Question 1

If economic profit is equal to zero, then

Accepted Answer

A)  the entrepreneur's profit as measured by accountants is also equal to zero. 
B)  the entrepreneur's profit as measured by accountants must be less than zero. 
C)  the entrepreneur is making only a normal profit. 
D)  The entrepreneur's profit cannot be determined based on the information given. 
A)  the entrepreneur's profit as measured by accountants is also equal to zero. 
B)  the entrepreneur's profit as measured by accountants must be less than zero. 
C)  the entrepreneur is making only a normal profit. 
D)  The entrepreneur's profit cannot be determined based on the information given.

Question 2

Economic efficiency necessarily occurs when the firm

Accepted Answer

A)  produces a given output at least cost. 
B)  produces a given output by using the least inputs. 
C)  earns a normal profit. 
D)  earns an economic profit. 
A)  produces a given output at least cost. 
B)  produces a given output by using the least inputs. 
C)  earns a normal profit. 
D)  earns an economic profit.

Question 3

-The table above lists the market shares of the twenty makers of personal computers. The four-firm concentration equals

Accepted Answer

A)  5 percent. 
B)  20 percent. 
C)  25 percent. 
D)  100 percent. 
A)  5 percent. 
B)  20 percent. 
C)  25 percent. 
D)  100 percent.

Question 4

Smith's Shoes is a failed business enterprise, with debts of $10 million. Steve Smith has an ownership stake in Smith's shoes. Which of the following statements INCORRECTLY characterizes Steve Smith's legal liability for the debts of Smith's Shoes, depending on the firm's type of business organization?

Accepted Answer

A)  If Smith's Shoes is a proprietorship, then Steve Smith is fully liable for the entire $10 million in debt of the failed shoe store. 
B)  If Steve Smith is a partner in Smith's Shoes, then his legal liability for the debts of Smith Shoes is $10 million divided by the number of partners. 
C)  If Smith's Shoes is a corporation in which Steve Smith is a stockholder, then Steve Smith does not need to use any of his wealth to pay the debt because the company has limited liability. 
D)  None of the above statements is incorrect. 
A)  If Smith's Shoes is a proprietorship, then Steve Smith is fully liable for the entire $10 million in debt of the failed shoe store. 
B)  If Steve Smith is a partner in Smith's Shoes, then his legal liability for the debts of Smith Shoes is $10 million divided by the number of partners. 
C)  If Smith's Shoes is a corporation in which Steve Smith is a stockholder, then Steve Smith does not need to use any of his wealth to pay the debt because the company has limited liability. 
D)  None of the above statements is incorrect.

Question 5

A market structure in which a small number of firms compete is called

Accepted Answer

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

Question 6

The accountant for Muzhi's Sushi claims that Muzhi has accomplished "economic efficiency." This means that Muzhi's Sushi

Accepted Answer

A)  produces a given output using the least inputs. 
B)  produces a given output at the lowest cost. 
C)  has an economic profit greater than a normal profit. 
D)  has a normal profit greater than an economic profit. 
A)  produces a given output using the least inputs. 
B)  produces a given output at the lowest cost. 
C)  has an economic profit greater than a normal profit. 
D)  has a normal profit greater than an economic profit.

Question 7

A command system is a method of coordinating a firm's productive resources that uses

Accepted Answer

A)  government regulations. 
B)  discipline and punishment. 
C)  a managerial hierarchy. 
D)  survival of the fittest. 
A)  government regulations. 
B)  discipline and punishment. 
C)  a managerial hierarchy. 
D)  survival of the fittest.

Question 8

Costs to the firm arising from reaching agreements on input prices with suppliers and then ensuring that terms of agreements are fulfilled, are called

Accepted Answer

A)  negotiation costs. 
B)  agency costs. 
C)  transactions costs. 
D)  implicit costs. 
A)  negotiation costs. 
B)  agency costs. 
C)  transactions costs. 
D)  implicit costs.

Question 9

Which of the following statements is TRUE? I. A firm that is not economically efficient does not maximize profit.
II) Economic efficiency depends on the relative costs of resources.
III) A technological efficient firm is also economically efficient.

Accepted Answer

A)  I only 
B)  II only 
C)  II and III 
D)  I and II 
A)  I only 
B)  II only 
C)  II and III 
D)  I and II

Question 10

In an oligopoly with two firms, one firm's share of the market is 70 percent. The Herfindahl-Hirschman Index is ________.

Accepted Answer

A)  4,900 
B)  0.7 
C)  5,800 
D)  100 
A)  4,900 
B)  0.7 
C)  5,800 
D)  100

Question 11

According to Nobel laureate Ronald Coase, firms exist in order to

Accepted Answer

A)  maximize transactions costs. 
B)  minimize transactions costs. 
C)  maximize transactions. 
D)  employ workers. 
A)  maximize transactions costs. 
B)  minimize transactions costs. 
C)  maximize transactions. 
D)  employ workers.

Question 12

A firm finds that it can produce several different goods at a lower average cost by using some of the same production facilities than it could if it produced each of the goods with separate production facilities. This firm is

Accepted Answer

A)  gaining economies of scope. 
B)  gaining economies of team production. 
C)  gaining economies of scale. 
D)  incurring diseconomies of scale. 
A)  gaining economies of scope. 
B)  gaining economies of team production. 
C)  gaining economies of scale. 
D)  incurring diseconomies of scale.

