Question 1

Technological efficiency occurs when it is not possible for a firm to get more output from the inputs it is currently using.

Accepted Answer

A) True 
 B)False

Question 2

The decision about whether a firm in each particular industry must operate as a proprietorship, partnership, or corporation is made by the Internal Revenue Service.

Accepted Answer

A) True 
 B)False

Question 3

A firm's market constraints include the conditions under which it can

Accepted Answer

A)  convert inputs into outputs. 
B)  buy its inputs and sell its outputs. 
C)  issue stock. 
D)  produce the inputs to production.

Question 4

-The above table shows the market shares for all the landscaping services in a suburban area. A merger between firms E and F would

Accepted Answer

A)  raise the four-firm concentration ratio. 
B)  have no effect on the four-firm concentration ratio. 
C)  lower the four-firm concentration ratio. 
D)  create a monopoly.

Question 5

If the four-firm concentration ratio for an industry equals 100 percent, then definitely

Accepted Answer

A)  the Herfindahl-Hirschman Index (HHI) equals 10,000. 
B)  the industry is a monopoly. 
C)  a small number of firms are in the industry. 
D)  there are no barriers to entry into the industry.

Question 6

When Fatz confectionery can lower the cost of manufacturing and packaging a pound of candy by doubling the quantity manufactured and packaged each day, it will achieve

Accepted Answer

A)  economies of scope. 
B)  economies of scale. 
C)  economies of team production. 
D)  all of the above

Question 7

When a firm links its employees' compensation to the performance of the firm, the firm is using

Accepted Answer

A)  an incentive system. 
B)  a command system. 
C)  a cooperative system. 
D)  an agency system.

Question 8

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.

Question 9

Emma owns a firm that produces umbrellas. Currently, Emma produces 2,500 umbrellas a day. Emma cannot produce more umbrellas in a day unless she purchases another machine or else hires more workers. Emma is ________ efficient.

Accepted Answer

A)  cost 
B)  technologically 
C)  economically 
D)  capital and labor

Question 10

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.

Question 11

If a firm that repairs both motorcycles and cars is able to do so at a lower cost than a firm that does only one or the other, this would be an example of

Accepted Answer

A)  economies of scope. 
B)  economies of scale. 
C)  monitoring. 
D)  increasing transactions costs.

Question 12

Which of the following factors helps explain limitations of concentration measures?

Accepted Answer

A)  data collection challenges 
B)  failure of the market and industry to correspond 
C)  poor public information about firms 
D)  lack of staff to perform professional market research

Question 13

There are 6 firms in a market and the market shares of the firms are 40 percent, 30 percent, 10 percent, 8 percent, 7 percent, and 5 percent. The four-firm concentration ratio is equal to

Accepted Answer

A)  2738. 
B)  2664. 
C)  100. 
D)  88.

Question 14

Bud opened a flower shop. He rented a building for $9,000 a year. To buy equipment for the store, he withdrew $10,000 from his savings account, which earned an annual interest rate of 3 percent. During the first year of operation, Bud paid $4,000 for utilities and $12,000 to his suppliers. The store's total annual revenue was $55,000. The market value of the store's equipment at the end of the year was $8,000. If Bud had not started this business, he would have continued to work as an employee at another flower shop for $30,000 a year. During the first year of operation, Bud

Accepted Answer

A)  received an economic profit of $30,000. 
B)  received an economic profit of $20,000. 
C)  incurred an economic loss of $2,300 
D)  incurred an economic loss of $12,300

Question 15

Which of the following is NOT a solution to a principal-agent problem?

Accepted Answer

A)  ownership 
B)  managerial hierarchy 
C)  incentive pay 
D)  long-term contracts

Question 16

Which of the following are characteristics of a proprietorship? I. Single owner
II) Limited liability

Accepted Answer

A)  I only 
B)  II only 
C)  both I and II 
D)  neither I nor II

Question 17

The four-firm concentration ratio is the percentage of the ________ accounted for by ________ in an industry.

Accepted Answer

A)  normal profit; any four firms 
B)  value of sales; the four largest firms 
C)  economic profit; any four firms 
D)  economic profit; the four largest firms

Question 18

Which market type has characteristics as follows: large number of firms, differentiated product?

Accepted Answer

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

Question 19

What is economic profit?

Accepted Answer

The answer of What is economic profit?...

Question 20

What is the Herfindahl-Hirschman Index and what does it measure?

Accepted Answer

The answer of What is the Herfindahl-Hirschman Index and what...

Exam 10: Organizing Production