125.An investment of $100,000 promises net operating cash inflows of $40,000 per year for each of the next three years. If the required rate of return is 14%, what is the net present value of the project? A.$92,864 B.$20,000 C.($7,135) D.($19,000) 126.When the NPV is calculated, what occurs? A.The company adds the rate of return to the future incoming cash flows. B.The […]
8.1 The Theory of Imperfect Competition 1) A monopolistic firm A) will never sell a product whose demand is inelastic at the quantity sold. B) can sell as much as it wants for any price it determines in the market. C) cannot determine the price, which is determined by consumer demand. D) cannot sell additional quantity unless it raises the price on each […]
25.1 The Lucas Critique of Policy Evaluation 1) Whether one views the discretionary policies of the 1960s and 1970s as destabilizing or believes the economy would have been less stable without these policies, most economists agree that A) stabilization policies proved more difficult in practice than many economists had expected. B) stabilization policies proved not to be inflationary. C) the nondiscretionary policymakers were right […]
21) An Italian citizen buys a U.S. bond. This transaction will be entered as A) a credit in the U.S. current account. B) a credit in the U.S. capital account. C) a debit in the U.S. current account. D) a debit in the U.S. capital account. 22) A U.S. individual buys shares in a Swiss company. This transaction will be entered as A) […]
91) Suppose there is a rise in the world price of Canada’s imports. If the Canadian demand for imports has a price elasticity greater than 1 (elastic), the demand for foreign exchange will ________ and the Canadian dollar will ________. A) rise; appreciate B) rise; depreciate C) fall; appreciate D) fall; depreciate E) fall; and remain constant 92) Suppose there is a rise in […]
41) Tomas increased his consumption of potato chips when the price of pistachios increased. For Tomas, potato chips and pistachios are A) substitutes in consumption. B) both inferior goods. C) complements in consumption. D) both luxury goods. 42) If the price of automobiles was to increase, then A) the demand for gasoline would decrease. B) the demand for gasoline would increase. C) […]
81) Which of the following is a common way to decrease the IT spending of a company? A) shifting to proprietary software B) moving toward cloud computing C) increasing in-house IT personnel D) reducing outsourcing operations 82) Which of the following is the best example of the strategic use of IT? A) maintaining the IT systems of a company B) establishing a […]
11) If the economy is operating on the relatively vertical segment of the aggregate supply curve, an increase in aggregate demand causes a small change in the ________ and a big change in ________. A) aggregate demand; aggregate supply B) aggregate supply; aggregate demand C) output; price level D) price level; output 12) If the economy is operating way below capacity, an […]
61.Ifthegovernmentweretointerveneinamarketeconomyandfixthepriceofvisitingahealthcareproviderbelowthemarketprice,thenwewouldexpect,relativetothemarketoutcome, a.anincreaseinthenumberofvisitspeoplewanttomakeandanincreaseinthenumberofvisitshealthcareproviderswanttoprovide. b.anincreaseinthenumberofvisitspeoplewanttomakeandadecreaseinthenumberofvisitshealthcareproviderswanttoprovide. c.adecreaseinthenumberofvisitspeoplewanttomakeandanincreaseinthenumberofvisitshealthcareproviderswanttoprovide. d.adecreaseinthenumberofvisitspeoplewanttomakeandadecreaseinthenumberofvisitshealthcareproviderswanttoprovide. 62.IfthegovernmentweretointerveneandsettherentforapartmentsinNewYorkCitybelowthemarketrent,thenwewouldexpect,relativetothemarketoutcome, a.anincreaseinthenumberofpeoplewantingtoliveinapartmentsinNewYorkCity. b.adecreaseinthenumberofpeoplewantingtoliveinapartmentsinNewYorkCity. c.anincreaseinthenumberofapartmentsavailableforrentinNewYorkCity. d.Noneoftheaboveiscorrect. 63.Ifthegovernmentweretointerveneandsetthepriceofadozeneggsabovethemarketprice,thenwewouldexpect,relativetothemarketoutcome, a.anincreaseinthenumberofeggspeoplewanttobuyandanincreaseinthenumberofeggsfarmerswanttosell. b.anincreaseinthenumberofeggspeoplewanttobuyandadecreaseinthenumberofeggsfarmerswanttosell. c.adecreaseinthenumberofeggspeoplewanttobuyandanincreaseinthenumberofeggsfarmerswanttosell. d.adecreaseinthenumberofeggspeoplewanttobuyandadecreaseinthenumberofeggsfarmerswanttosell. 64.Ifthegovernmentweretointerveneandsetawageforunskilledlaborabovethemarketwage,thenwewouldexpect,relativetothemarketoutcome, a.anincreaseinthenumberofunskilledjobsavailable. b.adecreaseinthenumberofunskilledjobsavailable. c.adecreaseinthenumberofworkerswantingunskilledjobs. d.Noneoftheaboveiscorrect. 65.Whenthegovernmentpreventspricesfromadjustingnaturallytosupplyanddemand, a.itequatestheamountbuyerswanttobuywiththeamountsellerswanttosell. b.itadverselyaffectstheallocationofresources. c.itimprovesequalityandefficiency. d.itimprovesefficiencybutreducesequality. 66.Onereasonweneedgovernment,eveninamarketeconomy,isthat a.thereisinsufficientmarketpowerintheabsenceofgovernment. b.propertyrightsaretoostrongintheabsenceofgovernment. c.theinvisiblehandisnotperfect. d.Bothaandbarecorrect. 