Question 1

To maximize its profit for a particular quantity of output,a firm should equate the

Accepted Answer

A)  total amount spent on each of its inputs. 
B)  marginal product of each of its inputs. 
C)  average product of each of its inputs. 
D)  marginal product with the average product of each of its inputs. 
E)  marginal product of a dollar's worth of each input. 
A)  total amount spent on each of its inputs. 
B)  marginal product of each of its inputs. 
C)  average product of each of its inputs. 
D)  marginal product with the average product of each of its inputs. 
E)  marginal product of a dollar's worth of each input.

Question 2

Smaller auto firms such as Studebaker were unable to survive after World War II because

Accepted Answer

A)  of Japanese competition. 
B)  of antitrust actions by the U.S. Department of Justice. 
C)  the reliability and durability of their cars were unsatisfactory. 
D)  they were not able to achieve a scale of production that would lower unit costs. 
E)  they were organized as proprietorships rather than corporations. 
A)  of Japanese competition. 
B)  of antitrust actions by the U.S. Department of Justice. 
C)  the reliability and durability of their cars were unsatisfactory. 
D)  they were not able to achieve a scale of production that would lower unit costs. 
E)  they were organized as proprietorships rather than corporations.

Question 3

The distinction between variable and fixed inputs

Accepted Answer

A)  can be made only in the long run. 
B)  can be made by calculating the difference between an input's marginal product and its average product. 
C)  is based on the time period under consideration. 
D)  is that variable inputs are not subject to the law of diminishing returns. 
E)  reflects the difference between human and nonhuman inputs. 
A)  can be made only in the long run. 
B)  can be made by calculating the difference between an input's marginal product and its average product. 
C)  is based on the time period under consideration. 
D)  is that variable inputs are not subject to the law of diminishing returns. 
E)  reflects the difference between human and nonhuman inputs.

Question 4

Compared to the proprietorship,the partnership has the disadvantage of

Accepted Answer

A)  limited liability to each partner. 
B)  encountering more red tape to remain in existence. 
C)  double taxation of each partner. 
D)  finding more difficulty in securing funds and specialized know-how. 
E)  unlimited liability of each partner. 
A)  limited liability to each partner. 
B)  encountering more red tape to remain in existence. 
C)  double taxation of each partner. 
D)  finding more difficulty in securing funds and specialized know-how. 
E)  unlimited liability of each partner.

Question 5

The following question are based on the following diagram illustrating the weekly average and marginal products for salespersons in the appliance department of a large department store:
  
-The additional number of appliances sold by adding the fifth person is

Accepted Answer

A)  1. 
B)  3. 
C)  7. 
D)  8. 
E)  15. 
A)  1. 
B)  3. 
C)  7. 
D)  8. 
E)  15.

Question 6

One reason for the appearance of diminishing returns is that

Accepted Answer

A)  each additional unit of an input has proportionately less of the other units with which to work. 
B)  the fixed inputs cannot produce any more as more units of a variable input are added. 
C)  whenever inputs are added to a production process, output falls because of increased inefficiency. 
D)  the marginal product continually rises whenever output is increased. 
E)  specialization becomes impossible as more units of a variable input are added to a fixed input. 
A)  each additional unit of an input has proportionately less of the other units with which to work. 
B)  the fixed inputs cannot produce any more as more units of a variable input are added. 
C)  whenever inputs are added to a production process, output falls because of increased inefficiency. 
D)  the marginal product continually rises whenever output is increased. 
E)  specialization becomes impossible as more units of a variable input are added to a fixed input.

Question 7

The corporate form of business has the major advantage of

Accepted Answer

A)  less red tape. 
B)  no double taxation. 
C)  limited liability. 
D)  unlimited liability. 
E)  complete control. 
A)  less red tape. 
B)  no double taxation. 
C)  limited liability. 
D)  unlimited liability. 
E)  complete control.

Question 8

In economic analysis,the long run

Accepted Answer

A)  is a period of time during which a firm may vary one or two of its inputs. 
B)  represents a planning horizon for a firm currently making an investment decision. 
C)  exists when all inputs are frozen. 
D)  is never realized. 
E)  is the time a firm needs to vary output to respond to changes in demand. 
A)  is a period of time during which a firm may vary one or two of its inputs. 
B)  represents a planning horizon for a firm currently making an investment decision. 
C)  exists when all inputs are frozen. 
D)  is never realized. 
E)  is the time a firm needs to vary output to respond to changes in demand.

Question 9

The following question are based on the following information for an auto repair shop specializing in muffler installation.
  
-The average product of the third worker is

Accepted Answer

A)  1. 
B)  3. 
C)  4. 
D)  9. 
E)  27. 
A)  1. 
B)  3. 
C)  4. 
D)  9. 
E)  27.

