Question 1

An economic profit for a self-employed entrepreneur is

Accepted Answer

A)  an opportunity cost. 
B)  the same as the normal profit. 
C)  a profit over and above opportunity cost. 
D)  None of the above answers is correct. 
A)  an opportunity cost. 
B)  the same as the normal profit. 
C)  a profit over and above opportunity cost. 
D)  None of the above answers is correct.

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

The principal-agent problem suggests that

Accepted Answer

A)  principals and agents always have the same goals. 
B)  principals and agents will never have the same goals. 
C)  principals and agents are more likely to have the same goals if the principal gives the agent flexibility to make his own decisions. 
D)  principals and agents are more likely to have the same goals if the agent's pay is tied to satisfying the principal's goals. 
A)  principals and agents always have the same goals. 
B)  principals and agents will never have the same goals. 
C)  principals and agents are more likely to have the same goals if the principal gives the agent flexibility to make his own decisions. 
D)  principals and agents are more likely to have the same goals if the agent's pay is tied to satisfying the principal's goals.

Question 4

Which of the following constrain (that is, limit) a firm's profits? I. its technology
II) its information
III) the market in which it operates

Accepted Answer

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

Question 5

-The table above shows techniques that can be used to produce 100 shirts. If the price of an hour of labor is $10 and the price of a unit of capital is $12, 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 6

If a firm produces a given amount of output using the least amount of inputs, it definitely achieves economic efficiency.

Accepted Answer

A) True 
 B)False

Question 7

A command system is a method of organizing production that

Accepted Answer

A)  uses a market-like mechanism inside the firm. 
B)  relies on competitive markets. 
C)  uses a managerial hierarchy. 
D)  uses incentives most extensively. 
A)  uses a market-like mechanism inside the firm. 
B)  relies on competitive markets. 
C)  uses a managerial hierarchy. 
D)  uses incentives most extensively.

Question 8

Which of the following about corporations is true?

Accepted Answer

A)  The cost of capital and labor is high relative to that paid by a proprietorship. 
B)  Profits are taxed only once as the owners' income. 
C)  The owners' entire wealth is at risk. 
D)  Corporations' profits are taxed independently of their owners' incomes. 
A)  The cost of capital and labor is high relative to that paid by a proprietorship. 
B)  Profits are taxed only once as the owners' income. 
C)  The owners' entire wealth is at risk. 
D)  Corporations' profits are taxed independently of their owners' incomes.

Question 9

When Jitters Coffee Company, Inc., can lower the cost of packaging a pound of coffee by doubling the quantity packaged each day, it is achieving

Accepted Answer

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

Question 10

One of the reasons that a firm can be ________ efficient than a market is that the firm ________.

Accepted Answer

A)  more; does not have any economies of scale 
B)  more; lowers transactions costs 
C)  less; has economies of scope 
D)  less; produces lower profits 
A)  more; does not have any economies of scale 
B)  more; lowers transactions costs 
C)  less; has economies of scope 
D)  less; produces lower profits

Question 11

Widgets Gadgets Blodgets  
-In the above table, based on the four-firm concentration ration, which industry is the most concentrated?

Accepted Answer

A)  Widgets 
B)  Gadgets 
C)  Blodgets 
D)  All three industries are equally concentrated. 
A)  Widgets 
B)  Gadgets 
C)  Blodgets 
D)  All three industries are equally concentrated.

Question 12

A chief reason firms give employees bonuses based on the firm's profit is to cope with

Accepted Answer

A)  the tax laws. 
B)  the law of diminishing returns. 
C)  the principal-agent problem. 
D)  unions. 
A)  the tax laws. 
B)  the law of diminishing returns. 
C)  the principal-agent problem. 
D)  unions.

Question 13

A baseball player who has signed a long-term contract with his club and then constantly says he is injured and cannot play is an example of ________.

