Question 1

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 2

-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.

Question 3

-The above figure shows the cost curves for a competitive firm.The firm will incur economic losses if the price is less than

Accepted Answer

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

Question 4

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 5

A small business owner earns $60,000 in revenue annually.The explicit annual costs equal $40,000.The owner could work for someone else and earn $25,000 annually.The owner's accounting profit is ________ and owner's economic profit is ________.

Accepted Answer

A)  $20,000, $5,000 
B)  $20,000, -$5,000 
C)  $25,000, -$5,000 
D)  $45,000, -$5,000 
A)  $20,000, $5,000 
B)  $20,000, -$5,000 
C)  $25,000, -$5,000 
D)  $45,000, -$5,000

Question 6

In which governance form so 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 7

A firm that backward vertically integrates

Accepted Answer

A)  moves downstream in the production process. 
B)  requires that the production process be relatively simple. 
C)  has to merge with another firm. 
D)  may be producing its own inputs. 
A)  moves downstream in the production process. 
B)  requires that the production process be relatively simple. 
C)  has to merge with another firm. 
D)  may be producing its own inputs.

Question 8

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, $5,000 
B)  $20,000, -$5,000 
C)  $25,000, -$5,000 
D)  $45,000, -$5,000 
A)  $20,000, $5,000 
B)  $20,000, -$5,000 
C)  $25,000, -$5,000 
D)  $45,000, -$5,000

Question 9

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 10

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 11

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 12

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 13

If a firm traded on the New York Stock Exchange posts an accounting profit of $10 million,then the firm is making a positive economic profit

Accepted Answer

A)  only if the Securities and Exchange Commission (SE
C)  approves the accounting report. 
B)  only if the firm's opportunity cost is less than $10 million. 
C)  only if the firm's opportunity benefit is more than $10 million. 
D)  only if the firm's management receives stock compensation. 
A)  only if the Securities and Exchange Commission (SE
C)  approves the accounting report. 
B)  only if the firm's opportunity cost is less than $10 million. 
C)  only if the firm's opportunity benefit is more than $10 million. 
D)  only if the firm's management receives stock compensation.

Question 14

Monitoring is often used by firms in an attempt to decrease

Accepted Answer

A)  shirking. 
B)  piece rates. 
C)  adverse selection. 
D)  signaling. 
A)  shirking. 
B)  piece rates. 
C)  adverse selection. 
D)  signaling.

Question 15

If manager performance is easily observable then

Accepted Answer

A)  profits will be maximized for the firm. 
B)  the owner can directly reward the manager. 
C)  the manager will attempt to manipulate the reported profit. 
D)  the firm's stock price will go up. 
A)  profits will be maximized for the firm. 
B)  the owner can directly reward the manager. 
C)  the manager will attempt to manipulate the reported profit. 
D)  the firm's stock price will go up.

Question 16

What is one of the biggest differences between a sole proprietorship and a corporation?

Accepted Answer

A)  Sole proprietorships offer stock. 
B)  Corporation shareholders elect the managers of the firm. 
C)  Sole proprietorships have limited liability. 
D)  Corporations are the only profitable firms. 
A)  Sole proprietorships offer stock. 
B)  Corporation shareholders elect the managers of the firm. 
C)  Sole proprietorships have limited liability. 
D)  Corporations are the only profitable firms.

Question 17

By shutting down,a firm

Accepted Answer

A)  stops receiving revenue but continues to pay variable costs. 
B)  stops receiving revenue but 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 but 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 18

One problem with compensation systems is that

Accepted Answer

A)  sometimes a manager is rewarded for an objective other than maximizing profits. 
B)  managers are often paid too much. 
C)  owners sometimes want to pursue social objectives. 
D)  the Dodd-Frank Act of 2010 requires shareholder votes on compensation that are non-binding. 
A)  sometimes a manager is rewarded for an objective other than maximizing profits. 
B)  managers are often paid too much. 
C)  owners sometimes want to pursue social objectives. 
D)  the Dodd-Frank Act of 2010 requires shareholder votes on compensation that are non-binding.

Question 19

In deciding whether to operate in the short run,the firm must be concerned with the relationship between price of the output and

Accepted Answer

A)  total cost. 
B)  average variable cost. 
C)  total fixed cost. 
D)  the number of buyers. 
A)  total cost. 
B)  average variable cost. 
C)  total fixed cost. 
D)  the number of buyers.

Question 20

If a firm doesn't make an economic profit it will shut down.

Accepted Answer

A) True 
 B)False

The agency problem can be avoided if

-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

-The above figure shows the cost curves for a competitive firm.The firm will incur economic losses if the price is less than

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

A small business owner earns $60,000 in revenue annually.The explicit annual costs equal $40,000.The owner could work for someone else and earn $25,000 annually.The owner's accounting profit is and owner's economic profit is .

In which governance form so shareholders own the company?

A firm that backward vertically integrates

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 .

Vertically integrated firms can use transfer pricing

A McDonald's franchise is an example of

A firm that is vertically integrated

A firm's horizontal dimension refers to

If a firm traded on the New York Stock Exchange posts an accounting profit of $10 million,then the firm is making a positive economic profit

Monitoring is often used by firms in an attempt to decrease

If manager performance is easily observable then

What is one of the biggest differences between a sole proprietorship and a corporation?

By shutting down,a firm

One problem with compensation systems is that

In deciding whether to operate in the short run,the firm must be concerned with the relationship between price of the output and

If a firm doesn't make an economic profit it will shut down.

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 agency problem can be avoided if

-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

-The above figure shows the cost curves for a competitive firm.The firm will incur economic losses if the price is less than

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

A small business owner earns $60,000 in revenue annually.The explicit annual costs equal $40,000.The owner could work for someone else and earn $25,000 annually.The owner's accounting profit is ________ and owner's economic profit is ________.

In which governance form so shareholders own the company?

A firm that backward vertically integrates

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 ________.

Vertically integrated firms can use transfer pricing

A McDonald's franchise is an example of

A firm that is vertically integrated

A firm's horizontal dimension refers to

If a firm traded on the New York Stock Exchange posts an accounting profit of $10 million,then the firm is making a positive economic profit

Monitoring is often used by firms in an attempt to decrease

If manager performance is easily observable then

What is one of the biggest differences between a sole proprietorship and a corporation?

By shutting down,a firm

One problem with compensation systems is that

In deciding whether to operate in the short run,the firm must be concerned with the relationship between price of the output and

If a firm doesn't make an economic profit it will shut down.

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 $60,000 in revenue annually.The explicit annual costs equal $40,000.The owner could work for someone else and earn $25,000 annually.The owner's accounting profit is and owner's economic profit is .

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 .