Question 1

One advantage of team production over contracting out is that

Accepted Answer

A)  the cost of negotiating and enforcing contracts is generally lower with team production than with contracting out. 
B)  the principal agent problem is eliminated by team production but cannot be addressed in contracting out. 
C)  costs are always lower with team production because of the elimination of transactions costs. 
D)  efficiency is always greater with team production. 
A)  the cost of negotiating and enforcing contracts is generally lower with team production than with contracting out. 
B)  the principal agent problem is eliminated by team production but cannot be addressed in contracting out. 
C)  costs are always lower with team production because of the elimination of transactions costs. 
D)  efficiency is always greater with team production.

Question 2

Profit-sharing plans, where employees receive bonuses in proportion to the company's profits,

Accepted Answer

A)  reduce the principal-agent problem. 
B)  are intended to reduce the number of employees who are residual claimants. 
C)  eliminate shirking problems. 
D)  are essentially gifts to employees and do not generate any benefit for the firm's owners. 
A)  reduce the principal-agent problem. 
B)  are intended to reduce the number of employees who are residual claimants. 
C)  eliminate shirking problems. 
D)  are essentially gifts to employees and do not generate any benefit for the firm's owners.

Question 3

The short run is the time period during which

Accepted Answer

A)  all of the firm's costs are fixed. 
B)  the value of the firm's assets starts to decay. 
C)  the firm can adjust all inputs freely. 
D)  some of the firm's input decisions are constrained by previous commitments. 
A)  all of the firm's costs are fixed. 
B)  the value of the firm's assets starts to decay. 
C)  the firm can adjust all inputs freely. 
D)  some of the firm's input decisions are constrained by previous commitments.

Question 4

Which of the following is true?

Accepted Answer

A)  under the partnership form of business organization, the owners are not personally liable for the debts of the business. 
B)  when employees also own a business, their incentive to shirk is removed. 
C)  the limited liability of stockholders under the corporate business structure makes it easier to raise equity capital. 
D)  under the corporate form of business organization, the owners of the firm are personally liable for its debts. 
A)  under the partnership form of business organization, the owners are not personally liable for the debts of the business. 
B)  when employees also own a business, their incentive to shirk is removed. 
C)  the limited liability of stockholders under the corporate business structure makes it easier to raise equity capital. 
D)  under the corporate form of business organization, the owners of the firm are personally liable for its debts.

Question 5

A disadvantage of team production compared to contracting out is that

Accepted Answer

A)  transaction costs are often higher with team production. 
B)  the level of specialized knowledge required by team production is greater than with contracting out. 
C)  the problem of shirking must be more carefully addressed with team production. 
D)  team production increases the cost of production in most situations. 
A)  transaction costs are often higher with team production. 
B)  the level of specialized knowledge required by team production is greater than with contracting out. 
C)  the problem of shirking must be more carefully addressed with team production. 
D)  team production increases the cost of production in most situations.

Question 6

An activity known as shirking is least likely to occur when

Accepted Answer

A)  workers are not monitored. 
B)  all workers are paid the same wage rate. 
C)  the earnings of workers are closely tied to the worker's output. 
D)  the firm is organized as a corporation. 
A)  workers are not monitored. 
B)  all workers are paid the same wage rate. 
C)  the earnings of workers are closely tied to the worker's output. 
D)  the firm is organized as a corporation.

Question 7

In the short run, the firm's average fixed costs

Accepted Answer

A)  always increase as output increases. 
B)  always decline as output increases. 
C)  equal zero. 
D)  remain constant as output expands. 
A)  always increase as output increases. 
B)  always decline as output increases. 
C)  equal zero. 
D)  remain constant as output expands.

Question 8

Which of the following is true about employment discrimination?

Accepted Answer

A)  Employers who discriminate against women will have lower costs than rival firms that hire employees strictly on the basis of merit (productivity). 
B)  If employers can hire equally productive female employees at a lower wage than males, the profit motive gives them a strong incentive to do so. 
C)  The female/male earnings ratio is higher for persons who are married than for those who remain single. 
D)  Both a and c are true. 
A)  Employers who discriminate against women will have lower costs than rival firms that hire employees strictly on the basis of merit (productivity). 
B)  If employers can hire equally productive female employees at a lower wage than males, the profit motive gives them a strong incentive to do so. 
C)  The female/male earnings ratio is higher for persons who are married than for those who remain single. 
D)  Both a and c are true.