Accepted Answer

A)  the principal-agent problem 
B)  marginal returns to work 
C)  the law of diminishing returns 
D)  inefficient hiring practices 
A)  the principal-agent problem 
B)  marginal returns to work 
C)  the law of diminishing returns 
D)  inefficient hiring practices

Question 14

An electrician quits her current job, which pays $40,000 per year. She can take a job with another firm for $45,000 per year or work for herself. The opportunity cost of working for herself is

Accepted Answer

A)  $5,000. 
B)  $40,000. 
C)  $45,000. 
D)  $85,000. 
A)  $5,000. 
B)  $40,000. 
C)  $45,000. 
D)  $85,000.

Question 15

Which of the following statements does NOT correctly characterize normal profit?

Accepted Answer

A)  It is part of a firm's opportunity cost. 
B)  It is equal to a firm's total revenue minus its opportunity cost. 
C)  It is the average return for supplying entrepreneurial ability. 
D)  None of the above because all the statements correctly characterize normal profit. 
A)  It is part of a firm's opportunity cost. 
B)  It is equal to a firm's total revenue minus its opportunity cost. 
C)  It is the average return for supplying entrepreneurial ability. 
D)  None of the above because all the statements correctly characterize normal profit.

Question 16

A high four-firm concentration ratio implies

Accepted Answer

A)  an absence of product differentiation. 
B)  a presence of product differentiation. 
C)  an absence of competition. 
D)  a presence of competition. 
A)  an absence of product differentiation. 
B)  a presence of product differentiation. 
C)  an absence of competition. 
D)  a presence of competition.

Question 17

Production Information for
Scully's Splendid Spacecrafts  
-In the above table, if the price of labor is $10 per hour and the price of capital is $20 per unit, what is the total cost of Technique W?

Accepted Answer

A)  $80,000 
B)  $200,000 
C)  $280,000 
D)  $360,000 
A)  $80,000 
B)  $200,000 
C)  $280,000 
D)  $360,000

Question 18

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. 
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 19

A firm that is maximizing its profit

Accepted Answer

A)  is economically efficient and technologically efficient. 
B)  is economically efficient but might be technologically inefficient. 
C)  is technologically efficient but might be economically inefficient. 
D)  might be economically inefficient and/or technologically inefficient. 
A)  is economically efficient and technologically efficient. 
B)  is economically efficient but might be technologically inefficient. 
C)  is technologically efficient but might be economically inefficient. 
D)  might be economically inefficient and/or technologically inefficient.

Question 20

Dell uses outsourcing, that is, Dell buys the components of the computers it produces from other firms. This is an example of

Accepted Answer

A)  firm coordination. 
B)  a partnership. 
C)  a command system. 
D)  market coordination. 
A)  firm coordination. 
B)  a partnership. 
C)  a command system. 
D)  market coordination.

Exam 10: Organizing Production

An economic profit for a self-employed entrepreneur is

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

The principal-agent problem suggests that

Which of the following constrain (that is, limit) a firm's profits? I. its technology II) its information III) the market in which it operates

-The table above shows techniques that can be used to produce 100 shirts. If the price of an hour of labor is $10 and the price of a unit of capital is $12, then the economically efficient technique is

If a firm produces a given amount of output using the least amount of inputs, it definitely achieves economic efficiency.

A command system is a method of organizing production that

Which of the following about corporations is true?

When Jitters Coffee Company, Inc., can lower the cost of packaging a pound of coffee by doubling the quantity packaged each day, it is achieving

One of the reasons that a firm can be ________ efficient than a market is that the firm ________.

Widgets Gadgets Blodgets -In the above table, based on the four-firm concentration ration, which industry is the most concentrated?

A chief reason firms give employees bonuses based on the firm's profit is to cope with

A baseball player who has signed a long-term contract with his club and then constantly says he is injured and cannot play is an example of ________.

An electrician quits her current job, which pays $40,000 per year. She can take a job with another firm for $45,000 per year or work for herself. The opportunity cost of working for herself is

Which of the following statements does NOT correctly characterize normal profit?

A high four-firm concentration ratio implies

Production Information for Scully's Splendid Spacecrafts -In the above table, if the price of labor is $10 per hour and the price of capital is $20 per unit, what is the total cost of Technique W?

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

A firm that is maximizing its profit

Dell uses outsourcing, that is, Dell buys the components of the computers it produces from other firms. This is an example 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

Filters

One of the reasons that a firm can be efficient than a market is that the firm .