ECON 3030 CHP 1

What is given up to use a resource in a business is called ________.

opportunity cost

A _______ firm has many competitors, while a _______ firm has a product that is different from other products.

price-taking; price-setting

Because businesses seek to maximize _______, understanding ________ is helpful.

profits; microeconomics

________ costs are the monetary payments made for market-supplied inputs while ________ costs are non-monetary opportunity costs.

Explicit; implicit

True or false: Maximizing profit in each period will always result in the maximum value of the firm.

False because the equivalence of single-period profit maximization and maximizing the value of the firm holds only when the revenue and cost conditions in one time period are independent of revenue and cost conditions in future periods.

_______ focuses on the behavior and structure of firms and industries.

Industrial organization

_______ do not accept the existing business conditions as fixed, but seek to alter the circumstances of competition.

Strategic decisions

Which of the following are the features characterizing market structures?

The likelihood of new firms entering a market. The number and size of firms. The degree of product differentiation.

Which of the following are the features characterizing market structures? The number and size of firms. The corporate structure. The degree of product differentiation. The level of capital investment in research and development. The likelihood of new firms entering a market.

The number and size of firms. The degree of product differentiation. The likelihood of new firms entering a market.

Which of the following leads to the principal-agent problem?

The principal cannot enforce the contract agent or finds it too costly to monitor the agent. The principal and the agent have different objectives.

oligopoly

a few firms produce and sell all the product in a market.

monopolistic competition

a large number of relatively small firms sell a differentiated product.

perfect competition

a large number of small firms produces and sells identical products.

monopoly

a single firm produces all the product in the market.

Using economic theory requires that one _______ nonessential items and ________ what is relevant.

abstract from; concentrate on

Business owners should maximize economic profits because

accounting profit ignores implicit cost.

Which of the following are markets? auction grocery school supply giveaway flea market stock exchange garage sale free carwash

auction grocery flea market stock exchange garage sale

Businesses utilize

both market-supplied resources and owner-supplied resources.

Globalization of markets implies

the integration of markets around the world.

The value of the firm is calculated as

the present value of future economic profits.

Total economic costs is _________ owner-supplied resources and market-supplied resources.

the sum of the opportunity costs of both

Markets exist

to reduce transaction costs.

Accounting profit is

total revenue minus explicit cost

Microeconomics studies

workers firms consumers industries

A(n) ______ is any arrangement through which buyers and sellers exchange final goods or services, resources used for production or anything of value.

market

Examples of ways principals can control agent behavior include

linking directors' compensation to the value of the firm tying managers' compensation to fulfilling the goals of shareholders