Question : 11) Real capital includes A) a firm’s physical assets. B) corporate bonds. C) : 1384195

11) Real capital includes

A) a firm’s physical assets.

B) corporate bonds.

C) corporate stock.

D) a firm’s balance in its bank account.

E) owner’s equity.

12) Undistributed profits of a firm are

A) earnings that are used to pay dividends to shareholders.

B) earnings that are used to cover the costs of production.

C) earnings that are used to cover interest expenses of the firm.

D) profits that are paid out to owners of the firm.

E) profits that are available to be reinvested in the firm’s operations.

13) When a corporation issues a bond

A) the purchaser of the bond assumes ownership rights in the corporation.

B) it is making a promise to pay interest each year and to repay the principal at a stated time in the future.

C) it is called equity capital.

D) it is called financing through the stock market.

E) it is making a promise to pay interest each year but not repay the principal.

14) An example of debt financing for any form of business organization is

A) issuing new stock.

B) buying back bonds.

C) borrowing from a bank.

D) using undistributed profits.

E) buying back previously issued stock.

15) It is assumed in standard economic theory that a firm makes decisions in an effort to

A) become as large as possible.

B) have a highly diversified product.

C) be favoured politically.

D) maximize its revenue.

E) maximize its profits.

16) “An objective of firms is to maximize profits.” This statement

A) has been proven by empirical testing to be always true.

B) is an assumption used by economists to predict the behaviour of firms.

C) is a normative statement and thus cannot be tested.

D) applies only to corporations.

E) is an unrealistic assumption, and therefore of little use to economists.

17) The theory of the firm is based on the following two key assumptions:

A) Firms seek to become as large as possible, and they seek to maximize total revenue.

B) Each firm has a highly diversified product, and this leads to profit maximization.

C) Firms seek to maximize profit, and to distribute the maximum value in dividends.

D) Firms seek to maximize profits, and the firm is a single, consistent decision-making unit.

E) Firms seek to maximize revenues, and to maximize undistributed profits.

18) Which of the following is the best example of an input to production that is an intermediate product?

A) 40 acres of farmland

B) the skills and training of a web designer

C) computer circuit boards

D) a textile factory

E) a sewing machine

19) The relationship between factors of production used in the production process and the resulting output is called a(n)

A) consumption possibilities boundary.

B) economic function.

C) production boundary.

D) cost function.

E) production function.

20) Economists use the notation Q = f(L,K) to describe

A) the flow of labour (L) and capital (K) services that are available when output is (Q).

B) the financial relationship between the inputs that a firm uses and the outputs that it produces.

C) the arithmetic relationship between the outputs that a firm uses and the inputs that it produces.

D) the technological relationship between the inputs that a firm uses and the outputs that it produces.

E) the level of output (Q) required to fully employ labour (L) and capital (K).