Question 1

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

Question 2

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

Question 3

By making most of its employees owners of the company, United Airlines attempted to

Accepted Answer

A)  cope with the unlimited liability problem. 
B)  change its business organization from a corporation to a partnership. 
C)  address the principal-agent problem between the workers and managers. 
D)  increase the role of the command system in managing the firm. 
A)  cope with the unlimited liability problem. 
B)  change its business organization from a corporation to a partnership. 
C)  address the principal-agent problem between the workers and managers. 
D)  increase the role of the command system in managing the firm.

Question 4

The four largest firms in an industry account for the following value of industry sales: 12 percent, 8 percent, 5 percent and 4 percent. Calculate the four-firm concentration ratio. Would this industry be regarded as competitive or concentrated?

Accepted Answer

The four-firm concentration ra

Question 5

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

Accepted Answer

The main advantages are limited liabilit

Question 6

A market structure in which many firms compete by making similar but slightly different products is called

Accepted Answer

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

Question 7

In the personal computer (PC) market in the first half of 2008, Hewlett-Packard maintained its worldwide No. 1 ranking at a market share of 19.1 percent. Dell's market share was 16 percent and Acer held onto third place with a 9.5 percent share, and Lenovo maintained fourth place, with a 7.9 percent share. What is the Herfindahl-Hirschman Index for the firms mentioned?

Accepted Answer

A)  52.5 
B)  1643 
C)  773 
D)  105 
A)  52.5 
B)  1643 
C)  773 
D)  105

Question 8

-The cookie industry in Eatsweetland consists of 15 firms. The industry sales are $80 million per month. The sales of the largest 5 firms are shown in the table below. The rest 10 firms have sales of $3 million each. What is the Herfindahl-Hirschman index in the market for cookies in Eatsweetland?

Accepted Answer

A)  1013 
B)  2278 
C)  872 
D)  2632 
A)  1013 
B)  2278 
C)  872 
D)  2632

Question 9

Ed is a freelance writer who could work for a newspaper at $25,000 a year but instead works for himself for $41,000 a year. His only business expenses are $1,000 for writing materials and $12,000 for rent. Ed's normal profit is $1,000. Ed's economic profit from working as a freelance writer is

Accepted Answer

A)  $1,000. 
B)  $2,000. 
C)  $15,000. 
D)  $25,000. 
A)  $1,000. 
B)  $2,000. 
C)  $15,000. 
D)  $25,000.

Question 10

What would be an example of economies of scope achieved in the automobile insurance industry?

Accepted Answer

The auto insurance industry can achieve

Question 11

Widgets Gadgets Blodgets  
-In the above table, what is the four-firm concentration ratio for the Gadgets industry?

Accepted Answer

A)  25 percent 
B)  40 percent 
C)  250 percent 
D)  1,000 percent 
A)  25 percent 
B)  40 percent 
C)  250 percent 
D)  1,000 percent

Question 12

A normal profit for a self-employed entrepreneur is I. an opportunity cost.
II) part of the implicit rental rate of the funds invested in the business.

Accepted Answer

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

Question 13

There are six firms in an industry, with market shares of 50 percent, 25 percent, 10 percent, 10 percent, 3 percent and 2 percent. The four firm concentration ratio is ________, and the HHI is ________.

Accepted Answer

A)  100; 100 
B)  95; 3338 
C)  95; 10,000 
D)  100; 3338 
A)  100; 100 
B)  95; 3338 
C)  95; 10,000 
D)  100; 3338

Question 14

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

Question 15

The profits of a partnership are

Accepted Answer

A)  taxed as personal income. 
B)  subject to a corporate tax. 
C)  taxed as capital gains indexed for inflation. 
D)  exempt from taxation. 
A)  taxed as personal income. 
B)  subject to a corporate tax. 
C)  taxed as capital gains indexed for inflation. 
D)  exempt from taxation.

Question 16

-The table above shows four methods for producing 10 computer desks a day. If the cost of a worker is $50 a day and the cost of capital is $150 a day, ________ economically efficient .

Accepted Answer

A)  method A is 
B)  method B is 
C)  method D is 
D)  method A or C is 
A)  method A is 
B)  method B is 
C)  method D is 
D)  method A or C is

Question 17

Firms that survive in the long run are usually those that

Accepted Answer

A)  become as large as possible. 
B)  remain small. 
C)  use more capital rather than more labor. 
D)  earn the largest possible profit. 
A)  become as large as possible. 
B)  remain small. 
C)  use more capital rather than more labor. 
D)  earn the largest possible profit.

Question 18

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 
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 19

The market structure in which a large number of firms compete by making similar but slightly different products is called

Accepted Answer

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

Question 20

The Herfindahl-Hirschman Index is definitely larger in a ________ market than in a ________ market.

Accepted Answer

A)  monopoly; perfectly competitive 
B)  monopolistic competitive; monopoly 
C)  perfectly competitive; monopoly 
D)  perfectly competitive; monopolistic competitive 
A)  monopoly; perfectly competitive 
B)  monopolistic competitive; monopoly 
C)  perfectly competitive; monopoly 
D)  perfectly competitive; monopolistic competitive

Exam 10: Organizing Production

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

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.

By making most of its employees owners of the company, United Airlines attempted to

The four largest firms in an industry account for the following value of industry sales: 12 percent, 8 percent, 5 percent and 4 percent. Calculate the four-firm concentration ratio. Would this industry be regarded as competitive or concentrated?

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

A market structure in which many firms compete by making similar but slightly different products is called

-The cookie industry in Eatsweetland consists of 15 firms. The industry sales are $80 million per month. The sales of the largest 5 firms are shown in the table below. The rest 10 firms have sales of $3 million each. What is the Herfindahl-Hirschman index in the market for cookies in Eatsweetland?

Ed is a freelance writer who could work for a newspaper at $25,000 a year but instead works for himself for $41,000 a year. His only business expenses are $1,000 for writing materials and $12,000 for rent. Ed's normal profit is $1,000. Ed's economic profit from working as a freelance writer is

What would be an example of economies of scope achieved in the automobile insurance industry?

Widgets Gadgets Blodgets -In the above table, what is the four-firm concentration ratio for the Gadgets industry?

A normal profit for a self-employed entrepreneur is I. an opportunity cost. II) part of the implicit rental rate of the funds invested in the business.

There are six firms in an industry, with market shares of 50 percent, 25 percent, 10 percent, 10 percent, 3 percent and 2 percent. The four firm concentration ratio is ________, and the HHI is ________.

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

The profits of a partnership are

-The table above shows four methods for producing 10 computer desks a day. If the cost of a worker is $50 a day and the cost of capital is $150 a day, ________ economically efficient .

Firms that survive in the long run are usually those that

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

The market structure in which a large number of firms compete by making similar but slightly different products is called

The Herfindahl-Hirschman Index is definitely larger in a ________ market than in a ________ market.

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

There are six firms in an industry, with market shares of 50 percent, 25 percent, 10 percent, 10 percent, 3 percent and 2 percent. The four firm concentration ratio is , and the HHI is .

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

The Herfindahl-Hirschman Index is definitely larger in a market than in a market.