Question 10

An important distinction between corporate and unincorporated businesses is that

Accepted Answer

A)  corporations have unlimited life, while unincorporated businesses are limited to the life spans of their owners. 
B)  income earned by corporations is not subject to the double taxation of unincorporated businesses. 
C)  corporations are subject to reorganization when major stockholders withdraw. 
D)  corporations have more trouble raising large sums of money than unincorporated businesses. 
E)  corporations issue common stock, while unincorporated businesses issue preferred stock. 
A)  corporations have unlimited life, while unincorporated businesses are limited to the life spans of their owners. 
B)  income earned by corporations is not subject to the double taxation of unincorporated businesses. 
C)  corporations are subject to reorganization when major stockholders withdraw. 
D)  corporations have more trouble raising large sums of money than unincorporated businesses. 
E)  corporations issue common stock, while unincorporated businesses issue preferred stock.

Question 11

A corporation is a

Accepted Answer

A)  business with at least $100,000 in assets. 
B)  form of business organization in which 10 or more people agree to conduct a business. 
C)  business organization with a charter from the federal government. 
D)  firm owned by a single person. 
E)  fictitious legal person separate and distinct from its owners. 
A)  business with at least $100,000 in assets. 
B)  form of business organization in which 10 or more people agree to conduct a business. 
C)  business organization with a charter from the federal government. 
D)  firm owned by a single person. 
E)  fictitious legal person separate and distinct from its owners.

Question 12

The following question are based on the following table, which illustrates for a given level of wheat production the ratio of marginal products for different combinations of land and labor:
  
-If the price of land falls to $4 per unit and the firm wishes to hold output constant,it should choose combination

Accepted Answer

A)  1. 
B)  2. 
C)  3. 
D)  4. 
E)  5. 
A)  1. 
B)  2. 
C)  3. 
D)  4. 
E)  5.

Question 13

The addition to total output due to the addition of the last unit of an input is the ________ of the input.

Accepted Answer

A)  cost 
B)  supply 
C)  average product 
D)  marginal product 
E)  combined product 
A)  cost 
B)  supply 
C)  average product 
D)  marginal product 
E)  combined product

Question 14

Which of the following presents an optimal combination of inputs?

Accepted Answer

A)  marginal product of labor/marginal product of capital = price of labor/price of capital 
B)  marginal product of labor/price of capital = marginal product of capital/price of labor 
C)  marginal product of capital/price of labor = price of labor/marginal product of labor 
D)  marginal product of capital/marginal product of labor = price of labor/price of capital 
E)  marginal product of capital = marginal product of labor 
A)  marginal product of labor/marginal product of capital = price of labor/price of capital 
B)  marginal product of labor/price of capital = marginal product of capital/price of labor 
C)  marginal product of capital/price of labor = price of labor/marginal product of labor 
D)  marginal product of capital/marginal product of labor = price of labor/price of capital 
E)  marginal product of capital = marginal product of labor

Question 15

A group of individuals who wish to start a business that needs considerable funds to initiate and who wish protection in the event that their business fails should

Accepted Answer

A)  form a simple proprietorship. 
B)  incorporate. 
C)  establish a partnership. 
D)  form a complex proprietorship. 
E)  establish a firm. 
A)  form a simple proprietorship. 
B)  incorporate. 
C)  establish a partnership. 
D)  form a complex proprietorship. 
E)  establish a firm.

Exam 3: The Business Firm: Organization,motivation,and Optimal Input Decisions

To maximize its profit for a particular quantity of output,a firm should equate the

Smaller auto firms such as Studebaker were unable to survive after World War II because

The distinction between variable and fixed inputs

Compared to the proprietorship,the partnership has the disadvantage of

The following question are based on the following diagram illustrating the weekly average and marginal products for salespersons in the appliance department of a large department store: -The additional number of appliances sold by adding the fifth person is

One reason for the appearance of diminishing returns is that

The corporate form of business has the major advantage of

In economic analysis,the long run

The following question are based on the following information for an auto repair shop specializing in muffler installation. -The average product of the third worker is

An important distinction between corporate and unincorporated businesses is that

A corporation is a

The addition to total output due to the addition of the last unit of an input is the ________ of the input.

Which of the following presents an optimal combination of inputs?

A group of individuals who wish to start a business that needs considerable funds to initiate and who wish protection in the event that their business fails should

What is Economics

Markets and Prices

Getting Behind the Demand and Supply Curves

Market Demand and Price Elasticity

Economic Efficiency,market Supply,and Perfect Competition

Monopoly and Its Regulation

Monopolistic Competition,oligopoly,and Antitrust Policy

Pollution and the Environment

The Supply and Demand for Labor

Interest,rent,and Profit

Poverty,income Inequality,and Discrimination

Economic Growth

Public Goods and the Role of the Government

National Income and Product

Business Fluctuations and Unemployment

The Determination of National Output and the Keynesian Multiplier

Fiscal Policy and National Output

Inflation

Money and the Banking System

The Federal Reserve and Monetary Policy

Supply Shocks and Inflation

Productivity,growth,and Technology Policy

Surpluses,deficits,public Debt,and the Federal Budget

Monetary Policy,interest Rates,and Economic Activity

Controversies Over Stabilization Policy

International Trade

Exchange Rates and the Balance of Payments

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