Final Exam - Focused Chapters Managerial Economics

Two hospitals are bargaining with an insurance company to get into its provider network. The insurance company can earn $100 if it puts one of the hospitals in its network and $200 if it puts both hospitals in its network. If both hospitals merge and bargain jointly, how much more will they earn? a. $0 b. $50 c. $100 d. $200

a. $0

Joe runs the Service Division for a car dealership. The overall dealership has profit of $10 million on sales of $100 million and costs of $90 million. Joe's division contributed $9 million in sales and $7 million in costs. If the Service Division is evaluated as a profit center, what dollar amount is most relevant to Joe? a. $2 million b. $7 million c. $9 million d. $10 million

a. $2 million

See question 4, chapter 14

a. $2,300

A consumer values a car at $525,000 and a seller values the same car at $485,000. If sales tax is 8% and is levied on the seller, then the seller's bottom-line price is (rounded to the nearest thousand) a. $527,000 b. $524,000 c. $525,000 d. $500,000

a. $527,000

Following are the costs to produce Product A, Product B, and Products A and B together. Which of the following exhibits economies of scope? a. 100, 150, 240 b. 100, 150, 250 c. 100, 150, 260 d. All of the above

a. 100, 150, 240

What is the net present value of a project that requires a $100 investment today and returns $50 at the end of the first year and $80 at the end of the second year? Assume a discount rate of 10%. a. $10.52 b. $11.57 c. $18.18 d. $30.00

b. $11.57

See question 4, chapter 16

c. 18

See question 3, chapter 16

c. 2

If GDP is expected to increase at a steady rate of 3% per year, how many years would it take for living standards to double? a. 10 b. 20 c. 24 d. 30

c. 24

Which of the following will increase the break-even quantity? a. A decrease in overall fixed costs b. A decrease in the marginal costs c. A decrease in the price level d. An increase in the price level

c. A decrease in the price level

Sarah's Machinery Company is deciding to dump their current technology A for a new technology B with small fixed costs but big marginal costs. The current technology has fixed costs of $500 and marginal costs of $50 whereas the new technology has fixed costs of $250 and marginal costs of $100. At what quantity is Sarah's Machinery Company indifferent between two technologies? a. 5 b. 6 c. 7 d. 8

a. 5

Which of the following is not an example of adverse selection? a. A business bets the proceeds of a bank loan on the next NFL game. b. An accident-prone driver buys auto insurance. c. A patient suffering from a terminal disease buys life insurance. d. A really hungry person decides to go to the all-you-can-eat buffet for dinner.

a. A business bets the proceeds of a bank loan on the next NFL game.

Once marginal cost rises above average cost, a. Average costs will increase b. Average costs are unaffected c. Average costs will decrease d. None of the above

a. Average costs will increase

If you were a manager of a cost center, which of the following areas would be of most interest to you? a. Capturing potential economies of scale. b. Increasing the quality of your product. c. Hiring more marketing staff to figure out how to increase prices. d. Adding additional features to your product.

a. Capturing potential economies of scale.

Look at question #9 of Chapter 7 Pg. 92

a. Increasing

Which of the following are examples of a price floor? a. Minimum wages b. Rent controls in New York c. Both a and b d. None of the above

a. Minimum wages

In July 2014, the price of a Big Mac was $4.80 in the United States while in China it was only $2.73 at market exchange rates. So the "raw" Big Mac index says that the yuan was under-valued by 43% at that time. How would domestic inflation in China affect the Big Mac Index? a. The Big Mac Index would indicate that the Chinese currency is less under-valued b. The Big Mac Index would indicate that the Chinese currency is more under-valued c. The Big Mac Index is not affected by inflation d. The Big Mac Index would indicate that the Dollar is more under-valued

a. The Big Mac Index would indicate that the Chinese currency is less under-valued

Metering is a. a type of indirect price discrimination b. a type of direct price discrimination c. an evaluation of a product d. an example of bundling

a. a type of indirect price discrimination

In order to create an effective incentive compensation scheme, you must have a. adequate performance measures. b. unlimited funds. c. a flat management structure. d. none of the above.

a. adequate performance measures

Voluntary transactions a. always produce gains for both parties. b. produce gains for at least one party. c. always increase wealth for everyone. d. are inefficient.

a. always produce gains for both parties.

