Question 1

Technological efficiency necessarily means producing

Accepted Answer

A)  at minimum cost. 
B)  with the highest level technology available. 
C)  without using more inputs than necessary. 
D)  technology itself. 
A)  at minimum cost. 
B)  with the highest level technology available. 
C)  without using more inputs than necessary. 
D)  technology itself.

Question 2

An economic profit is

Accepted Answer

A)  an opportunity cost of the company. 
B)  a cost that is always measured by the accountant. 
C)  the amount of profit an accountant calculates for a company. 
D)  not the same as the company's normal profit. 
A)  an opportunity cost of the company. 
B)  a cost that is always measured by the accountant. 
C)  the amount of profit an accountant calculates for a company. 
D)  not the same as the company's normal profit.

Question 3

Constellation Brands Inc. is the world's biggest wine firm 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?

Accepted Answer

A)  Constellation has economies of scope. 
B)  Constellation has lower transaction costs. 
C)  Constellation has economies of scale. 
D)  Constellation has economies of team production. 
A)  Constellation has economies of scope. 
B)  Constellation has lower transaction costs. 
C)  Constellation has economies of scale. 
D)  Constellation has economies of team production.

Question 4

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

Accepted Answer

A)  cope with the unlimited liability problem. 
B)  change its business organization from a corporation to a partnership. 
C)  address the principal-agent problem between the workers and managers. 
D)  increase the role of the command system in managing the firm. 
A)  cope with the unlimited liability problem. 
B)  change its business organization from a corporation to a partnership. 
C)  address the principal-agent problem between the workers and managers. 
D)  increase the role of the command system in managing the firm.

Question 5

Economic profit is

Accepted Answer

A)  equal to the firm's total revenue minus its opportunity costs. 
B)  an opportunity cost of operating the firm. 
C)  equal to the firm's total revenue minus its normal profit. 
D)  the average return for supplying entrepreneurial ability. 
A)  equal to the firm's total revenue minus its opportunity costs. 
B)  an opportunity cost of operating the firm. 
C)  equal to the firm's total revenue minus its normal profit. 
D)  the average return for supplying entrepreneurial ability.

Question 6

An advantage of the corporation over other forms of business organization is that

Accepted Answer

A)  the owners have unlimited liability. 
B)  a corporation's profits are taxed only once. 
C)  large-scale, low-cost capital is more readily available. 
D)  the decision-making structure is simple. 
A)  the owners have unlimited liability. 
B)  a corporation's profits are taxed only once. 
C)  large-scale, low-cost capital is more readily available. 
D)  the decision-making structure is simple.

Question 7

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. What is Angelo's economic profit?

Accepted Answer

A)  $28,400 
B)  $350,000 
C)  $58,400 
D)  $268,400 
A)  $28,400 
B)  $350,000 
C)  $58,400 
D)  $268,400

Question 8

Firms use incentives to pursue their most fundamental goal, which is to maximize

Accepted Answer

A)  profits. 
B)  sales revenue. 
C)  worker satisfaction. 
D)  worker pay. 
A)  profits. 
B)  sales revenue. 
C)  worker satisfaction. 
D)  worker pay.

Question 9

In order to maximize profits, firms organize their production using

Accepted Answer

A)  only a command system. 
B)  only an incentive system. 
C)  a combination of command and incentive systems. 
D)  neither a command nor an incentive system. 
A)  only a command system. 
B)  only an incentive system. 
C)  a combination of command and incentive systems. 
D)  neither a command nor an incentive system.

Question 10

It was more than a century ago that an engineer named Frederick Taylor walked into factories and starting timing workers with a stop watch. He dissected their movements, and organized them more efficiently. The monitoring tool, the 21st century equivalent of Taylor's stopwatch, is the computer. Those of us who use them produce rivers of data describing the hours of our work day. Suppose modern firms pay employees based on the quantity of work completed each day as monitored through computers by managers. How would this solve the principal-agent problem?

Accepted Answer

A)  through employee incentive pay 
B)  through employee ownership 
C)  through employee long-term contracts 
D)  through employee monitoring 
A)  through employee incentive pay 
B)  through employee ownership 
C)  through employee long-term contracts 
D)  through employee monitoring

Question 11

Which of the following is CORRECT?

Accepted Answer

A)  If a firm is technologically efficient, it is always economically efficient. 
B)  If a firm is technologically efficient, it is always producing at the lowest costs of production. 
C)  If a firm is economically efficient, it is always technologically efficient. 
D)  None of the above answers is correct. 
A)  If a firm is technologically efficient, it is always economically efficient. 
B)  If a firm is technologically efficient, it is always producing at the lowest costs of production. 
C)  If a firm is economically efficient, it is always technologically efficient. 
D)  None of the above answers is correct.

Question 12

If a firm produces a given amount of output using the least amount of inputs, it definitely achieves economic efficiency.

Accepted Answer

A) True 
 B)False

Question 13

What are three major ways that corporations can cope with the principal-agent problem?

