Question Details

The primary objective of a for-profit firm is 



1.	Which of the following will increase (V0), the shareholder wealth maximization model of the firm:
	V0∙(shares outstanding) = t=1(t ) / (1+ke)t   + Real Option Value.
a.	Decrease the required rate of return (ke).
b.	Decrease the stream of profits (t).
c.	Decrease the number of periods from ï‚¥ to 10 periods.
d.	Decrease the real option value.
e.	All of the above.

	

2.	The primary objective of a for-profit firm is to ___________.
a.	maximize agency costs
b.	minimize average cost
c.	maximize total revenue
d.	set output where total revenue equals total cost
e	maximize shareholder value


3.	Possible goals of Not-For-Profit (NFP) enterprises include all of the following EXCEPT: 
a.	maximize total costs
b.	maximize output, subject to a breakeven constraint
c.	maximize the happiness of the administrators of the NFP enterprise
d.	maximize the utility of the contributors
e.	a. and c.


4.	The flat-screen plasma TVs are selling extremely well.  The originators of this technology are earning higher profits.  What theory of profit best reflects the performance of the plasma screen makers?
a.	risk-bearing theory of profit
b.	dynamic equilibrium theory of profit
c.	innovation theory of profit  
d.	managerial efficiency theory of profit 
e.	stochastic optimization theory of profit


5.	 To reduce Agency Problems, executive compensation should be designed to:
		a.	create incentives so that managers act like owners of the firm.
	b.	avoid making the executives own shares in the company.
		c.	be an increasing function of the firm's expenses.
	d.	be an increasing function of the sales revenue received by the firm.
	e.	all of the above

	
6.	Recently, the American Medical Association changed its recommendations on the frequency of pap-smear exams for women.  The new frequency recommendation was designed to address the family histories of the patients.  The optimal frequency should be where the marginal benefit of an additional pap-test: 
a.	equals zero.
b.	is greater than the marginal cost of the test
c.	is lower than the marginal cost of an additional test
d.	equals the marginal cost of the test
e.	both a and b.




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