Exam 10: Organizing Production

One of the ways of coping with the principal-agent problem is

Mr. Blowfish opened a seafood store in December. He borrowed $60,000 from a bank at an annual interest rate of 8 percent. He used the funds he borrowed to purchase $60,000 of capital equipment. Over the year, he rented a building for $50,000 a year. During the first year of operation, Blowfish paid $45,000 to his employees, $20,000 for utilities, and $25,000 for raw fish he bought from other firms. In December of the next year, the market value of his capital was $50,000. Blowfish's best alternative to running the seafood store is to work for a grocery store as a sales clerk for $20,000 a year. a) What is the economic depreciation of Blowfish's capital? b) What are Blowfish's total opportunity costs? c) What is Blowfish's economic profit?

Techniques that produce 100 sweaters -In the above table, the technique that is NEVER economically efficient is

Suppose Angelo Sessa, owner of Sezz Medi Brick Oven Pizza in NYC, earns $350,000 in revenue per year. He spends $800 a month on ash wood for his stove, $2000 a month on rent, and $1500 a month on ingredients. He used to be a lawyer and earned $240,000 a year before he opened up Sezz Medi. Normal profit for a pizza business is $30,000. If Angelo switches to oak wood to fire his stove and oak costs an extra $2500 each month, but this change causes his revenues to increase to $351,000. What is Angelo's opportunity cost of production?

Suppose Angelo Sessa, owner of Sezz Medi Brick Oven Pizza in NYC, earns $350,000 in revenue per year. He spends $800 a month on ash wood for his stove, $2000 a month on rent, and $1500 a month on ingredients. He used to be a lawyer and earned $240,000 a year before he opened up Sezz Medi. Normal profit for a pizza business is $30,000. If Angelo switches to oak wood to fire his stove and oak costs an extra $2500 each month, but this change causes his revenues to increase to $351,000. What is Angelo's economic profit?

-The cookie industry in Eatsweetland consists of 15 firms. The industry sales are $80 million per month. The sales of the largest 5 firms are shown in the table below. The rest 10 firms have sales of $3 million each. What is the four-firm concentration ratio in Eatsweetland's cookie industry?

By making most of its employees owners of the company, United Airlines attempted to

The only two ways of dealing with the principal agent problem are the use of long-term contracts and monitoring.

Unlimited liability is NOT a characteristic of

A form of business whose profits are taxed twice is

There are six firms in an industry, with market shares of 50 percent, 25 percent, 10 percent, 10 percent, 3 percent and 2 percent. The four firm concentration ratio is ________, and the HHI is ________.

When bank tellers converse with each other, keeping customers waiting in line, they are

Kansas Power and Light, the only supplier of electricity in Kansas, is an example of a firm in what type of market?

Methods for making 2,000 CDs per day -In the table above, which method is NOT technologically efficient?

Constellation Brands Inc. is the world's biggest wine producer with 300-plus brands, from jug wines to coveted California reds, including the Clos du Bois, Geyser Peak and Woodbridge by Robert Mondavi labels. Based on this characteristic of firms, why would Constellation be more efficient than a market at coordinating economic activity?

Suppose that Tracy and Pat start a business. Because of a series of bad decisions by Tracy, the company goes bankrupt, owing a total of $50,000. Tracy is penniless and Pat is a millionaire. If the company were organized as a partnership, Pat would be responsible for

-The table below shows four alternative techniques for assembling a car. Which of the four techniques for assembling a car cannot be economically efficient with any input prices?

Suppose there are five firms in the disposable diaper market. Hug-Me's share is 30 percent. Plumper's share is 30 percent. Drippy's share is 20 percent. Kool Kid's share is 10 percent. Nappomatic's share is 10 percent. The Herfindahl-Hirschman Index in this industry is

Which of the following statements about the Herfindahl-Hirschman Index is CORRECT? I. It is the square of the percentage market share of each firm summed over the largest 50 firms (or summed over all the firms if there are fewer than 50) in a market. II) A small index is indicative of a high degree of competition. III) The index is used to measure the degree of competition.

Suppose the four-firm concentration ratio for an industry is 10 percent. This value indicates ________. If the four-firm concentration ratio for another industry is 95 percent, this value indicates ________.