Question 1

A principal-agent problem occurs when hiring workers to work for a firm because

Accepted Answer

A)  workers' interests are not always the same as the interests of the owners of the firm. 
B)  workers do not respond to incentives. 
C)  the owners of a firm are always in a position to exploit the workers. 
D)  workers' interests are not important in the managerial decisions of the firm. 
A)  workers' interests are not always the same as the interests of the owners of the firm. 
B)  workers do not respond to incentives. 
C)  the owners of a firm are always in a position to exploit the workers. 
D)  workers' interests are not important in the managerial decisions of the firm.

Question 2

Firms organize production by using a mix of

Accepted Answer

A)  command and incentive systems. 
B)  market and agency systems. 
C)  command and market systems. 
D)  incentive and agency systems. 
A)  command and incentive systems. 
B)  market and agency systems. 
C)  command and market systems. 
D)  incentive and agency systems.

Question 3

Economies of scale exist when the ________ a unit of a good ________.

Accepted Answer

A)  average cost of producing; falls as its output rate increases 
B)  price; falls as its input rate decreases 
C)  price; rises as its output rate increases 
D)  average cost of producing; rises as its input rate increases 
A)  average cost of producing; falls as its output rate increases 
B)  price; falls as its input rate decreases 
C)  price; rises as its output rate increases 
D)  average cost of producing; rises as its input rate increases

Question 4

Firm A can produce a unit of output with 10 hours of labor and 5 units of material. Firm B can produce a unit of output with 5 hours of labor and 10 units of material. Firm C can produce a unit of output with 10 hours of labor and 10 units of material. If the prices of labor and material are $10 per hour and $5 per unit, respectively, which of these firms is economically efficient?

Accepted Answer

A)  firm A only 
B)  firm B only 
C)  firm C only 
D)  Firms A and B could both be economically efficient. 
A)  firm A only 
B)  firm B only 
C)  firm C only 
D)  Firms A and B could both be economically efficient.

Question 5

In the personal computer (PC) market in the first half of 2008, Hewlett-Packard maintained its worldwide No. 1 ranking at a market share of 19.1 percent. Dell's market share was 16 percent and Acer held onto third place with a 9.5 percent share, and Lenovo maintained fourth place, with a 7.9 percent share. What type of market structure would the market for PCs represent?

Accepted Answer

A)  oligopoly 
B)  perfect competition 
C)  monopolistic competition 
D)  monopoly 
A)  oligopoly 
B)  perfect competition 
C)  monopolistic competition 
D)  monopoly

Question 6

The legal responsibility for losses incurred by a proprietorship falls upon the

Accepted Answer

A)  stockholders. 
B)  partners. 
C)  owner. 
D)  creditors. 
A)  stockholders. 
B)  partners. 
C)  owner. 
D)  creditors.

Question 7

Economic efficiency definitely occurs whenever

Accepted Answer

A)  a firm cannot increase its output without increasing all its inputs. 
B)  there are no implicit costs. 
C)  the most modern technology is used in the production process. 
D)  the firm produces a given output at the least cost. 
A)  a firm cannot increase its output without increasing all its inputs. 
B)  there are no implicit costs. 
C)  the most modern technology is used in the production process. 
D)  the firm produces a given output at the least cost.

Question 8

Methods for making 2,000 CDs per day  
-In the table above, if a unit of capital is $50 per day and an hour of labor is $15 per day, which method is economically efficient?

Accepted Answer

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

Question 9

Which of the following businesses have limited liability?

Accepted Answer

A)  Mainline Texaco, a gas station downtown with Frank Jones as proprietorship 
B)  Fakker, Chayse, and Blaimm, partners in medical malpractice law 
C)  StrideRite Shoe Company, Inc., a corporation that produces shoes 
D)  Both answers B and C are correct. 
A)  Mainline Texaco, a gas station downtown with Frank Jones as proprietorship 
B)  Fakker, Chayse, and Blaimm, partners in medical malpractice law 
C)  StrideRite Shoe Company, Inc., a corporation that produces shoes 
D)  Both answers B and C are correct.

Question 10

The Roomba 570 is a robotic vacuum cleaner made and sold by iRobot. It can vacuum 4 rooms on a single battery charge and it costs $2 of electricity to charge the Roomba. Lynn is a house cleaner and can vacuum 4 rooms in 1 hour with a traditional vacuum. Suppose you want the 4 rooms in your house vacuumed once a week for one year. Ignoring the cost of any electricity Lynn uses, what is the maximum Lynn could charge per hour for you to choose her over the Roomba?

Accepted Answer

A)  $10.23 per hour 
B)  $20.45 per hour 
C)  $8.27 per hour 
D)  $16.54 per hour 
A)  $10.23 per hour 
B)  $20.45 per hour 
C)  $8.27 per hour 
D)  $16.54 per hour

Question 11

Heidi quit her job as a chef making $40,000 per year to start her own restaurant. The first year, Heidi's restaurant earned $100,000 in revenue. Heidi pays $50,000 per year in wages to the waitresses and hostess and $20,000 per year to buy food. What is Heidi's economic profit for the year?

Accepted Answer

A)  $80,000 
B)  $50,000 
C)  $30,000 
D)  -$10,000 
A)  $80,000 
B)  $50,000 
C)  $30,000 
D)  -$10,000

Question 12

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

Accepted Answer

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

Question 13

The only two ways of dealing with the principal agent problem are the use of long-term contracts and monitoring.

Accepted Answer

A) True 
 B)False

Question 14

Mr. Adams owns a textile business. In order to deal with the principal-agent problem, Mr. Adams might offer his employees

Accepted Answer

A)  incentive pay. 
B)  long-term contracts. 
C)  part- ownership. 
D)  all of the above. 
A)  incentive pay. 
B)  long-term contracts. 
C)  part- ownership. 
D)  all of the above.

