Question 1

Paul and Wayne are starting a consulting firm together. Their liability is limited; therefore, their firm is an example of a

Accepted Answer

A)  partnership. 
B)  proprietorship. 
C)  corporation. 
D)  None of the above answers is correct. 
A)  partnership. 
B)  proprietorship. 
C)  corporation. 
D)  None of the above answers is correct.

Question 2

An industry with a high concentration ratio might still be competitive if

Accepted Answer

A)  there are no close substitutes for its product. 
B)  its barriers to entry are low. 
C)  its production is geographically concentrated. 
D)  it has a high ratio of value added to sales. 
A)  there are no close substitutes for its product. 
B)  its barriers to entry are low. 
C)  its production is geographically concentrated. 
D)  it has a high ratio of value added to sales.

Question 3

An incentive system is a

Accepted Answer

A)  method of organizing production that uses a market-like mechanism inside the firm. 
B)  method of organizing production that uses a managerial hierarchy. 
C)  set of rules that induce an agent to act in the best interest of a principal. 
D)  method of production that implements an assembly-line process. 
A)  method of organizing production that uses a market-like mechanism inside the firm. 
B)  method of organizing production that uses a managerial hierarchy. 
C)  set of rules that induce an agent to act in the best interest of a principal. 
D)  method of production that implements an assembly-line process.

Question 4

Tara, a pharmacist, is planning on opening her own pharmacy. Tara currently earns $50,000 a year at her job. She has calculated that it will cost her $6,000 in rent and utilities and $25,000 for an assistant per year to run her pharmacy. What is the amount of opportunity cost that Tara incurs in running her own pharmacy?

Accepted Answer

A)  $31,000 
B)  $25,000 
C)  $50,000 
D)  $81,000 
A)  $31,000 
B)  $25,000 
C)  $50,000 
D)  $81,000

Question 5

The Herfindahl-Hirschman Index for a monopoly is

Accepted Answer

A)  1. 
B)  100. 
C)  10,000. 
D)  undefined. 
A)  1. 
B)  100. 
C)  10,000. 
D)  undefined.

Question 6

If a firm is achieving economic efficiency it must also be achieving technological efficiency.

Accepted Answer

A) True 
 B)False

Question 7

If worker output is NOT measurable in physical units, and employees are hard to monitor, it would be best to organize the firm using

Accepted Answer

A)  a command system. 
B)  a monitoring system. 
C)  an incentive system. 
D)  None of the above answers is correct. 
A)  a command system. 
B)  a monitoring system. 
C)  an incentive system. 
D)  None of the above answers is correct.

Question 8

Widgets Gadgets Blodgets
  
-In the above table, what is the four-firm concentration ratio for the Gadgets industry?

Accepted Answer

A)  25 percent 
B)  40 percent 
C)  250 percent 
D)  1,000 percent 
A)  25 percent 
B)  40 percent 
C)  250 percent 
D)  1,000 percent

Question 9

The implicit rental rate for capital includes the

Accepted Answer

A)  total value of a piece of capital equipment. 
B)  interest income forgone by purchasing the piece of capital equipment. 
C)  firm's normal profit. 
D)  amount paid for the use of a piece of capital equipment owned by someone else. 
A)  total value of a piece of capital equipment. 
B)  interest income forgone by purchasing the piece of capital equipment. 
C)  firm's normal profit. 
D)  amount paid for the use of a piece of capital equipment owned by someone else.

Question 10

What is a firm?

Accepted Answer

A firm is an institution that

Question 11

Which of the following firms has unlimited liability?

Accepted Answer

A)  only proprietorships 
B)  only partnerships 
C)  only corporations 
D)  both proprietorships and partnerships 
A)  only proprietorships 
B)  only partnerships 
C)  only corporations 
D)  both proprietorships and partnerships

Question 12

Techniques for making 100 automobiles
  
-The table above shows three production methods to produce 100 automobiles per day. If the price of labor is $20 per unit and the price of capital is $100 per unit, which of the three methods is economically efficient?

Accepted Answer

A)  Method A only 
B)  Method B only 
C)  Method C only 
D)  All three methods are economically efficient. 
A)  Method A only 
B)  Method B only 
C)  Method C only 
D)  All three methods are economically efficient.

Question 13

In their relationship with stockholders, a firm's managers act

Accepted Answer

A)  as agents. 
B)  as principals. 
C)  in loco parentis. 
D)  as proprietors. 
A)  as agents. 
B)  as principals. 
C)  in loco parentis. 
D)  as proprietors.

Question 14

-The above table shows the market shares for all the landscaping services in a suburban area. The Herfindahl-Hirschman Index (HHI) equals

Accepted Answer

A)  65. 
B)  900. 
C)  1400. 
D)  1600. 
A)  65. 
B)  900. 
C)  1400. 
D)  1600.

Question 15

A proprietorship is a firm with

Accepted Answer

A)  two or more owners who both have unlimited liability. 
B)  a single owner who has limited liability. 
C)  a single owner who has unlimited liability. 
D)  many owner all of whom have limited liability. 
A)  two or more owners who both have unlimited liability. 
B)  a single owner who has limited liability. 
C)  a single owner who has unlimited liability. 
D)  many owner all of whom have limited liability.

