Question 1

If interest rates are high,

Accepted Answer

A) money significantly in the future is worth very little today. 
B) money significantly in the future is worth a lot today. 
C) stock investors will not invest. 
D) firms will have low profits. 
A) money significantly in the future is worth very little today. 
B) money significantly in the future is worth a lot today. 
C) stock investors will not invest. 
D) firms will have low profits.

Question 2

Vertical integration can

Accepted Answer

A) lower transaction costs due to lower costs of writing and enforcing contracts. 
B) increase management costs and complexity. 
C) reduce problems between owners and managers. 
D) All of the above. 
A) lower transaction costs due to lower costs of writing and enforcing contracts. 
B) increase management costs and complexity. 
C) reduce problems between owners and managers. 
D) All of the above.

Question 3

Vertical integration

Accepted Answer

A) is always driven by profitability concerns. 
B) results in lower transaction costs. 
C) may be undertaken to avoid government regulations. 
D) hampers timely delivery of inputs into the production process. 
A) is always driven by profitability concerns. 
B) results in lower transaction costs. 
C) may be undertaken to avoid government regulations. 
D) hampers timely delivery of inputs into the production process.

Question 4

Ronald McDonald Houses are an example of

Accepted Answer

A) altruistic corporate social responsibility. 
B) reduction in shareholder value. 
C) vertical integration. 
D) strategic corporate social responsibility. 
A) altruistic corporate social responsibility. 
B) reduction in shareholder value. 
C) vertical integration. 
D) strategic corporate social responsibility.

Question 5

Opportunistic behavior may occur when

Accepted Answer

A) a firm buys its inputs from multiple suppliers. 
B) firms incur significant transaction costs when negotiating contracts. 
C) a firm backwards vertically integrates. 
D) a firm can buy a key component from only one supplier. 
A) a firm buys its inputs from multiple suppliers. 
B) firms incur significant transaction costs when negotiating contracts. 
C) a firm backwards vertically integrates. 
D) a firm can buy a key component from only one supplier.

Question 6

If a firm sets marginal revenue equal to marginal cost it will make an economic profit.

Accepted Answer

A) True 
 B)False

Question 7

A small business owner earns $75,000 in revenue annually. The explicit annual costs equal $40,000. The owner could work for someone else and earn $20,000 annually. The owner's accounting profit is ________ and owner's economic profit is ________.

Accepted Answer

A) $10,000, $10,000 
B) $35,000, $10,000 
C) $35,000, $55,000 
D) $10,000, $55,000 
A) $10,000, $10,000 
B) $35,000, $10,000 
C) $35,000, $55,000 
D) $10,000, $55,000

Question 8

If a firm traded on the New York Stock Exchange posts an accounting profit of $10 million, then the firm is making a positive economic profit

Accepted Answer

A) only if the Securities and Exchange Commission (SE
C) approves the accounting report. 
B) only if the firm's opportunity cost is less than $10 million. 
C) only if the firm's opportunity benefit is more than $10 million. 
D) only if the firm's management receives stock compensation. 
A) only if the Securities and Exchange Commission (SE
C) approves the accounting report. 
B) only if the firm's opportunity cost is less than $10 million. 
C) only if the firm's opportunity benefit is more than $10 million. 
D) only if the firm's management receives stock compensation.

Question 9

If marginal revenue equals marginal cost, the firm is maximizing profits as long as

Accepted Answer

A) the resulting profits are positive. 
B) marginal cost exceeds marginal revenue for greater levels of output. 
C) the average cost curve lies above the demand curve. 
D) All of the above are required. 
A) the resulting profits are positive. 
B) marginal cost exceeds marginal revenue for greater levels of output. 
C) the average cost curve lies above the demand curve. 
D) All of the above are required.

Question 10

Market structure depends upon

Accepted Answer

A) the ease of entry and exit. 
B) the ability of firms to differentiate their goods and services. 
C) the number of firms in the market. 
D) All of the above. 
A) the ease of entry and exit. 
B) the ability of firms to differentiate their goods and services. 
C) the number of firms in the market. 
D) All of the above.

Question 11

If a short-run fixed cost is sunk, then

Accepted Answer

A) losses can be minimized by shutting down. 
B) the firm should keep producing to cover the sunk cost. 
C) the cost cannot be avoided by shutting down. 
D) Both B and C. 
A) losses can be minimized by shutting down. 
B) the firm should keep producing to cover the sunk cost. 
C) the cost cannot be avoided by shutting down. 
D) Both B and C.

Question 12

Even though fixed costs do not affect the output decision, an increase in fixed costs results in a wider range of prices for which the firm operates at a loss.

Accepted Answer

A) True 
 B)False

Question 13

If a firm cannot earn profits in the short run, it will shut down.

Accepted Answer

A) True 
 B)False

Question 14

If the present value of all future profit is positive, then

Accepted Answer

A) the firm should remain operating, even if it earns negative profit in the short run. 
B) the firm should shut down if it is earning a negative profit in the short run. 
C) the firm should shut down if it cannot cover its fixed costs in the short run. 
D) None of the above. 
A) the firm should remain operating, even if it earns negative profit in the short run. 
B) the firm should shut down if it is earning a negative profit in the short run. 
C) the firm should shut down if it cannot cover its fixed costs in the short run. 
D) None of the above.