Question 15

Greg, a landscaper, is planning on opening his own landscaping company. He currently earns $40,000 per year working for his uncle but he will need to quit that job. He plans to use $10,000 in savings to pay for the equipment he needs, though even after use he could sell the equipment for what he paid, $10,000. The current interest rate on savings is 5 percent. What is the total opportunity cost incurred by Greg in running his own business?

Accepted Answer

A)  $10,000 
B)  $40,500 
C)  $40,000 
D)  $50,000 
A)  $10,000 
B)  $40,500 
C)  $40,000 
D)  $50,000

Question 16

Production Information forScully's Splendid Spacecrafts  
-In the above table, if the price of labor is $10 per hour and the price of capital is $20 per unit, what is the total cost of Technique W?

Accepted Answer

A)  $80,000 
B)  $200,000 
C)  $280,000 
D)  $360,000 
A)  $80,000 
B)  $200,000 
C)  $280,000 
D)  $360,000

Question 17

Widgets Gadgets Blodgets  
-In the above table, what is the four-firm concentration ratio for the Gadgets industry?

Accepted Answer

A)  25 percent 
B)  40 percent 
C)  250 percent 
D)  1,000 percent 
A)  25 percent 
B)  40 percent 
C)  250 percent 
D)  1,000 percent

Question 18

Economic efficiency occurs when the firm produces a given output

Accepted Answer

A)  by using the least amount of inputs. 
B)  by using the maximum amount of inputs. 
C)  at the least cost. 
D)  at the greatest cost. 
A)  by using the least amount of inputs. 
B)  by using the maximum amount of inputs. 
C)  at the least cost. 
D)  at the greatest cost.

Question 19

Production Information forScully's Splendid Spacecrafts  
-In the above table, if the price of labor is $10 per hour and the price of capital is $20 per unit, which method of producing 50 space crafts is economically efficient?

Accepted Answer

A)  Technique W 
B)  Technique X 
C)  Technique Y 
D)  Technique Z 
A)  Technique W 
B)  Technique X 
C)  Technique Y 
D)  Technique Z

Question 20

If an industry were perfectly competitive, the four-firm concentration ratio would be close to ________ and the Herfindahl-Hirschman index would be close to ________.

Accepted Answer

A)  0; 0 
B)  0; 100 
C)  100; 0. 
D)  100; 100. 
A)  0; 0 
B)  0; 100 
C)  100; 0. 
D)  100; 100.

A principal-agent problem occurs when hiring workers to work for a firm because

Firms organize production by using a mix of

Economies of scale exist when the a unit of a good .

The legal responsibility for losses incurred by a proprietorship falls upon the

Economic efficiency definitely occurs whenever

Methods for making 2,000 CDs per day -In the table above, if a unit of capital is $50 per day and an hour of labor is $15 per day, which method is economically efficient?

Which of the following businesses have limited liability?

Heidi quit her job as a chef making $40,000 per year to start her own restaurant. The first year, Heidi's restaurant earned $100,000 in revenue. Heidi pays $50,000 per year in wages to the waitresses and hostess and $20,000 per year to buy food. What is Heidi's economic profit for the year?

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

The only two ways of dealing with the principal agent problem are the use of long-term contracts and monitoring.

Mr. Adams owns a textile business. In order to deal with the principal-agent problem, Mr. Adams might offer his employees

Production Information forScully's Splendid Spacecrafts -In the above table, if the price of labor is $10 per hour and the price of capital is $20 per unit, what is the total cost of Technique W?

Widgets Gadgets Blodgets -In the above table, what is the four-firm concentration ratio for the Gadgets industry?

Economic efficiency occurs when the firm produces a given output

Production Information forScully's Splendid Spacecrafts -In the above table, if the price of labor is $10 per hour and the price of capital is $20 per unit, which method of producing 50 space crafts is economically efficient?

If an industry were perfectly competitive, the four-firm concentration ratio would be close to and the Herfindahl-Hirschman index would be close to .

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

A principal-agent problem occurs when hiring workers to work for a firm because

Firms organize production by using a mix of

Economies of scale exist when the ________ a unit of a good ________.

The legal responsibility for losses incurred by a proprietorship falls upon the

Economic efficiency definitely occurs whenever

Methods for making 2,000 CDs per day -In the table above, if a unit of capital is $50 per day and an hour of labor is $15 per day, which method is economically efficient?

Which of the following businesses have limited liability?

Heidi quit her job as a chef making $40,000 per year to start her own restaurant. The first year, Heidi's restaurant earned $100,000 in revenue. Heidi pays $50,000 per year in wages to the waitresses and hostess and $20,000 per year to buy food. What is Heidi's economic profit for the year?

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

The only two ways of dealing with the principal agent problem are the use of long-term contracts and monitoring.

Mr. Adams owns a textile business. In order to deal with the principal-agent problem, Mr. Adams might offer his employees

Production Information forScully's Splendid Spacecrafts -In the above table, if the price of labor is $10 per hour and the price of capital is $20 per unit, what is the total cost of Technique W?

Widgets Gadgets Blodgets -In the above table, what is the four-firm concentration ratio for the Gadgets industry?

Economic efficiency occurs when the firm produces a given output

Production Information forScully's Splendid Spacecrafts -In the above table, if the price of labor is $10 per hour and the price of capital is $20 per unit, which method of producing 50 space crafts is economically efficient?

If an industry were perfectly competitive, the four-firm concentration ratio would be close to ________ and the Herfindahl-Hirschman index would be close to ________.

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

Economies of scale exist when the a unit of a good .

If an industry were perfectly competitive, the four-firm concentration ratio would be close to and the Herfindahl-Hirschman index would be close to .