Accepted Answer

First, employees can be made part-owners

Question 14

The profits of a partnership are

Accepted Answer

A)  taxed as personal income. 
B)  subject to a corporate tax. 
C)  taxed as capital gains indexed for inflation. 
D)  exempt from taxation. 
A)  taxed as personal income. 
B)  subject to a corporate tax. 
C)  taxed as capital gains indexed for inflation. 
D)  exempt from taxation.

Question 15

Much of the outcry in the 2008 fight over a fat bailout for Wall Street focused on the size of Wall Street's fat paychecks. The real problem, according to corporate governance researchers, isn't the amount executives receive, it's how companies pay them. Most companies link compensation to quarterly performance, encouraging short-term gambles. One way to align pay with long-term incentives and discourage risky bets would be to stretch compensation over more years. What is a suggested solution to the principal-agent problem?

Accepted Answer

A)  employee ownership 
B)  employee incentive pay 
C)  employee long-term contracts 
D)  employee monitoring 
A)  employee ownership 
B)  employee incentive pay 
C)  employee long-term contracts 
D)  employee monitoring

Question 16

Economies of scope are cost reductions achieved by

Accepted Answer

A)  the production of multiple, related products. 
B)  the production of large amounts of a single product. 
C)  limiting the size of the firm. 
D)  increasing firm size. 
A)  the production of multiple, related products. 
B)  the production of large amounts of a single product. 
C)  limiting the size of the firm. 
D)  increasing firm size.

Question 17

-The above table gives techniques Jitters Coffee Company can use to package 5,000 pounds of coffee. If the cost of capital is $50 per unit and the cost of labor is $100 per unit, the economically efficient technique for packaging 5000 pounds of coffee is

Accepted Answer

A)  A. 
B)  B. 
C)  C. 
D)  D. 
A)  A. 
B)  B. 
C)  C. 
D)  D.

Question 18

A command system is a

Accepted Answer

A)  method of organizing production that uses a market-like mechanism inside the firm. 
B)  method of organizing production that uses a managerial hierarchy. 
C)  set of rules that induce an agent to act in the best interest of a principal. 
D)  method of production that implements an assembly-line process. 
A)  method of organizing production that uses a market-like mechanism inside the firm. 
B)  method of organizing production that uses a managerial hierarchy. 
C)  set of rules that induce an agent to act in the best interest of a principal. 
D)  method of production that implements an assembly-line process.

Question 19

The main disadvantage to organizing a business as a proprietorship is

Accepted Answer

A)  its complex management structure. 
B)  limited liability. 
C)  unlimited liability. 
D)  that economic profit cannot be maximized. 
A)  its complex management structure. 
B)  limited liability. 
C)  unlimited liability. 
D)  that economic profit cannot be maximized.

Question 20

Techniques for making 100 automobiles  
-The table above shows three production methods to produce 100 automobiles per day. If the price of labor is $20 per unit and the price of capital is $100 per unit, which of the three methods is economically efficient?

Accepted Answer

A)  Method A only 
B)  Method B only 
C)  Method C only 
D)  All three methods are economically efficient. 
A)  Method A only 
B)  Method B only 
C)  Method C only 
D)  All three methods are economically efficient.

Technological efficiency necessarily means producing

An economic profit is

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

Economic profit is

An advantage of the corporation over other forms of business organization is that

Firms use incentives to pursue their most fundamental goal, which is to maximize

In order to maximize profits, firms organize their production using

Which of the following is CORRECT?

If a firm produces a given amount of output using the least amount of inputs, it definitely achieves economic efficiency.

What are three major ways that corporations can cope with the principal-agent problem?

The profits of a partnership are

Economies of scope are cost reductions achieved by

-The above table gives techniques Jitters Coffee Company can use to package 5,000 pounds of coffee. If the cost of capital is $50 per unit and the cost of labor is $100 per unit, the economically efficient technique for packaging 5000 pounds of coffee is

A command system is a

The main disadvantage to organizing a business as a proprietorship is

Techniques for making 100 automobiles -The table above shows three production methods to produce 100 automobiles per day. If the price of labor is $20 per unit and the price of capital is $100 per unit, which of the three methods is economically efficient?

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Public Choices, Public Goods, and Healthcare

Externalities

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Filters

Exam 10: Organizing Production

Technological efficiency necessarily means producing

An economic profit is

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

Economic profit is

An advantage of the corporation over other forms of business organization is that

Firms use incentives to pursue their most fundamental goal, which is to maximize

In order to maximize profits, firms organize their production using

Which of the following is CORRECT?

If a firm produces a given amount of output using the least amount of inputs, it definitely achieves economic efficiency.

What are three major ways that corporations can cope with the principal-agent problem?

The profits of a partnership are

Economies of scope are cost reductions achieved by

-The above table gives techniques Jitters Coffee Company can use to package 5,000 pounds of coffee. If the cost of capital is $50 per unit and the cost of labor is $100 per unit, the economically efficient technique for packaging 5000 pounds of coffee is

A command system is a

The main disadvantage to organizing a business as a proprietorship is

Techniques for making 100 automobiles -The table above shows three production methods to produce 100 automobiles per day. If the price of labor is $20 per unit and the price of capital is $100 per unit, which of the three methods is economically efficient?

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Public Choices, Public Goods, and Healthcare

Externalities

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Filters