Average costs curves initially fall a. due to declining average fixed costs b. due to rising average fixed costs c. due to declining accounting costs d. due to rising marginal costs

a. due to declining average fixed costs

A sudden decrease in the market demand in a competitive industry leads to a. losses in the short-run and average profits in the long-run b. above above average profits in the short-run and average profits in the long-run c. new firms being attracted to the industry d. demand creating supply

a. losses in the short-run and average profits in the long-run

To combat the problem of adverse selection, _____________ informed parties can employ ______________ techniques a. more; signaling b. less; signaling c. equally; screening d. equally; signaling

a. more; signaling

An insurance company suffers from adverse selection if a. safe customers are less likely to insure than risky customers b. customers know their willingness to pay for insurance but the company does not c. a customer takes on much greater risk because he is insured d. its customers are risk averse

a. safe customers are less likely to insure than risky customers

An all-you-can-eat buffet attracts two types of customers. Regular customers value the buffet at $20 and eat $5 of food in costs to the restaurant. Hungry customers value the buffet at $40 and eat $10 of food. If there are 100 of each types in the market for a buffet dinner, what is the restaurant's maximum profit? a. $2,500 b. $3,000 c. $4,500 d. $6,500

b. $3,000

A competitive firm's profit maximizing price is $15. At MC=MR, the output is 100 units. At this level of production, average total costs are $12. The firm's profits are a. $300 in the short-run and long-run b. $300 in the short-run an zero in the long-run c. $500 in the short-run and long-run d. $500 in the short-run and zero in the long-run

b. $300 in the short-run an zero in the long-run

An individual in the United States wants to buy office equipment from England that costs 2,800 pounds. If the exchange rate is $1.92, how much will it cost him in dollar terms? a. $2,800 b. $5,376 c. $1,458 d. Need more information

b. $5,376

An employer faces two types of employees. Regular workers are 70% of the population and generate $100,000 in productivity. Exceptional workers are 30% of the population, and generate $120,000 in productivity. Employees know their types, and reject salaries below their productivity. If the employer offers a salary equal to the average productivity in the population, what will be the employer's per-employee profit? a. -$10,000 b. -$6,000 c. $0 d. $4,000

b. -$6,000

Which of the following is an example of adverse selection? a. A safe driver taking greater risk in a rental car than his own car. b. A terminally ill person purchasing life insurance. c. An employment contract encourages little effort on the part of their employees. d. All of the above.

b. A terminally ill person purchasing life insurance.

If buyers expect future price increases, they will _________________ their purchases to avoid it. Similarly, sellers will ___________________ selling to take advantage of it. a. Accelerate; accelerate b. Accelerate; delay c. Delay; accelerate d. Delay; delay

b. Accelerate; delay

See question 6, chapter 14

b. Bundle the goods at $4,000; Profits = $8,000

In the magazine Budget Travel, a hotel maid admits, "I cut corners everywhere I could. Instead of vacuuming, I found that just picking up the larger crumbs from the carpet would do. Rather than scrub the tub with hot water, sometimes it was just a spray-and-wipe kind of day....After several weeks on the job, I discovered that the staff leader who inspected the rooms couldn't tell the difference between a clean sink and one that was simply dry, so I would often just run a rag over the wet spots....I apologize to you now if you ever stayed in one of my rooms." Which of the following organizational forms is more likely to have caused this kind of shirking? a. Franchising: where the hotel managers are the owners of the hotel b. Company-owned hotels c. Franchising with a sharing contract, where the hotel managers are the owners of the hotel (franchisee); they pay a smaller fixed fee to the franchisor but share revenue with the franchisor d. None of the above

b. Company-owned hotels

Which of the products below is closest to operating in a perfectly competitive industry? a. Nike shoes b. Cotton c. Perdue Chicken d. Restaurants

b. Cotton

Which of the following organizational forms requires the strongest management oversight to ensure coordination of functions? a. Profit centers b. Functional organizations c. M-form organizations d. Functional and M-form organizations likely require similar oversight

b. Functional organizations

George and KC have been working jobs that pay $60,000 and $30,000 per year, respectively. They are trying to decide whether to quit their jobs and jointly open up a taco stand on the beach, which they estimate can earn $150,000 per year. How will the taco stand proceeds be split? a. They won't quit their jobs. b. George gets $90,000 and KC gets $60,000. c. George gets $75,000 and KC gets $75,000. d. George gets $100,000 and KC gets $50,000.

b. George gets $90,000 and KC gets $60,000.

