Question 1

A firm that is vertically integrated

Accepted Answer

A) participates in more than one successive stage of production. 
B) has higher profits than firms that are not vertically integrated. 
C) produces all of its own inputs. 
D) relies on other firms to market its products. 
A) participates in more than one successive stage of production. 
B) has higher profits than firms that are not vertically integrated. 
C) produces all of its own inputs. 
D) relies on other firms to market its products.

Question 2

By shutting down, a firm

Accepted Answer

A) stops receiving revenue but continues to pay variable costs. 
B) stops receiving revenue and is stuck with its fixed costs. 
C) avoids its sunk costs as well as its variable costs. 
D) can avoid paying taxes on its previously earned profits. 
A) stops receiving revenue but continues to pay variable costs. 
B) stops receiving revenue and is stuck with its fixed costs. 
C) avoids its sunk costs as well as its variable costs. 
D) can avoid paying taxes on its previously earned profits.

Question 3

A conflict between an owner and a manager may occur when

Accepted Answer

A) the manager earns more when the firm has higher profits. 
B) the manager is seeking to maximize leisure time. 
C) the owner can easily observe the manager slacking off and punish him accordingly. 
D) the firm is very small and the manager must perform multiple tasks. 
A) the manager earns more when the firm has higher profits. 
B) the manager is seeking to maximize leisure time. 
C) the owner can easily observe the manager slacking off and punish him accordingly. 
D) the firm is very small and the manager must perform multiple tasks.

Question 4

Vertically integrated firms can use transfer pricing

Accepted Answer

A) to avoid government price controls. 
B) as a way to compensate managers for transferring among departments in a vertically integrated firm. 
C) to avoid paying market prices for inputs. 
D) to shift profit. 
A) to avoid government price controls. 
B) as a way to compensate managers for transferring among departments in a vertically integrated firm. 
C) to avoid paying market prices for inputs. 
D) to shift profit.

Question 5

A firm's vertical dimension refers to

Accepted Answer

A) its ability to grow its profits. 
B) the size of its headquarters building. 
C) the degree to which it participates in the various stages of producing the products and services it sells. 
D) the downstream stages of production. 
A) its ability to grow its profits. 
B) the size of its headquarters building. 
C) the degree to which it participates in the various stages of producing the products and services it sells. 
D) the downstream stages of production.

Question 6

If a firm goes out of business because of negative economic profits, its books

Accepted Answer

A) might indicate a positive accounting profit. 
B) might indicate that opportunity costs were zero. 
C) might indicate that taxes are too high. 
D) might suggest a mistaken value of explicit costs. 
A) might indicate a positive accounting profit. 
B) might indicate that opportunity costs were zero. 
C) might indicate that taxes are too high. 
D) might suggest a mistaken value of explicit costs.

Question 7

Vertical integration

Accepted Answer

A) is always driven by profitability concerns. 
B) results in lower transaction costs. 
C) may be undertaken to avoid government regulations. 
D) hampers timely delivery of inputs into the production process. 
A) is always driven by profitability concerns. 
B) results in lower transaction costs. 
C) may be undertaken to avoid government regulations. 
D) hampers timely delivery of inputs into the production process.

Question 8

If a firm cannot earn profits in the short run, it will shut down.

Accepted Answer

A) True 
 B)False

Question 9

A firm bought a pizza oven for $13,500 and if it shut down now, could sell the oven for $9,500. Which of the following statements is TRUE?

Accepted Answer

A) The relevant cost of the oven when considering shutting down is $13,500. 
B) The relevant cost of the oven when considering shutting down is $9,500. 
C) The relevant cost of the oven when considering shutting down is $4,000. 
D) The cost of the oven does not matter when deciding whether or not to shut down. 
A) The relevant cost of the oven when considering shutting down is $13,500. 
B) The relevant cost of the oven when considering shutting down is $9,500. 
C) The relevant cost of the oven when considering shutting down is $4,000. 
D) The cost of the oven does not matter when deciding whether or not to shut down.

Question 10

If a firm makes zero economic profit, then the firm

Accepted Answer

A) has total revenues greater than its economic costs. 
B) must shut down. 
C) can be earning positive business profit. 
D) must have no fixed costs. 
A) has total revenues greater than its economic costs. 
B) must shut down. 
C) can be earning positive business profit. 
D) must have no fixed costs.

Question 11

Vertical integration can

Accepted Answer

A) lower transaction costs due to lower costs of writing and enforcing contracts. 
B) increase management costs and complexity. 
C) reduce problems between owners and managers. 
D) All of the above. 
A) lower transaction costs due to lower costs of writing and enforcing contracts. 
B) increase management costs and complexity. 
C) reduce problems between owners and managers. 
D) All of the above.

Question 12

If a firm sets marginal revenue equal to marginal cost it will make an economic profit.

Accepted Answer

A) True 
 B)False

Question 13

Ronald McDonald Houses is an example of

Accepted Answer

A) altruistic corporate social responsibility. 
B) reduction in shareholder value. 
C) vertical integration. 
D) strategic corporate social responsibility. 
A) altruistic corporate social responsibility. 
B) reduction in shareholder value. 
C) vertical integration. 
D) strategic corporate social responsibility.

