Question Test Quiz 1 • Question 1 1 out of 1 points Owners of a firm want the managers to make business decis

04 Jun Question Test Quiz 1 • Question 1 1 out of 1 points Owners of a firm want the managers to make business decis

Question
Test Quiz 1

• Question 1

1 out of 1 points

Owners of a firm want the managers to make business decisions that will

Answers: maximize the value of the firm.

maximize expected profit in each period of operation.

maximize the market share of the firm.

both a and b are correct when revenue and cost conditions in one time period are independent of revenues and costs in future time periods.

• Question 2

1 out of 1 points

Managers’ pursuit of which of the following objectives would NOT lead to a principal-agent problem in a corporation?

Answers: The corporation’s growth

Increased market share for the corporation

The maximum possible profit for the corporation

A great “golden parachute” or retirement package

• Question 3

1 out of 1 points

The principal-agent problem of ownership vs. control of the corporation arises when owners and managers

Answers: pursue objectives that differ from those their customers wish them to pursue.

pursue objectives that differ from those their workers wish them to pursue.

pursue objectives that differ from those the government wishes them to pursue.

pursue different objectives.

• Question 4

1 out of 1 points

Moral hazard is the

Answers: outcome of a Prisoner’s Dilemma.

result of market signaling.

risk associated with a Dutch auction.

risk that one party to a contract may alter its post-contract behavior to the detriment of another party.

• Question 5

1 out of 1 points

The amount of money a firm pays to lease a building it uses for office space is called:

Answers: the full opportunity cost of production.

an explicit cost.

a real cost of production.

an implicit cost.

• Question 6

1 out of 1 points

Which of the following is an example of an “implicit cost”?

Answers:

Interest that could have been earned on retained earnings used by the firm to finance expansion.

The payment of rent by the firm for the building in which it is housed.

The interest payment made by the firm for funds borrowed from a bank.

The payment of wages by the firm.

• Question 7

1 out of 1 points

From the manager’s perspective:

Answers:

it is important to treat implicit costs as part of the total cost in order to make sound strategic decisions.

implicit costs are simply a theoretical construct and should be ignored in the decision-making process.

only explicit costs matter because accounting profit is based on explicit costs.

there is no difference between implicit and explicit costs. As such, treating implicit costs as explicit would result in double counting and an overstatement of total costs.

• Question 8

1 out of 1 points

Which of the following is true?

Answers:

Profit as calculated by accountants and economic profit are not necessarily equal.

Profit as calculated by accountants is always smaller than economic profit.

Economic profit ignores implicit costs.

The Internal Revenue Service taxes the firm?s economic profit but not its normal profit.

• Question 9

1 out of 1 points

April quit her job as an accountant at Ernst and Young, where she was paid $45,000 per year.