Question 16

A method that is technologically inefficient

Accepted Answer

A)  might or might not be economically efficient. 
B)  can never be economically efficient. 
C)  results from failure to calculate the ratio of the cost of labor to the cost of capital. 
D)  means that it uses too much labor and too little capital. 
A)  might or might not be economically efficient. 
B)  can never be economically efficient. 
C)  results from failure to calculate the ratio of the cost of labor to the cost of capital. 
D)  means that it uses too much labor and too little capital.

Question 17

Firms are often more efficient than markets as coordinators of economic activity because

Accepted Answer

A)  firms can achieve lower transaction costs. 
B)  markets cannot coordinate production. 
C)  firms don't rely on economies of scale while markets do. 
D)  firm coordination is always more economically efficient than market coordination. 
A)  firms can achieve lower transaction costs. 
B)  markets cannot coordinate production. 
C)  firms don't rely on economies of scale while markets do. 
D)  firm coordination is always more economically efficient than market coordination.

Question 18

A firm's opportunity costs

Accepted Answer

A)  equal the costs of resources it buys from others in the market. 
B)  include the cost of using resources owned by the firm. 
C)  increase when economies of scope exist. 
D)  do not include any opportunity costs for resources the owner suppliers. 
A)  equal the costs of resources it buys from others in the market. 
B)  include the cost of using resources owned by the firm. 
C)  increase when economies of scope exist. 
D)  do not include any opportunity costs for resources the owner suppliers.

Question 19

Which of the following is NOT an advantage of firm coordination of economic activity?

Accepted Answer

A)  Firm coordination decreases transactions costs. 
B)  When firms coordinate economic activity, there are no opportunity costs. 
C)  Firms can take advantage of the economies of team production. 
D)  Economies of scope can be realized by firms that produce a range of goods and services that share specialized resources. 
A)  Firm coordination decreases transactions costs. 
B)  When firms coordinate economic activity, there are no opportunity costs. 
C)  Firms can take advantage of the economies of team production. 
D)  Economies of scope can be realized by firms that produce a range of goods and services that share specialized resources.

Question 20

-Suppose there are ten firms that occupy the Odell, Oregon cherry pie market. The market share of each firm is listed in the above table.
a) What is the four-firm concentration ratio in this market?
b) What is the Herfindahl-Hirschman Index for this market?
c) If Firm H and Firm A merge, what is the new Herfindahl-Hirschman Index for this market?
d) A severe winter causes every firm except A, B, and E to close. With only these three firms operating, Firm A's market share is 71 percent, Firm B's market share is 23 percent, and Firm C's market share is 6 percent. What is the Herfindahl-Hirschman Index for this market now?

Accepted Answer

a) The four-firm concentration rate is 7

Paul and Wayne are starting a consulting firm together. Their liability is limited; therefore, their firm is an example of a

An industry with a high concentration ratio might still be competitive if

An incentive system is a

The Herfindahl-Hirschman Index for a monopoly is

If a firm is achieving economic efficiency it must also be achieving technological efficiency.

If worker output is NOT measurable in physical units, and employees are hard to monitor, it would be best to organize the firm using

Widgets Gadgets Blodgets -In the above table, what is the four-firm concentration ratio for the Gadgets industry?

The implicit rental rate for capital includes the

What is a firm?

Which of the following firms has unlimited liability?

Techniques for making 100 automobiles -The table above shows three production methods to produce 100 automobiles per day. If the price of labor is $20 per unit and the price of capital is $100 per unit, which of the three methods is economically efficient?

In their relationship with stockholders, a firm's managers act

-The above table shows the market shares for all the landscaping services in a suburban area. The Herfindahl-Hirschman Index (HHI) equals

A proprietorship is a firm with

A method that is technologically inefficient

Firms are often more efficient than markets as coordinators of economic activity because

A firm's opportunity costs

Which of the following is NOT an advantage of firm coordination of economic activity?

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Public Choices, Public Goods, and Healthcare

Externalities

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Filters

Exam 10: Organizing Production

Paul and Wayne are starting a consulting firm together. Their liability is limited; therefore, their firm is an example of a

An industry with a high concentration ratio might still be competitive if

An incentive system is a

The Herfindahl-Hirschman Index for a monopoly is

If a firm is achieving economic efficiency it must also be achieving technological efficiency.

If worker output is NOT measurable in physical units, and employees are hard to monitor, it would be best to organize the firm using

Widgets Gadgets Blodgets -In the above table, what is the four-firm concentration ratio for the Gadgets industry?

The implicit rental rate for capital includes the

What is a firm?

Which of the following firms has unlimited liability?

Techniques for making 100 automobiles -The table above shows three production methods to produce 100 automobiles per day. If the price of labor is $20 per unit and the price of capital is $100 per unit, which of the three methods is economically efficient?

In their relationship with stockholders, a firm's managers act

-The above table shows the market shares for all the landscaping services in a suburban area. The Herfindahl-Hirschman Index (HHI) equals

A proprietorship is a firm with

A method that is technologically inefficient

Firms are often more efficient than markets as coordinators of economic activity because

A firm's opportunity costs

Which of the following is NOT an advantage of firm coordination of economic activity?

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Public Choices, Public Goods, and Healthcare

Externalities

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Filters