Question 15

-The above figure shows the cost curves for a competitive firm. If the firm is to earn economic profit, price must exceed

Accepted Answer

A) $0. 
B) $5. 
C) $10. 
D) $11. 
A) $0. 
B) $5. 
C) $10. 
D) $11.

Question 16

If a firm can borrow money at 0% interest, then

Accepted Answer

A) the lender is irrational. 
B) its business investment is guaranteed to be profitable. 
C) present value and future value are equal. 
D) interest payments are deferred. 
A) the lender is irrational. 
B) its business investment is guaranteed to be profitable. 
C) present value and future value are equal. 
D) interest payments are deferred.

Question 17

An oligopoly

Accepted Answer

A) requires government licensing. 
B) has relatively few firms, but they are still price takers. 
C) always collude to keep prices high. 
D) has barriers to entry. 
A) requires government licensing. 
B) has relatively few firms, but they are still price takers. 
C) always collude to keep prices high. 
D) has barriers to entry.

Question 18

-The above figure shows the cost curves for a competitive firm. The firm will shut down in the short run if price falls below

Accepted Answer

A) $5. 
B) $10. 
C) $11. 
D) $15. 
A) $5. 
B) $10. 
C) $11. 
D) $15.

Question 19

All of the following are characteristics of an oligopolistic market EXCEPT

Accepted Answer

A) firms must consider the actions of their rivals. 
B) cartels eventually form to keep prices high. 
C) firms have the ability to influence prices. 
D) firms earn lower profits than a monopoly. 
A) firms must consider the actions of their rivals. 
B) cartels eventually form to keep prices high. 
C) firms have the ability to influence prices. 
D) firms earn lower profits than a monopoly.

Question 20

In deciding whether to operate in the short run, the firm must consider the relationship between price and

Accepted Answer

A) total cost. 
B) average variable cost. 
C) total fixed cost. 
D) the number of buyers. 
A) total cost. 
B) average variable cost. 
C) total fixed cost. 
D) the number of buyers.

If interest rates are high,

Vertical integration can

Vertical integration

Ronald McDonald Houses are an example of

Opportunistic behavior may occur when

If a firm sets marginal revenue equal to marginal cost it will make an economic profit.

A small business owner earns $75,000 in revenue annually. The explicit annual costs equal $40,000. The owner could work for someone else and earn $20,000 annually. The owner's accounting profit is and owner's economic profit is .

If a firm traded on the New York Stock Exchange posts an accounting profit of $10 million, then the firm is making a positive economic profit

If marginal revenue equals marginal cost, the firm is maximizing profits as long as

Market structure depends upon

If a short-run fixed cost is sunk, then

Even though fixed costs do not affect the output decision, an increase in fixed costs results in a wider range of prices for which the firm operates at a loss.

If a firm cannot earn profits in the short run, it will shut down.

If the present value of all future profit is positive, then

-The above figure shows the cost curves for a competitive firm. If the firm is to earn economic profit, price must exceed

If a firm can borrow money at 0% interest, then

An oligopoly

-The above figure shows the cost curves for a competitive firm. The firm will shut down in the short run if price falls below

All of the following are characteristics of an oligopolistic market EXCEPT

In deciding whether to operate in the short run, the firm must consider the relationship between price and

Introduction

Supply and Demand

Empirical Methods for Demand Analysis

Consumer Choice

Production

Costs

Competitive Firms and Markets

Monopoly

Pricing With Market Power

Oligopoly and Monopolistic Competition

Game Theory and Business Strategy

Strategies Over Time

Managerial Decision-Making Under Uncertainty

Asymmetric Information

Government and Business

Global Business

Filters

Exam 7: Firm Organization and Market Structure

If interest rates are high,

Vertical integration can

Vertical integration

Ronald McDonald Houses are an example of

Opportunistic behavior may occur when

If a firm sets marginal revenue equal to marginal cost it will make an economic profit.

A small business owner earns $75,000 in revenue annually. The explicit annual costs equal $40,000. The owner could work for someone else and earn $20,000 annually. The owner's accounting profit is ________ and owner's economic profit is ________.

If a firm traded on the New York Stock Exchange posts an accounting profit of $10 million, then the firm is making a positive economic profit

If marginal revenue equals marginal cost, the firm is maximizing profits as long as

Market structure depends upon

If a short-run fixed cost is sunk, then

Even though fixed costs do not affect the output decision, an increase in fixed costs results in a wider range of prices for which the firm operates at a loss.

If a firm cannot earn profits in the short run, it will shut down.

If the present value of all future profit is positive, then

-The above figure shows the cost curves for a competitive firm. If the firm is to earn economic profit, price must exceed

If a firm can borrow money at 0% interest, then

An oligopoly

-The above figure shows the cost curves for a competitive firm. The firm will shut down in the short run if price falls below

All of the following are characteristics of an oligopolistic market EXCEPT

In deciding whether to operate in the short run, the firm must consider the relationship between price and

Introduction

Supply and Demand

Empirical Methods for Demand Analysis

Consumer Choice

Production

Costs

Competitive Firms and Markets

Monopoly

Pricing With Market Power

Oligopoly and Monopolistic Competition

Game Theory and Business Strategy

Strategies Over Time

Managerial Decision-Making Under Uncertainty

Asymmetric Information

Government and Business

Global Business

Filters

A small business owner earns $75,000 in revenue annually. The explicit annual costs equal $40,000. The owner could work for someone else and earn $20,000 annually. The owner's accounting profit is and owner's economic profit is .