Question 9

What is the difference between accounting profit and economic profit?

Accepted Answer

A)  They are the same thing. 
B)  They are only different if the accountant makes a mistake. 
C)  Accounting profit is usually smaller than economic profits. 
D)  Accounting profit makes no allowance for several implicit costs, including equity capital, while economic profit takes these costs into account. 
A)  They are the same thing. 
B)  They are only different if the accountant makes a mistake. 
C)  Accounting profit is usually smaller than economic profits. 
D)  Accounting profit makes no allowance for several implicit costs, including equity capital, while economic profit takes these costs into account.

Question 10

In the short run, a firm will eventually experience rising average total costs because of

Accepted Answer

A)  economies of scale. 
B)  diseconomies of scale. 
C)  the law of supply. 
D)  the law of diminishing returns. 
A)  economies of scale. 
B)  diseconomies of scale. 
C)  the law of supply. 
D)  the law of diminishing returns.

Question 11

The long run is a period of

Accepted Answer

A)  at least one year. 
B)  sufficient length to allow a firm to expand output by hiring additional workers. 
C)  sufficient length to allow a firm to alter its plant size and capacity and all other factors of production. 
D)  sufficient length to allow a firm to transform economic losses into economic profits by hiring better workers. 
A)  at least one year. 
B)  sufficient length to allow a firm to expand output by hiring additional workers. 
C)  sufficient length to allow a firm to alter its plant size and capacity and all other factors of production. 
D)  sufficient length to allow a firm to transform economic losses into economic profits by hiring better workers.

Question 12

Which of the following will become smaller and smaller as the firm expands output?

Accepted Answer

A)  average total cost 
B)  average fixed cost 
C)  marginal cost 
D)  total fixed cost 
A)  average total cost 
B)  average fixed cost 
C)  marginal cost 
D)  total fixed cost

Question 13

Use the figure to answer the following question(s).
Figure 8-11  
-The average variable cost (AVC) and average total cost (ATC) for a firm are indicated in Figure 8-11. The firm's total cost of producing 20 units is

Accepted Answer

A)  $6. 
B)  $84. 
C)  $120. 
D)  $150. 
A)  $6. 
B)  $84. 
C)  $120. 
D)  $150.

Question 14

Use the figure to answer the following question(s).
Figure 8-1  
-At what output in Figure 8-1 would the firm's per-unit cost of production be minimized?

Accepted Answer

A)  3 
B)  4 
C)  5 
D)  6 
A)  3 
B)  4 
C)  5 
D)  6

Question 15

As a company adds the first four workers to its production process in the short run, its output rises from 0 to 12 to 25 to 35 to 43. Addition of the fifth worker will most likely lead to an output rate

Accepted Answer

A)  greater than 51. 
B)  equal to 51. 
C)  less than 51. 
D)  greater than 51 if the firm experiences diseconomies of scale. 
E)  none of the above. 
A)  greater than 51. 
B)  equal to 51. 
C)  less than 51. 
D)  greater than 51 if the firm experiences diseconomies of scale. 
E)  none of the above.

Question 16

Approximately three-fourths of all U.S. firms are

Accepted Answer

A)  corporations. 
B)  proprietorships. 
C)  partnerships. 
D)  consumer cooperatives. 
A)  corporations. 
B)  proprietorships. 
C)  partnerships. 
D)  consumer cooperatives.

Question 17

James opened a baseball manufacturing operation, and initially the more balls he made, the lower the per-unit cost. Now, as output expands, his per-unit costs are rising. He concludes that diseconomies of scale have set in. Is he correct? Why?

Accepted Answer

Since diseconomies of scale apply to the

Question 18

Use the figure to answer the following question(s).
Figure 8-10  
-Using Figure 8-10, calculate the firm's approximate average total cost when it produces 12 units.

