Question 1

-The above figure shows the cost curves for a competitive firm. If the market price is $15 per unit, the firm will earn profits of

Accepted Answer

A) $0. 
B) $4. 
C) $40. 
D) $160. 
A) $0. 
B) $4. 
C) $40. 
D) $160. D

Question 2

Vertical restraints in a contract

Accepted Answer

A) are generally illegal in the U.S. 
B) usually benefit the firm that produces the raw inputs to the production process. 
C) are used in vertical mergers. 
D) can approximate the outcome of a vertical merger. 
A) are generally illegal in the U.S. 
B) usually benefit the firm that produces the raw inputs to the production process. 
C) are used in vertical mergers. 
D) can approximate the outcome of a vertical merger. D

Question 3

Toyota's just-in-time system is an example of

Accepted Answer

A) backward (upstream)integration. 
B) quasi-vertical integration. 
C) using transfer pricing to avoid price controls. 
D) horizontal, downstream integration. 
A) backward (upstream)integration. 
B) quasi-vertical integration. 
C) using transfer pricing to avoid price controls. 
D) horizontal, downstream integration. B

Question 4

A small business owner earns $50,000 in revenue annually. The explicit annual costs equal $30,000. The owner could work for someone else and earn $25,000 annually. The owner's business profit is ________ and the economic profit is ________.

Accepted Answer

A) $20,000, $20,000 
B) $20,000, -$5,000 
C) $25,000, -$5,000 
D) $25,000, $20,000 
A) $20,000, $20,000 
B) $20,000, -$5,000 
C) $25,000, -$5,000 
D) $25,000, $20,000

Question 5

A ________ is a governance structure where owners are not personally liable.

Accepted Answer

A) sole proprietorship 
B) partnership 
C) mixed enterprise 
D) corporation 
A) sole proprietorship 
B) partnership 
C) mixed enterprise 
D) corporation

Question 6

A McDonald's franchise is an example of

Accepted Answer

A) horizontal integration. 
B) quasi-vertical integration. 
C) a vertical merger. 
D) None of the above. 
A) horizontal integration. 
B) quasi-vertical integration. 
C) a vertical merger. 
D) None of the above.

Question 7

Which of the following generally does NOT seek to maximize profit?

Accepted Answer

A) public sector companies 
B) corporations 
C) partnerships 
D) sole proprietorships 
A) public sector companies 
B) corporations 
C) partnerships 
D) sole proprietorships

Question 8

In a monopolistically competitive market

Accepted Answer

A) firms are price setters. 
B) barriers to entry are high. 
C) firms earn positive economic profit in the long run. 
D) products are undifferentiated. 
A) firms are price setters. 
B) barriers to entry are high. 
C) firms earn positive economic profit in the long run. 
D) products are undifferentiated.

Question 9

A small business owner earns $75,000 in revenue annually. The explicit annual costs equal $40,000. The owner could work for someone else and earn $20,000 annually. The owner's accounting profit is ________ and owner's economic profit is ________.

Accepted Answer

A) $10,000, $10,000 
B) $35,000, $10,000 
C) $35,000, $55,000 
D) $10,000, $55,000 
A) $10,000, $10,000 
B) $35,000, $10,000 
C) $35,000, $55,000 
D) $10,000, $55,000

Question 10

If a short-run fixed cost is sunk, then

Accepted Answer

A) losses can be minimized by shutting down. 
B) the firm should keep producing to cover the sunk cost. 
C) the cost cannot be avoided by shutting down. 
D) Both B and C. 
A) losses can be minimized by shutting down. 
B) the firm should keep producing to cover the sunk cost. 
C) the cost cannot be avoided by shutting down. 
D) Both B and C.

Question 11

If a competitive firm maximizes short-run profits by producing some quantity of output, which of the following must be TRUE at that level of output?

Accepted Answer

A) p = MC 
B) MR = MC 
C) p ≥ AVC 
D) All of the above 
A) p = MC 
B) MR = MC 
C) p ≥ AVC 
D) All of the above

Question 12

If a profit-maximizing firm finds that, at its current level of production, MR > MC, it will

Accepted Answer

A) earn greater profits than if MR = MC. 
B) increase output. 
C) decrease output. 
D) shut down. 
A) earn greater profits than if MR = MC. 
B) increase output. 
C) decrease output. 
D) shut down.

Question 13

Under perfect competition

Accepted Answer

A) information about prices is hard to obtain. 
B) there is a maximum number of firms that can enter the market. 
C) if a firm exits the market, price will rise. 
D) transaction costs are low. 
A) information about prices is hard to obtain. 
B) there is a maximum number of firms that can enter the market. 
C) if a firm exits the market, price will rise. 
D) transaction costs are low.

Question 14

A firm's horizontal dimension refers to

Accepted Answer

A) its size in its primary market. 
B) its size in all markets in which is competes. 
C) the level of supply chain integration the firm undertakes. 
D) the number of stages in the production process that are upstream from the stages the firm undertakes. 
A) its size in its primary market. 
B) its size in all markets in which is competes. 
C) the level of supply chain integration the firm undertakes. 
D) the number of stages in the production process that are upstream from the stages the firm undertakes.

