Ch 7 Econ Exam 2

Lakukan tugas rumah & ujian kamu dengan baik sekarang menggunakan Quizwiz!

The above figure shows the cost curves for a competitive firm. If the firm is to earn economic profit, price must exceed

$10

The above figure shows the cost curves for a competitive firm. The firm will incur economic losses if the price is less than

$10.

The above figure shows the cost curves for a competitive firm. If the profit-maximizing level of output is 40 price is equal to

$15.

The above figure shows the cost curves for a competitive firm. If the market price is $15 per unit, the firm will earn profits of

$160.

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 ________.

$20,000, -$5,000

A small business owner earns $60,000 in revenue annually. The explicit annual costs equal $40,000. The owner could work for someone else and earn $25,000 annually. The owner's accounting profit is ________ and owner's economic profit is ________.

$20,000, -$5,000

The above figure shows the cost curves for a competitive firm. If the firm is to operate in the short run, price must exceed

$5.

According to the survivor principle

only firms that maximize profits survive in highly competitive markets.

If a firm traded on the New York Stock Exchange posts an accounting profit of $10 million, then the firm is making a positive economic profit

only if the firm's opportunity cost is less than $10 million.

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?

p ≥ AVC

A firm that is vertically integrated

participates in more than one successive stage of production.

A monopoly

produces the market output.

Which of the following generally does NOT seek to maximize profit?

public sector companies

A McDonald's franchise is an example of

quasi-vertical integration.

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

quasi-vertical integration.

Monitoring is often used by firms in an attempt to decrease

shirking.

One problem with compensation systems is that

sometimes a manager is rewarded for an objective other than maximizing profits.

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

Corporation shareholders elect the managers of the firm.

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

It will minimize its loss by decreasing output so that price exceeds marginal cost.

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

The relevant cost of the oven when considering shutting down is $4,000.

If the present value of all future revenue is positive, then

Unable to determine with the information given.

According to economists, competitive firms

are price takers.

In deciding whether to operate in the short run, the firm must be concerned with the relationship between price of the output and

average variable cost.

By shutting down, a firm

stops receiving revenue but and is stuck with its fixed costs.

If a short-run fixed cost is sunk, then

the cost cannot be avoided by shutting down.

Supply chain management refers to

the decisions around which stages of production to handle internally and which to buy from others.

A firm's vertical dimension refers to

the degree to which it participates in the various stages of producing the products and services it sells.

A firm's profit is

the difference between revenue and cost.

If the present value of all future profit is positive, then

the firm should remain operating, even if it earns negative profit in the short run.

The agency problem can be avoided if

the goals of the owner and manager are aligned.

A conflict between an owner and a manager may occur when

the manager is seeking to maximize leisure time.

Vertical restraints in a contract

can approximate the outcome of a vertical merger.

If a firm makes zero economic profit, then the firm

can be earning positive business profit.

All of the following are characteristics of an oligopolistic market EXCEPT

cartels eventually form to keep prices high.

A ________ is a governance structure where owners are not personally liable.

corporation

In which governance form so shareholders own the company?

corporation

Limited liability is a benefit to

corporations.

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

decrease output.

American Apparel is an example of

extreme vertical integration.

Which entity produces the greatest proportion of U.S. gross national product?

firms

In a monopolistically competitive market

firms are price setters.

An oligopoly

has barriers to entry.

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

increase output.

If manager performance is easily observable then

the owner can directly reward the manager.

Monitoring a manager can be difficult if

the owner cannot easily observe the manager's actions.

Vertically integrated firms can use transfer pricing

to shift profit.

A firm will shut down in the short run if

total revenue from operating would not cover variable costs.

Under perfect competition

transaction costs are low.

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

A) decrease output slightly to see if profits increase. B) increase output slightly to see if profits increase. C) Both A and B.

An organization that converts inputs (like Labor, Capital etc.) into output can be a

A) firm. B) sole proprietorship. C) corporation. D) All of the above.

Vertical integration can

A) lower transaction costs due to lower costs of writing and enforcing contracts. B) increase management costs and complexity. C) reduce problems between owners and managers. D) All of the above.

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?

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

Market structure depends upon

A) the ease of entry and exit. B) the ability of firms to differentiate their goods and services. C) the number of firms in the market. D) All of the above.

A common incentive owners offer managers is

A) the year-end bonus. B) stock options. C) profit sharing. D) All of the above.

A firm sets its output where

marginal profit is zero.

A firm sets its output where

marginal revenue minus marginal cost equals zero (MR - MC = 0).

Economists typically assume that the owners of firms wish to

maximize profits.

A firm that backward vertically integrates

may be producing its own inputs.

Vertical integration

may be undertaken to avoid government regulations.

If a firm goes out of business because of negative economic profits, its books

might indicate a positive accounting profit.

If a firm is operating at an output level where losses are minimized the firm

is maximizing profits.

Firms might vertically disintegrate when

it becomes more profitable for a firm to specialize.

A firm's horizontal dimension refers to

its size in its primary market.

A firm should always shut down if its revenue is

less than its avoidable costs.

If marginal revenue equals marginal cost, the firm is maximizing profits as long as

marginal cost exceeds marginal revenue for greater levels of output.


Set pelajaran terkait

[states of matter and gasses] SOLIDS AND PLASMAS *pre-test*

View Set

Human Sexuality Exam 3, Human Sexuality exam 3 review

View Set

Ch. 3: Product Costing and Cost Accumulation in a Batch Production Environment

View Set

Access Control using Group Policy (Windows)

View Set

Chapter 1.1, 1.2, 1.3, 1.4, 1.5,

View Set

ac 612 - accounting master - forecasting and budgeting

View Set