ECON 414

If a firm manager has a base salary of $50,000 and also gets 2 percent of all profits, how much will his/her income be if revenues are $8,000,000 and profits are $2,000,000?

$90,000

You are the manager of a firm that sells its product in a competitive market at a price of $60. Your firm's cost function is C = 50 + 3Q 2 and MC=6Q. Your firm's maximum profits are:

250

You are the manager of a monopoly that faces a demand curve described by P = 230 − 20Q. Your costs are C = 5 + 30Q and MC=30. Your firm's maximum profits are:

495

You are the manager of a firm that sells its product in a competitive market at a price of $50. Your firm's cost function is C = 40 + 5Q 2 and marginal cost is MC=10Q. The profit-maximizing output for your firm is:

5

You are the manager of a monopoly that faces a demand curve described by P = 230 − 20Q. Your costs are C = 5 + 30Q and MC=30. The profit-maximizing output for your firm is:

5

One of the sources of monopoly power for a monopoly may be:

Patents

Which of the following industry structures would you expect to have the lowest Lerner index score?

Perfect Competition

There is a market supply curve in a:

Perfectly competitive market

A perfectly competitive firm faces a:

Perfectly elastic demand function

Which type of compensation mechanism works by threats?

Spot Check

Which of the following is NOT a means of avoiding opportunities?

Spot exchange

Which of the following methods might be an efficient way of obtaining inputs when specialized investments are not important?

Spot exchange

Firms have market power in:

monopolistically competitive markets and monopolistic markets.

To ensure quality, piece-rate plans must usually be accompanied by:

quality control mechanisms

You are a manager in a perfectly competitive market. The price in your market is $14. Your total cost curve is C(Q) = 10 + 4Q + 0.5Q 2. What level of profits will you make in the short run?

$40

An industry is comprised of 10 firms, each with an equal market share. What is the four-firm concentration ratio of this industry?

.4

A firm has a marginal cost of $200 and charges a price of $500. The Lerner index for this firm is:

.6

In the long run, perfectly competitive firms produce a level of output such that:

1. P = MC and P = minimum of AC.

An industry consists of three firms with equal annual sales. What is the industry's C 4?

1.00

You are the manager of a firm that sells its product in a competitive market at a price of $60. Your firm's cost function is C = 50 + 3Q 2 and marginal cost MC = 6Q. The profit-maximizing output for your firm is:

10

You are the manager of a firm that sells its product in a competitive market at a price of $50. Your firm's cost function is C = 40 + 5Q 2 and marginal cost is MC=10Q . Your firm's maximum profits are:

85

In the long run, monopolistically competitive firms charge prices

Above the minimum of average total cost

An incentive for managers to maximize profits is:

All of the statements associated with this question are correct

In the long run, monopolistically competitive firms produce a level of output such that:

All of the statements associated with this question are correct

Shirking

All of the statements associated with this question are correct

Which of the following is(are) basic feature(s) of a perfectly competitive industry?

All of the statements associated with this question are correct.

Relationship-specific investments include:

All of these statements associated with the question are correct

In a competitive industry with identical firms, long-run equilibrium is characterized by:

All of these statements associated with this question are correct.

R&D is an aspect of a firm's:

Conduct

An Increase in the marginal cost arising from a more complex specialized investment environment will cause the optimal contract length to:

Decrease

The principal-agent problem refers to the fact that the agent's goals:

Do not always coincide with those of the principal

If we reduce performance-based rewards to CEO's, the profits of firms will:

Fall

Which of the following forms of payment is NOT an incentive plan?

Flat salary for a plant manager

Which of the following are measures of industry concentration?

Four-firm concentration ratio and HHi index

A negative side of a revenue-sharing plan is that it:

Gives no incentive for workers to minimize costs.

Which of the following mergers is an example of vertical integration?

IDM purchases a California computer chip company

Producer and consumer surpluses are measured of:

Industry Performance

Point A in the figure below is:

Inefficient since it produces 20 units of output at a cost greater than the minimum cost

Which of the following features is common to both perfectly competitive markets and monopolistically competitive markets?

Long-run profits are zero

Which of the following is the primary disadvantage of producing inputs within a firm?

Loss of specialization

Differentiated goods are a feature of a:

Monopolistically competitive market

A HHI of 10,000 suggests:

Monopoly

Vertical Integration

Occurs when a firm produces its own inputs

Spot markets are an efficient way for the firm to purchase inputs if:

Opportunism is not a problem

One way of alleviating opportunism is:

Vertical Integration

When the relationship-specific exchange occurs in complex contractual environments, the best way to purchase inputs is through

Vertical Integration

A negative side of long-term contracts is:

a loss of flexibility