Midterm Part 1 Essay

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4 out of 4 points

The form of economics most relevant to managerial decision-making within the firm is:
Answer

Selected Answer: microeconomics
Correct Answer: microeconomics

Question 2
4 out of 4 points

A Real Option Value is:
Answer

Selected Answer: An opportunity to implement cost savings or revenue expansion in a flexible business plan.
Correct Answer: An opportunity to implement cost savings or revenue expansion in a flexible business plan.

Question 3
4 out of 4 points

In the shareholder wealth maximization model, the value of a firm's stock is equal to the present value of all expected future ____ discounted at the stockholders' required rate of return.
Answer

Selected Answer: profits (cash flows)
Correct Answer: profits (cash flows)

Question 4
4 out of 4 points

Possible goals of Not-For-Profit (NFP) enterprises include all of the following EXCEPT:
Answer

Selected Answer: maximize total costs
Correct Answer: maximize total costs

Question 5
4 out of 4 points

Various executive compensation plans have been employed to motivate managers to make decisions that maximize shareholder wealth. These include:
Answer

Selected Answer: requiring officers to own stock in the company
Correct Answer: requiring officers to own stock in the company

Question 6
4 out of 4 points

To reduce Agency Problems, executive compensation should be designed to:
Answer

Selected Answer: create incentives so that managers act like owners of the firm.
Correct Answer: create incentives so that managers act like owners of the firm.

Question 7
4 out of 4 points

Based on risk-return tradeoffs observable in the financial marketplace, which of the following securities would you expect to offer higher expected returns than corporate bonds?
Answer

Selected Answer: common stock
Correct Answer: common stock

Question 8
4 out of 4 points

A change in the level of an economic activity is desirable and should be undertaken as long as the marginal benefits exceed the ____.
Answer

Selected Answer: marginal costs
Correct Answer: marginal costs

Question 9
4 out of 4 points

The standard deviation is appropriate to compare the risk between two investments only if
Answer

Selected Answer: the expected returns from the investments are approximately equal
Correct Answer: the expected returns from the investments are approximately equal

Question 10
4 out of 4 points

The level of an economic activity should be increased to the point where the ____ is zero.
Answer

Selected Answer: net marginal benefit
Correct Answer: net marginal benefit

Question 11
4 out of 4 points

The primary difference(s) between the standard deviation and the coefficient of variation as measures of risk are:
Answer

Selected Answer: the coefficient of variation is a measure of relative risk whereas the standard deviation is a measure of absolute risk
Correct Answer: the coefficient of variation is a measure of relative risk whereas the standard deviation is a measure of absolute risk

Question 12
4 out of 4 points

Generally, investors expect that projects with high expected net present values also will be projects with
Answer

Selected Answer: high risk
Correct Answer: high risk

Question 13
4 out of 4 points

Songwriters and composers press music companies to lower the price for music downloads because
Answer

Selected Answer: songwriter royalties are a percentage of sales revenue
Correct Answer: songwriter royalties are a percentage of sales revenue

Question 14
4 out of 4 points
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