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




1. Which of the following forms of payment is not an incentive plan?;A. Commission plans for salesman;B. Flat salary for a plant manager;C. Bounses for managers that increase as profits increase D. None of the above;2. When relationship-specific exchange occurs in complex contractural environments, the best;way to purchase inputs is through;A. Spot markets;C. Short-term agency agreements;B. Vertical integration;D. Long-term contracts;3. Suppose compensation is given by W = 512,000 + 217X(Profits)+ 10.08S, where W = total;compensation of the CEO, X = company profits (in millions) = $200, and S = Sales (in;millions) = $400. What percentage of the CEOs total earnings are tied to profits of the firm.;A. 8.2%;B. 10.9%;C. 7.8%;D. 5.1%;4. Long-term contracts are not efficient if;A.;B.;C.;D.;A firm engages in relationship-specific exchange;Specialized investments are unimportant;The contractural environment is simple;A and C, only;5. The solutions to the principal-agent problem ensures that the firm is operating;A. On the production function;C. Below the production function;B. Above the production function;D. Above the isoquant curve;6. Spot exchange typically involves;A. No transaction costs;C. Extremely high transaction costs;B. Some transaction costs;D. Long-term contracts;7. Given that the income of franchise restaurant managers is directly tied to profits and the;income of the manager of the company owned restaurant is paid a flat fee, we might expect;profits to be;A. Higher in company-owned restaurants;C. Equal in both types of restaurants;B. Lower in company-owned restaurants;D. None of the above;Page 2;Busn 6120;8. Which of the following is the primary disadvantage of producing inputs within a firm?;A. Increases in transaction costs;C. Reductions in opportunism;B. Loss of specialization;D. Mitigation of hold-up problems;9. A firm=s average cost is $20 and it charges a price of $20. The Lerner index for this firm is;A..20;B..50;C..33;D. Insufficient information;10. The concentration and Herfindahl indices computed by the US Bureau of Census must be;interpreted with caution because;A.;B.;C.;D.;They overstate the actual level of concentration in markets served by foreign firms.;They undersate the degree of concentration in local markets, such as the gas market.;All of the above.;None of the above.;11. Suppose that there are 2 industries, A and B. There are five firms in industry A with sales;at;$5 million, $2 million, $1 million, $ 1 million, and $1 million, respectively. There are 4firms in industry B with equal sales of $2.5 million for each firm. The HHI for industry A is;A. 3200;B. 2800;C. 1800;D. 2500;12. As a general rule of thumb, industries with a Herfindahl index below;are;considered;to be competitive, while those above;are considered noncompetitive.;A. 1000, 1800;B. 1800, 1000 C. 1000, 3000 D. 1800, 3000;13. Which of the following measures market structure?;A. Four-firm concentration ratio;C. Herfindahl-Hirshman index;B. Lerner index;D. All of the above may be used to make;inferences about market;structures;14. Which of the following integration types exploits economies of scope?;A. Vertical integration;B. Horizontal integration;D. Conglomerate integration;C. Cointegration;Page 3;Busn 6120;15. Which of the following may transform an industry from oligopoly to monopolistic;competition?;A. Entry;B. Takeover;C. Exit;D. Acquisition;16. Which market structure has the most market power?;A. Monopolistic competition B. Perfect competition C. Monopoly D. Oligopoly;17. You are the manager of a firm that produces output in 2 plants. The demand for your firms;product is P = 78 - 15Q, where Q = Q1 + Q2. The marginal cost associated with producing;in 2 plants are MC 1= 3Q 1 and MC 2 = 2Q 2. What price should be charged to maximize;profits?;A. 20.5;B. 40.5;C. 60.5;D. 80.5;18. Which of the following is true?;A.;B.;C.;D.;A monopolist produces on the inelastic portion of its demand.;A monopolist always earns an economic profit.;The more inelastic the demand, the closer marginal revenue is to price.;In the short run a monopoly will shutdown if P < AVC.;19. You are the manager of a monopoly that faces a demand curve described by P = 63 - 5Q.;Your costs are C = 10 + 3Q. Your firms maximum profits are;A. 0;B. 66;C. 120;D. 170;20. If a monopolistically competitive firms marginal cost increases, then in order to maximize;profits the firm will;A. Reduce output and increase price;C. Increase both output and price;B. Increase output and decrease price;D. Reduce both output and price;21. Suppose that initially the price is $50 in a perfectly competitive market. Firms are making;zero economic profits. Then the market demand shrinks permanently and some firms leave;the industry and the industry returns back to a long run equilibrium. What will be the new;equilibrium price, assuming cost conditions in the industry remain constant?;A. $50;B. $45;C. Lower than $50 but exact value cannot be known without more information.;D. Larger than $45 buy exact value cannot be known without more information.;Page 4;Busn 6120;22. A monoploy has 2 production plants with cost functions C 1 =50 +0.1Q1(squared) and C 2;=30+0.05Q The demand it faces is Q=500-10P. What is the condition for profit;maximization?;A.;B.;C.;D.;MC 1 (Q1) = MC 2 (Q2) = P (Q 1 + Q 2);MC 1 (Q1) = MC 2 (Q2) =MR (Q 1 + Q 2);MC 1 (Q1 + Q 2) = MC 2 (Q1 + Q2) = P (Q1+ Q 2);MC 1 (Q 1+ Q 2) = MC 2 (Q 1+Q 2) = MR (Q1 + Q 2);23. You are a manager in a perfectly competitive market. The price in your market is $14.;Your;total cost curve is C(Q) = 10 + 4Q + 0.5 Q(squared). What level of profits will you;make in;the short-run?;A. $20;B. $40;C. $60;D. $80;24. You are a manager for a monopolistically competitive firm. From experience, the profitmaximizing level of output of your firm is 100 units. However, it is expected that prices of;other close substitutes will fall in the near future. How should you adjust your level of;production in response to this change?;A. Produce more than 100 units.;C. Produce 100 units.;B. Produces less than 100 units.;D. Insufficient information to decide;25. Which of the following is true?;A. In Bertrand oligopoly each firm believes that their rivals will hold their output;constant if it changes its output;B. In Cournot oligopoly firms produce an identical product at a constant marginal cost;and engage in price competition;C. In oligopoly a change in marginal cost never has an affect on output or price;D. None of the above are true;26. Two firms compete in a Stackelberg fashion and firm 2 is the leader, then;A.;B.;C.;D.;Firm 1 views the output of firm 2 as given;Firm 2 views the output of firm 1 as given;All of the above;None of the above;Page 5;Busn 6120;27. A firm=s isoprofit curve is defined as;A. The combinations of outputs produced by a firm that earns it the same level of;profits;B. The combinations of outputs produced by all firms that yield the firm the same level;of profit.;C. The combinations of outputs produced by all firms that makes total industry profits;constant;D. None of the above;28.Two firms compete as a Stackelberg duopoly. The demand they face is P = 100 - 3Q. The;cost function for each firm is C(Q) = 4Q. The outputs of the 2 firms are;A.;B.;C.;D.;Q(L=leader) = 16, Q(F=follower) = 8;Q L = 24, Q F = 12;Q L = 12, Q F = 8;Q L = 20, Q F = 15;29. The spirit of equating marginal cost with marginal revenue is not held by;A. Perfectly competitive firms;C. Both A and B;B. Oligopolistic firms;D. None of the above;30. Which would expect to make the highest profits, other things equal;A. Bertrand oligopolist;D. Stackelberg follower;B. Cournot oligopolist;C. Stackelberg leader;31. The inverse demand in a Cournot duopoly is P = a - b (Q 1 + Q 2), and costs are C1 (Q1) =;c 1 Q 1, and C 2 (Q2) = c 2 Q 2. The Government has imposed a per unit tax of $t on each;unit sold by each firm. The tax revenue is;A.;B.;C.;D.;t times the total output of the 2 firms should there be no sales tax;Less than t times the total output of the 2 firms should there be no sales tax;Greater than t times the total output of the 2 firms should there be no sales tax;None of the above;32. A new firm enters a market which is initially serviced by a Cournot duopoly charging a;price of $20. What will the new market price be should the 3 firms co-exist after the entry?;A. $20;B. Below $20;C. Above $20;D. None of the above;Page 6;Busn 6120;33. An important condition for a contestable market is;A.;B.;C.;D.;All producers have different technologies;There are high transaction costs.;Existing firms cannot respond quickly to entry by lowering their price;There are sunk costs;Additional Problems (Test 2);Busn 6120;Name;1. If a firm manager has a base salary of $50,000 and also gets 2% of all profits, how much;will;his income be if revenues are $8,000,000 and profits are $2,000,000.;A. $250,000;B. $210,000;C. $90,000;D. $150,000;2. The industry elasticity of demand for telephone service is -2 while the elasticity of demand;for a specific phone company is -5. What is the Rothchild index?;A. 0.2;B. 0.4;C. 0.5;D. 0.7;3. You are the manager in a perfectly competitive market. The price in your market is $14.;Your total cost curve is C(Q) = 10 + 4Q + 0.5 Q(squared). What will happen in the long-run if;there is no change in the demand curve?;A. Some firms will leave the market eventually.;C. There will be neither entry nor leave.;B. Some firms will enter the market.;D. None of the above;4. 2 firms compete as a Stackelberg duopoly. The demand they face is P = 100 -3Q. The cost;function for each firm is C(Q) = 4Q. The profits (X) of the 2 firms are;A. X L = $384, X F = $192;B. X L = $192, X F = $91;C. X L = $56, X F = (- $28);D. X L = $56, X F = $28;5. Sue and Jane own 2 local gas stations. They have identical constant marginal costs, but earn;zero economic profits. Sue and Jane constitute;A.;B.;C.;D.;A Sweezy oligopoly;A Cournot oligopoly;A Bertrand oligopoly;None of the above


Paper#29531 | Written in 18-Jul-2015

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