Question 13

The principal-agent problem means that managers must

Accepted Answer

A)  find ways for managers to get people to buy stock in their company. 
B)  devise compensation rules to induce principals to act in the best interest of agents. 
C)  devise compensation rules to induce agents to act in the best interest of principals. 
D)  find efficient agents who will negotiate fair compensation rules for a firm's principal managers. 
A)  find ways for managers to get people to buy stock in their company. 
B)  devise compensation rules to induce principals to act in the best interest of agents. 
C)  devise compensation rules to induce agents to act in the best interest of principals. 
D)  find efficient agents who will negotiate fair compensation rules for a firm's principal managers.

Question 14

Methods for making 2,000 CDs per day  
-In the table above, which method is NOT technologically efficient?

Accepted Answer

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

Question 15

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. If Angelo switches to oak wood to fire his stove and oak costs an extra $2500 each month, but this change causes his revenues to increase to $351,000. What is Angelo's economic profit?

Accepted Answer

A)  -$1,600 
B)  -$600 
C)  $9,000 
D)  $8,000 
A)  -$1,600 
B)  -$600 
C)  $9,000 
D)  $8,000

Question 16

________ is the change in market value of capital over a given period.

Accepted Answer

A)  Accounting depreciation 
B)  Implicit rental rate 
C)  Economic depreciation 
D)  Accounting implicit rental cost 
A)  Accounting depreciation 
B)  Implicit rental rate 
C)  Economic depreciation 
D)  Accounting implicit rental cost

Question 17

A proprietorship is a firm with

Accepted Answer

A)  two or more owners who both have unlimited liability. 
B)  a single owner who has limited liability. 
C)  a single owner who has unlimited liability. 
D)  many owner all of whom have limited liability. 
A)  two or more owners who both have unlimited liability. 
B)  a single owner who has limited liability. 
C)  a single owner who has unlimited liability. 
D)  many owner all of whom have limited liability.

Question 18

In their calculation, concentration ratios take barriers to entry into a market into consideration.

Accepted Answer

A) True 
 B)False

Question 19

-The above table gives techniques Jitters Coffee Company can use to package 5,000 pounds of coffee. Which technique(s) is (are) technologically inefficient?

Accepted Answer

A)  A 
B)  C 
C)  B and C 
D)  B, C, and D 
A)  A 
B)  C 
C)  B and C 
D)  B, C, and D

Question 20

Which of the following statements regarding principal-agent relations is CORRECT?

Accepted Answer

A)  Workers are principals for managers. 
B)  Stockholders are agents. 
C)  Managers are both principals and agents. 
D)  All of the above answers are correct. 
A)  Workers are principals for managers. 
B)  Stockholders are agents. 
C)  Managers are both principals and agents. 
D)  All of the above answers are correct.

If economic profit is equal to zero, then

Economic efficiency necessarily occurs when the firm

-The table above lists the market shares of the twenty makers of personal computers. The four-firm concentration equals

A market structure in which a small number of firms compete is called

The accountant for Muzhi's Sushi claims that Muzhi has accomplished "economic efficiency." This means that Muzhi's Sushi

A command system is a method of coordinating a firm's productive resources that uses

Costs to the firm arising from reaching agreements on input prices with suppliers and then ensuring that terms of agreements are fulfilled, are called

Which of the following statements is TRUE? I. A firm that is not economically efficient does not maximize profit. II) Economic efficiency depends on the relative costs of resources. III) A technological efficient firm is also economically efficient.

In an oligopoly with two firms, one firm's share of the market is 70 percent. The Herfindahl-Hirschman Index is ________.

According to Nobel laureate Ronald Coase, firms exist in order to

A firm finds that it can produce several different goods at a lower average cost by using some of the same production facilities than it could if it produced each of the goods with separate production facilities. This firm is

The principal-agent problem means that managers must

Methods for making 2,000 CDs per day -In the table above, which method is NOT technologically efficient?

________ is the change in market value of capital over a given period.

A proprietorship is a firm with

In their calculation, concentration ratios take barriers to entry into a market into consideration.

-The above table gives techniques Jitters Coffee Company can use to package 5,000 pounds of coffee. Which technique(s) is (are) technologically inefficient?

Which of the following statements regarding principal-agent relations is CORRECT?

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

If economic profit is equal to zero, then

Economic efficiency necessarily occurs when the firm

-The table above lists the market shares of the twenty makers of personal computers. The four-firm concentration equals

A market structure in which a small number of firms compete is called

The accountant for Muzhi's Sushi claims that Muzhi has accomplished "economic efficiency." This means that Muzhi's Sushi

A command system is a method of coordinating a firm's productive resources that uses

Costs to the firm arising from reaching agreements on input prices with suppliers and then ensuring that terms of agreements are fulfilled, are called

Which of the following statements is TRUE? I. A firm that is not economically efficient does not maximize profit. II) Economic efficiency depends on the relative costs of resources. III) A technological efficient firm is also economically efficient.

In an oligopoly with two firms, one firm's share of the market is 70 percent. The Herfindahl-Hirschman Index is ________.

According to Nobel laureate Ronald Coase, firms exist in order to

A firm finds that it can produce several different goods at a lower average cost by using some of the same production facilities than it could if it produced each of the goods with separate production facilities. This firm is

The principal-agent problem means that managers must

Methods for making 2,000 CDs per day -In the table above, which method is NOT technologically efficient?

________ is the change in market value of capital over a given period.

A proprietorship is a firm with

In their calculation, concentration ratios take barriers to entry into a market into consideration.

-The above table gives techniques Jitters Coffee Company can use to package 5,000 pounds of coffee. Which technique(s) is (are) technologically inefficient?

Which of the following statements regarding principal-agent relations is CORRECT?

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