Question 1

Vertical restraints in a contract

Accepted Answer

A) are generally illegal in the U.S. 
B) usually benefit the firm that produces the raw inputs to the production process. 
C) are used in vertical mergers. 
D) can approximate the outcome of a vertical merger. 
A) are generally illegal in the U.S. 
B) usually benefit the firm that produces the raw inputs to the production process. 
C) are used in vertical mergers. 
D) can approximate the outcome of a vertical merger.

Question 2

A firm bought a pizza oven for $13,500 and if it shut down now, could sell the oven for $9,500. Which of the following statements is TRUE?

Accepted Answer

A) The relevant cost of the oven when considering shutting down is $13,500. 
B) The relevant cost of the oven when considering shutting down is $9,500. 
C) The relevant cost of the oven when considering shutting down is $4,000. 
D) The cost of the oven does not matter when deciding whether or not to shut down. 
A) The relevant cost of the oven when considering shutting down is $13,500. 
B) The relevant cost of the oven when considering shutting down is $9,500. 
C) The relevant cost of the oven when considering shutting down is $4,000. 
D) The cost of the oven does not matter when deciding whether or not to shut down.

Question 3

Corporate Social Responsibility

Accepted Answer

A) is illegal in most countries. 
B) minimizes conflict between owners and managers. 
C) is the pursuit of social objectives by corporations. 
D) disputes the stakeholder theory of R. Edward Freeman. 
A) is illegal in most countries. 
B) minimizes conflict between owners and managers. 
C) is the pursuit of social objectives by corporations. 
D) disputes the stakeholder theory of R. Edward Freeman.

Question 4

According to economists, competitive firms

Accepted Answer

A) compete for the same customers. 
B) are price takers. 
C) differentiate their products. 
D) are able to change output and affect the market price. 
A) compete for the same customers. 
B) are price takers. 
C) differentiate their products. 
D) are able to change output and affect the market price.

Question 5

If a manager is unsure what the entire profit function looks like, then she can

Accepted Answer

A) decrease output slightly to see if profits increase. 
B) increase output slightly to see if profits increase. 
C) Both A and B. 
D) None of the above. 
A) decrease output slightly to see if profits increase. 
B) increase output slightly to see if profits increase. 
C) Both A and B. 
D) None of the above.

Question 6

Economists typically assume that the owners of firms wish to

Accepted Answer

A) produce efficiently. 
B) maximize sales revenues. 
C) maximize profits. 
D) All of the above. 
A) produce efficiently. 
B) maximize sales revenues. 
C) maximize profits. 
D) All of the above.

Question 7

If a competitive firm maximizes short-run profits by producing some quantity of output, which of the following must be TRUE at that level of output?

Accepted Answer

A) p > MC 
B) MR > MC 
C) p ≥ AVC 
D) All of the above. 
A) p > MC 
B) MR > MC 
C) p ≥ AVC 
D) All of the above.

Question 8

According to the survivor principle

Accepted Answer

A) firms will get taken over by their larger rivals over time. 
B) only firms that maximize profits survive in highly competitive markets. 
C) managers only work hard if they are threatened with their survival at the firm. 
D) eventually all firms merge to become one large monopoly. 
A) firms will get taken over by their larger rivals over time. 
B) only firms that maximize profits survive in highly competitive markets. 
C) managers only work hard if they are threatened with their survival at the firm. 
D) eventually all firms merge to become one large monopoly.

Question 9

The future value of a loan is the

Accepted Answer

A) present value plus the interest rate. 
B) amount of money the firm repay. 
C) value of the profits the firm will earn from investing the loan. 
D) compounded value of the interest payments. 
A) present value plus the interest rate. 
B) amount of money the firm repay. 
C) value of the profits the firm will earn from investing the loan. 
D) compounded value of the interest payments.

Question 10

If a profit-maximizing firm finds that, at its current level of production, MR < MC, it will

Accepted Answer

A) decrease output. 
B) increase output. 
C) shut down. 
D) operate at a loss. 
A) decrease output. 
B) increase output. 
C) shut down. 
D) operate at a loss.

Question 11

A firm sets its output where

Accepted Answer

A) marginal profit minus marginal cost equals zero (Mπ - MC = 0). 
B) marginal revenue minus marginal profit equals zero (MR - Mπ = 0). 
C) marginal revenue minus marginal cost equals zero (MR - MC = 0). 
D) marginal revenue minus marginal cost is greater than zero (MR - MC > 0). 
A) marginal profit minus marginal cost equals zero (Mπ - MC = 0). 
B) marginal revenue minus marginal profit equals zero (MR - Mπ = 0). 
C) marginal revenue minus marginal cost equals zero (MR - MC = 0). 
D) marginal revenue minus marginal cost is greater than zero (MR - MC > 0).

Question 12

The board of a U.S. corporation usually includes

Accepted Answer

A) outside directors. 
B) executives of competitors. 
C) non-executive employees of the corporation. 
D) All of the above. 
A) outside directors. 
B) executives of competitors. 
C) non-executive employees of the corporation. 
D) All of the above.

Question 13

If a competitive firm cannot earn a profit at any level of output during a given short-run period, then which of the following is FALSE?

Accepted Answer

A) It will shut down in the short run and wait until the price increases sufficiently. 
B) It will exit the industry in the long run. 
C) It will operate at a loss in the short run. 
D) It will minimize its loss by decreasing output so that price exceeds marginal cost. 
A) It will shut down in the short run and wait until the price increases sufficiently. 
B) It will exit the industry in the long run. 
C) It will operate at a loss in the short run. 
D) It will minimize its loss by decreasing output so that price exceeds marginal cost.

