Question 1

Economic efficiency occurs when the firm produces a given output

Accepted Answer

A)  by using the least amount of inputs. 
B)  by using the maximum amount of inputs. 
C)  at the least cost. 
D)  at the greatest cost. 
A)  by using the least amount of inputs. 
B)  by using the maximum amount of inputs. 
C)  at the least cost. 
D)  at the greatest cost.

Question 2

Industry concentration measures the extent to which

Accepted Answer

A)  products are differentiated by the firms in the industry. 
B)  the market is dominated by a small number of firms. 
C)  the industry executives concentrate on their product. 
D)  consumers are geographically concentrated. 
A)  products are differentiated by the firms in the industry. 
B)  the market is dominated by a small number of firms. 
C)  the industry executives concentrate on their product. 
D)  consumers are geographically concentrated.

Question 3

Techniques that produce 100 sweaters  
-Using the data in the above table, if the price of an hour of labor is $20 and the price of a unit of capital is $10, then the most economically efficient technique for producing 100 sweaters is

Accepted Answer

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

Question 4

Is the number of sellers in the market the only thing that is different in each of the four market types economists study?

Accepted Answer

No, the number of sellers is not the onl

Question 5

"When the cost of producing a unit of a good falls as its output rate increases" is the definition of

Accepted Answer

A)  economies of scope. 
B)  economies of scale. 
C)  economic efficiency. 
D)  technological efficiency. 
A)  economies of scope. 
B)  economies of scale. 
C)  economic efficiency. 
D)  technological efficiency.

Question 6

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, Acer held onto third place with a 9.5 percent share, and Lenovo maintained fourth place with a 7.9 percent share. Predict the range of the Herfindahl-Hirschman Index for the PC market.

Accepted Answer

A)  0 - 100 
B)  100 - 999 
C)  10,000 
D)  800 - 1,200 
A)  0 - 100 
B)  100 - 999 
C)  10,000 
D)  800 - 1,200

Question 7

Firms organize production by using a mix of

Accepted Answer

A)  command and incentive systems. 
B)  market and agency systems. 
C)  command and market systems. 
D)  incentive and agency systems. 
A)  command and incentive systems. 
B)  market and agency systems. 
C)  command and market systems. 
D)  incentive and agency systems.

Question 8

An incentive system is a

Accepted Answer

A)  method of organizing production that uses a market-like mechanism inside the firm. 
B)  method of organizing production that uses a managerial hierarchy. 
C)  set of rules that induce an agent to act in the best interest of a principal. 
D)  method of production that implements an assembly-line process. 
A)  method of organizing production that uses a market-like mechanism inside the firm. 
B)  method of organizing production that uses a managerial hierarchy. 
C)  set of rules that induce an agent to act in the best interest of a principal. 
D)  method of production that implements an assembly-line process.

Question 9

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, which method of producing 50 space crafts is economically efficient?

Accepted Answer

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

Question 10

Constellation Brands Inc. is the world's biggest wine firm with 300-plus brands, from jug wines to coveted California reds, including the Clos du Bois, Geyser Peak and Woodbridge by Robert Mondavi labels. Based on this characteristic of firms, why would Constellation be more efficient than a market at coordinating economic activity?

Accepted Answer

A)  Constellation has economies of scope. 
B)  Constellation has lower transaction costs. 
C)  Constellation has economies of scale. 
D)  Constellation has economies of team production. 
A)  Constellation has economies of scope. 
B)  Constellation has lower transaction costs. 
C)  Constellation has economies of scale. 
D)  Constellation has economies of team production.

Question 11

What are three major ways that corporations can cope with the principal-agent problem?

Accepted Answer

First, employees can be made part-owners

Question 12

In September 2008, Toyota Motor's share of the U.S. auto sales market was 15 percent, Ford's market share was 12.1 percent, GM's was 29.1 percent, Honda's was 10 percent, Nissan's share was 6.2 percent, and Chrysler's market share was 11.1 percent. What is the Herfindahl-Hirschman Index for the firms mentioned?

Accepted Answer

A)  167 
B)  1670 
C)  1641 
D)  1479 
A)  167 
B)  1670 
C)  1641 
D)  1479

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 Herfindahl-Hirschman index is

Accepted Answer

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

Question 14

Concentration ratios are generally computed for ________ markets.

Accepted Answer

A)  local 
B)  regional 
C)  national 
D)  global 
A)  local 
B)  regional 
C)  national 
D)  global

Question 15

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

Question 16

In their relationship with stockholders, a firm's managers act

Accepted Answer

A)  as agents. 
B)  as principals. 
C)  in loco parentis. 
D)  as proprietors. 
A)  as agents. 
B)  as principals. 
C)  in loco parentis. 
D)  as proprietors.

Question 17

Greg and Todd form a partnership and start a business in which each has a 50 percent share of the profit. After a year, the firm goes bankrupt and has debts of $20,000. Greg has no money, but Todd has $25,000 in the bank. Todd must pay ________ of debt.

Accepted Answer

A)  $0 because in a partnership each partner must pay the same 
B)  $0 because partners in a partnership have limited liability 
C)  half, or $10,000 
D)  $20,000 
A)  $0 because in a partnership each partner must pay the same 
B)  $0 because partners in a partnership have limited liability 
C)  half, or $10,000 
D)  $20,000

Question 18

The four-firm concentration ratio measures

Accepted Answer

A)  profitability. 
B)  economic efficiency. 
C)  technological efficiency. 
D)  competitiveness. 
A)  profitability. 
B)  economic efficiency. 
C)  technological efficiency. 
D)  competitiveness.

Question 19

An industry with a high concentration ratio might still be competitive if

Accepted Answer

A)  there are no close substitutes for its product. 
B)  its barriers to entry are low. 
C)  its production is geographically concentrated. 
D)  it has a high ratio of value added to sales. 
A)  there are no close substitutes for its product. 
B)  its barriers to entry are low. 
C)  its production is geographically concentrated. 
D)  it has a high ratio of value added to sales.

Question 20

Economic profit is

Accepted Answer

A)  equal to the firm's total revenue minus its opportunity costs. 
B)  an opportunity cost of operating the firm. 
C)  equal to the firm's total revenue minus its normal profit. 
D)  the average return for supplying entrepreneurial ability. 
A)  equal to the firm's total revenue minus its opportunity costs. 
B)  an opportunity cost of operating the firm. 
C)  equal to the firm's total revenue minus its normal profit. 
D)  the average return for supplying entrepreneurial ability.

Exam 10: Organizing Production

Economic efficiency occurs when the firm produces a given output

Industry concentration measures the extent to which

Techniques that produce 100 sweaters -Using the data in the above table, if the price of an hour of labor is $20 and the price of a unit of capital is $10, then the most economically efficient technique for producing 100 sweaters is

Is the number of sellers in the market the only thing that is different in each of the four market types economists study?

"When the cost of producing a unit of a good falls as its output rate increases" is the definition of

Firms organize production by using a mix of

An incentive system is a

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, which method of producing 50 space crafts is economically efficient?

What are three major ways that corporations can cope with the principal-agent problem?

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 Herfindahl-Hirschman index is

Concentration ratios are generally computed for ________ markets.

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

In their relationship with stockholders, a firm's managers act

Greg and Todd form a partnership and start a business in which each has a 50 percent share of the profit. After a year, the firm goes bankrupt and has debts of $20,000. Greg has no money, but Todd has $25,000 in the bank. Todd must pay ________ of debt.

The four-firm concentration ratio measures

An industry with a high concentration ratio might still be competitive if

Economic profit is

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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