Question 1

Which of the following statements pertains to the four-firm concentration ratio? I. It is the percentage of the value of sales accounted for by the four largest firms in an industry.
II) A high concentration ratio is indicative of a high degree of competition.
III) The ratio is used to measure product differentiation.

Accepted Answer

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

Question 2

A firm with two or more owners who have unlimited liability is known as

Accepted Answer

A)  a partnership. 
B)  a proprietorship. 
C)  a corporation. 
D)  an establishment.

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

The limited liability enjoyed by Jitters Coffee Company Corporation is a benefit that protects

Accepted Answer

A)  its employees. 
B)  its Board of Directors. 
C)  its stockholders. 
D)  all of the above

Question 5

________ 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

Question 6

Economic profit is the difference between total revenue and the

Accepted Answer

A)  normal profit. 
B)  interest costs of production. 
C)  opportunity costs of production. 
D)  costs of resources bought in markets.

Question 7

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.

Question 8

If Quick Auto Service increases the size of its shop, enabling it to purchase cost-saving capital equipment so that the cost of servicing a car falls, this would be an example of

Accepted Answer

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

Question 9

Techniques that produce 100 sweaters
 
-In the above table, the technique that is NOT technologically efficient is

Accepted Answer

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

Question 10

The profits of a proprietorship are

Accepted Answer

A)  taxed at the same rate as the owner's other personal income. 
B)  subject to a corporate tax. 
C)  taxed as capital gains indexed for inflation. 
D)  exempt from taxation.

Question 11

Last Tuesday you purchased 100 shares of Jitters Coffee Company, a corporation, for $25.00 per share. Unfortunately, the company went bankrupt later that same day. If the company still owed $1 million in debts after all assets have been liquidated and there are 1 million stockholders, what would be your personal loss from the remaining debt?

Accepted Answer

A)  $0 
B)  $1.00 
C)  $100.00 
D)  $1 million

Question 12

If there are five firms in an industry, each with a market share of 20 percent, the Herfindahl-Hirschman Index (HHI) of concentration is

Accepted Answer

A)  2000. 
B)  400. 
C)  100. 
D)  20.

Question 13

-The above table gives techniques that Fatz Confectionery can use to produce 2,000 pounds of candy. Which technique is technology inefficient?

Accepted Answer

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

Question 14

Suppose Pippi buys an oven for her pizza parlor for $100,000. Pippi's pizza tasted so pitiful she went out of business 12 months later. She was able to sell the pizza oven for $75,000. This decrease in the value of the oven is

Accepted Answer

A)  the total implicit rental rate on the oven. 
B)  an economic loss. 
C)  economic depreciation. 
D)  interest forgone.

Question 15

A student wrote: "Monopolistic competition is a market structure in which a small number of firms compete by making an identical product." If you were the instructor, how would you correct this statement?

Accepted Answer

The answer of A student wrote: "Monopolistic competition is a...

Question 16

Owners of a proprietorship have ________ liability and stockholders in a corporation have ________.

Accepted Answer

A)  limited; limited 
B)  limited; unlimited 
C)  unlimited; unlimited 
D)  unlimited; limited

Question 17

A market with the characteristics of many firms selling an identical product, many buyers, and no restrictions on entry or exit to the market is

Accepted Answer

A)  a monopoly market. 
B)  an oligopolistic market. 
C)  a perfectly competitive market. 
D)  a monopolistically competitive market.

Question 18

The owner of a proprietorship might decide incorporate the firm as a corporation in order to

Accepted Answer

A)  be able to conduct business in more than one county. 
B)  avoid the principal-agent problem. 
C)  be eligible for patent protection of new products. 
D)  gain limited liability.

Question 19

The return that an entrepreneur can expect to earn, on average, is called

Accepted Answer

A)  profit. 
B)  normal profit. 
C)  economic profit. 
D)  accounting profit.

Question 20

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

Accepted Answer

A)  12.5. 
B)  25. 
C)  50. 
D)  200.

Exam 10: Organizing Production