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Economics
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14 Nov 2018

Question 18

  1. Externalities occur when there is a lack of

    free-riding.

    well-defined property rights.

    market participants.

    government regulation.

3 points

Question 19

  1. When people buy insurance they often adopt risky behavior. This is an example of

    adverse selection.

    moral hazard.

    a negative externality.

    moral hazard and a negative externality.

3 points

Question 20

  1. All the costs of a transaction are referred to as

    transfer costs.

    transactions costs.

    marketing expenditures.

    accounting costs.

3 points

Question 21

  1. Firms would not exist if

    contracts were incomplete.

    residual income equaled normal profit.

    income was spontaneously earned.

    contracts were complete.

3 points

Question 22

  1. The Prime Directive says look to

    the market.

    the government.

    competitors.

    all of these choices.

3 points

Question 23

  1. A firm can find a competitive advantage

    by differentiating its product.

    by having a barrier to entry.

    through its organizational structure.

    all of these choices.

3 points

Question 24

  1. An organizational form that is structured around basic business functions is called

    M-form.

    U-form.

    a matrix.

    a network.

3 points

Question 25

  1. The set of collectively held beliefs, values, and norms among the members of a firm that influence individual behavior is referred to as

    network values.

    horizontal values.

    implicit contracts.

    corporate culture.

3 points

Question 26

  1. "People who have dental insurance don't floss often enough." This is an example of

    asymmetric information.

    bad parenting.

    moral hazard.

    risk adverse behavior

3 points

Question 27

  1. A common way used to align the interests of managers with the interests of equity holders is

    piecework pay.

    stock options.

    forwarded loaded pay schemes.

    insurance.

3 points

Question 28

  1. A piecework wage compensation may be used if productivity

    can be related to the supply chain.

    is easy to measure.

    is difficult to observe.

    is backloaded.

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Reid Wolff
Reid WolffLv2
16 Nov 2018
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Related textbook solutions

Principles of Economics
2nd Edition, 2017
Openstax
ISBN: 9781947172364
Principles of Macroeconomics
2 Edition,
Openstax
ISBN: 9781947172388
Principles of Microeconomics
2 Edition,
Openstax
ISBN: 9781947172340

Related questions

Question 29

  1. A problem associated with the principal-agent relationship is

    Ā  Ā 

    imperfect information.
    Ā  Ā 

    perfect information.
    Ā  Ā 

    the low costs of monitoring behavior.
    Ā  Ā 

    none of these choices.

3 points

Question 30

  1. A problem with teams is that individuals

    Ā  Ā 

    are too individualistic to work with others.
    Ā  Ā 

    prefer piecework pay schemes.
    Ā  Ā 

    tend to free ride.
    Ā  Ā 

    none of these choices.

3 points

Question 31

  1. Backloaded compensation encourages

    Ā  Ā 

    employee turnover.
    Ā  Ā 

    employee rollover.
    Ā  Ā 

    principals to be agents.
    Ā  Ā 

    employees to stay with the firm.

3 points

Question 32

  1. Being paid a wage more than your opportunity costs is an example of

    Ā  Ā 

    economic profit.
    Ā  Ā 

    normal profit.
    Ā  Ā 

    an accounting cost.
    Ā  Ā 

    an efficiency wage.

3 points

Question 33

  1. Free riding is a problem

    Ā  Ā 

    if an individual's contribution to a team is not easily measured.
    Ā  Ā 

    if an individual's contribution is to a team is easily measured.
    Ā  Ā 

    when monitoring is costless.
    Ā  Ā 

    when team members are altruistic.

3 points

Question 34

  1. The board of directors and the CEO

    Ā  Ā 

    do not have a principal/agent relationship.
    Ā  Ā 

    are agent and principal, respectively.
    Ā  Ā 

    are principal and agent, respectively.
    Ā  Ā 

    are one in the same for small corporations.

3 points

Question 35

  1. Ways to address free riding include

    Ā  Ā 

    profit-sharing.
    Ā  Ā 

    subjective evaluations.
    Ā  Ā 

    improved monitoring.
    Ā  Ā 

    all of these choices.

3 points

Question 36

  1. A firm in which market has the most market power?

    Ā  Ā 

    perfect competition
    Ā  Ā 

    monopolistic competition
    Ā  Ā 

    oligopoly
    Ā  Ā 

    monopoly

3 points

Question 37

  1. A graphical representation of the choices between two allocations of resources is called

    Ā  Ā 

    the production possibilities frontier.
    Ā  Ā 

    supply and demand.
    Ā  Ā 

    the free choice model.
    Ā  Ā 

    the moral hazard model.

3 points

Question 38

  1. A unique resource can serve as

    Ā  Ā 

    an economic profit
    Ā  Ā 

    a sunk cost
    Ā  Ā 

    an entry barrier
    Ā  Ā 

    none of these choices

3 points

Question 39

  1. Any point inside the production possibilities frontier is called

    Ā  Ā 

    full employment.
    Ā  Ā 

    unemployment.
    Ā  Ā 

    efficient.
    Ā  Ā 

    unobtainable.

