Question 1

Why is business failure a necessary phenomenon in a free economy?

Accepted Answer

A)   It allows governments to choose which industries to help.
B)   It allows entrepreneurs to deduct losses from their taxes.
C)   It shifts resources from areas of higher demand to areas of lower demand.
D)   It provides an incentive for firms to be efficient and to innovate.E) None of the above
F) A) and B)

Question 2

The price of land is determined equally by shifts in demand and supply.

Accepted Answer

A) True 
 B)False

Question 3

Which statement explains why occupations that require many years of education, such as those in medicine, have higher salaries than an occupation that requires far less training?

Accepted Answer

A)   The salary would need to be higher to induce people to cover the cost of the extra investment in human capital, given that fewer years to work will be available after schooling is completed.
B)   The demand for higher-skilled services is stronger than the demand for lower-skilled levels.
C)   The supply of workers seeking higher salaries is greater, and the higher supply leads to a higher equilibrium salary.
D)   The marginal return to investment in education rises as the investment moves to higher levels of education.E) A) and C)
F) A) and B)

Question 4

The rate of return approach

Accepted Answer

A)   does not consider the present value concept.
B)   is better than the present value approach.
C)   determines the rate of interest when the net present value is zero.
D)   does not consider the cost of capital.E) None of the above
F) C) and D)

Question 5

In general, which is TRUE about the focus of different countries' university educational systems?

Accepted Answer

A)   American programs focus on a specific field of study, while European programs offer more breadth of topics.
B)   Asian programs focus on a specific field of study, while European programs offer more breadth of topics.
C)   European programs focus on a specific field of study, while Asian programs offer more breadth of topics.
D)   European programs focus on a specific field of study, while American programs offer more breadth of topics.E) None of the above
F) B) and C)

Question 6

In economics, firms continue to invest until the marginal _____ the cost of capital.

Accepted Answer

A)   revenue product of capital exceeds
B)   product of capital exceeds
C)   revenue product of capital equals
D)   product of capital equalsE) A) and C)
F) All of the above

Question 7

Reductions in federally subsidized student loans will _____ human capital.

Accepted Answer

A)   increase the supply of
B)   decrease the supply of
C)   decrease the demand for
D)   increase the demand forE) All of the above
F) None of the above

Question 8

A bond's yield and its risk have an inverse relationship.

Accepted Answer

A) True 
 B)False

Question 9

A bond's yield is its coupon payment as a percentage of the current price of a bond.

Accepted Answer

A) True 
 B)False

Question 10

If the price of a corporate bond rises above its face value, this means that the yield has _____ and the bond's risk level has _____.

Accepted Answer

A)   fallen; risen
B)   fallen; fallen
C)   risen; fallen
D)   risen; risenE) None of the above
F) All of the above

Question 11

All of these resources tend to give students an advantage in achieving human capital EXCEPT

Accepted Answer

A)   family resources allowing students to draw on a pool of inexpensive funds.
B)   tax incentives allowing individuals to deduct a portion of tuition payment.
C)   an expansion of subsidized low-interest student loans and federal grants.
D)   an increase in overtime work opportunities.E) A) and D)
F) A) and C)

Question 12

A college degree helping a student convince potential employers that she is intelligent and hard-working is an example of

Accepted Answer

A)   on-the-job training.
B)   signaling.
C)   investment in human capital.
D)   labor-market discrimination.E) B) and D)
F) All of the above

Question 13

Andrea started her own company 15 years ago when she launched a line of women's garments. Her firm was successful and grew for a decade. Then sales began to stagnate and subsequently fall. Now her firm is on the verge of bankruptcy. She is willing to give up partial ownership in order to gain funding for the firm to survive its current crisis. Which of these is her MOST likely source of funding?

Accepted Answer

A)   IPO
B)   venture capital
C)   private equity
D)   bondsE) A) and B)
F) A) and C)

Question 14

The internal rate of return of a project is the interest rate at which the present value of the investment is zero.

Accepted Answer

A) True 
 B)False

Question 15

Entrepreneurs

Accepted Answer

A)   receive profits as rewards for risks they assume in producing goods and services.
B)   combine only certain factors of production to produce goods and services.
C)   do not have to worry about innovation.
D)   do not consider the desires of consumers.E) B) and C)
F) None of the above

Question 16

Which statement is TRUE regarding financial capital?

Accepted Answer

A)   It is an important resource used in the production process of goods and services.
B)   It is the return to investment in physical capital.
C)   It is not an economic resource, but it is used by firms to gain access to resources needed for production.
D)   The supply of financial capital increases when risk increases.E) All of the above
F) C) and D)

Question 17

Describe how equilibrium levels for human capital are determined. Support your response with a graph.

Accepted Answer

Each of us must decide how much to inves...

Question 18

The forgone earnings of a college student are shown by the average earnings of

Accepted Answer

A)   high school graduates.
B)   college graduates.
C)   people with a professional degree.
D)   people without a high school education.E) B) and C)
F) C) and D)

Question 19

Individuals who have made an investment in human capital tend to be more productive than individuals who have not.