Question 14

Even though fixed costs do not affect the output decision, an increase in fixed costs results in a wider range of prices for which the firm operates at a loss.

Accepted Answer

A) True 
 B)False

Question 15

If the present value of all future revenue is positive, then

Accepted Answer

A) the firm should remain operating, even if it earns negative profit in the short run. 
B) the firm should shut down if it is earning a negative profit in the short run. 
C) the firm should shut down if it cannot cover its fixed costs in the short run. 
D) Unable to determine with the information given. 
A) the firm should remain operating, even if it earns negative profit in the short run. 
B) the firm should shut down if it is earning a negative profit in the short run. 
C) the firm should shut down if it cannot cover its fixed costs in the short run. 
D) Unable to determine with the information given.

Question 16

The agency problem can be avoided if

Accepted Answer

A) the firm is not subject to regulation by a government agency. 
B) the manager and owner can manipulate reported profit. 
C) the firm has positive profits. 
D) the goals of the owner and manager are aligned. 
A) the firm is not subject to regulation by a government agency. 
B) the manager and owner can manipulate reported profit. 
C) the firm has positive profits. 
D) the goals of the owner and manager are aligned.

Question 17

-The above figure shows the cost curves for a competitive firm. If the firm is to earn economic profit, price must exceed

Accepted Answer

A) $0. 
B) $5. 
C) $10. 
D) $11. 
A) $0. 
B) $5. 
C) $10. 
D) $11.

Question 18

If the present value of all future profit is positive, then

Accepted Answer

A) the firm should remain operating, even if it earns negative profit in the short run. 
B) the firm should shut down if it is earning a negative profit in the short run. 
C) the firm should shut down if it cannot cover its fixed costs in the short run. 
D) None of the above. 
A) the firm should remain operating, even if it earns negative profit in the short run. 
B) the firm should shut down if it is earning a negative profit in the short run. 
C) the firm should shut down if it cannot cover its fixed costs in the short run. 
D) None of the above.

Question 19

If a competitive firm cannot earn a profit at any level of output during a given short-run period, then which of the following is FALSE?

Accepted Answer

A) It will shut down in the short run and wait until the price increases sufficiently. 
B) It will exit the industry in the long run. 
C) It will operate at a loss in the short run. 
D) It will minimize its loss by decreasing output so that price exceeds marginal cost. 
A) It will shut down in the short run and wait until the price increases sufficiently. 
B) It will exit the industry in the long run. 
C) It will operate at a loss in the short run. 
D) It will minimize its loss by decreasing output so that price exceeds marginal cost.

Question 20

-The above figure shows the cost curves for a competitive firm. If the firm is to operate in the short run, price must exceed

Accepted Answer

A) $0. 
B) $5. 
C) $10. 
D) $11. 
A) $0. 
B) $5. 
C) $10. 
D) $11.

A firm that is vertically integrated

By shutting down, a firm

A conflict between an owner and a manager may occur when

Vertically integrated firms can use transfer pricing

A firm's vertical dimension refers to

If a firm goes out of business because of negative economic profits, its books

Vertical integration

If a firm cannot earn profits in the short run, it will shut down.

A firm bought a pizza oven for $13,500 and if it shut down now, could sell the oven for $9,500. Which of the following statements is TRUE?

If a firm makes zero economic profit, then the firm

Vertical integration can

If a firm sets marginal revenue equal to marginal cost it will make an economic profit.

Ronald McDonald Houses is an example of

Even though fixed costs do not affect the output decision, an increase in fixed costs results in a wider range of prices for which the firm operates at a loss.

If the present value of all future revenue is positive, then

The agency problem can be avoided if

-The above figure shows the cost curves for a competitive firm. If the firm is to earn economic profit, price must exceed

If the present value of all future profit is positive, then

If a competitive firm cannot earn a profit at any level of output during a given short-run period, then which of the following is FALSE?

-The above figure shows the cost curves for a competitive firm. If the firm is to operate in the short run, price must exceed

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

A firm that is vertically integrated

By shutting down, a firm

A conflict between an owner and a manager may occur when

Vertically integrated firms can use transfer pricing

A firm's vertical dimension refers to

If a firm goes out of business because of negative economic profits, its books

Vertical integration

If a firm cannot earn profits in the short run, it will shut down.

A firm bought a pizza oven for $13,500 and if it shut down now, could sell the oven for $9,500. Which of the following statements is TRUE?

If a firm makes zero economic profit, then the firm

Vertical integration can

If a firm sets marginal revenue equal to marginal cost it will make an economic profit.

Ronald McDonald Houses is an example of

Even though fixed costs do not affect the output decision, an increase in fixed costs results in a wider range of prices for which the firm operates at a loss.

If the present value of all future revenue is positive, then

The agency problem can be avoided if

-The above figure shows the cost curves for a competitive firm. If the firm is to earn economic profit, price must exceed

If the present value of all future profit is positive, then

If a competitive firm cannot earn a profit at any level of output during a given short-run period, then which of the following is FALSE?

-The above figure shows the cost curves for a competitive firm. If the firm is to operate in the short run, price must exceed

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