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Morehead State University ECON 661 Quiz 1 SP 2015

Question # 00062814
Subject: Economics
Due on: 04/23/2015
Posted On: 04/23/2015 09:21 AM

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Test Quiz 1

• Question 1

1 out of 1 points

Owners of a firm want the managers to make business decisions that will

Answers: maximize the value of the firm.

maximize expected profit in each period of operation.

maximize the market share of the firm.

both a and b are correct when revenue and cost conditions in one time period are independent of revenues and costs in future time periods.

• Question 2

1 out of 1 points

Managers' pursuit of which of the following objectives would NOT lead to a principal-agent problem in a corporation?

Answers: The corporation's growth

Increased market share for the corporation

The maximum possible profit for the corporation

A great "golden parachute" or retirement package

• Question 3

1 out of 1 points

The principal-agent problem of ownership vs. control of the corporation arises when owners and managers

Answers: pursue objectives that differ from those their customers wish them to pursue.

pursue objectives that differ from those their workers wish them to pursue.

pursue objectives that differ from those the government wishes them to pursue.

pursue different objectives.

• Question 4

1 out of 1 points

Moral hazard is the

Answers: outcome of a Prisoner's Dilemma.

result of market signaling.

risk associated with a Dutch auction.

risk that one party to a contract may alter its post-contract behavior to the detriment of another party.

• Question 5

1 out of 1 points

The amount of money a firm pays to lease a building it uses for office space is called:

Answers: the full opportunity cost of production.

an explicit cost.

a real cost of production.

an implicit cost.

• Question 6

1 out of 1 points

Which of the following is an example of an "implicit cost"?

Answers:

Interest that could have been earned on retained earnings used by the firm to finance expansion.

The payment of rent by the firm for the building in which it is housed.

The interest payment made by the firm for funds borrowed from a bank.

The payment of wages by the firm.

• Question 7

1 out of 1 points

From the manager's perspective:

Answers:

it is important to treat implicit costs as part of the total cost in order to make sound strategic decisions.

implicit costs are simply a theoretical construct and should be ignored in the decision-making process.

only explicit costs matter because accounting profit is based on explicit costs.

there is no difference between implicit and explicit costs. As such, treating implicit costs as explicit would result in double counting and an overstatement of total costs.

• Question 8

1 out of 1 points

Which of the following is true?

Answers:

Profit as calculated by accountants and economic profit are not necessarily equal.

Profit as calculated by accountants is always smaller than economic profit.

Economic profit ignores implicit costs.

The Internal Revenue Service taxes the firm?s economic profit but not its normal profit.

• Question 9

1 out of 1 points

April quit her job as an accountant at Ernst and Young, where she was paid $45,000 per year.

She started her own landscaping business. She rents machines and tools for $50,000 and pays

$10,000 as wages to her help. These are her only costs. April earned total revenue of $100,000.

Answers: Her accountant calculates her profit as $40,000.

She has an economic loss.

Her explicit cost is $105,000.

Both answers A and B are correct.

• Question 10

1 out of 1 points

Economists define a market to be competitive when the firms

Answers: spend large amounts of money on advertising to lure customers away from the competition.

watch each other's behavior closely.

are price takers.

All of the above.

• Question 11

1 out of 1 points

In which market model would there be a unique product for which there are no close substitutes?

Answers: Monopolistic competition

Pure competition

Pure monopoly

Oligopoly

• Question 12

1 out of 1 points

The steel and automobile industries would be examples of which market model?

Answers: Monopolistic competition

Pure competition

Pure monopoly

Oligopoly


Tags quiz 0 econ university state morehead question points profit costs cost firm implicit explicit pursue market economic competition objectives answers corporation managers pure revenue differ following payment total production accountants risk result calculated firms behavior earned

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Morehead State University ECON 661 Quiz 1 SP 2015 with Correct Answers

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Preview: and xxxxxxxx profit xxx not necessarily xxxxx Answers: Profit as xxxxxxxxxx by xxxxxxxxxxx xxx economic xxxxxx are not xxxxxxxxxxx equal Profit xxxx calculated xx xxxxxxxxxxx is xxxxxx smaller than xxxxxxxx profit Economic xxxxxx ignores xxxxxxxx xxxxx The xxxxxxxx Revenue Service xxxxx the firm?s xxxxxxxx profit xxx xxx its xxxxxx profit Question xx out of x pointsApril xxxx xxx job xx an accountant xx Ernst and xxxxxx where xxx xxx paid xxxxxxx per year xxx started her xxx landscaping xxxxxxxx xxx rents xxxxxxxx and tools xxx $50,000 and xxxxxxxxxxx as xxxxx xx her xxxx These are xxx only costs xxxxx earned xxxxx xxxxxxx of xxxxxxxx Selected Answer: Her xxxxxxxxxx calculates her xxxxxx as xxxxxxx xxxxxxxxxxx accountant xxxxxxxxxx her profit xx $40,000 She xxx an xxxxxxxx xxxx Her xxxxxxxx cost is xxxxxxxx  Both answers x and x xxx correct xxxxxxxx 100 out xx 1 pointsEconomists xxxxxx a xxxxxx xx be xxxxxxxxxxx when the.....
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