Question 15

Stock options

Accepted Answer

A) are a type of contingent reward. 
B) allow you to pay people only $1 in salary. 
C) force CEOs to try and maximize the share price in the short run. 
D) All of the above. 
A) are a type of contingent reward. 
B) allow you to pay people only $1 in salary. 
C) force CEOs to try and maximize the share price in the short run. 
D) All of the above.

Question 16

A monopoly

Accepted Answer

A) must have a patent to protect its products. 
B) is a price taker. 
C) produces the market output. 
D) doesn't lose any sales when it raises its price. 
A) must have a patent to protect its products. 
B) is a price taker. 
C) produces the market output. 
D) doesn't lose any sales when it raises its price.

Question 17

Monitoring a manager can be difficult if

Accepted Answer

A) the owner and manager do not have an enforceable contract. 
B) the owner cannot easily observe the manager's actions. 
C) the manager doesn't have to use a time clock. 
D) the board does not have enough outside directors. 
A) the owner and manager do not have an enforceable contract. 
B) the owner cannot easily observe the manager's actions. 
C) the manager doesn't have to use a time clock. 
D) the board does not have enough outside directors.

Question 18

The board of a U.S. corporation usually includes

Accepted Answer

A) outside directors. 
B) company executives. 
C) former politicians. 
D) All of the above. 
A) outside directors. 
B) company executives. 
C) former politicians. 
D) All of the above.

Question 19

In which governance form do shareholders own the company?

Accepted Answer

A) public sector 
B) state-owned enterprise 
C) corporation 
D) non-profit 
A) public sector 
B) state-owned enterprise 
C) corporation 
D) non-profit

Question 20

A common incentive owners offer managers is

Accepted Answer

A) the year-end bonus. 
B) stock options. 
C) profit sharing. 
D) All of the above. 
A) the year-end bonus. 
B) stock options. 
C) profit sharing. 
D) All of the above.

-The above figure shows the cost curves for a competitive firm. If the market price is $15 per unit, the firm will earn profits of

Vertical restraints in a contract

Toyota's just-in-time system is an example of

A small business owner earns $50,000 in revenue annually. The explicit annual costs equal $30,000. The owner could work for someone else and earn $25,000 annually. The owner's business profit is and the economic profit is .

A ________ is a governance structure where owners are not personally liable.

A McDonald's franchise is an example of

Which of the following generally does NOT seek to maximize profit?

In a monopolistically competitive market

A small business owner earns $75,000 in revenue annually. The explicit annual costs equal $40,000. The owner could work for someone else and earn $20,000 annually. The owner's accounting profit is and owner's economic profit is .

If a short-run fixed cost is sunk, then

If a competitive firm maximizes short-run profits by producing some quantity of output, which of the following must be TRUE at that level of output?

If a profit-maximizing firm finds that, at its current level of production, MR > MC, it will

Under perfect competition

A firm's horizontal dimension refers to

Stock options

A monopoly

Monitoring a manager can be difficult if

The board of a U.S. corporation usually includes

In which governance form do shareholders own the company?

A common incentive owners offer managers is

Introduction

Supply and Demand

Empirical Methods for Demand Analysis

Consumer Choice

Production

Costs

Competitive Firms and Markets

Monopoly

Pricing With Market Power

Oligopoly and Monopolistic Competition

Game Theory and Business Strategy

Strategies Over Time

Managerial Decision-Making Under Uncertainty

Asymmetric Information

Government and Business

Global Business

Filters

Exam 7: Firm Organization and Market Structure

-The above figure shows the cost curves for a competitive firm. If the market price is $15 per unit, the firm will earn profits of

Vertical restraints in a contract

Toyota's just-in-time system is an example of

A small business owner earns $50,000 in revenue annually. The explicit annual costs equal $30,000. The owner could work for someone else and earn $25,000 annually. The owner's business profit is ________ and the economic profit is ________.

A ________ is a governance structure where owners are not personally liable.

A McDonald's franchise is an example of

Which of the following generally does NOT seek to maximize profit?

In a monopolistically competitive market

A small business owner earns $75,000 in revenue annually. The explicit annual costs equal $40,000. The owner could work for someone else and earn $20,000 annually. The owner's accounting profit is ________ and owner's economic profit is ________.

If a short-run fixed cost is sunk, then

If a competitive firm maximizes short-run profits by producing some quantity of output, which of the following must be TRUE at that level of output?

If a profit-maximizing firm finds that, at its current level of production, MR > MC, it will

Under perfect competition

A firm's horizontal dimension refers to

Stock options

A monopoly

Monitoring a manager can be difficult if

The board of a U.S. corporation usually includes

In which governance form do shareholders own the company?

A common incentive owners offer managers is

Introduction

Supply and Demand

Empirical Methods for Demand Analysis

Consumer Choice

Production

Costs

Competitive Firms and Markets

Monopoly

Pricing With Market Power

Oligopoly and Monopolistic Competition

Game Theory and Business Strategy

Strategies Over Time

Managerial Decision-Making Under Uncertainty

Asymmetric Information

Government and Business

Global Business

Filters

A small business owner earns $50,000 in revenue annually. The explicit annual costs equal $30,000. The owner could work for someone else and earn $25,000 annually. The owner's business profit is and the economic profit is .

A small business owner earns $75,000 in revenue annually. The explicit annual costs equal $40,000. The owner could work for someone else and earn $20,000 annually. The owner's accounting profit is and owner's economic profit is .