Pete and Lisa are entering into a bargaining situation in which Pete stands to gain up to $5,000 and Lisa stands to gain up to $1,000, provided they reach agreement. Who is likely to have the stronger bargaining position? a. Pete b. Lisa c. They will be equally effective d. These potential gains will have no impact on bargaining

b. Lisa

Which of the following types of firms are guaranteed to make positive economic profit? a. Both a perfectly competitive firm and a monopoly b. Neither a perfectly competitive firm nor a monopoly c. A perfectly competitive firm but not a monopoly d. A monopoly but not a perfectly competitive firm

b. Neither a perfectly competitive firm nor a monopoly

A software firm can offer a high-feature version of its software or a stripped-down low-feature version, each with similar production costs. Which of the following cannot be an optimal strategy? a. Offer only the high-feature version aimed only at a high-value market segment b. Offer only the low-feature version aimed at all market segments c. Offer both versions targeted to different value segments d. Offer only the high-feature version aimed at all market segments

b. Offer only the low-feature version aimed at all market segments

Following a peso appreciation relative to the dollar, which of the following results is expected to occur? a. Prices in the United States would rise, and prices in Mexico would rise b. Prices in the United States would rise, and prices in Mexico would fall c. Prices in the United States would fall, and prices in Mexico would rise d. Prices in the United States would fall, and prices in Mexico would fall

b. Prices in the United States would rise, and prices in Mexico would fall

Which of the following provides an example of divisions based on a functional organizational structure? a. Americas, Africa, Asia, Europe b. Research and development, production, finance, marketing c. Youth products, teen products, senior products d. Business users, home users, educational users

b. Research and development, production, finance, marketing

Decentralization of decision-making authority is consistent with which of the following? a. A trend of stronger, more active CEOs. b. Shrinking costs of computing bandwidth, which allows information to be inexpensively aggregated from geographically diverse business units. c. Development of computing resources at the corporate, division, and employee level. d. Reduction in the use of incentive compensation.

c. Development of computing resources at the corporate, division, and employee level.

The game of chicken has a. a second-mover advantage b. a first-mover advantage c. no sequential-move advantage d. potential sequential-move advantages, depending on the players

b. a first-mover advantage

All of the costs associated with a principal interacting with an agent are called a. opportunity costs b. agency costs c. monitoring costs d. sunk costs

b. agency costs

A good incentive-compensation scheme a. maximizes the agent's utility. b. anticipates how an agent will game the scheme. c. does not subject a risk-averse agent to risk. d. accompanies centralized decision-making authority.

b. anticipates how an agent will game the scheme.

The intersection between demand for dollars and the supply of dollars is known as the a. inflation rate b. exchange rate c. price d. quantity

b. exchange rate

Airlines charge a ___________________ price to business travelers compared to leisure travelers because business travelers have a ______________________ demand than leisure a. higher; more elastic b. higher; less elastic c. lower; more elastic d. lower; less elastic

b. higher; less elastic

A price ceiling a. is a government-set maximum price. b. is an implicit tax on producers and an implicit subsidy to consumers. c. will create a surplus. d. causes an increase in consumer and producer surplus.

b. is an implicit tax on producers and an implicit subsidy to consumers

The demand for insurance arises primarily from people who are a. risk-seeking b. risk-averse c. risk-neutral d. None of the above

b. risk-averse

An individual's value for a good or service is a. the amount of money he or she used to pay for a good b. the amount of money he or she is willing to pay for it c. the amount of money he or she has to spend on goods d. None of the above

b. the amount of money he or she is willing to pay for it

Perfect price discrimination is when a firm can charge each customer exactly what they are willing to pay. In this case, a. the demand curve is very inelastic b. the marginal revenue is the demand curve c. the demand curve is very elastic d. the marginal cost curve is the average cost curve

b. the marginal revenue is the demand curve

The higher the discount rates a. the more value individuals place on future dollars b. the more value individuals place on current dollars c. the more investments will take place d. does not affect the investment strategy

b. the more value individuals place on current dollars

One of the basic functions of the budgeting process is a. assigning decision rights. b. transferring information. c. evaluating managerial performance. d. implementing structural change.

b. transferring information.

Principal-agent problems a. occur when firm managers have more incentive to maximize profit than shareholders do. b. would be reduced if firm owners had better information about the actions of firm's managers. c. are made worse when executives own stock in their companies. d. are increased as more information is shared between the parties.

b. would be reduced if firm owners had better information about the actions of firm's managers.