Accepted Answer

A)  $5 
B)  $10 
C)  $15 
D)  $20 
A)  $5 
B)  $10 
C)  $15 
D)  $20

Question 19

As output is expanded, if marginal cost (MC) is less than average total cost (ATC),

Accepted Answer

A)  ATC must be at its minimum. 
B)  ATC must be at its maximum. 
C)  ATC must be decreasing. 
D)  the firm must be earning economic profit. 
A)  ATC must be at its minimum. 
B)  ATC must be at its maximum. 
C)  ATC must be decreasing. 
D)  the firm must be earning economic profit.

Question 20

Use the figure to answer the following question(s).
Figure 8-6  
-At what output does the firm depicted in Figure 8-6 begin to experience diminishing marginal returns to its variable factors of production?

Accepted Answer

A)  q1 
B)  q2 
C)  q3 
D)  an output beyond q3 
A)  q1 
B)  q2 
C)  q3 
D)  an output beyond q3

One advantage of team production over contracting out is that

Profit-sharing plans, where employees receive bonuses in proportion to the company's profits,

The short run is the time period during which

Which of the following is true?

A disadvantage of team production compared to contracting out is that

An activity known as shirking is least likely to occur when

In the short run, the firm's average fixed costs

Which of the following is true about employment discrimination?

What is the difference between accounting profit and economic profit?

In the short run, a firm will eventually experience rising average total costs because of

The long run is a period of

Which of the following will become smaller and smaller as the firm expands output?

Use the figure to answer the following question(s). Figure 8-11 -The average variable cost (AVC) and average total cost (ATC) for a firm are indicated in Figure 8-11. The firm's total cost of producing 20 units is

Use the figure to answer the following question(s). Figure 8-1 -At what output in Figure 8-1 would the firm's per-unit cost of production be minimized?

As a company adds the first four workers to its production process in the short run, its output rises from 0 to 12 to 25 to 35 to 43. Addition of the fifth worker will most likely lead to an output rate

Approximately three-fourths of all U.S. firms are

James opened a baseball manufacturing operation, and initially the more balls he made, the lower the per-unit cost. Now, as output expands, his per-unit costs are rising. He concludes that diseconomies of scale have set in. Is he correct? Why?

Use the figure to answer the following question(s). Figure 8-10 -Using Figure 8-10, calculate the firm's approximate average total cost when it produces 12 units.

As output is expanded, if marginal cost (MC) is less than average total cost (ATC),

Use the figure to answer the following question(s). Figure 8-6 -At what output does the firm depicted in Figure 8-6 begin to experience diminishing marginal returns to its variable factors of production?

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Consumer Choice and Elasticity

Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Gaining From International Trade

Filters

Exam 8: Costs and the Supply of Goods

One advantage of team production over contracting out is that

Profit-sharing plans, where employees receive bonuses in proportion to the company's profits,

The short run is the time period during which

Which of the following is true?

A disadvantage of team production compared to contracting out is that

An activity known as shirking is least likely to occur when

In the short run, the firm's average fixed costs

Which of the following is true about employment discrimination?

What is the difference between accounting profit and economic profit?

In the short run, a firm will eventually experience rising average total costs because of

The long run is a period of

Which of the following will become smaller and smaller as the firm expands output?

Use the figure to answer the following question(s). Figure 8-11 -The average variable cost (AVC) and average total cost (ATC) for a firm are indicated in Figure 8-11. The firm's total cost of producing 20 units is

Use the figure to answer the following question(s). Figure 8-1 -At what output in Figure 8-1 would the firm's per-unit cost of production be minimized?

As a company adds the first four workers to its production process in the short run, its output rises from 0 to 12 to 25 to 35 to 43. Addition of the fifth worker will most likely lead to an output rate

Approximately three-fourths of all U.S. firms are

James opened a baseball manufacturing operation, and initially the more balls he made, the lower the per-unit cost. Now, as output expands, his per-unit costs are rising. He concludes that diseconomies of scale have set in. Is he correct? Why?

Use the figure to answer the following question(s). Figure 8-10 -Using Figure 8-10, calculate the firm's approximate average total cost when it produces 12 units.

As output is expanded, if marginal cost (MC) is less than average total cost (ATC),

Use the figure to answer the following question(s). Figure 8-6 -At what output does the firm depicted in Figure 8-6 begin to experience diminishing marginal returns to its variable factors of production?

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Consumer Choice and Elasticity

Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Gaining From International Trade

Filters