Managerial Economics exam 2 Ch 5,6,7

question

Suppose the marginal product of labor is and marginal product of capital is 2. If wage rate is $4 and price of capital is $2, then in order to maximize costs the firm should use

answer

More labor and less capital

question

You are an efficiency expert hired by a manufacturing firm that uses K and L as inputs. The firm produces and sells a given output. If w = $40, r = $100, MPL = 20, and MPK = 40 the firm:

answer

Should use more K and less L to cost minimize

question

the feasible means of converting raw inputs such as steel,labor, and machinery into an output are summarized by:

answer

Technology

question

What is the average product of labor, given that the level of labor equals 10, total output equals 1200, and the marginal product of labor equals 200?

answer

120

question

firm managers should use inputs at levels where the

answer

marginal benefit equals marginal cost and value marginal product of labor equals wage

question

Fixed costs exist only in

answer

The short run

question

Which curve does the marginal cost sure intersect at the minimum point

answer

Average total cost curve and average variable cost curve

question

Which of following cost functions exhibits cost complementarily

answer

-4Q1Q2 + 8Q1

question

The long run is defines as

answer

The horizon in which the manager can adjust all factors of production

question

The manager institutes an incentive structure to ensure

answer

the firm produces on the production function

question

The average product of labor depends on how many units of

answer

Labor and capital are used

question

An isocost line

answer

Represents the combinations of K and L that cost the firm the same amount of money

question

when there are economies of scope between products, selling off an unprofitable subsidiary could lead to

answer

Only a minor reduction in costs

question

Which of the following conditions is true when a producer minimizes the cost of producing a given level of output

answer

The marginal product per dollar spent on all inputs is equal

question

Often owners of firms who hire managers must install incentive or bonus plans to ensure that the

answer

Managers will work hard

question

a firm might choose to produce its own inputs if

answer

Long-term contracts are costly to write

question

A drawback of separating ownership from control by creating a firm is:

answer

the principal agent problem

question

A potential problem with piece rate plans is that

answer

Workers may stress quantity instead of quality.

question

to ensure quality, piece rate plans must usually be accompanied by

answer

Quality control mechanisms

question

Which of the following mergers is an example of vertical integration

answer

IBM purchases a California computer chip company

question

The Principal's goals are NOT in line with the goals of

answer

the agents

question

A long term contract

answer

exists when a firm is legally bound to purchase inputs from a particular supplier

question

relationship-specific investment include

answer

site specificity, dedicated assets, human capital

question

one way of alleviating opportunism is

answer

vertical integration

question

Which of the following involves the most risk from the point of view of the employee?

answer

Profit sharing

question

Spot markets

answer

markets in which assets are bought and sold for on the spot delivery

question

suppose a new contracting environment that requires greater specialized investments is considered. This new contract will result in

answer

An increase in the marginal benefit and a longer optimal contract

question

The presence of minimal specialized investments relative to contracting costs suggest that the optimal procurement method is

answer

Spot exchange

question

Spot checks are typically a solution to the

answer

manager worker, principal agent problem

question

Which of the following is NOT a solution to the manager-worker-principal-agent problem

answer

Threat of Takeover

question

An increase in the marginal cost arising from a more complex specialized investment environment will cause the optional contract length to

answer

Decrease

question

By instituting performance based rewards to CEOs, the profits of firms will

answer

Rise

question

Which of the following are measures of industry concentration?

answer

Four-Firm concentration and HHI Index

question

A Lerner index 0 suggests

answer

perfect competition

question

Suppose that there are two industries, A and B. There are five firms in industry A with sales of 5, 2, 1, 1, and 1 million. There are four firms in industry B with equals sales for 2.5million for each firm. The 4 firm concentration ratio for industryB is

answer

1.0

question

A student figured out that the HHI for an industry was 15,000. What is the proper conclusion?

answer

the student made some computational errors

question

When the relevant markets are local, the concentration and HHI based on figures for the entire United States tend to:

answer

be biased downward

question

Pricing is an aspect of a firm's

answer

Conduct

question

A local telephone company charges $.10/min based on a &.08 min. marginal cost of operation. What is Lerner Index?