67.Theabilityofanindividualtoownandexercisecontroloverscarceresourcesiscalled a.marketfailure. b.propertyrights. c.externality. d.marketpower. 68.Thegovernmentenforcespropertyrightsby a.requiringpropertyownerstopaypropertytaxes. b.providingpoliceandcourts. c.forcingpeopletoownproperty. d.providingpublicparksandrecreationfacilities. 69.AcompanythatformerlyproducedmusicCDswentoutofbusinessbecausetoomanypotentialcustomersboughtillegally-producedcopiesoftheCDsinsteadofbuyingtheproductdirectlyfromthecompany.Thisinstanceservesasanexampleof a.marketpower. b.inefficienttrade. c.inadequateenforcementofpropertyrights. d.theinvisiblehandatwork. 70.Forwhichofthefollowingproblemscanwell-designedpublicpolicyenhanceeconomicefficiency? a.bothexternalitiesandmarketpower b.externalities,butnotmarketpower c.marketpower,butnotexternalities d.neitherexternalitiesnormarketpower
21) Which of the following is a final good or service? A) tires purchased by Ford for use on one of their SUVs B) the new economics textbook you are using C) the hair gels used by a hair stylist at the local hair salon D) the butter used by a chef to make butter cream frosting E) the taco shells purchased by […]
101. On January 1, a company issued and sold a $400,000, 7%, 10-year bond payable, and received proceeds of $396,000. Interest is payable each June 30 and December 31. The company uses the straight-line method to amortize the discount. The journal entry to record the first interest payment is:
A. Debit Bond Interest Expense $14,000; credit Cash $14,000.
B. Debit Bond Interest Expense $28,000; credit Cash $28,000.
C. Debit Bond Interest Expense $14,200; credit Cash $14,000; credit Discount on Bonds Payable $200.
D. Debit Bond Interest Expense $13,800; debit Discount on Bonds Payable $200; credit Cash $14,000.
E. Debit Bond Interest Expense $14,000; debit Discount on Bonds Payable $200; credit Cash $14,200.
102. A company issued 5-year, 7% bonds with a par value of $100,000. The company received $97,947 for the bonds. Using the straight-line method, the amount of interest expense for the first semiannual interest period is:
A. $3,294.70.
B. $3,500.00.
C. $3,705.30.
D. $7,000.00.
E. $7,410.60.
103. The effective interest amortization method:
A. Allocates bond interest expense over the bond's life using a changing interest rate.
B. Allocates bond interest expense over the bond's life using a constant interest rate.
C. Allocates a decreasing amount of interest over the life of a discounted bond.
D. Allocates bond interest expense using the current market rate for each interest period.
E. Is not allowed by the FASB.
104. A company issued 7%, 5-year bonds with a par value of $100,000. The market rate when the bonds were issued was 7.5%. The company received $97,947 cash for the bonds. Using the effective interest method, the amount of interest expense for the first semiannual interest period is:
A. $3,500.00.
B. $3,673.01.
C. $3,705.30.
D. $7,000.00.
E. $7,346.03.
105. The market value of a bond is equal to:
A. The present value of all future cash payments provided by a bond.
B. The present value of all future interest payments provided by a bond.
C. The present value of the principal for an interest-bearing bond.
D. The future value of all future cash payments provided by a bond.
E. The future value of all future interest payments provided by a bond.
106. The Premium on Bonds Payable account is a(n):
A. Revenue account.
B. Adjunct or accretion liability account.
C. Contra revenue account.
D. Contra asset account.
E. Contra liability account.
107. Adidas issued 10-year, 8% bonds with a par value of $200,000. Interest is paid semiannually. The market rate on the issue date was 7.5%. Adidas received $206,948 in cash proceeds. Which of the following statements is True?
A. Adidas must pay $200,000 at maturity and no interest payments.
B. Adidas must pay $206,948 at maturity and no interest payments.
C. Adidas must pay $200,000 at maturity plus 20 interest payments of $8,000 each.
D. Adidas must pay $206,948 at maturity plus 20 interest payments of $8,000 each.
E. Adidas must pay $200,000 at maturity plus 20 interest payments of $7,500 each.
108. A company received cash proceeds of $206,948 on a bond issue with a par value of $200,000. The difference between par value and issue price for this bond is recorded as a:
A. Credit to Interest Income.
B. Credit to Premium on Bonds Payable.
C. Credit to Discount on Bonds Payable.
D. Debit to Premium on Bonds Payable.
E. Debit to Discount on Bonds Payable.
109. If an issuer sells bonds at a date other than an interest payment date:
A. This means the bonds sell at a premium.
B. This means the bonds sell at a discount.
C. The issuing company will report a loss on the sale of the bonds.
D. The issuing company will report a gain on the sale of the bonds.
E. The buyers normally pay the issuer the purchase price plus any interest accrued since the prior interest payment date.
110. A company issues at par 9% bonds with a par value of $100,000 on April 1, which is 4 months after the most recent interest date. The cash received for accrued interest on April 1 by the bond issuer is:
A. $750.
B. $5,250.
C. $1,500.
D. $3,000.
E. $6,000.
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