1. Which of the following is not a right or attribute of
common stock ownership?
A. Electing directors.
B. Liability limited to amount invested.
C. Approving changes in corporate charter.
D. Determining dividend policy.
2. Which of the terms is not used to identify owners’
A. Partner’s capital.
B. Proprietor’s capital.
C. Paid-in-capital and retained earnings.
D. Additional-paid-in-retained earnings.
3. Which of the following is not an owner’s equity account?
A. Common stock.
B. Capital stock.
C. Retained earnings.
D. Accumulated depreciation.
E. Paid-in-capital in excess of par.
4. Another term frequently used to describe owners’ equity
A. net assets.
B. gross assets.
C. paid-in capital.
D. capital stock.
5. Which of the following is one of the two generally
practiced methods for electing corporate directors?
A. Democratic voting.
B. Representative voting.
C. Cumulative voting.
D. Census voting.
E. None of the above.
6. If a common stock has no par value:
A. there is no way of determining the market value per
B. the stock must have a stated value.
C. there will not be any additional paid-in capital related
D. the stockholders do not have a preemptive right.
7. When common stock has a par value:
A. the liability of the stockholders is limited to the par
B. there will probably be additional paid-in capital in the
C. the market value of the stock will be higher than if
there is no par value.
D. the paid-in capital will equal the par value of the
number of shares issued.
8. The dollar amount of the common stock in the balance
sheet of a corporation that has common stock with a par value is the number of
A. issued, multiplied by the amount received per share.
B. outstanding, multiplied by the amount received per share.
C. issued, multiplied by the par value per share.
D. outstanding, multiplied by the par value per share.
9. Which of the following is not usually a right or
attribute of preferred stock?
A. Having a claim to dividends in excess of the annual
dividend requirement if dividends on common stock exceed dividends on preferred
B. Having a priority claim to dividends relative to the
common stock’s claim to dividends.
C. Having a priority claim in liquidation relative to the
common stock’s claim in liquidation.
D. Having a claim to dividends that is cumulative over time
if the annual dividend requirement is not satisfied.
10. Additional paid-in capital is most likely to appear in
the balance sheet of a corporation that:
A. has par value stock.
B. has no-par value stock.
C. has issued stock at different dates.
D. has issued stock dividends.
11. Retained earnings represents:
A. cash that is available for dividends.
B. the total net income of the firm since its beginning.
C. net income that has been reinvested in the company.
D. net income plus gains (or minus losses) on treasury stock
12. Preferred stock is used much less than long-term debt in
the capital structure of most industrial and merchandising companies
A. the preferred stock dividend requirement is a fixed claim
against income, but interest on long-term debt is not a fixed amount.
B. preferred stock has a fixed liquidation or redemption
value, but long-term debt does not have a fixed maturity value.
C. preferred stock may be convertible to common stock, but
long-term debt cannot be convertible.
D. for income tax purposes, dividends paid on preferred
stock are not deductible, but interest on long-term debt is deductible.
13. The annual per share dividend requirement of a 6%, $80
par value preferred stock that was issued for $85 is:
14. The number of shares of a class of stock that are outstanding
A. the number of shares authorized minus the number of
B. the number of shares authorized minus the number of
shares held in the treasury.
C. the number of shares issued minus the number of shares
held in the treasury.
D. the number of shares issued minus the number of shares
owned by directors.
15. A stock dividend is similar to a cash dividend in that:
A. the stockholder’s equity in the firm’s net assets is
reduced by each.
B. the stockholder’s cash is increased by each.
C. the stockholder’s equity in the firm’s net assets is
increased by each.
D. retained earnings and the amount of potential future
dividends is reduced by each.
1.) Which one of the following acts declared “Every
contract, combination … or conspiracy, in restraint of trade or commerce
among the several states … to be illegal”?
A. the Wheeler-Lea Act
B. the Federal Trade Commission Act
C. the Sherman Act
D. the Interstate Commerce Act
2.) The Clayton Act of 1914:
A. outlawed price discrimination, tying contracts,
intercorporate stockholding, and interlocking directorates that lessen
B. prohibited unfair or deceptive acts or practices in
commerce that tend to reduce competition.
C. outlawed vertical and conglomerate mergers.
D. prohibited one firm from acquiring the assets of another
when the effect was to limit competition.
3.) A function of the Federal Trade Commission is to:
A. investigate instances of faulty and misleading advertising.
B. establish railway rates for interstate railroads.
C. ban or recall unsafe consumer products.
D. prevent insider trading in securities markets.
4.) Which one of the following is not prohibited by the
original Clayton Act?