answer

0.2

question

The Dansby-Willig index measures the potential for a change in:

answer

social welfare

question

Which of following integration types has the potential problem of increasing the firms marker power

answer

Horizontal integration

question

monopolistic competition is characterized by

answer

differentiated products

question

Tobacco industry has lerner index of 0.76. bases on this info, compute optimal markup factor

answer

4.17 times marginal cost

question

Holding all else constant, higher prices will

answer

Increase Lerner Index

question

Which of following is not a measure of market structure?

answer

Pricing Behavior

question

In a perfectly competitive market that is operating at maximum efficiency, at the Dansby-Willig index would be

answer

ZERO

question

The industry elasticity of demand for good Y is -1.5, while the elasticity of demand for an individual manufacturer of good Y is -9. Based on the Rothschild approach to measuring market power, we conclude that:

answer

1/6, indicating there is little monopoly power in this industry

question

An industry consists of four firms with annual sales of $3,000, $5,000, $4000, and $6000. What is industry's HHI?

answer

2,654

question

There are five firms in an industry. Sales of the four largest are $800k, 700k, 440k, and 230k. If the C4 ratio is 80%, then the HHI is

answer

2,271

question

You are the manager of a monopoly that faces a demand curve described by P=230-20Q. Your costs are C +30Q. Your firms max profits are

answer

495

question

In long run, monopolistically competitive firms:

answer

Have excess capacity

question

Which of the following industries is best characterized as monopolistically competitive?

answer

Toothpaste

question

Economies of scale whenever

answer

Average total costs decline as output decreases

question

A monopoly has produced a product with a patent for the last few years. The patent is going to expire. What will likely happen to the demand for patent holders product when the parent runs out?

answer

Demand will decrease

question

Monopolistic competition is literally a kind of competition. Hence, there is no deadweight loss in a monopolistically competitive market

answer

Statement is incorrect

question

Which of following statements is NOT correct about monopoly

answer

Monopolists always make positive profits in the long run

question

A firm has a total cost function of C(Q) = 75 + 25Q ^1/2. The firm experiences:

answer

Economies of Scale

question

Which of the following is true under monopolistic competition in the long run?

answer

Profits are always zero

question

In a monopoly where the marginal revenue and price are, respectively, given by $0.50 and $2, the price elasticity of demand is:

answer

-4/3

question

You are the manager of a monopoly that faces a demand curve described by P=10-2Q. Your costs are C=20+2Q. The revenue maximizing output is:

answer

1 of 60

question

Suppose the marginal product of labor is and marginal product of capital is 2. If wage rate is $4 and price of capital is $2, then in order to maximize costs the firm should use

answer

More labor and less capital

question

You are an efficiency expert hired by a manufacturing firm that uses K and L as inputs. The firm produces and sells a given output. If w = $40, r = $100, MPL = 20, and MPK = 40 the firm:

answer

Should use more K and less L to cost minimize

question

the feasible means of converting raw inputs such as steel,labor, and machinery into an output are summarized by:

answer

Technology

question

What is the average product of labor, given that the level of labor equals 10, total output equals 1200, and the marginal product of labor equals 200?

answer

120

question

firm managers should use inputs at levels where the

answer

marginal benefit equals marginal cost and value marginal product of labor equals wage

question

Fixed costs exist only in

answer

The short run

question

Which curve does the marginal cost sure intersect at the minimum point

answer

Average total cost curve and average variable cost curve

question

Which of following cost functions exhibits cost complementarily

answer

-4Q1Q2 + 8Q1

question

The long run is defines as

answer

The horizon in which the manager can adjust all factors of production

question

The manager institutes an incentive structure to ensure

answer

the firm produces on the production function

question

The average product of labor depends on how many units of

answer

Labor and capital are used

question

An isocost line

answer

Represents the combinations of K and L that cost the firm the same amount of money

question

when there are economies of scope between products, selling off an unprofitable subsidiary could lead to

answer

Only a minor reduction in costs

question

Which of the following conditions is true when a producer minimizes the cost of producing a given level of output

answer

The marginal product per dollar spent on all inputs is equal

question

Often owners of firms who hire managers must install incentive or bonus plans to ensure that the

answer

Managers will work hard

question

a firm might choose to produce its own inputs if

answer

Long-term contracts are costly to write

question

A drawback of separating ownership from control by creating a firm is:

answer

the principal agent problem

question

A potential problem with piece rate plans is that

answer

Workers may stress quantity instead of quality.

