If a manager is not the owner, the manager:
A. receives the full benefit of good decisions.
B. bears the full cost of bad decisions.
C. does not receive the full benefit nor the full cost of his or her decisions.
D. None of the statements is correct.
A new firm enters a market which is initially serviced by a Bertrand duopoly charging a
price of $20. What will the new price be should the three firms coexist after the entry?
A. $25
B. $20
C. $15
D. None of the answers is correct.
Consumer surplus is
A. the value consumers get from a supplier.
B. the value consumers do not pay because of a discount by supplier.
C. the value consumers get from a good but do not pay for.
D. equal to the amount consumers pay for a good.
You are a hotel manager and you are considering four projects that yield different
payoffs, depending upon whether there is an economic boom or a recession. The
potential payoffs and corresponding payoffs are summarized in the following table.
The variance in the returns of project C is:
A. 900
B. 225
C. 0
D. 1,600
A floor price is
A. the minimum legal price that can be charged in a market.
B. the maximum legal price that can be charged in a market.
C. below the initial market equilibrium price.
D. equal to the initial market equilibrium price.
A potential entrepreneur is trying to decide whether to open a new health spa. She
currently makes $35,000 per year as an aerobics instructor and will have to give up this
job if she opens the new health spa. If she chooses to open the spa, it will cost her
$200,000 per year in rent and other operating expenses.a. What are her accounting
costs?b. What are her opportunity costs?c. How much would she need to make in
revenues to earn positive accounting profits? Positive economic profits?
Other things held constant, the higher the price of a good
A. the lower the producer surplus.
B. the greater the producer surplus.
C. the higher the supply.
D. the lower the supply.
Firms that can effectively price discriminate can increase profitability when they
engage in:
A. limit pricing.
B. vertical foreclosure.
C. a price-cost squeeze.
D. Any of the statements associated with this question are correct.
Which of the following integration types aims at reducing transaction costs?
A. Vertical integration
B. Horizontal integration
C. Cointegration
D. Conglomerate integration
Maximizing the lifetime value of the firm is equivalent to maximizing the firms current
profits if the:
A. interest rate is larger than the growth rate in profits and both are constant.
B. growth rate in profits is constant and is larger than the interest rate.
C. interest rate is smaller than the growth rate of profits.
D. growth rate of profits and the interest rate are equal.
OJs Orange Juice produces orange juice to sell in a competitive market. Given
uncertainty in weather patterns, OJ has to determine how much juice to produce before
knowing the competitive price. It is estimated that there is a 10 percent chance the
competitive price will be $5 and a 90 percent chance the price will be $2. If the
marginal cost of producing orange juice is MC(Q) = 2Q, then to maximize expected
profits, OJ should produce:
A. 0.25 units.
B. 0.9 units.
C. 1.15 units.
D. 2.5 units.
You are a hotel manager considering four projects that yield different payoffs,
depending upon whether there is an economic boom or a recession. The potential
payoffs and corresponding payoffs are summarized in the following table.
Which project has the highest variance?
A. A
B. B
C. C
D. D
Suppose you read in an industry publication that the Rothschild index for the petroleum
industry is 0.88. Based on past experience, you know that the price elasticity of demand
for the petroleum products sold by your firm is -1.5. Based on this information, you
know that the elasticity of demand for a representative firm in the petroleum industry is:
A. 1.32.
B. 1.70.
C. -0.587.
D. -1.32.
A Herfindahl index of 0 suggests:
A. monopoly.
B. monopolistic competition.
C. perfect competition.
D. oligopoly.
Maximizing total benefits is equivalent to maximizing net benefits if and only if there
are:
A. constant marginal costs associated with achieving more benefits.
B. no costs associated with achieving more benefits.
C. increasing costs associated with achieving more benefits.
D. decreasing costs associated with achieving more benefits.
Which of the following is NOT an example of a piece-rate compensation method?
A. Paying typists a fixed amount per page
B. Paying sewing machine operators a flat amount per shirt sewn
C. Paying a carpenter to install a new back porch
D. Paying an assembly line worker per bolt put into car bodies
The production function in the table below exhibits decreasing marginal returns to
capital over what output range?
A. Between 0 and 1,524
B. Between 0 and 2,991
C. Between 2,391 and 3,048
D. Between 3,016 and 2,945
Eric provides cheese (H) and milk (M) to the market with the following total cost
function: C(H, M) = 10 + 0.4H2 + 0.2M2. The prices of cheese and milk in the market
are $2 and $5 respectively. Assume that the cheese and milk markets are perfectly
competitive. What output of milk maximizes profits?
A. 1.25
B. 12.5
C. 15
D. 20
Your firm is planning to hold an auction to sell its mining facility. Your boss has asked
you to determine the best type of auction to hold to maximize expected profits from
selling the facility. Based on your knowledge of auctions, provide your boss with a
suggestion.
The maker of Turbotax produces software that prepares federal income tax returns. In
addition, it produces software that prepares various state income tax returns. Why
doesnt it pay for the firm to specialize in federal software?
In the early part of 1998, crude oil prices fell to a nine-year low at $13.28 a barrel.
Falling crude oil prices were due in part to technological advances that made locating
reservoirs and extraction cheaper. What impact will these lower crude oil prices have on
the price of gasoline?
In the 1990s the Mobil Oil Corporation acquired the rights to increase pollution by 900
pounds of sulfur dioxide per day at its Torrance, California, refinery. These rights were
purchased from South Gate, California, at a price of $3 million after the latter acquired
them from General Motors. As a result of this change, Mobil increased its output of
noxious vapors in Torrance, California, by 900 pounds per day. Do you think the
environment was harmed as a result of the sale of these pollution rights? Explain.
Show that the Cobb-Douglas production function exhibits the law of
diminishing marginal rate of technical substitution.
Will consumers spend more time searching when stores are located in a mall or when
they are spread all over town? Explain.