Question 1

A price-taking firm can exert no control over price because

Accepted Answer

A) the firm's demand curve is downward sloping. 
B) of a lack of substitutes for the product. 
C) the firm's individual production is insignificant relative to total production in the industry. 
D) no other firms make a product that is nearly identical to its product. 
A) the firm's demand curve is downward sloping. 
B) of a lack of substitutes for the product. 
C) the firm's individual production is insignificant relative to total production in the industry. 
D) no other firms make a product that is nearly identical to its product. C

Question 2

Until recently you worked as an accountant earning $30,000 annually.Then you inherited a piece of commercial real estate bringing in $12,000 rent annually.You decided to leave your job and operate a video rental store in the office space you inherited. At the end of the first year,your books showed total revenues of $60,000 and total costs of $30,000 for video purchases,utilities,taxes,and supplies.What is the total cost of operating the video store?

Accepted Answer

A) $72,000 
B) $42,000 
C) $30,000 
D) $12,000 
A) $72,000 
B) $42,000 
C) $30,000 
D) $12,000 A

Question 3

value of a firm is

Accepted Answer

A) smaller the higher is the risk premium used to compute the firm's value. 
B) larger the higher is the risk premium used to compute the firm's value. 
C) the price for which the firm can be sold minus the present value of the expected future profits. 
D) both b and c 
A) smaller the higher is the risk premium used to compute the firm's value. 
B) larger the higher is the risk premium used to compute the firm's value. 
C) the price for which the firm can be sold minus the present value of the expected future profits. 
D) both b and c A

Question 4

The principal-agent problem arises when

Accepted Answer

A) the principal and the agent have different objectives. 
B) the principal cannot enforce the contract with the agent or finds it too costly to monitor the agent. 
C) the principal cannot decide whether the firm should seek to maximize the expected future profits of the firm or maximize the price for which the firm can be sold. 
D) both a and b 
A) the principal and the agent have different objectives. 
B) the principal cannot enforce the contract with the agent or finds it too costly to monitor the agent. 
C) the principal cannot decide whether the firm should seek to maximize the expected future profits of the firm or maximize the price for which the firm can be sold. 
D) both a and b

Question 5

When a firm is a price-taking firm,

Accepted Answer

A) the price of the product it sells is determined by the intersection of the market demand and supply curves for the product. 
B) raising the price of the product above the market-determined price will cause sales to fall nearly to zero. 
C) many other firms produce a product that is identical to the output produced by the rest of the firms in the industry. 
D) all of the above 
A) the price of the product it sells is determined by the intersection of the market demand and supply curves for the product. 
B) raising the price of the product above the market-determined price will cause sales to fall nearly to zero. 
C) many other firms produce a product that is identical to the output produced by the rest of the firms in the industry. 
D) all of the above

Question 6

In markets characterized by monopolistic competition,

Accepted Answer

A) a small number of relatively small firms sell a differentiated product. 
B) a small number of relatively large firms sell a standardized product. 
C) entry into the market is relatively easy so that profit in the long run is zero. 
D) entry into the market is restricted so that profit may be positive in the long run. 
A) a small number of relatively small firms sell a differentiated product. 
B) a small number of relatively large firms sell a standardized product. 
C) entry into the market is relatively easy so that profit in the long run is zero. 
D) entry into the market is restricted so that profit may be positive in the long run.

Question 7

Moral hazard

Accepted Answer

A) occurs when managers pursue profit maximization without regard to the interests of society in general. 
B) exists when either party to a contract has an incentive to cancel the contract. 
C) occurs only rarely in modern corporations. 
D) is the cause of principal-agent problems. 
A) occurs when managers pursue profit maximization without regard to the interests of society in general. 
B) exists when either party to a contract has an incentive to cancel the contract. 
C) occurs only rarely in modern corporations. 
D) is the cause of principal-agent problems.

Question 8

A manager who does not see his or her goal as the maximization of profit

Accepted Answer

A) may nevertheless maximize the value of the firm. 
B) represents a principle-agent problem. 
C) will likely be replaced either by shareholders or by a takeover of the firm. 
D) both b and c 
A) may nevertheless maximize the value of the firm. 
B) represents a principle-agent problem. 
C) will likely be replaced either by shareholders or by a takeover of the firm. 
D) both b and c

Question 9

A price-setting firm

Accepted Answer

A) can lower the price of its product and sell more units. 
B) can raise the price of its product and sell the same number of units. 
C) possesses little market power. 
D) sells a product that is notdifferentiated from the product sold by its rivals or sells in a limited geographic market area with only one or a few sellers. 
A) can lower the price of its product and sell more units. 
B) can raise the price of its product and sell the same number of units. 
C) possesses little market power. 
D) sells a product that is notdifferentiated from the product sold by its rivals or sells in a limited geographic market area with only one or a few sellers.