question

to ensure quality, piece rate plans must usually be accompanied by

answer

Quality control mechanisms

question

Which of the following mergers is an example of vertical integration

answer

IBM purchases a California computer chip company

question

The Principal's goals are NOT in line with the goals of

answer

the agents

question

A long term contract

answer

exists when a firm is legally bound to purchase inputs from a particular supplier

question

relationship-specific investment include

answer

site specificity, dedicated assets, human capital

question

one way of alleviating opportunism is

answer

vertical integration

question

Which of the following involves the most risk from the point of view of the employee?

answer

Profit sharing

question

Spot markets

answer

markets in which assets are bought and sold for on the spot delivery

question

suppose a new contracting environment that requires greater specialized investments is considered. This new contract will result in

answer

An increase in the marginal benefit and a longer optimal contract

question

The presence of minimal specialized investments relative to contracting costs suggest that the optimal procurement method is

answer

Spot exchange

question

Spot checks are typically a solution to the

answer

manager worker, principal agent problem

question

Which of the following is NOT a solution to the manager-worker-principal-agent problem

answer

Threat of Takeover

question

An increase in the marginal cost arising from a more complex specialized investment environment will cause the optional contract length to

answer

Decrease

question

By instituting performance based rewards to CEOs, the profits of firms will

answer

Rise

question

Which of the following are measures of industry concentration?

answer

Four-Firm concentration and HHI Index

question

A Lerner index 0 suggests

answer

perfect competition

question

answer

1.0

question

A student figured out that the HHI for an industry was 15,000. What is the proper conclusion?

answer

the student made some computational errors

question

When the relevant markets are local, the concentration and HHI based on figures for the entire United States tend to:

answer

be biased downward

question

Pricing is an aspect of a firm's

answer

Conduct

question

A local telephone company charges $.10/min based on a &.08 min. marginal cost of operation. What is Lerner Index?

answer

0.2

question

The Dansby-Willig index measures the potential for a change in:

answer

social welfare

question

Which of following integration types has the potential problem of increasing the firms marker power

answer

Horizontal integration

question

monopolistic competition is characterized by

answer

differentiated products

question

Tobacco industry has lerner index of 0.76. bases on this info, compute optimal markup factor

answer

4.17 times marginal cost

question

Holding all else constant, higher prices will

answer

Increase Lerner Index

question

Which of following is not a measure of market structure?

answer

Pricing Behavior

question

In a perfectly competitive market that is operating at maximum efficiency, at the Dansby-Willig index would be

answer

ZERO

question

answer

1/6, indicating there is little monopoly power in this industry

question

An industry consists of four firms with annual sales of $3,000, $5,000, $4000, and $6000. What is industry's HHI?

answer

2,654

question

There are five firms in an industry. Sales of the four largest are $800k, 700k, 440k, and 230k. If the C4 ratio is 80%, then the HHI is

answer

2,271

question

You are the manager of a monopoly that faces a demand curve described by P=230-20Q. Your costs are C +30Q. Your firms max profits are

answer

495

question

In long run, monopolistically competitive firms:

answer

Have excess capacity

question

Which of the following industries is best characterized as monopolistically competitive?

answer

Toothpaste

question

Economies of scale whenever

answer

Average total costs decline as output decreases

question

A monopoly has produced a product with a patent for the last few years. The patent is going to expire. What will likely happen to the demand for patent holders product when the parent runs out?

answer

Demand will decrease

question

Monopolistic competition is literally a kind of competition. Hence, there is no deadweight loss in a monopolistically competitive market

answer

Statement is incorrect

question

Which of following statements is NOT correct about monopoly

answer

Monopolists always make positive profits in the long run

question

A firm has a total cost function of C(Q) = 75 + 25Q ^1/2. The firm experiences:

answer

Economies of Scale

question

Which of the following is true under monopolistic competition in the long run?

answer

Profits are always zero

question

In a monopoly where the marginal revenue and price are, respectively, given by $0.50 and $2, the price elasticity of demand is:

answer

-4/3

question

You are the manager of a monopoly that faces a demand curve described by P=10-2Q. Your costs are C=20+2Q. The revenue maximizing output is:

answer

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