Question 1

If economic profit is equal to zero, then the entrepreneur is making

Accepted Answer

A) a normal profit. 
B) zero profit as recorded by accountants. 
C) negative profit as recorded by accountants. 
D) zero taxable income. 
E) an amount equal to the implicit rental rate. 
A) a normal profit. 
B) zero profit as recorded by accountants. 
C) negative profit as recorded by accountants. 
D) zero taxable income. 
E) an amount equal to the implicit rental rate.

Question 2

A four-firm concentration ratio that exceeds 60 percent indicates

Accepted Answer

A) a perfectly competitive market. 
B) a monopolistically competitive market. 
C) a monopoly. 
D) an oligopoly. 
E) a competitive market. 
A) a perfectly competitive market. 
B) a monopolistically competitive market. 
C) a monopoly. 
D) an oligopoly. 
E) a competitive market.

Question 3

In the relationship between the owner of a bakery and the baker, the owner is

Accepted Answer

A) an agent, as is the baker. 
B) an agent and the baker is a principal. 
C) a principal and the baker is an agent. 
D) a principal, as is the baker. 
E) neither a principal nor an agent, but the baker is an agent. 
A) an agent, as is the baker. 
B) an agent and the baker is a principal. 
C) a principal and the baker is an agent. 
D) a principal, as is the baker. 
E) neither a principal nor an agent, but the baker is an agent.

Question 4

An industry with a high four-firm concentration ratio may have little monopoly power if

Accepted Answer

A) its production is geographically concentrated. 
B) its barriers to entry are low. 
C) its barriers to entry are high. 
D) there are no international producers of the product. 
E) there are no close substitutes for its product. 
A) its production is geographically concentrated. 
B) its barriers to entry are low. 
C) its barriers to entry are high. 
D) there are no international producers of the product. 
E) there are no close substitutes for its product.

Question 5

Team production is

Accepted Answer

A) a production process with decreasing costs per unit as production increases. 
B) a production process with individuals specializing in mutually supportive tasks. 
C) the production that results from market activity. 
D) the cost of organizing an assembly line. 
E) the lower costs resulting from organizing a firm versus using the market to coordinate production. 
A) a production process with decreasing costs per unit as production increases. 
B) a production process with individuals specializing in mutually supportive tasks. 
C) the production that results from market activity. 
D) the cost of organizing an assembly line. 
E) the lower costs resulting from organizing a firm versus using the market to coordinate production.

Question 6

A firm with a sales department, a production department, and a marketing department is an example of

Accepted Answer

A) team production. 
B) joint production. 
C) economies of scale. 
D) economies of scope. 
E) transactions costs. 
A) team production. 
B) joint production. 
C) economies of scale. 
D) economies of scope. 
E) transactions costs.

Question 7

Firms coordinate economic activity more efficiently than markets when firms have

Accepted Answer

A) lower transactions costs. 
B) economies of scale. 
C) economies of scope. 
D) economies of team production. 
E) all of the above 
A) lower transactions costs. 
B) economies of scale. 
C) economies of scope. 
D) economies of team production. 
E) all of the above

Question 8

The profits of a sole proprietorship are

Accepted Answer

A) taxed twice. 
B) subject to a corporate tax. 
C) not taxed. 
D) exempt from taxation. 
E) treated as the owner's income. 
A) taxed twice. 
B) subject to a corporate tax. 
C) not taxed. 
D) exempt from taxation. 
E) treated as the owner's income.

Question 9

Which one of the following would not likely be a firm with economies of scale?

Accepted Answer

A) an electrical production plant 
B) a steel mill 
C) a telephone company 
D) a firm that produces handmade cabinetry 
E) a multi-store dry-cleaning firm 
A) an electrical production plant 
B) a steel mill 
C) a telephone company 
D) a firm that produces handmade cabinetry 
E) a multi-store dry-cleaning firm

Question 10

Which one of the following is included in the implicit rental rate of capital?