Question 1

Which compensation method helps to explain the large difference between the salaries of top-level managers and mid-level managers in a firm?

A.

Tournaments
B.

New blood
C.

Piece rate
D.

Backloaded compensation

3 points

Question 2

Please consider the information provided under Question 19 in Chapter 3 (page 54). Based on the stated information, the optimal number of bees kept if the externality is ignored by Yung is 5,000. Is the socially optimal number of bees higher or lower than 5,000?

A.

We do not have enough information to answer this question
B.

Same
C.

Lower
D.

Higher

3 points

Question 3

Which of the following factors contribute to the existence of firms?

A.

All of these factors contribute to firm existence
B.

Risks associated with specialization
C.

Incomplete contracts
D.

Willingness of some people to take on risk in exchange for residual income

3 points

Question 4

Public goods are often subject to free-rider problems because these goods are:

A.

Non-rival and non-excludable
B.

Rival and non-excludable
C.

Non-rival and excludable
D.

Rival and excludable

3 points

Question 5

Which of the following is the most efficient mechanism for allocating scarce goods?

A.

Government allocation system
B.

First-come-first-served system
C.

Market system
D.

Random allocation system

3 points

Question 6

Many years ago, most of the major Hollywood movie studios also owned chains of local movie theaters across the US. Today, most of the local movie theaters are owned by other companies. What has happened to the degree of integration in the movie industry over time?

A.

Less horizontally integrated
B.

Less vertically integrated
C.

More horizontally integrated
D.

More vertically integrated

3 points

Question 7

Your firm produces replacement parts for the nuclear submarines operated by the US Navy. Which one of Porter's Five Forces will be most prominent in determining your strategies and profitability?

A.

Bargaining Power of Suppliers
B.

Bargaining Power of Customers
C.

Threat of New Entrants
D.

Threat of Substitutes

3 points

Question 8

Which of the following statements is NOT true?

A.

The market mechanism for allocating resources is most efficient due to the incentives it creates.
B.

Markets are always the most efficient way to allocate goods, even if the market is not perfectly competitive.
C.

The random allocation mechanism provides no incentives at all.
D.

The government allocation mechanism provides no incentive for the economy to grow.

3 points

Question 9

Suppose a firm's cost structure exhibits economies of scope. Which of the following actions is compatible with this cost structure?

A.

Diversify into other product lines
B.

Focus on core competencies and reduce production
C.

Focus on core competencies and maintain constant production
D.

Focus on core competencies and expand production

Question 10

Please refer to Table 8.3 on page 132 in the book. Suppose we change the payoffs in the "low price, low price" cell to 0, 25 from 0, 0. Does this change the Nash equilibrium for the game, and is the game still a Prisoner's Dilemma?

A.

Equilibrium changes, still a Prisoner's Dilemma
B.

Equilibrium changes, no longer a Prisoner's Dilemma
C.

Same equilibrium, no longer a Prisoner's Dilemma
D.

Same equilibrium, still a Prisoner's Dilemma

3 points

Question 11

Which of the following statements about restricting entry to markets is NOT true?

A.

Brand identity and logos are expensive to establish, and entrants may find it very expensive to establish comparable position in the market.
B.

Predatory pricing is illegal but very difficult to prove in court
C.

Branded products tend to have more elastic demand, which makes it more difficult for entrants to charge high prices and they must stay out of the market.
D.

A low-quality seller cannot effectively use a warranty program to keep other firms out of its market

3 points

Question 12

Your firm earns $2 million per quarter in total revenue, and your accounting profits are $100,000 per quarter. You do not charge the firm for the use of an old building that you own because it is 50 years old and fully depreciated. However, another firm has offered you $200,000 per quarter to use the facility, and this is the market rental rate for similar facilities. In this case, we know that your:

A.

Opportunity costs are positive and economic profits are negative
B.

Opportunity costs and economic profits are positive
C.

Opportunity costs are negative and economic profits are positive
D.

Opportunity costs and economic profits are negative

3 points

Question 13

Please refer to Question 13 in Chapter 1 (page 17). What is the marginal cost of reducing global warming by 0.017 degrees?

A.

MC = 60
B.

MC = 5
C.

We do not have enough information to answer this question
D.

MC = 50

3 points

Question 14

In Chapter 6, Boyes focuses on negative externalities such as the various types of pollution. However, as we discussed during our online session, we can also observe positive externalities in which external benefits are generated for people. Which of the following is NOT an example of a positive externality?

A.

Workers can help one another to "cover the phones" and make sure that someone is always available to help clients
B.

Workers can provide ideas to one another about how to solve problems
C.

All of these cases are examples of positive externalities
D.

Workers can form carpools and use other means to reduce commuting costs

3 points

Question 15

Common property resources are:

A.

Non-rival and non-excludable
B.

Non-rival and excludable
C.

Rival and non-excludable
D.

Rival and excludable

3 points

Question 16

The free-rider problem arises in markets for common property resources.

A.

False
B.

True

3 points

Question 17

Firms that set their product price below the actual cost of production may be engaging in:

A.

Predatory pricing
B.

Monopoly pricing
C.

Moral hazard
D.