Question 10

Economic theory is a valuable tool for business decision making because it

Accepted Answer

A) identifies for managers the essential information for making a decision. 
B) assumes away the problem. 
C) creates a realistic,complex model of the business firm. 
D) provides an easy solution to complex business problems. 
A) identifies for managers the essential information for making a decision. 
B) assumes away the problem. 
C) creates a realistic,complex model of the business firm. 
D) provides an easy solution to complex business problems.

Question 11

St.Charles Hospital,located in an upper-income neighborhood of a large city,recently received a restored mansion as a gift from an appreciative patient.The board of directors decided to remodel the mansion and use it as recuperative quarters for patients willing to pay for luxurious accommodations.The cost to the hospital of using the mansion includes

Accepted Answer

A) nothing because it was a gift. 
B) how much the hospital pays for upkeep--taxes,insurance,utilities,maintenance,etc. 
C) how much the hospital would receive if it rented or sold the mansion. 
D) both b and c 
A) nothing because it was a gift. 
B) how much the hospital pays for upkeep--taxes,insurance,utilities,maintenance,etc. 
C) how much the hospital would receive if it rented or sold the mansion. 
D) both b and c

Question 12

At the beginning of 2015,market analysts expect Atlantis Company,holder of a valuable patent,to earn the following stream of economic profits over the next five years.At the end of five years,Atlantis will lose its patent protection,and analysts expect economic profit to be zero after five years.   If investors apply an annual risk-adjusted discount rate of 15%,the value of Atlantis Company in 2015 is $______________________,which is also the maximum price investors would be willing to pay for Atlantis Company.

Accepted Answer

A) $726,916 
B) $884,912 
C) $1,275,000 
D) $2,215,000 
E) $3,824,318 
A) $726,916 
B) $884,912 
C) $1,275,000 
D) $2,215,000 
E) $3,824,318

Question 13

Owners of a firm want the managers to make business decisions which will

Accepted Answer

A) maximize the value of the firm. 
B) maximize expected profit in each period of operation. 
C) maximize the market share of the firm. 
D) both a and b are correct when revenue and cost conditions in one time period are independent of revenues and costs in future time periods. 
A) maximize the value of the firm. 
B) maximize expected profit in each period of operation. 
C) maximize the market share of the firm. 
D) both a and b are correct when revenue and cost conditions in one time period are independent of revenues and costs in future time periods.

Question 14

Economic profit

Accepted Answer

A) is a theoretical measure of a firm's performance and has little value in real world decision making. 
B) can be calculated by subtracting implicit costs of using owner-supplied resources from the firm's total revenue. 
C) is negative when total costs exceed total revenues. 
D) is generally larger than accounting profit. 
A) is a theoretical measure of a firm's performance and has little value in real world decision making. 
B) can be calculated by subtracting implicit costs of using owner-supplied resources from the firm's total revenue. 
C) is negative when total costs exceed total revenues. 
D) is generally larger than accounting profit.

Question 15

Economic profit is the difference between

Accepted Answer

A) total revenue and the opportunity cost of all of the resources used in production. 
B) total revenue and the implicit costs of using owner-supplied resources. 
C) accounting profit and the opportunity cost of the market-supplied resources used by the firm. 
D) accounting profit and explicit costs. 
A) total revenue and the opportunity cost of all of the resources used in production. 
B) total revenue and the implicit costs of using owner-supplied resources. 
C) accounting profit and the opportunity cost of the market-supplied resources used by the firm. 
D) accounting profit and explicit costs.

Question 16

economic profit is positive,

Accepted Answer

A) total revenue exceeds total economic cost. 
B) the firm's owners have successfully solved the principle-agent problem. 
C) the firm's owners experience a decrease in their wealth. 
D) foreign companies experience loss of market share 
A) total revenue exceeds total economic cost. 
B) the firm's owners have successfully solved the principle-agent problem. 
C) the firm's owners experience a decrease in their wealth. 
D) foreign companies experience loss of market share

Question 17

Which of the following statements is false?

Accepted Answer

A) Explicit costs of using market-supplied resources entail an opportunity cost equal to the dollar cost of obtaining the resources in the market. 
B) When economic profit is zero,the firm's owners could not have done better putting their resources in some other industry of comparable risk. 
C) If economic profit is positive,accounting profit must also be positive. 
D) If economic profit is negative,accounting profit must also be negative. 
E) None of the above statements is false. 
A) Explicit costs of using market-supplied resources entail an opportunity cost equal to the dollar cost of obtaining the resources in the market. 
B) When economic profit is zero,the firm's owners could not have done better putting their resources in some other industry of comparable risk. 
C) If economic profit is positive,accounting profit must also be positive. 
D) If economic profit is negative,accounting profit must also be negative. 
E) None of the above statements is false.

