ECO MCQ Test 2 - 2015: Market Structures, Incentives, and Profit Maximization - Solved Assignments | Economics

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ECO MCQ TEST 2 2015Report this Question as Inappropriate1. Which of the following forms of payment is not an incentive plan?A. Commission plans for salesmanB. Flat salary for a plant managerC. Bounses for managers that increase as profits increaseD. None of the above2. When relationship-specific exchange occurs in complex contractural environments, the bestway to purchase inputs is through:A. Spot marketsB. Vertical integrationC. Short-term agency agreementsD. Long-term contracts3. Suppose compensation is given by W = 512,000 + 217X(Profits)+ 10.08S, where W = totalcompensation of the CEO, X = company profits (in millions) = $200, and S = Sales (in millions)= $400. How much will this CEO be compensated?A. $812,431B. $43,400C. $555,400D. $559,4324.Long-term contracts are not efficient if:A. A firm engages in relationship-specific exchangeB. Specialized investments are unimportantC. The contractural environment is simpleD. A and C, only5. The solutions to the principal-agent problem ensures that the firm is operatingA. On the production functionB. Above the production functionC. Below the production functionD. Above the isoquant curve6. Spot exchange typically involves

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A. No transaction costsB. Some transaction costsC. Extremely high transaction costsD. Long-term contracts7. Given that the income of franchise restaurant managers is directly tied to profits and theincome of the manager of the company owned restaurant is paid a flat fee, we might expectprofits to beA. Higher in company-owned restaurantsB. Lower in company-owned restaurantsC. Equal in both types of restaurantsD. None of the above8. Which of the following is not a benefit associated with producing inputs within a firm?A. Reductions in transaction costsB. Reductions in opportunismC. Gains of specializingD. Mitigation of hold-up problems9. A firm=s average cost is $20 and it charges a price of $20. The Lerner index for this firm is:A. .20B. .50C. .33D. Insufficientinformation10. The concentration and Herfindahl indices computed by the US Bureau of Census must beinterpreted with caution because:A. They overstate the actual level of concentration in markets served by foreign firms.B. They undersate the degree of concentration in local markets, such as the gas market.C. All of the above.D. 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 $1million, respectively. There are 4-firms inindustry B with equal sales of $2.5 million for each firm. The firm concentration ratio forindustry A is:

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