Assignment 4 Financial Environment

Question 1

In which of the following​ situation(s) will owners who supply factors of production be most likely to earn economic​ rents?
I. Highly elastic supply of the​ factor; highly elastic demand for the factor.
II. Highly elastic supply of the​ factor; highly inelastic demand for the factor.
III. Highly inelastic supply of the​ factor; highly inelastic demand for the factor.

Answer 1

III. Highly inelastic supply of the​ factor; highly inelastic demand for the factor.

Question 2

Economic Rent is

Answer 2

the amount paid for a resource over and above its opportunity cost.

Question 3

Accounting profit equals _____ minus all ______ ​

Answer 3

total revenues, explicit costs

Question 4

Economic profit equals _____ minus all ______.

Answer 4

accounting profit, all implict costs

Question 5

Thus, if accounting profit increased while all _____ remained​ unchanged, economic profit would have to _____

Answer 5

implicit costs, to rise

Question 6

All of the following are advantages of proprietorship ​except:
A. taxes only paid once.
B.easy to dissolve.
C.unlimited liability.
D.easy to form.

Answer 6

c. unlimited liability

Question 7

When caclulating accounting​ profits, the costs that accountants take into consideration are

Answer 7

explicit costs

Question 8

T or F If a proprietor owns her own​ building, the use of that building for her proprietorship has no opportunity cost.

Answer 8

FALSE

Question 9

When caclulating economic​ profits, economists take into consideration

Answer 9

explicit and implicit costs

Question 10

An important difference between common stock and preferred stock is that

Answer 10

preferred stockholders are entitled to their dividends before common stockholders.

Question 11

The basic difference between a share of stock and a bond is the​ following:

Answer 11

A share of stock is a legal claim on the future profits of the​ firm, whereas a bond is a loan to the firm and entitles the holder to receive a fixed annual coupon payment and a​ lump-sum payment of principal at maturity.  

Question 12

What are explicit costs?

Answer 12

expenses that must be paid out by firm

Question 13

what are implicit costs?

Answer 13

defined as expenses that managers do not have to pay out of pocket (oppurtunity costs)

Question 14

What is Preferred Stock?

Answer 14

owning a share of future profits of the company but no voting rights and receive dividends early