Question 18

Which of the following is NOT a characteristic of monopoly market structures?

Accepted Answer

A) A single firm produces the entire market output. 
B) The easier consumers can find imperfect substitutes for the firm's product the lower will be the firm's market power. 
C) There are no barriers to entry. 
D) No close substitutes for the product are available. 
A) A single firm produces the entire market output. 
B) The easier consumers can find imperfect substitutes for the firm's product the lower will be the firm's market power. 
C) There are no barriers to entry. 
D) No close substitutes for the product are available.

Question 19

Which of the following is NOT one of features characterizing market structures?

Accepted Answer

A) the number and size of firms 
B) the likelihood of new firm's entering a market 
C) the level of capital investment in research and development 
D) the degree of product differentiation 
A) the number and size of firms 
B) the likelihood of new firm's entering a market 
C) the level of capital investment in research and development 
D) the degree of product differentiation

Question 20

Suppose Marv,the owner-manager of Marv's Hot Dogs,earned $82,000 in revenue last year.Marv's explicit costs of operation totaled $36,000.Marv has a Bachelor of Science degree in mechanical engineering and could be earning $40,000 annually as mechanical engineer.

Accepted Answer

A) Marv's implicit cost of using owner-supplied resources is $36,000. 
B) Marv's economic profit is $36,000. 
C) Marv's implicit cost of using owner-supplied resources is $30,000. 
D) Marv's economic profit is $6,000. 
A) Marv's implicit cost of using owner-supplied resources is $36,000. 
B) Marv's economic profit is $36,000. 
C) Marv's implicit cost of using owner-supplied resources is $30,000. 
D) Marv's economic profit is $6,000.

A price-taking firm can exert no control over price because

value of a firm is

The principal-agent problem arises when

When a firm is a price-taking firm,

In markets characterized by monopolistic competition,

Moral hazard

A manager who does not see his or her goal as the maximization of profit

A price-setting firm

Economic theory is a valuable tool for business decision making because it

Owners of a firm want the managers to make business decisions which will

Economic profit

Economic profit is the difference between

economic profit is positive,

Which of the following statements is false?

Which of the following is NOT a characteristic of monopoly market structures?

Which of the following is NOT one of features characterizing market structures?

Suppose Marv,the owner-manager of Marv's Hot Dogs,earned $82,000 in revenue last year.Marv's explicit costs of operation totaled $36,000.Marv has a Bachelor of Science degree in mechanical engineering and could be earning $40,000 annually as mechanical engineer.

Demand, supply, and Market Equilibrium

Marginal Analysis for Optimal Decision Making

Basic Estimation Techniques

Theory of Consumer Behavior

Elasticity and Demand

Demand Estimation and Forecasting

Production and Cost in the Short Run

Production and Cost in the Long Run

Production and Cost Estimation

Managerial Decisions in Competitive Markets

Managerial Decisions for Firms With Market Power

Strategic Decision Making in Oligopoly Markets

Advanced Pricing Techniques

Decisions Under Risk and Uncertainty

Government Regulation of Business

Filters

Exam 1: Managers, profits, and Markets

A price-taking firm can exert no control over price because

value of a firm is

The principal-agent problem arises when

When a firm is a price-taking firm,

In markets characterized by monopolistic competition,

Moral hazard

A manager who does not see his or her goal as the maximization of profit

A price-setting firm

Economic theory is a valuable tool for business decision making because it

Owners of a firm want the managers to make business decisions which will

Economic profit

Economic profit is the difference between

economic profit is positive,

Which of the following statements is false?

Which of the following is NOT a characteristic of monopoly market structures?

Which of the following is NOT one of features characterizing market structures?

Suppose Marv,the owner-manager of Marv's Hot Dogs,earned $82,000 in revenue last year.Marv's explicit costs of operation totaled $36,000.Marv has a Bachelor of Science degree in mechanical engineering and could be earning $40,000 annually as mechanical engineer.

Demand, supply, and Market Equilibrium

Marginal Analysis for Optimal Decision Making

Basic Estimation Techniques

Theory of Consumer Behavior

Elasticity and Demand

Demand Estimation and Forecasting

Production and Cost in the Short Run

Production and Cost in the Long Run

Production and Cost Estimation

Managerial Decisions in Competitive Markets

Managerial Decisions for Firms With Market Power

Strategic Decision Making in Oligopoly Markets

Advanced Pricing Techniques

Decisions Under Risk and Uncertainty

Government Regulation of Business

Filters