Accepted Answer

A) economic depreciation 
B) the cost of electricity 
C) the cost of raw materials 
D) the cost of low-skilled labour 
E) the cost of heating 
A) economic depreciation 
B) the cost of electricity 
C) the cost of raw materials 
D) the cost of low-skilled labour 
E) the cost of heating

Question 11

One difference between oligopoly and monopolistic competition is

Accepted Answer

A) there is a smaller number of firms in a monopolistically competitive market than in an oligopoly. 
B) in oligopolies firms make slightly different products whereas in monopolistic competition the products are identical. 
C) monopolistic competition has barriers to entry, whereas oligopoly has none. 
D) fewer firms compete in an oligopoly than in a monopolistically competitive market. 
E) in oligopolies, firms are typically smaller in size. 
A) there is a smaller number of firms in a monopolistically competitive market than in an oligopoly. 
B) in oligopolies firms make slightly different products whereas in monopolistic competition the products are identical. 
C) monopolistic competition has barriers to entry, whereas oligopoly has none. 
D) fewer firms compete in an oligopoly than in a monopolistically competitive market. 
E) in oligopolies, firms are typically smaller in size.

Question 12

The Herfindahl-Hirschman Index is calculated as

Accepted Answer

A) the cube of the percentage market share of each firm summed over the largest 100 firms. 
B) 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. 
C) the square of the percentage market share of each firm summed over the largest 20 firms. 
D) double the market share of the five largest firms. 
E) none of the above 
A) the cube of the percentage market share of each firm summed over the largest 100 firms. 
B) 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. 
C) the square of the percentage market share of each firm summed over the largest 20 firms. 
D) double the market share of the five largest firms. 
E) none of the above

Question 13

To produce a unit of output, Alphaworks uses 10 hours of labour and 5 kilograms of material. Betaworks uses 5 hours of labour and 10 kilograms of material, and Gammaworks uses 10 hours of labour and 10 kilograms of material. If labour costs $10 per hour and material costs $5 per kilogram, which firm is economically efficient?

Accepted Answer

A) Alphaworks only 
B) Betaworks only 
C) Gammaworks only 
D) Alphaworks and Betaworks 
E) Alphaworks and Gammaworks 
A) Alphaworks only 
B) Betaworks only 
C) Gammaworks only 
D) Alphaworks and Betaworks 
E) Alphaworks and Gammaworks

Question 14

Firm strategies for coping with the principal-agent problem are

Accepted Answer

A) ownership, incentive pay, and long-term contracts. 
B) sole proprietorship, partnership, and the corporation. 
C) economies of scale, scope, and team production. 
D) technology, information, and the market. 
E) ownership, scope, and the market. 
A) ownership, incentive pay, and long-term contracts. 
B) sole proprietorship, partnership, and the corporation. 
C) economies of scale, scope, and team production. 
D) technology, information, and the market. 
E) ownership, scope, and the market.

Question 15

A firm that is technologically efficient

Accepted Answer

A) always makes an economic profit. 
B) must be economically efficient, but a firm that is economically efficient is not always technologically efficient. 
C) must be economically efficient, and a firm that is economically efficient must always be technologically efficient. 
D) is not always economically efficient, and a firm that is economically efficient is not always technologically efficient. 
E) is not always economically efficient, but a firm that is economically efficient must always be technologically efficient. 
A) always makes an economic profit. 
B) must be economically efficient, but a firm that is economically efficient is not always technologically efficient. 
C) must be economically efficient, and a firm that is economically efficient must always be technologically efficient. 
D) is not always economically efficient, and a firm that is economically efficient is not always technologically efficient. 
E) is not always economically efficient, but a firm that is economically efficient must always be technologically efficient.

Question 16

The correct ranking of the four basic market structures from low HHI (Herfindahl-Hirschman Index)to high HHI is

Accepted Answer

A) monopolistic competition, perfect competition, oligopoly, monopoly. 
B) perfect competition, oligopoly, monopolistic competition, monopoly. 
C) monopoly, oligopoly, monopolistic competition, perfect competition. 
D) perfect competition, monopolistic competition, oligopoly, monopoly. 
E) monopoly, monopolistic competition, oligopoly, perfect competition. 
A) monopolistic competition, perfect competition, oligopoly, monopoly. 
B) perfect competition, oligopoly, monopolistic competition, monopoly. 
C) monopoly, oligopoly, monopolistic competition, perfect competition. 
D) perfect competition, monopolistic competition, oligopoly, monopoly. 
E) monopoly, monopolistic competition, oligopoly, perfect competition.

