed
A financial security that represents a promise to repay a fixed amount of funds is a what?
bond
What is the central role of financial intermediaries in a market company?
bringing together savers and borrowers
Which type of business has the most government rules and regulations affecting it?
corporation
Which type of business earns the majority of revenues in the United States?
corporations
Firms in perfectly competitive industries are unable to control the prices of the products they sell and earn a profit in the long run. Why is this true?
firms in these industries sell identical products
How are sunk costs and fixed costs related?
in the short run they are equal to each other
Raising funds through financial intermediaries is called what?
indirect finance
Why does the marginal cost curve have a U shape?
initially, the marginal product of labor rises, then falls
A perfectly competitive firm has to charge the same price as every other firm in the market. Therefore, the firm...
is a price taker
If the personal assets of the owners cannot be claimed if the business is bankrupt, the owners are said to have what?
limited liability
The long run refers to a time period...
long enough for a firm to vary all of its inputs, to adopt new technology and change the size of its physical plant
At the profit-maximizing level of output for a perfectly competitive firm, what does price equal?
marginal cost
For a perfectly competitive firm, at profit maximization..
marginal revenue equals marginal cost
Improvements in technology used to produce solar panels allow manufactures such as 1366 Technologies to produce what?
more output using the same inputs, thereby reducing average total cost
Can a proprietorship easily attain additional funding?
no
Can a proprietorship or partnership raise funds for expansion by issuing stock through financial markets?
no
Does a firm market economy have to be organized as a corporation to succeed?
no
Is the Fortune 500 one of the three most widely followed stock indexes in the United States?
no
Is this equation correct: ATC=AVC-AFC
no
A firm will make a profit when..
profit is greater than average total cost
When you buy previously-issued shares of Google stock, this transaction takes place in the what?
secondary market
If a firm shuts down in the short run it will..
suffer a loss equal to its fixed costs
The marginal product of labor is defined as what?
the change in output that a firm produces as a result of hiring one more worker
A firm's net worth is calculated as what?
the difference between a firm's assets and liabilities
The supply curve of a perfectly competitive firm in the short run is..
the portion of the firm's marginal cost curve about the minimum point of the average variable cost curve
Who owns a corporation?
the stockholders
In the short run, a firm that is operating at a loss has two options. These options are..
to shut down temporarily or continue to produce
The division of labor and specialization explain what?
why the marginal product of labor rises as a firm hires its first unties of labor
If a firm shuts down it..
will suffer a loss equal to its fixed costs
Is the ability to raise funds an advantage of starting a corporation as a business?
yes
Is this statement true: as output increases, average fixed cost becomes smaller and smaller
yes
