Question

QUESTION 21

1. In the United States, ________ percent of all firms are partnerships.

   		4
   		10
   		14
   		26

2 points   

QUESTION 22

1. In general, the costs tariffs and quotas impose on consumers are

   		large in total but relatively small per person.
   		small in total but relatively large per person.
   		large in total and large per person.
   		small in total and small per person.

2 points   

QUESTION 23

1. Which of the following describes the national security argument for protectionism?

   		Some goods should be insulated from foreign competition to ensure an adequate supply of these goods in the event of an international conflict.
   		Nearly all industries can make some claim to strategic importance so such trade restrictions can get out of hand.
   		Private companies (for example, Coca-Cola) should not be forced to reveal their trade secrets to foreign companies.
   		Increases in economic surplus outweigh the decreases in consumer surplus that result from protectionism.

2 points   

QUESTION 24

1. If you want to know the present value of $5,000 received in one year, and the interest rate is 2 percent, what formula can you use?

   		Present value equals $5,000 times 1.02.
   		Present value equals $5,000 divided by 1.02
   		Present value equals 1.02 divided by $5,000.
   		Present value equals $5,000 times 0.02.

2 points   

QUESTION 25

1. Walmart wants to raise $250 million to finance the renovation of their retail stores, and the company wishes to raise the funds through indirect finance. Which of the following methods could it use?

   		It could issue $250 million in stock.
   		It could sell $250 million in bonds.
   		It could borrow $250 million from a bank.
   		It could choose either It could issue $250 million in stock or It could sell $250 million in bonds.

Answer 1

a) Option B - 10%
The partnership is business ownership by two or more persons. In the US, the sole proprietorship is the most popular and partnership business varies between 7% to 10%.

b) Option A - large in total but relatively small per person
Tariffs and quotas are imposed to restrict the import and help domestic producers. However, this reduces consumer welfare but the government as a political obligation, never put up a large burden on the consumers. There is a large burden in total but it is spread across the whole consumers and so that it is relatively small.

c) Option A - Some goods should be insulated from foreign competition to ensure an adequate supply of these goods in the event of international conflict.
Every nation is concerned about its security in case of an unexpected event or emergency such as war. the US had faced oil embargo by the Gulf countries which resulted in supply shock to the economy. The food, electricity, fuel, and defense equipment tens to be one of the most important for any country and so the government all over the world use protectionist policy for these industries.

d) Option B - Present value equals $5,000 divided by 1.02
Present Value = Payment / ( 1 + Interest Rate ) ^ Time Period
So the only option possible is option B.

e) Option D - It could choose either It could issue $250 million in stock or It could sell $250 million in bonds.
In direct financing, the company can raise money from the financial institution such as a bank. However, in indirect financing, it either issues shares in the secondary market or sells the bond to raise the money.