Managerial Economics: Exam 2 - Assignment Essays

question

suppose the marginal product of labor is 8 and the marginal product of capital is 2. If the wage rate is $4 and the price of capital is $2, then in order to minimize costs the firm should use:

answer

more labor and less capital

question

If a firm's production function is Leontief and the wage rate goes up the:

answer

cost minimizing combination of capital and labor does not change

question

if the last unit of input increases total product, we know that the marginal product id

answer

positive

question

Total product begins to fall when:

answer

marginal product is zero

question

The combination of inputs that produce a given level of output are depicted by:

answer

isoquants

question

Isoquants are normally drawn with a convex shape because

answer

inputs are not perfectly complementary

question

The absolute value of the slope of the isoquant is the

answer

marginal rate of technical substitution

question

The Leontief production function implies

answer

L-shaped isoquants

question

Changes in the price of an input cause:

answer

parallel shifts of the isocost line

question

Costs that change as output changes are:

answer

variable costs

question

Which curve(s) does the marginal cost curve intersect at (their) minimum point?

answer

Average total cost curve and average variable cost curve

question

What is implied when the total cost of producing Q1 and Q2 together is less than the total cost of producing Q1 and Q2 separately?

answer

Economies of scope

question

Which of the following cost functions exhibits cost complementarity?

answer

-4q1q2+ 8q1

question

The long run is defined as

answer

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

question

It is profitable to hire labor so long as the

answer

VMPL is greater than wage

question

As isoquant denies the combination of inputs that yield the producer:

answer

The same level of output

question

Economies of scale exist whenever long-run average costs:

answer

decrease as output is increased

question

Two firms producing identical products may merge due to the existence of:

answer

Economies of scale

question

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

answer

manager will work hard

question

Which of the following forms of payment is NOT an incentive plan?

answer

Flat salary for a plant manager

question

Long-term contracts become longer

answer

when specialized investment becomes more important

question

When relationship-specific exchange occurs in complex contractual environments, the best way to purchase inputs is through:

answer

vertical integration

question

Spot exchange can be inefficient in the presence of:

answer

opportunism

question

The disadvantage of vertical integration is that

answer

firms no longer specialize in what they do best

question

In the absence of worker incentives:

answer

there is a natural tendency for workers to not give their maximum effort

question

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

answer

the principal-agent problem

question

Shirking can take the form of

answer

sleeping at work, long lunch hours, and leaving work early

question

Which of the following plans does NOT give an incentive to manager to stop shirking?

answer

Flat salary regardless of firm profits

question

An example of a job that usually involves a revenue-sharing plan would be:

answer

insurance agents, waiters and waitresses, car salesmen

question

In order for spot checks to be effective, they must be:

answer

Random in nature

question

The LEAST risky payment plan from the viewpoint of the worker is:

answer

Hourly wage

question

Transaction costs refer to:

answer

costs of exchange unrelated to production costs.

question

Long-term contracts:

answer

Can reduce opportunistic behavior

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

General Motors purchased Fischer Auto Body to produce bodies to place on a chassis. This transaction is best described as:

answer

vertical integration

question

The industry elasticity of demand for gadgets is −2, while the elasticity of demand for 47) an individual gadget manufacturer's product is −2. Based on the Rothschild approach to measuring market power, we conclude that:

answer

there is a significant monopoly power in this industry

question

A herfindahl index of 10,000 suggests:

answer

monopoly

question

The concentration and Herfindahl indices computed by the U.S. Bureau of Census must be interpreted with caution because:

answer

Both they overstate the actual level of concentration in markets saved by foreign firms and they understate the degree of concentration in local markets, such the gasoline market are correct

question

A Lerner index of 0 suggests

answer

perfect competition

question

When economies of scale are large, firms can reduce their average total cost by:

answer

merging into even larger firms

question

In the 1960s, each firm in the computer industry was able to make extremely large profit margins, some as high as 50 to 60 percent. The margin decreased to 20 to 40percent in the 1970s and to 10 to 20 percent in the 1980s. We conclude that:

answer

the industry evolved from oligopolistic to more competitive industry in the two decades

question

according to the "feedback critique"

answer

-the conduct of firms in an industry may affect the firm's performance.
-the conduct of firms in an industry may affect the market structure.
-market structure may affect the firm's conduct.

question

The Dansby-Willig index measure the potential for a change in

answer

firm's profit

question

Which of the following integration types exploits economies of scope?

answer

Horizontal integration

question

An electronics company purchases a food company. This is an example of:

answer

Conglomerate integration

question

Which of the following integration types aims at reducing transaction costs?

answer

vertical integration

question

Which of the following may transform an industry from oligopoly to monopolistic competition?

answer

Entry

question

Which of the following is true under monopoly?

answer

P > MC

question

Which of the following is true?