A consumer values a car at $20,000 and it costs a producer $15,000 to make the same car. If the transaction is completed at $18,000, the transaction will generate a. no surplus. b. $5,000 worth of seller surplus and unknown amount of buyer surplus. c. $2,000 worth of buyer surplus and $3,000 of seller surplus. d. $3,000 worth of buyer surplus and unknown amount of seller surplus.

c. $2,000 worth of buyer surplus and $3,000 of seller surplus.

You expect to sell 500 cell phones a month, which have a MC of $50. If your fixed costs are $5,000 per month, what is the break-even price? a. $10 b. $50 c. $60 d. $100

c. $60

You own a retail establishment run by a store manager who receives a flat salary of $80,000. If you set up another store as a franchise with incentive compensation to the franchisee, what would be a reasonable total compensation range that the franchisee could earn? a. $80,000 b. $40,000- $80,000 c. $60,000- $100,000 d. $80,000- $100,000

c. $60,000- $100,000

See question 5, chapter 14

c. $7,000

Which type of organizational form has the benefit of closer coordination to serve a particular product or geographic area? a. Profit centers. b. Functional organizations. c. M-form organizations. d. Functional and M-form organizations have the same benefits.

c. M-form organizations

What is the main difference between a competitive firm and a monopoly? a. The number of customers served by the firm b. Monopoly firms are more efficient and therefore have lower costs c. Monopoly firms can generally earn positive profits over a longer period of time d. Monopoly firms enjoy government protection from competition

c. Monopoly firms can generally earn positive profits over a longer period of time

A firm in a perfectly competitive market (a price taker) faces what type of demand curve? a. Unit elastic b. Perfectly inelastic c. Perfectly elastic d. None of the above

c. Perfectly elastic

A computer manufacturer has two divisions: one serving residential customers and one serving business customers. If an incentive conflict arises between the two divisions, how will overall company profits be affected? a. Profits will definitely fall. b. Profits will definitely rise. c. Profits may fall, but it depends on the nature of the conflict. d. The conflict has no potential to affect overall profit.

c. Profits may fall, but it depends on the nature of the conflict.

Consider bargaining in which each party increases its outside option by $10,000. Which of the following is a likely result. a. The chance of a deal increases. b. Each party's share of the bargaining surplus increases by $10,000. c. The bargaining split remains the same. d. Each party share of the beginning surplus increases by $5,000.

c. The bargaining split remains the same.

If the U.S. economy strengthens, consumer incomes increase, and consumers buy more imported goods and services. How will this affect exchange rates? a. The dollar will appreciate relative to the yuan, and U.S. prices will increase b. The dollar will appreciate relative to the yuan, and U.S. prices will decrease c. The dollar will depreciate relative to the yuan, and U.S. prices will increase d. The dollar will depreciate relative to the yuan, and U.S. prices will decrease

c. The dollar will depreciate relative to the yuan, and U.S. prices will increase

A security system company's total production costs depend on the number of systems produced according to the following equation: Total Costs = $20,000,000 + $4,000 * quantity produced. Given these data, which of the following is a false statement? a. There are economies of scale. b. There are fixed costs associated with this business. c. There are diseconomies of scale d. A firm that produces a larger output has a cost advantage over a smaller firm.

c. There are diseconomies of scale

Assume that the price elasticity of demand for movie theaters is -.85 during all evening shows but for all afternoon shows the price elasticity of demand is -2.28. For the theater to maximize total revenue, is should a. charge the same price for both shows, holding other things constant. b. charge a higher price for the afternoon shows and lower price for the evening shows, holding other things constant. c. charge a lower price for the afternoon shows and higher price for the evening shows, holding other things constant. d. need more information.

c. charge a lower price for the afternoon shows and higher price for the evening shows, holding other things constant.

For threats or commitments, they must be a. irrational b. profitable c. credible d. none of the above

c. credible

Microsoft found that instead of producing a DVD player and a gaming system separate, it is cheaper to incorporate DVD playing capabilities in their new version of the gaming system. Microsoft is taking advantage of a. economies of scale b. learning curve c. economies of scope d. decreasing marginal costs

c. economies of scope

In the short run, a firm's decision to shut down should not take into consideration a. avoidable costs b. variable costs c. fixed costs d. MCs

c. fixed costs

Transfer prices should be set at a. marginal cost of the selling division plus a reasonable profit amount. b. marginal cost of the selling division unless it is evaluated as a profit center. c. the opportunity cost of the asset being transferred. d. at whatever price is negotiated between the selling and buying divisions.

c. the opportunity cost of the asset being transferred.