Question 14

Under perfect competition

Accepted Answer

A) information about prices is hard to obtain. 
B) there is a maximum number of firms that can enter the market. 
C) if a firm exits the market, price will rise. 
D) transaction costs are low. 
A) information about prices is hard to obtain. 
B) there is a maximum number of firms that can enter the market. 
C) if a firm exits the market, price will rise. 
D) transaction costs are low.

Question 15

A monopoly

Accepted Answer

A) must have a patent to protect its products. 
B) is a price taker. 
C) produces the market output. 
D) doesn't lose any sales when it raises its price. 
A) must have a patent to protect its products. 
B) is a price taker. 
C) produces the market output. 
D) doesn't lose any sales when it raises its price.

Question 16

If a profit-maximizing firm finds that, at its current level of production, MR > MC, it will

Accepted Answer

A) earn greater profits than if MR = MC. 
B) increase output. 
C) decrease output. 
D) shut down. 
A) earn greater profits than if MR = MC. 
B) increase output. 
C) decrease output. 
D) shut down.

Question 17

A small business owner earns $50,000 in revenue annually. The explicit annual costs equal $30,000. The owner could work for someone else and earn $25,000 annually. The owner's business profit is ________ and the economic profit is ________.

Accepted Answer

A) $20,000, $20,000 
B) $20,000, -$5,000 
C) $25,000, -$5,000 
D) $25,000, $20,000 
A) $20,000, $20,000 
B) $20,000, -$5,000 
C) $25,000, -$5,000 
D) $25,000, $20,000

Question 18

A company that undertakes an activity so that it can "do well by doing good" is practicing

Accepted Answer

A) strategic corporate social responsibility. 
B) altruistic corporate social responsibility. 
C) profit sharing. 
D) the survivor principle. 
A) strategic corporate social responsibility. 
B) altruistic corporate social responsibility. 
C) profit sharing. 
D) the survivor principle.

Question 19

Toyota's just-in-time system is an example of

Accepted Answer

A) backward (upstream)integration. 
B) quasi-vertical integration. 
C) using transfer pricing to avoid price controls. 
D) horizontal, downstream integration. 
A) backward (upstream)integration. 
B) quasi-vertical integration. 
C) using transfer pricing to avoid price controls. 
D) horizontal, downstream integration.

Question 20

What is one of the biggest differences between a sole proprietorship and a corporation?

Accepted Answer

A) Sole proprietorships offer stock. 
B) Corporation shareholders elect the managers of the firm. 
C) Sole proprietorships have limited liability. 
D) Corporations are the only profitable firms. 
A) Sole proprietorships offer stock. 
B) Corporation shareholders elect the managers of the firm. 
C) Sole proprietorships have limited liability. 
D) Corporations are the only profitable firms.

Vertical restraints in a contract

A firm bought a pizza oven for $13,500 and if it shut down now, could sell the oven for $9,500. Which of the following statements is TRUE?

Corporate Social Responsibility

According to economists, competitive firms

If a manager is unsure what the entire profit function looks like, then she can

Economists typically assume that the owners of firms wish to

If a competitive firm maximizes short-run profits by producing some quantity of output, which of the following must be TRUE at that level of output?

According to the survivor principle

The future value of a loan is the

If a profit-maximizing firm finds that, at its current level of production, MR < MC, it will

A firm sets its output where

The board of a U.S. corporation usually includes

If a competitive firm cannot earn a profit at any level of output during a given short-run period, then which of the following is FALSE?

Under perfect competition

A monopoly

If a profit-maximizing firm finds that, at its current level of production, MR > MC, it will

A small business owner earns $50,000 in revenue annually. The explicit annual costs equal $30,000. The owner could work for someone else and earn $25,000 annually. The owner's business profit is and the economic profit is .

A company that undertakes an activity so that it can "do well by doing good" is practicing

Toyota's just-in-time system is an example of

What is one of the biggest differences between a sole proprietorship and a corporation?

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

Vertical restraints in a contract

A firm bought a pizza oven for $13,500 and if it shut down now, could sell the oven for $9,500. Which of the following statements is TRUE?

Corporate Social Responsibility

According to economists, competitive firms

If a manager is unsure what the entire profit function looks like, then she can

Economists typically assume that the owners of firms wish to

If a competitive firm maximizes short-run profits by producing some quantity of output, which of the following must be TRUE at that level of output?

According to the survivor principle

The future value of a loan is the

If a profit-maximizing firm finds that, at its current level of production, MR < MC, it will

A firm sets its output where

The board of a U.S. corporation usually includes

If a competitive firm cannot earn a profit at any level of output during a given short-run period, then which of the following is FALSE?

Under perfect competition

A monopoly

If a profit-maximizing firm finds that, at its current level of production, MR > MC, it will

A small business owner earns $50,000 in revenue annually. The explicit annual costs equal $30,000. The owner could work for someone else and earn $25,000 annually. The owner's business profit is ________ and the economic profit is ________.

A company that undertakes an activity so that it can "do well by doing good" is practicing

Toyota's just-in-time system is an example of

What is one of the biggest differences between a sole proprietorship and a corporation?

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 $50,000 in revenue annually. The explicit annual costs equal $30,000. The owner could work for someone else and earn $25,000 annually. The owner's business profit is and the economic profit is .