1. Agency problems would be least likely to arise

a) in sole proprietorships.

b) in partnerships with less than 3 partners.

c) in partnerships with 3 or more partners.

d) in for profit corporations.

e) in not for profit corporations.

2. Which of the following statements is false?

Not-for-profit hospitals differ from traditional corporations in that

a) a hospital may raise money for a capital building project from charitable social events.

b) a hospital may raise money from charitable organizations to fund every day operating shortfalls.

c) a hospital may have a large endowment from previous benefactors.

d) a hospital is expected to provide a small, but significant portion of its services to patients who are unwilling or unable to pay for them.

e) a hospital is most often subject to systemic (correlated) risks, while a traditional corporation is mostly subject to independent (uncorrelated) risks.

3. Below is the list of the most important risks an investor must evaluate when projecting an HMO’s profitability. Which option does not belong to this list?

a) not obtaining enough enrollees

b) setting the capitation rate too high

c) underestimating business expenses

d) overestimating amount of capital and labor needed to run an HMO

e) having too much equity (relative to debt obligations).

4. Which one of the following basic findings about for-profits is not true?

a) For profits tend to respond quicker to any changes in the market situation.

b) For profits have lower costs, higher prices, and consequently greater profits.

c) For profits are often engaged in cream skimming.

d) For profits are often engaged in overcompensated activities like teaching and research.

e) For profits avoid patients who are sicker, poor, or uninsured.