Question 1

A ________ is a governance structure where owners are not personally liable.

Accepted Answer

A)  sole proprietorship
B)  partnership
C)  mixed enterprise
D)  corporationE) None of the above
F) B) and C)

Question 2

If the market price in a competitive market is below the minimum of average variable cost, the firm will shut down.

Accepted Answer

A) True 
 B)False

Question 3

-The above figure shows the cost curves for a competitive firm. The firm will incur economic losses if the price is less than

Accepted Answer

A)  $0.
B)  $5.
C)  $10.
D)  $11.E) A) and B)
F) A) and C)

Question 4

If a firm makes zero economic profit, then the firm

Accepted Answer

A)  has total revenues greater than its economic costs.
B)  must shut down.
C)  can be earning positive accounting profit.
D)  must have no fixed costs.E) A) and D)
F) All of the above

Question 5

If a firm doesn't make an economic profit, it will shut down.

Accepted Answer

A) True 
 B)False

Question 6

A firm should always shut down if its revenue is

Accepted Answer

A)  declining.
B)  less than its average fixed costs.
C)  less than its total costs.
D)  less than its avoidable costs.E) A) and C)
F) All of the above

Question 7

A firm's horizontal dimension refers to

Accepted Answer

A)  its size in its primary market.
B)  its size in all markets in which is competes.
C)  the level of supply chain integration the firm undertakes.
D)  the number of stages in the production process that are upstream from the stages the firm undertakes.E) All of the above
F) A) and B)

Question 8

Firms might vertically disintegrate when

Accepted Answer

A)  it becomes more profitable for a firm to specialize.
B)  the IRS cracks down on transfer pricing.
C)  the industry becomes too large to support itself.
D)  the industry shrinks in size.E) A) and B)
F) B) and D)

Question 9

Supply chain management refers to

Accepted Answer

A)  the contracts put in place to manage a firm's suppliers.
B)  the decisions around which stages of production to handle internally and which to buy from others.
C)  how the firm compensates the employees who work on the firm's internal stages of production.
D)  the 19th century practice of having barges move downstream with the flow of the river.E) None of the above
F) A) and D) B

Question 10

A firm sets its output where

Accepted Answer

A)  marginal profit is zero.
B)  marginal revenue is maximized.
C)  marginal profit equals marginal revenue.
D)  marginal profit is maximized.E) A) and B)
F) A) and D)

Question 11

If the present value of all future revenue is positive, then

Accepted Answer

A)  the firm should remain operating, even if it earns negative profit in the short run.
B)  the firm should shut down if it is earning a negative profit in the short run.
C)  the firm should shut down if it cannot cover its fixed costs in the short run.
D)  Unable to determine with the information given.E) All of the above
F) A) and B)

Question 12

A firm that is vertically integrated

Accepted Answer

A)  participates in more than one successive stage of production.
B)  has higher profits than firms that are not vertically integrated.
C)  produces all of its own inputs.
D)  relies on other firms to market its products.E) A) and D)
F) C) and D)

Question 13

Which entity produces the greatest proportion of U.S. gross domestic product?

Accepted Answer

A)  government
B)  non-profit organizations such as hospitals
C)  firms
D)  universitiesE) B) and C)
F) C) and D)

Question 14

A firm's vertical dimension refers to

Accepted Answer

A)  its ability to grow its profits.
B)  the size of its headquarters building.
C)  the degree to which it participates in the various stages of producing the products and services it sells.
D)  the downstream stages of production.E) A) and D)
F) None of the above

Question 15

Disruptive innovations

Accepted Answer

A)  are created exclusively by start-up companies.
B)  can create new industries or destroy old ones.
C)  create oligopolies.
D)  are always based on sophisticated advances in technology.E) A) and B)
F) None of the above B

Question 16

The present value of a loan is the

Accepted Answer

A)  amount of money the firm borrows today.
B)  amount of money the firm must earn to pay off the loan.
C)  future value plus interest.
D)  compounded value of the interest payments.E) A) and C)
F) None of the above A

Question 17

In a monopolistically competitive market

Accepted Answer

A)  firms are price setters.
B)  barriers to entry are high.
C)  firms earn positive economic profit in the long run.
D)  products are undifferentiated.E) None of the above
F) A) and B)

Question 18

Limited liability is a benefit available only to

Accepted Answer

A)  sole proprietorships.
B)  partnerships.
C)  corporations.
D)  All of the above.E) None of the above
F) A) and C)

Question 19

-The above figure shows the cost curves for a competitive firm. If the firm is to operate in the short run, price must exceed

Accepted Answer

A)  $0.
B)  $5.
C)  $10.
D)  $11.E) A) and D)
F) None of the above

Question 20

-The above figure shows the cost curves for a competitive firm. If the profit-maximizing level of output is 40, price is equal to

Accepted Answer

A)  $0.
B)  $15.
C)  $10.
D)  $11.E) All of the above
F) B) and C)

Exam 7: Firm Organization and Market Structure

A ________ is a governance structure where owners are not personally liable.

Correct AnswerverifiedShow Answer

If the market price in a competitive market is below the minimum of average variable cost, the firm will shut down.

Correct AnswerverifiedShow Answer

-The above figure shows the cost curves for a competitive firm. The firm will incur economic losses if the price is less than

Correct AnswerverifiedShow Answer

If a firm makes zero economic profit, then the firm

Correct AnswerverifiedShow Answer

If a firm doesn't make an economic profit, it will shut down.

Correct AnswerverifiedShow Answer

A firm should always shut down if its revenue is

Correct AnswerverifiedShow Answer

A firm's horizontal dimension refers to

Correct AnswerverifiedShow Answer

Firms might vertically disintegrate when

Correct AnswerverifiedShow Answer

Supply chain management refers to

Correct AnswerverifiedB

A firm sets its output where

Correct AnswerverifiedShow Answer

If the present value of all future revenue is positive, then

Correct AnswerverifiedShow Answer

A firm that is vertically integrated

Correct AnswerverifiedShow Answer

Which entity produces the greatest proportion of U.S. gross domestic product?

Correct AnswerverifiedShow Answer

A firm's vertical dimension refers to

Correct AnswerverifiedShow Answer

Disruptive innovations

Correct AnswerverifiedB

The present value of a loan is the

Correct AnswerverifiedA

In a monopolistically competitive market

Correct AnswerverifiedShow Answer

Limited liability is a benefit available only to

Correct AnswerverifiedShow Answer

-The above figure shows the cost curves for a competitive firm. If the firm is to operate in the short run, price must exceed

Correct AnswerverifiedShow Answer

-The above figure shows the cost curves for a competitive firm. If the profit-maximizing level of output is 40, price is equal to

Correct AnswerverifiedShow Answer

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B

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B

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A

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