Dollar-cost averaging

3 points

Question 18

Under a cap-and-trade mechanism to control air pollution, what happens to the price of pollution rights if the supply of righs is reduced (i.e., the supply of rights is reduced)?

A.

Increases
B.

Decreases
C.

No change

Question 19

The key method for a manufacturing firm to avoid hold-up problems is to have another source of inputs.

A.

False
B.

True

3 points

Question 20

Your firm sells luxury autos, and you have asked the marketing department to develop and stronger brand identity through a new ad campaign. After the campaign has run for 6 months, you hire an economic consultant to study the impact of the campaign on the demand for your autos. The consultant reports that the demand for your cars is now more elastic than it was 6 months ago. Was the new ad campaign successful?

A.

Yes
B.

No

QUESTION 1

Assume there are two basic goods produced in a nation, consumer goods and capital goods. The production possibilities graph for these two goods is bowed out from the origin. This reason for this shape of the graph is because of:

A.

the other-things-equal assumption.
B.

the law of increasing opportunity costs.
C.

diminishing marginal utility.
D.

present choices and future possibilities.

1 points

QUESTION 2

From an economic perspective, when a student decides to attend another year of college, the student has concluded that the:

A.

marginal costs of attending college are reduced by the availability of grants and subsidies.
B.

marginal benefits of attending college have increased because the future is brighter.
C.

marginal benefits of attending college are greater than the marginal costs.
D.

marginal costs of attending college have decreased to make college affordable.

1 points

QUESTION 3

A person observes that as consumer prices fall, economic growth increases. The person concludes that fall consumer prices leads to economic growth. This conclusion would be an example of:

A.

confusing correlation with causation.
B.

the fallacy of composition.
C.

trade-offs among economic goals.
D.

the other-things-equal assumption.

1 points

QUESTION 4

The problem of unlimited wants and limited income is known as

A.

the scientific method.
B.

unequal wealth distribution.
C.

normative economics.
D.

the economizing problem.

1 points

QUESTION 5

A point outside the production possibilities curve is:

A.

unattainable without economic growth.
B.

attainable and the economy is efficient.
C.

unattainable without inflation.
D.

attainable, but the economy is inefficient.

1 points

QUESTION 6

Which one of the following would be an example of loaded terminology?

A.

market forces
B.

tentative hypothesis
C.

entrepreneurial functions
D.

creeping socialism

1 points

QUESTION 7

Suppose there are two economies, Alpha and Beta, both of which have the same production possibilities curves. If Beta devotes more resources to produce investment goods than consumer goods as compared to Alpha, then in the future:

A.

Alpha will not be able to achieve full employment.
B.

Beta will not be able to achieve full employment.
C.

Alpha will experience greater economic growth than Beta.
D.

Beta will experience greater economic growth than Alpha.

1 points

QUESTION 8

Macroeconomics, as opposed to microeconomics, is concerned with

A.

individual businesses.
B.

new computer technology.
C.

the stock market.
D.

the economy as a whole.

1 points

QUESTION 9

Which one of the following is an example of a positive economic statement?

A.

The size of the Federal government should be reduced.
B.

Midwest states affected by drought should be given more federal disaster aid.
C.

Education and income are highly correlated.
D.

The minimum wage for workers should be raised to help low-income workers.

1 points

QUESTION 10

Economics is primarily concerned with

A.

interactions between the government and market participants.
B.

how scarce resources are used.
C.

the production and distribution of capital goods.
D.

how income is divided among individuals.

1 points

QUESTION 11

The production possibilities table below shows the hypothetical relationship between the production of guns (national defense) and butter (social goods) in an economy.

A B C D E

Guns 0 4 7 9 10

Butter 4 3 2 1 0

If the economy is producing at alternative C, what is the opportunity cost of producing another unit of butter?

A.

3 units of guns.
B.

1 units of guns.
C.

2 units of guns.
D.

4 units of guns.

1 points

QUESTION 12

Assume that a consumer can buy only two goods X and Y, and has an income of $120. The price of X is $10 and the price of Y is $20. If the consumer spends all of her money on X and Y, which of the following would be a possible combination:

A.

4X and 2Y
B.

5X and 3Y
C.

6X and 3Y
D.

8X and 1Y

1 points

QUESTION 13

In the production possibilities model of an economy, when there is full employment of resources

a nation will be operating at an interior point within its production possibilities curve.

a nation will be operating on the production possibilities curve.

the production possibilities curve will shift outward to the right.

the production possibilies curve will shift inward to the left.

1 points

QUESTION 14

In economics the concept that there is "no free lunch" means

A.

scarce resources were used to produce these "free" goods so there is an opportunity cost to producing them.
B.

consumers are irrational when they ask for a free lunch unless they can make the case that the free lunch benefits business.
C.

the marginal cost of the "lunch" is greater than the marginal benefit.
D.

businesses could not make a profit if they gave away free goods to consumers.

1 points

QUESTION 15

Assume that a consumer can only purchase two goods with her income. A straight-line budget constraint indicates that the opportunity cost of obtaining an additional unit of one good is:

A.

negative.
B.

constant.
C.

increasing.
D.

decreasing.

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