A. the purchase of the stocks of rival firms that lessens
B. the purchase of the assets of rival firms that lessens
C. an exclusive dealer or tying agreements that lessen
D. price discrimination that lessens competition
5.) The government was successful in gaining an antitrust
conviction in the:
A. U.S. Steel case.
B. IBM case.
C. Alcoa case.
D. DuPont cellophane case.
6.) Which of the following laws prohibited mergers by stock
acquisition if the effect was to lessen competition?
A. Celler-Kefauver Act of 1950
B. Wheeler-Lea Act of 1938
C. Clayton Act of 1914
D. Sherman Act of 1890
7.) Tying agreements:
A. establish common boards of directors for previously
B. obligate a purchaser of product X to also buy product Y
from the same seller.
C. allow manufacturers to specify the retail prices of their
D. prohibit firms from selling their products outside of
specified geographic areas.
8.) The main purpose of the antitrust laws is:
A. to encourage firms to produce where P > MC.
B. the elimination of both negative and positive
C. to prevent the monopolization of industries.
D. to regulate natural monopolies.
9.) In which of the following cases did the final court
decision result in a breakup of the firm into competing businesses?
A. Microsoft case
B. Standard Oil case
C. U.S. Steel case
D. DuPont cellophane case.
10.) The rule of reason indicated that:
A. if less than four firms account for three-fourths of an
industry’s sales, the industry is in violation of the Sherman Act.
B. social regulation should not be enforced unreasonably so
that costs exceed benefits.
C. the mere possession of monopoly power is a violation of
the antitrust laws.
D. only contracts and combinations that unreasonably
restrain trade violate the antitrust laws.
11.) In the Alcoa case of 1945 the courts held that:
A. the mere possession of monopoly power is a violation of
the antitrust laws.
B. only contracts and combinations that unreasonably
restrain trade are in violation of the Sherman Act.
C. retail and wholesale firms are exempt from antitrust
D. firms which sell more than one-half of their output
overseas are exempt from antitrust.
12.) A merger between an automobile manufacturer and a maker
of automobile tires is an example of a:
A. conglomerate merger.
B. horizontal merger.
C. vertical merger.
D. tying contract.
13.) Which of the following would, other things equal,
increase the demand for U.S. farm products?
A. bumper crops abroad
B. depreciation of the U.S. dollar
C. deteriorating trade relations with China and Russia
D. increases in foreign tariffs on imported farm products
14.) A bumper crop of farm products causes:
A. only a slight decline in the price of farm products
because the demand for farm products is income inelastic.
B. a large decline in the price of farm products because the
demand for farm products is price inelastic.
C. only a slight decline in the price of farm products
because the demand for farm products is income elastic.
D. a large decline in the price of farm products because the
demand for farm products is price elastic.
15.) Over time, technological change has:
A. reduced both the price elasticity and income elasticity
of the demand for farm products.
B. reduced the minimum efficient scale of production in
agriculture and increased the prices of farm products.
C. increased both price elasticity and income elasticity of
the demand for farm products.
D. increased the minimum efficient scale of production in
agriculture and reduced the prices of farm products.
16.) Productivity increases in agriculture have:
A. increased the demand for foodstuffs.
B. been negligible since the Second World War.
C. increased the incomes of farm households above the
D. lowered farm prices.
17.) One consequence of the long-run problem faced by farms
has been a:
A. rapid increase in the price of farm output.
B. massive exit of workers from agriculture to other sectors
of the economy.
C. smaller average farm size.
D. reduction in U.S. exports of farm products.
18.) Which of the following is correct?
A. The rapid expansion of foreign incomes will reduce U.S.
B. A decrease in the international value of the dollar will
reduce U.S. agricultural exports.
C. An increase in the international value of the dollar will
reduce U.S. agricultural exports.
D. Changes in the international value of the dollar have no
effect on U.S. agricultural exports.
19.) Domestic price supports on, say, sugar:
A. generate trade barriers to reduce imports of foreign
B. increase world sugar prices.
C. keep the domestic price of sugar artificially low.
D. increase the earnings of foreign sugar producers.
20.) Price supports:
A. decrease pollution because participants must practice
B. neither increase nor decrease environmental pollution.
C. increase pollution because supports encourage the
cultivation of marginal land and the use of more pesticides and fertilizers.
D. discourage rent-seeking activity.