Econ 1000 Exam 2 Revision Que & Answ
When groups of mortgages are bundled together by financial institutions and sold to investors, these
institutions are said to be ________ mortgage loans.
A) Securitizing
B) Liquidating
C) Underwriting
D) Harvesting Answer - A) Securitizing
Which of the following takes place in the direct finance market?
A) Deposits from savers are accumulated and loans made to borrowers.
B) Ownership in corporations is sold in the form of preferred stock.
C) Banks offer savings accounts to customers.
D) Firms borrow funds from banks. Answer - B) Ownership in corporations is sold in the form of
preferred stock.
If a corporate bond with a face value of $5000 pays yearly coupon payments of $100, what is the coupon
rate?
A) 2%
B) 5%
C) 10%
D) 20% Answer - A) 2%
The profits a corporation keeps to finance future expansion are known as
A) Retained earnings
B) Dividends
C) Preferred Stock
D) Capital Gains Answer - A) Retained earnings
, Economists refer to the conflict between the interests of shareholders and the interests of top
management as
A) a liability problem
B) a principal-agent problem
C) a stock-equity problem
D) capital gains Answer - B) a principal-agent problem
If a firm's long-run average total curve shows that it can produce 5,000 DVDs at an average cost of $2.00
and 15,000 DVDs at an average cost of $1.50 this is evidence of
A) diseconomies of scale
B) the law of supply
C) economies of scale
D) diminishing returns Answer - C) economies of scale
Which of the following statements is true?
A) Average fixed cost does not change as output increases.
B) The marginal cost curve intersects the average fixed cost curve at its minimum point.
C) As output increases, average fixed cost becomes smaller and smaller.
D) When marginal cost is greater than average fixed cost, average fixed cost increases. Answer - C) As
output increases, average fixed cost becomes smaller and smaller.
A perfectly competitive firm produces 3000 units of a good at a total cost of 36,000. The fixed cost of
production is $5,000. The price of each good is $10. Should the firm continue to produce in the short
run?
A) Yes, it should continue to produce because its price exceeds its average fixed cost.
B) Yes, it should continue to produce because it is minimizing its loss. C) No, it should shut down and lose
only $5,000.
D) There is insufficient information to answer the question. Answer - C) No, it should shut down and lose
only $5000
All of the following characteristics are common to both monopolistic competition and perfect
competition except
When groups of mortgages are bundled together by financial institutions and sold to investors, these
institutions are said to be ________ mortgage loans.
A) Securitizing
B) Liquidating
C) Underwriting
D) Harvesting Answer - A) Securitizing
Which of the following takes place in the direct finance market?
A) Deposits from savers are accumulated and loans made to borrowers.
B) Ownership in corporations is sold in the form of preferred stock.
C) Banks offer savings accounts to customers.
D) Firms borrow funds from banks. Answer - B) Ownership in corporations is sold in the form of
preferred stock.
If a corporate bond with a face value of $5000 pays yearly coupon payments of $100, what is the coupon
rate?
A) 2%
B) 5%
C) 10%
D) 20% Answer - A) 2%
The profits a corporation keeps to finance future expansion are known as
A) Retained earnings
B) Dividends
C) Preferred Stock
D) Capital Gains Answer - A) Retained earnings
, Economists refer to the conflict between the interests of shareholders and the interests of top
management as
A) a liability problem
B) a principal-agent problem
C) a stock-equity problem
D) capital gains Answer - B) a principal-agent problem
If a firm's long-run average total curve shows that it can produce 5,000 DVDs at an average cost of $2.00
and 15,000 DVDs at an average cost of $1.50 this is evidence of
A) diseconomies of scale
B) the law of supply
C) economies of scale
D) diminishing returns Answer - C) economies of scale
Which of the following statements is true?
A) Average fixed cost does not change as output increases.
B) The marginal cost curve intersects the average fixed cost curve at its minimum point.
C) As output increases, average fixed cost becomes smaller and smaller.
D) When marginal cost is greater than average fixed cost, average fixed cost increases. Answer - C) As
output increases, average fixed cost becomes smaller and smaller.
A perfectly competitive firm produces 3000 units of a good at a total cost of 36,000. The fixed cost of
production is $5,000. The price of each good is $10. Should the firm continue to produce in the short
run?
A) Yes, it should continue to produce because its price exceeds its average fixed cost.
B) Yes, it should continue to produce because it is minimizing its loss. C) No, it should shut down and lose
only $5,000.
D) There is insufficient information to answer the question. Answer - C) No, it should shut down and lose
only $5000
All of the following characteristics are common to both monopolistic competition and perfect
competition except
