question
Economic theory is a valuable tool for business decision making because it
answer
identifies for managers the essential information for making a decision.
question
The total opportunity cost of using owner-supplied resources
answer
b. is part of the business firm's total economic cost.
d. must be covered by revenues or economic profit will be negative and owner's wealth will be reduced.
d. must be covered by revenues or economic profit will be negative and owner's wealth will be reduced.
question
Economic profit equals
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accounting profit minus the total cost of using owner-supplied resources.
question
When economic profit is positive,
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total revenue exceeds total economic cost, and the business owners' wealth increases.
AND
the firm earns more than enough revenue to cover the opportunity costs of all of the resources it uses.
AND
the firm earns more than enough revenue to cover the opportunity costs of all of the resources it uses.
question
The value of a firm is
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smaller the higher is the risk premium used to compute the firm's value
question
A risk premium
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accounts for the riskiness of future profits.
question
Moral hazard
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is a cause of principal-agent problems.
question
A price-taker can exert no control over price because
answer
a. price is determined by market forces.
b. price is determined by the intersection of demand and supply.
c. the firm's individual production is insignificant relative to production in the industry.
d. many other firms produce a product that is nearly identical to its product.
b. price is determined by the intersection of demand and supply.
c. the firm's individual production is insignificant relative to production in the industry.
d. many other firms produce a product that is nearly identical to its product.
question
A Price-Setting firm
answer
a. can lower the price of its product and sell more units.
b. can raise the price of its product and sell fewer units but will not lose all of its sales.
c. possesses market power.
d. sells a product that is somehow differentiated from the product sold by its rivals or sells in a limited geographic market area with only one or a few sellers.
b. can raise the price of its product and sell fewer units but will not lose all of its sales.
c. possesses market power.
d. sells a product that is somehow differentiated from the product sold by its rivals or sells in a limited geographic market area with only one or a few sellers.
question
Which of the following is NOT one of the features characterizing market structures?
answer
The level of capital investment in research and development.
question
The value of a firm is smaller the
answer
higher is the risk premium used to compute the firm's value.
question
In markets characterized by oligopoly, interdependence of firms means that
answer
actions of any one firm in the market will have an effect on the sales and profits of all other firms in the market.
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