You notebook computer's hard drive recently crashed, and you decide to take it to a local repair technician to have it fixed. In this relationship, a. you are the agent b. the technician is the principal c. the technician is the agent d. no principal-agent relationship exists

c. the technician is the agent.

As a golf club production company produces more clubs, the average total cost of each club produced decreases. This is because: a. total fixed costs are decreasing as more clubs are produced b. average variable cost is decreasing as more clubs are produced c. there are scale economies d. total variable cost is decreasing as more clubs are produced

c. there are scale economies

Fred and his employer both know that Fred can generate $200,000 of profit per year for his company. After negotiations, they agree that he will earn $110,000 in annual compensation. What does this imply for the value of his outside or next best alternative? a. $0 b. $5,000 c. $10,000 d. $20,000

d. $20,000

An insurance company offers doctors malpractice insurance. Assume the malpractice claims against careful doctors cost $5,000 on average over the term of the policy and settling malpractice claims against reckless doctors costs $30,000. Doctors are risk-neutral and know whether they are reckless or careful, but the insurance company only knows that 10% of doctors are reckless. How much do insurance companies have to charge for malpractice insurance to break even? a. $5,000 b. $7,500 c. $27,500 d. $30,000

d. $30,000

You are considering opening a new business to sell dartboards. You estimate that your manufacturing equipment will cost $100,000, facility updates will cost $250,000, and on average it will cost you $80 (in labor and material) to produce a board. If you can sell dart boards for $100 each, what is your break-even quantity? a. 1,000 b. 3,500 c. 4,375 d. 17,500

d. 17,500

At the individual firm level, which of the following types of firms faces a downward-sloping demand curve? a. Both a perfectly competitive firm and a monopoly firm b. Neither a perfectly competitive firm nor a monopoly firm c. A perfectly competitive firm but not a monopoly firm d. A monopoly firm but not a perfectly competitive firm

d. A monopoly firm but not a perfectly competitive firm

What might you reasonably expect of an industry in which firms tend to have economies of scale? a. Exceptional competition among firms b. A large number of firms c. Highly diversified firms d. A small number of firms

d. A small number of firms

Taxes a. impede the movement of assets to higher-valued uses. b. reduce incentives to work. c. decrease the number of wealth-creating transactions. d. All of the above.

d. All of the above

The biggest advantage of capitalism is that a. it allows the market to self-regulate b. it allows a person to follow his self-interest c. it allows voluntary transactions, which create wealth d. All of the above

d. All of the above

Wealth-creating transactions are more likely to occur a. with private property rights b. with strong contract enforcement c. with black markets d. All of the above

d. All of the above

Which of the following can be an example of a signal? a. An air-conditioning manufacturer offers a 50-year warranty b. A lawyer offers to be paid only if the client wins c. A student pursues an MBA d. All of the above

d. All of the above

Which of the following changes might help solve a divisional conflict regarding a decision? a. Change who has authority to make a decision b. Transfer information to the decision makers so they are better informed c. Change the performance evaluation and associated compensation of the decision makers d. All of the above

d. All of the above

Which of the following is a potential solution to the adverse selection problem faced by insurance companies? a. Offer plans with different deductibles so that higher-risk customers accept higher deductibles b. Create a national database of customers that allows companies to look up each person's historical risk c. Mandate that every person purchase insurance d. All of the above

d. All of the above

Which of these actions creates value? a. Buying a struggling firm and selling off its assets for more than the purchase price b. A baseball slugger drawing paying fans into the ballpark c. A student increasing his decision-making ability with an MBA d. All of the above

d. All of the above

Consider a vendor-buyer relationship. Which of the following conditions would lead to the buyer having more bargaining power? a. Lots of substitutes for the vendor's product are available. b. There are relatively few buyers and many vendors. c. It costs little for buyers to switch vendors. d. All of the above.

d. All of the above.

Which of the following actions is consistent with a manager whose compensation depends on meeting a budget goal and who does not believe he can make that goal? a. Asking a vendor to pre-ship and invoice materials for the following year. b. Discovering a "problem" in the order taking process, thereby forcibly pushing sales into the ensuing year. c. Increasing accounting reserve estimates, leading to higher recognized expenses. d. All of the above.

d. All of the above.