answer

In the short run, a monopoly will shut down if P<AVC

question

If a monopolistically competitive firm marginal cost increases, then in order to maximize profits, the firm will:

answer

reduce output and increase price

question

In the long run, monopolistically competitive firms produce a level of output such that:

answer

- P=Atc
-Atc> minimum of average cost
-P>Mc

question

A monopoly has produced a product with a patent for the last few years . The patent is going to expire. What will happen after the patent expires

answer

Some firms will enter the industry

question

A firm has a total cost function of c(q)= 75+25q1/2. The firm experiences:

answer

economies of scale

question

Which of the following formulas correctly measure the profit of a monopoly

answer

ii= Tr-Tc and ii=(p-atc)q

1 of 54

question

suppose the marginal product of labor is 8 and the marginal product of capital is 2. If the wage rate is $4 and the price of capital is $2, then in order to minimize costs the firm should use:

answer

more labor and less capital

question

If a firm's production function is Leontief and the wage rate goes up the:

answer

cost minimizing combination of capital and labor does not change

question

if the last unit of input increases total product, we know that the marginal product id

answer

positive

question

Total product begins to fall when:

answer

marginal product is zero

question

The combination of inputs that produce a given level of output are depicted by:

answer

isoquants

question

Isoquants are normally drawn with a convex shape because

answer

inputs are not perfectly complementary

question

The absolute value of the slope of the isoquant is the

answer

marginal rate of technical substitution

question

The Leontief production function implies

answer

L-shaped isoquants

question

Changes in the price of an input cause:

answer

parallel shifts of the isocost line

question

Costs that change as output changes are:

answer

variable costs

question

Which curve(s) does the marginal cost curve intersect at (their) minimum point?

answer

Average total cost curve and average variable cost curve

question

What is implied when the total cost of producing Q1 and Q2 together is less than the total cost of producing Q1 and Q2 separately?

answer

Economies of scope

question

Which of the following cost functions exhibits cost complementarity?

answer

-4q1q2+ 8q1

question

The long run is defined as

answer

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

question

It is profitable to hire labor so long as the

answer

VMPL is greater than wage

question

As isoquant denies the combination of inputs that yield the producer:

answer

The same level of output

question

Economies of scale exist whenever long-run average costs:

answer

decrease as output is increased

question

Two firms producing identical products may merge due to the existence of:

answer

Economies of scale

question

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

answer

manager will work hard

question

Which of the following forms of payment is NOT an incentive plan?

answer

Flat salary for a plant manager

question

Long-term contracts become longer

answer

when specialized investment becomes more important

question

When relationship-specific exchange occurs in complex contractual environments, the best way to purchase inputs is through:

answer

vertical integration

question

Spot exchange can be inefficient in the presence of:

answer

opportunism

question

The disadvantage of vertical integration is that

answer

firms no longer specialize in what they do best

question

In the absence of worker incentives:

answer

there is a natural tendency for workers to not give their maximum effort

question

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

answer

the principal-agent problem

question

Shirking can take the form of

answer

sleeping at work, long lunch hours, and leaving work early

question

Which of the following plans does NOT give an incentive to manager to stop shirking?

answer

Flat salary regardless of firm profits

question

An example of a job that usually involves a revenue-sharing plan would be:

answer

insurance agents, waiters and waitresses, car salesmen

question

In order for spot checks to be effective, they must be:

answer

Random in nature

question

The LEAST risky payment plan from the viewpoint of the worker is:

answer

Hourly wage

question

Transaction costs refer to:

answer

costs of exchange unrelated to production costs.

question

Long-term contracts:

answer

Can reduce opportunistic behavior

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

General Motors purchased Fischer Auto Body to produce bodies to place on a chassis. This transaction is best described as:

answer

vertical integration

question

answer

there is a significant monopoly power in this industry

question

A herfindahl index of 10,000 suggests:

answer

monopoly

question

The concentration and Herfindahl indices computed by the U.S. Bureau of Census must be interpreted with caution because:

answer

Both they overstate the actual level of concentration in markets saved by foreign firms and they understate the degree of concentration in local markets, such the gasoline market are correct

question

A Lerner index of 0 suggests

answer

perfect competition

question

When economies of scale are large, firms can reduce their average total cost by:

answer

merging into even larger firms

question

answer

the industry evolved from oligopolistic to more competitive industry in the two decades

question

according to the "feedback critique"

answer

-the conduct of firms in an industry may affect the firm's performance.
-the conduct of firms in an industry may affect the market structure.
-market structure may affect the firm's conduct.

question

The Dansby-Willig index measure the potential for a change in

answer

firm's profit

question

Which of the following integration types exploits economies of scope?

answer

Horizontal integration

question

An electronics company purchases a food company. This is an example of:

answer

Conglomerate integration

question

Which of the following integration types aims at reducing transaction costs?

answer

vertical integration

question

Which of the following may transform an industry from oligopoly to monopolistic competition?

answer

Entry

question

Which of the following is true under monopoly?

answer

P > MC

question

Which of the following is true?

answer

In the short run, a monopoly will shut down if P<AVC

question

If a monopolistically competitive firm marginal cost increases, then in order to maximize profits, the firm will:

answer

reduce output and increase price

question

In the long run, monopolistically competitive firms produce a level of output such that:

answer

- P=Atc
-Atc> minimum of average cost
-P>Mc

question

A monopoly has produced a product with a patent for the last few years . The patent is going to expire. What will happen after the patent expires

answer

Some firms will enter the industry

question

A firm has a total cost function of c(q)= 75+25q1/2. The firm experiences:

answer

economies of scale

question

Which of the following formulas correctly measure the profit of a monopoly

answer

ii= Tr-Tc and ii=(p-atc)q

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