Question 1

Which of the following statements is correct?

Accepted Answer

A)  Command systems are used only in the military. 
B)  An incentive system is a method of organizing production that uses a market-like mechanism inside the firm. 
C)  Selling organizations usually don't use incentive systems. 
D)  A production line is a good example of how an incentive system works. 
A)  Command systems are used only in the military. 
B)  An incentive system is a method of organizing production that uses a market-like mechanism inside the firm. 
C)  Selling organizations usually don't use incentive systems. 
D)  A production line is a good example of how an incentive system works.

Question 2

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 3

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 4

Suppose there are five firms in the disposable diaper market. Hug-Me's share is 30 percent. Plumper's share is 30 percent. Drippy's share is 20 percent. Kool Kid's share is 10 percent. Nappomatic's share is 10 percent. The Herfindahl-Hirschman Index in this industry is

Accepted Answer

A)  100. 
B)  900. 
C)  1,350. 
D)  2,400. 
A)  100. 
B)  900. 
C)  1,350. 
D)  2,400.

Question 5

-Based on the above table, which shows the firms and sales in an industry, what is the four-firm concentration ratio?

Accepted Answer

A)  55 
B)  74 
C)  100 
D)  $740 million 
A)  55 
B)  74 
C)  100 
D)  $740 million

Question 6

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

Question 7

Fatz Confectionery is a candy company that operates at the risk of unlimited liability for its many owner in case, for instance, all of its former employees win a class action lawsuit because of "sugar-lung" developed over decades of working there. Thus Fatz is a

Accepted Answer

A)  proprietorship. 
B)  partnership. 
C)  either of the above 
D)  neither of the above 
A)  proprietorship. 
B)  partnership. 
C)  either of the above 
D)  neither of the above

Question 8

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 
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 9

Unlimited liability is NOT a characteristic of

Accepted Answer

A)  corporations. 
B)  partnerships. 
C)  proprietorships. 
D)  the market economy today. 
A)  corporations. 
B)  partnerships. 
C)  proprietorships. 
D)  the market economy today.

Question 10

In order to maximize profits, firms organize their production using

Accepted Answer

A)  only a command system. 
B)  only an incentive system. 
C)  a combination of command and incentive systems. 
D)  neither a command nor an incentive system. 
A)  only a command system. 
B)  only an incentive system. 
C)  a combination of command and incentive systems. 
D)  neither a command nor an incentive system.

Question 11

The type of firm that is most numerous is the

Accepted Answer

A)  proprietorship. 
B)  corporation. 
C)  partnership. 
D)  multinational. 
A)  proprietorship. 
B)  corporation. 
C)  partnership. 
D)  multinational.

Question 12

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 earning 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 earning only a normal profit. 
D)  The entrepreneur's profit cannot be determined based on the information given.

Question 13

A form of business whose profits are taxed twice is

Accepted Answer

A)  a proprietorship. 
B)  a partnership. 
C)  a corporation. 
D)  either a proprietorship or a partnership, depending on other information. 
A)  a proprietorship. 
B)  a partnership. 
C)  a corporation. 
D)  either a proprietorship or a partnership, depending on other information.

Question 14

Sue owns a baking company. The company's total revenue for a month is $4000. The monthly costs of resources bought in the market and of resources owned by the firm are $2000 and monthly costs of resources supplied by the owner are $1000. Sue's economic profit for the month is equal to

Accepted Answer

A)  $4000. 
B)  $3000. 
C)  $2000. 
D)  $1000. 
A)  $4000. 
B)  $3000. 
C)  $2000. 
D)  $1000.

Question 15

What is the major advantage of the corporate form of business organization?

Accepted Answer

A)  Its owners have limited liability. 
B)  Its owners have unlimited liability. 
C)  Its profits are not taxed. 
D)  Its profits are taxed twice. 
A)  Its owners have limited liability. 
B)  Its owners have unlimited liability. 
C)  Its profits are not taxed. 
D)  Its profits are taxed twice.

Question 16

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

Accepted Answer

A)  reduce the number of transactions required. 
B)  enable individuals to avoid a large portion of their taxes. 
C)  reduce the rate at which the product is wasted. 
D)  do not require team production. 
A)  reduce the number of transactions required. 
B)  enable individuals to avoid a large portion of their taxes. 
C)  reduce the rate at which the product is wasted. 
D)  do not require team production.

Question 17

-The table above shows techniques that can be used to produce 100 shirts. If the price of an hour of labor is $6 and the price of a unit of capital is $30, then the economically efficient technique is

Accepted Answer

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

Question 18

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 19

-There are 9 firms in an industry with market shares in the table above. Calculate the HHI for the industry. What kind of market does this operate in and why?

Accepted Answer

The HHI equals 20² + 20² + 15² +

Question 20

You have just purchased 100 shares of the stock of Microsoft Corporation. This places you in the role of

Accepted Answer

A)  principal. 
B)  incentive system operator. 
C)  agent. 
D)  long-term contractor. 
A)  principal. 
B)  incentive system operator. 
C)  agent. 
D)  long-term contractor.

Exam 10: Organizing Production

Which of the following statements is correct?

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.

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?

Suppose there are five firms in the disposable diaper market. Hug-Me's share is 30 percent. Plumper's share is 30 percent. Drippy's share is 20 percent. Kool Kid's share is 10 percent. Nappomatic's share is 10 percent. The Herfindahl-Hirschman Index in this industry is

-Based on the above table, which shows the firms and sales in an industry, what is the four-firm concentration ratio?

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

Fatz Confectionery is a candy company that operates at the risk of unlimited liability for its many owner in case, for instance, all of its former employees win a class action lawsuit because of "sugar-lung" developed over decades of working there. Thus Fatz is a

Unlimited liability is NOT a characteristic of

In order to maximize profits, firms organize their production using

The type of firm that is most numerous is the

If economic profit is equal to zero, then

A form of business whose profits are taxed twice is

Sue owns a baking company. The company's total revenue for a month is $4000. The monthly costs of resources bought in the market and of resources owned by the firm are $2000 and monthly costs of resources supplied by the owner are $1000. Sue's economic profit for the month is equal to

What is the major advantage of the corporate form of business organization?

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

-The table above shows techniques that can be used to produce 100 shirts. If the price of an hour of labor is $6 and the price of a unit of capital is $30, then the economically efficient technique is

-There are 9 firms in an industry with market shares in the table above. Calculate the HHI for the industry. What kind of market does this operate in and why?

You have just purchased 100 shares of the stock of Microsoft Corporation. This places you in the role of

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 and Public Goods

Externalities and the Environment

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Extension A: Review

Extension B: Review

Extension C: Review

Extension D: Review

Extension E: Review

Extension F: Review

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