Accepted Answer

A) True 
 B)False

Question 20

Martin's Auto Repair Service is considering the purchase of a new piece of equipment that costs $5,000. The equipment would allow Martin's to generate additional revenue of $1,400 per year for four years. If the interest rate is 5%, what is the net present value of this investment?

Accepted Answer

A)   $6,234.56
B)   $5,467.67
C)   $4,964.33
D)   $4,359.46E) A) and B)
F) A) and D)

Exam 12: Land, Capital Markets, and Innovation

Why is business failure a necessary phenomenon in a free economy?

Correct Answer
verified

In general, which is TRUE about the focus of different countries' university educational systems?

Correct Answer
verified

Martin's Auto Repair Service is considering the purchase of a new piece of equipment that costs $5,000. The equipment would allow Martin's to generate additional revenue of $1,400 per year for four years. If the interest rate is 5%, what is the net present value of this investment?

Correct Answer
verified

All of these resources tend to give students an advantage in achieving human capital EXCEPT

Correct Answer
verified

A college degree helping a student convince potential employers that she is intelligent and hard-working is an example of

Correct Answer
verified

Which statement explains why occupations that require many years of education, such as those in medicine, have higher salaries than an occupation that requires far less training?

Correct Answer
verified

Which statement is TRUE regarding financial capital?

Correct Answer
verified

Correct Answer
verified

Entrepreneurs

Correct Answer
verified

The rate of return approach

Correct Answer
verified

A bond's yield and its risk have an inverse relationship.

Correct Answer
verified

Describe how equilibrium levels for human capital are determined. Support your response with a graph.

Correct Answer
verified
Each of us must decide how much to inves...
View Answer

The internal rate of return of a project is the interest rate at which the present value of the investment is zero.

Correct Answer
verified

If the price of a corporate bond rises above its face value, this means that the yield has _ and the bond's risk level has _.

Correct Answer
verified

Individuals who have made an investment in human capital tend to be more productive than individuals who have not.

Correct Answer
verified

A bond's yield is its coupon payment as a percentage of the current price of a bond.

Correct Answer
verified

The forgone earnings of a college student are shown by the average earnings of

Correct Answer
verified

The price of land is determined equally by shifts in demand and supply.

Correct Answer
verified

Reductions in federally subsidized student loans will _____ human capital.

Correct Answer
verified

In economics, firms continue to invest until the marginal _____ the cost of capital.

Correct Answer
verified

Exam 12: Land, Capital Markets, and Innovation

Why is business failure a necessary phenomenon in a free economy?

Correct AnswerverifiedShow Answer

In general, which is TRUE about the focus of different countries' university educational systems?

Correct AnswerverifiedShow Answer

Martin's Auto Repair Service is considering the purchase of a new piece of equipment that costs $5,000. The equipment would allow Martin's to generate additional revenue of $1,400 per year for four years. If the interest rate is 5%, what is the net present value of this investment?

Correct AnswerverifiedShow Answer

All of these resources tend to give students an advantage in achieving human capital EXCEPT

Correct AnswerverifiedShow Answer

A college degree helping a student convince potential employers that she is intelligent and hard-working is an example of

Correct AnswerverifiedShow Answer

Which statement explains why occupations that require many years of education, such as those in medicine, have higher salaries than an occupation that requires far less training?

Correct AnswerverifiedShow Answer

Which statement is TRUE regarding financial capital?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Entrepreneurs

Correct AnswerverifiedShow Answer

The rate of return approach

Correct AnswerverifiedShow Answer

A bond's yield and its risk have an inverse relationship.

Correct AnswerverifiedShow Answer

Describe how equilibrium levels for human capital are determined. Support your response with a graph.

Correct AnswerverifiedEach of us must decide how much to inves...View AnswerShow Answer

The internal rate of return of a project is the interest rate at which the present value of the investment is zero.

Correct AnswerverifiedShow Answer

If the price of a corporate bond rises above its face value, this means that the yield has _____ and the bond's risk level has _____.

Correct AnswerverifiedShow Answer

Individuals who have made an investment in human capital tend to be more productive than individuals who have not.

Correct AnswerverifiedShow Answer

A bond's yield is its coupon payment as a percentage of the current price of a bond.

Correct AnswerverifiedShow Answer

The forgone earnings of a college student are shown by the average earnings of

Correct AnswerverifiedShow Answer

The price of land is determined equally by shifts in demand and supply.

Correct AnswerverifiedShow Answer

Reductions in federally subsidized student loans will _____ human capital.

Correct AnswerverifiedShow Answer

In economics, firms continue to invest until the marginal _____ the cost of capital.

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
Each of us must decide how much to inves...
View Answer

Correct Answer
verified

If the price of a corporate bond rises above its face value, this means that the yield has _ and the bond's risk level has _.

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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