Which of the following conditions must be satisfied for price discrimination to be successful? a. The seller must have a different product for each group of customers. b. The seller must be able to identify each customer as having a high or low value. c. The seller must be able to prevent arbitrage between the two groups. d. None of the above.

d. None of the above

Following an increase in Mexican interest rates relative to U.S. interest rates, which caused Mexican investors to borrow abroad to invest domestically, which of the following is expected to occur? a. The dollar would appreciate relative to the peso, and Mexican prices would increase b. The dollar would appreciate relative to the peso, and Mexican prices would decrease c. The dollar would depreciate relative to the peso, and Mexican prices would increase d. The dollar would depreciate relative to the peso, and Mexican prices would decrease

d. The dollar would depreciate relative to the peso, and Mexican prices would decrease

Following an increase in Mexican interest rates relative to U.S. interest rates, which caused U.S. investors to invest in Mexican Bonds. Which of the following would occur? a. The dollar would appreciate relative to the peso, and Mexican prices would increase b. The dollar would depreciate relative to the peso, and Mexican prices would decrease c. The dollar would depreciate relative to the peso, and Mexican prices would increase d. The exchange rate would not be affected, and neither would Mexican prices

d. The exchange rate would not be affected, and neither would Mexican prices

What would happen to revenues if a firm in a perfectly competitive industry raised prices? a. They would increase b. They would increase but profit would decrease c. They would increase along with profit d. They would fall to zero

d. They would fall to zero

Following a peso appreciation relative to the dollar, which of the following results is expected to occur? a. U.S. consumers would benefit, and Mexican producers would benefit b. U.S. consumers would be hurt, and Mexican producers would benefit c. U.S. consumers would benefit, and Mexican producers would be hurt d. U.S. consumers would be hurt, and Mexican producers would be hurt

d. U.S. consumers would be hurt, and Mexican producers would be hurt

If the Chinese yuan devalues relative to the US dollar, then a. US producers will benefit; Chinese consumers will benefit b. US producers will benefit; Chinese consumers will be hurt c. US producers will be hurt; Chinese consumers will be benefit d. US producers will be hurt: Chinese consumers will be hurt

d. US producers will be hurt: Chinese consumers will be hurt

In the long-run, which of the following outcomes is most likely for a firm? a. Zero accounting profits but positive economic profits b. Zero accounting profits c. Positive accounting profits and positive economic profits d. Zero economic profits but positive accounting profits

d. Zero economic profits but positive accounting profits

Arbitrage a. is the act of buying low in one market and selling high in another market. b. can force a seller to go back to uniform pricing. c. can defeat direct price discrimination. d. all of the above

d. all of the above

Principal-agent relationships a. reduce monitoring costs. b. occur because managers have good information about employees. c. are not related to asymmetric information. d. are subject to moral hazard problems.

d. are subject to moral hazard problems.

According to the law of diminishing marginal returns, marginal returns a. diminish always prior to increasing b. diminish constantly c. diminish never d. diminish eventually

d. diminish eventually

It costs a firm $90 per unit to produce product A and $70 per unit to produce product B individually. If the firm can produce both products together at $175 per unit of product A and B, this exhibits signs of a. economies of scale b. economies of scope c. diseconomies of scale d. diseconomies of scope

d. diseconomies of scope

Assume a firm has the following cost and revenue characteristics at its current level of output: price = $10,00, average variable cost = $8.00 and average fixed cost = $4.00. This firm is a. incurring a loss of $2.00 per unit and should shut down. b. realizing only a normal profit. c. realizing an economic profit of $2.00 per unit. d. incurring a loss per unit of $2.00 but should continue to operate in the short run.

d. incurring a loss per unit of $2.00 but should continue to operate in the short run.

A firm faces two kinds of employees, those able to sell 10 units/year, and those able to sell 5 units/year. High-productivity employees are willing to work for $100/year while low-productivity employees are willing to work for only $50/year. To screen out the low-productivity employees, the firm should a. offer a salary of $100 b. offer a salary of $75 plus $5/unit commission c. offer sales commission of $10/unit d. offer a sales commission of $20/unit, on sales above 5 units

d. offer a sales commission of $20/unit, on sales above 5 units

If a firm in a perfectly competitive industry is experiencing average revenues greater than average costs, in the long-run a. some firms will leave the industry and price will fall b. some firms will enter the industry and price will rise c. some firms will leave the industry and price will fall d. some firms will enter the industry and price will fall

d. some firms will enter the industry and price will fall

Break-even quantity is a point where a. the level of profit is maximized. b. the level of cost is minimized. c. only variable costs are covered. d. there are zero profits.

d. there are zero profits.