If Tiger Toys faces a demand curve of P = 85 − 0.25Q and a MC = ATC = 20, then the
markup would be
A. $52.50.
B. $20.00.
C. $32.50.
D. $65.00.
Bundling of complements to create value strategically usually leads to lower prices for
the consumer, ______.
A. greater volume sold, and lower profits
B. less volume sold, and lower profits
C. greater volume sold, and greater profits
D. less volume sold, and greater profits
If D represents the level of decentralization of corporate decision making, and A and C
are positive constants, then Benefits = B D and Costs = A D + C D2. The optimal level
of decentralization occurs where the:
A. horizontal distance between the benefits and costs curves is greatest.
B. vertical distance between the benefits and costs curves is greatest.
C. sum of the squares of the distance between the benefits and costs curves is
minimized.
D. level of benefits is greatest.
Which one of the following is a source of conflict between owners and managers?
A. The amount owners and the managers want to pay to the shareholders
B. The amount owners and the managers want to receive
C. The amount owners want to pay and the amount managers want to receive
D. The amount owners want to receive and the amount managers want to pay
A production function of the form Q = 150L.75 K.50 exhibits ______ in the long run.
A. increasing returns to scale
B. decreasing returns to scale
C. constant returns to scale
D. diminishing returns to the variable input
A risk-averse agent
A. only cares about expected payoff.
B. cares about expected payoff as well as the variability of a payoff.
C. only cares about the variability of a payoff.
D. does not care about expected payoff.
If a firm is inundated by qualified applicants when it advertises a job opening and the
firm’s quit rate is unusually low, then the firm is probably paying:
A. below the market wage.
B. the market wage.
C. above the market wage.
D. each worker its marginal revenue product.
If a company picks an organizational architecture that is inappropriate for its
marketplace, then:
A. the company is unlikely to survive market competition.
B. technology is likely to rescue the company from bankruptcy.
C. competition is likely to help the company to grow.
D. government regulation is likely to cause the company to fail.
Environmental Protection Agency (EPA) regulations tend to go through many stages of
review and approval before they are implemented. Not only do many regulators have to
approve a new regulation, but comments and reviews from industry and conservation
organizations are typical. Explain these complicated procedures in light of the theories
of supply and demand for regulation.
Employee performance evaluation is needed because:
A. it justifies the incredibly high wages of the CEOs.
B. it justifies the incredibly high fringe benefits of the CEOs.
C. it minimizes the risks faced by employees for putting in their effort.
D. it determines rewards and sanctions—wages, raises, bonuses, and dismissals.
The benefit of a mixed strategy is
A. higher returns for both the players in the market.
B. lower risks for both the players in the market.
C. the element of consistency that baffles rivals.
D. the element of surprise that baffles rivals.
Matrix organizations may:
A. decrease influence costs.
B. reduce employee focus on the overall business.
C. reduce functional supervision.
D. increase influence costs.
In the Battle of the Sexes game, Man likes to go to watch football, while Woman likes
to go to the mall. Both of them would rather go together than go alone. They decide to
show up to one of these places without contacting each other. A game like this will have
A. a dominant strategy for Man and none for Women.
B. one dominant strategy for both the players.
C. no Nash equilibrium strategies.
D. a Nash equilibrium in mixed strategies.
A seller-provided product warranty is often offered to a consumer to:
A. assure the latter that cheating will not occur.
B. get rid of inventory.
C. to deal with shortages of products.
D. decrease the cost of doing business.
In an agency relationship, the costs incurred by agents to ensure that a principal is
compensated if they take any action that is detrimental to the principal is known as:
A. monitoring costs
B. bonding costs
C. recurring losses
D. residual losses
Independent distributors of soda can free ride on the brand name of the company
manufacturing soda. Two solutions to this problem are:
A. creating joint asset ownership and entering into long-term contracts.
B. encouraging open market transactions and distributing production secrets.
C. advertising and granting exclusive territories.
D. encouraging open market transactions and granting exclusive territories.
Consider the salary of Mary Sue Nelson, a sales agent for Plain Truth Advertising. Her
compensation package for a week is , where Q is her dollar volume
of sales. Her productivity is , where e denotes her hours of effort and is a
random variable with mean 0. She has an effort cost of . Under this contract,
her choice of effort will be:
A. 0 hours per week.
B. 20 hours per week.
C. 40 hours per week.
D. 80 hours per week.
One of the ways of overcoming the problem of adverse selection is through:
A. signaling.
B. bargaining.
C. free-riding.
D. costless contracting.
Currently, a monopolist’s MR = $10 and its MC = $5 and it serves 10 consumers. An
11th consumer walks in. Should the company provide service to the additional
customer?
A. Yes, MR > MC, so it should provide service to the additional customer.
B. Yes, MR is equal to the number of customers, so it should provide service to the
additional customer.
C. No, MR > MC, so it should not provide service to the additional customer.
D. No, MC is less than the number of customers, so it should not provide service to the
additional customer.
Which one of the following does not cause a shift in the demand curve for gasoline?
A. An increase in the amount of alternative fuels
B. An increase in gas tax
C. An increase in the price of gasoline
D. An increase in oil imports from the Gulf
If performance evaluation of work is used to change wages, raises, bonuses, or
dismissals, then the system is designed to:
A. indicate when training is required.
B. provide the employee with a system of self-assessment.
C. reduce risk-taking on the part of the employee.
D. determine rewards and sanctions for the employee.
Over of all the men and of all the women in the U.S.:
A. work for the same employer for at least 5 years.
B. work for the same employer for at least 10 years.
C. work for the same employer for at least 15 years.
D. work for the same employer for at least 20 years.
According to Kantian theory on ethics:
A. an act is ethical if and only if it promotes the individual’s long-term interests.
B. an act is ethical if it produces the greatest possible balance of good over bad for
everyone affected by it.
C. only good deeds matter.
D. good deeds often result in bad outcomes.
A key to understanding the difference between TQM and reengineering is TQM’s
emphasis on:
A. one-time reengineering of production processes.
B. the reorganization of inventory control.
C. outsourcing.
D. continuous improvement.
Many businesses face the same customers over and over again. Repeat business
generally:
A. increases ethical behavior toward customers.
B. reduces ethical behavior toward customers.
C. is a sign of poor product quality.
D. is the sign of a poorly run business.