Exam 10: Organizing Production

You have just been named President and Chief Executive Officer at the StrideRite Shoe Corporation. This appointment places you in the role of ________ to lower managers and ________ to the stockholders.

Firms are often more efficient than markets as coordinators of economic activity because

The principal-agent problem is the issue of inducing

Jake opens a pig farm in Idaho. To start his farm, he uses his entire $50,000 of savings from his savings account. The bank was paying him $2,500 interest on his saving. Explain why the $2,500 is one of Jake's costs.

Economies of scale exist when the

Over the years, the U.S. economy has become increasingly

-The table above shows techniques that can be used to produce 100 shirts. The technique that is NOT technologically efficient is

If a firm chooses to produce 100 units of output for $150 with 10 units of labor and 12 units of capital, when they could produce the same 100 units for $120 with 10 units of labor and 8 units of capital, the firm is technologically ________ and economically ________.

Which of the following compensation schemes can be explained as an attempt to solve a principal-agent problem?

The market for wheat is an example of

One reason why firms replace markets for some activities is that firms

A firm that is technologically efficient

On a national level, the concentration ratio for grocery stores is very low. But, the "true" market for grocery stores is local in nature. What limitation does the geographic market put on the measure of concentration for grocery stores?

One year ago, Ms. Case and Mr. Bond opened a jewelry store called T & J. They invested $1,000,000 of their savings into the partnership to buy equipment and initial inventory. They rented a building for $90,000 a year, and hired two employees for an annual wage of $40,000 each. Case and Bond believed that the best alternative investment of their money would be government bonds, which could yield an annual return of 8 percent. To run the store, Case quit her previous job, at which she earned $100,000, but her former boss told her that she was welcome to return anytime. Bond kept his job with the government, but gave up 6 hours of leisure each week (for 50 weeks), the time he used to spend playing golf. Bond used to say: "I'd only give up my golf time if someone paid me $100 an hour." During the first year of operation, T & J paid $20,000 for utilities and the firm's total revenue was $350,000. The market value of T & J's equipment was $200,000 at the beginning of the year and $170,000 at the end of the year. a) What is the economic depreciation of their capital? b) What are T & J's opportunity costs? c) What is the firm's economic profit in the first year of operation?

The possibility that the managers of a corporation might not always act in the best interest of its owners is an example of the principal-agent problem.

What are the main advantages and disadvantages of organizing a business as a corporation?

If a market is shared equally by 200 firms the Herfindahl-Hirschman Index is

A monopolistically competitive firm produces a good or service that has no close substitutes.

A corporation is a firm owned by

In a corporation, the managers are the stockholders'