Question 17

Use the information below to answer the following question.
Fact 10.2.2 A Medical Sensation
Hospitals are buying da Vinci surgical robots. Surgeons, sitting comfortably at a da Vinci console, can use various robotic attachments to perform even the most complex procedures.
Source: Fortune, April 28, 2008
-Refer to Fact 10.2.2. Assume that performing a surgery with a surgical robot requires fewer surgeons and nurses. Using the surgical robot ________ technologically efficient. We would need additional information about ________ to determine if switching to surgical robots is economically efficient for a hospital.

Accepted Answer

A) is not; the cost of surgery with a surgical robot and the cost of surgery without a surgical robot 
B) is not; the success rate of operations with surgical robots compared to the success rate of operations using other methods 
C) is; the success rate of operations with surgical robots compared to the success rate of operations using other methods 
D) is; the cost of surgery with a surgical robot and the cost of surgery without a surgical robot 
E) is not; clinical trials 
A) is not; the cost of surgery with a surgical robot and the cost of surgery without a surgical robot 
B) is not; the success rate of operations with surgical robots compared to the success rate of operations using other methods 
C) is; the success rate of operations with surgical robots compared to the success rate of operations using other methods 
D) is; the cost of surgery with a surgical robot and the cost of surgery without a surgical robot 
E) is not; clinical trials

Question 18

A firm uses capital and labour in production. To determine if the firm is technologically efficient, it

Accepted Answer

A) must know the cost of labour and the cost of capital. 
B) does not need to know the cost of labour or the cost of capital. 
C) must know the cost of labour but not the cost of capital. 
D) must know the cost of capital but not the cost of labour. 
E) must use unionized labour. 
A) must know the cost of labour and the cost of capital. 
B) does not need to know the cost of labour or the cost of capital. 
C) must know the cost of labour but not the cost of capital. 
D) must know the cost of capital but not the cost of labour. 
E) must use unionized labour.

Question 19

When the Herfindahl-Hirschman Index (HHI)is greater than 1,800,

Accepted Answer

A) the market is very competitive. 
B) a monopoly exists. 
C) there are many producers in the market. 
D) the market is moderately competitive. 
E) the market is uncompetitive. 
A) the market is very competitive. 
B) a monopoly exists. 
C) there are many producers in the market. 
D) the market is moderately competitive. 
E) the market is uncompetitive.

Question 20

The four-firm concentration ratio tells us the percentage of ________ for the four largest firms in an industry.

Accepted Answer

A) employment 
B) accounting profit 
C) economic profit 
D) the value of sales 
E) physical output 
A) employment 
B) accounting profit 
C) economic profit 
D) the value of sales 
E) physical output

Exam 10: Organizing Production

If economic profit is equal to zero, then the entrepreneur is making

A four-firm concentration ratio that exceeds 60 percent indicates

In the relationship between the owner of a bakery and the baker, the owner is

An industry with a high four-firm concentration ratio may have little monopoly power if

Team production is

A firm with a sales department, a production department, and a marketing department is an example of

Firms coordinate economic activity more efficiently than markets when firms have

The profits of a sole proprietorship are

Which one of the following would not likely be a firm with economies of scale?

Which one of the following is included in the implicit rental rate of capital?

One difference between oligopoly and monopolistic competition is

The Herfindahl-Hirschman Index is calculated as

Firm strategies for coping with the principal-agent problem are

A firm that is technologically efficient

The correct ranking of the four basic market structures from low HHI (Herfindahl-Hirschman Index)to high HHI is

A firm uses capital and labour in production. To determine if the firm is technologically efficient, it

When the Herfindahl-Hirschman Index (HHI)is greater than 1,800,

The four-firm concentration ratio tells us the percentage of ________ for the four largest firms in an industry.

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Governments Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Externalities

Public Goods and Common Resources

Markets for Factors of Production

Economic Inequality

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers

The Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

Macro Only: International Trade Policy

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