EU09L2


  • 1
  • Firms exist because of __________________.

    incentive systems
    the principal-agent problem
    command systems
    scarcity


  • 2
  • A major disadvantage of a proprietorship is that the __________________.

    owner's entire wealth is at risk
    profits are taxed twice
    owner has limited liability
    firm has perpetual life


  • 3
  • The five-firm concentration ratio is smaller in _______ market than in a _______ market.

    a monopolistic; perfectly competitive
    an oligopolistic; perfectly competitive
    a monopolistic; monopolistic competitive
    a perfectly competitive; monopolistic


  • 4
  • Lucinda starts a business consulting company. She makes all the management decisions and bears the risk of running the business. Lucinda expects to receive ________________.

    economic profit
    normal profit
    revenue greater than her opportunity cost
    revenue greater than the capital investment


  • 5
  • Total revenue minus the sum of implicit and explicit costs is equal to _______ profit.

    entrepreneurial
    economic
    normal
    opportunity


  • 6
  • Emma owns a firm that produces raincoats. Currently, Emma produces 25 raincoats a day. Emma cannot produce more raincoats in a day unless she purchases another sewing machine. Emma is _______ efficient.

    consumer
    technologically
    economically
    entrepreneurially


  • 7
  • All of the following statements are false except ___________________.

    economic efficiency implies technological efficiency
    economic efficiency implies maximum output with maximum inputs
    technological efficiency implies economic efficiency
    technological efficiency implies the lowest costs of production


  • 8
  • Andy wants to purchase a golden retriever. Andy buys newspapers to read the classified advertisements and he buys dog magazines to check out the locations of golden retriever breeders. Andy has incurred the _______ costs of making a purchase.

    transactions
    buying
    market
    private


  • 9
  • A firm that hires various specialists to work on a range of projects experiences ___________________.

    economies of scope
    economies of scale
    increasing economic profit
    increasing normal profit


  • 10
  • _______ coordinate most of our economic activity because firms can _______.

    Firms and not markets; organize efficient team production
    Firms and markets; organize efficient team production
    Firms and markets; reap economies of scale
    Markets; have a principal-agent problem