Econ 001 - Principles of Economics » Fall 2022 » Test 3 Ch 8-11

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Question #1
Which of the following is a drawback of sole proprietorship?
A.   All of these.
B.   They are difficult to dissolve.
C.   It is more difficult to attract outside funding sources because the business is linked to the sole owner.
D.   The owner has limited financial liability.
Question #2
A market in which a homogenous product is sold is
A.   Monopolistic competition
B.   Oligopoly
C.   Perfect competition
D.   Monopoly
Question #3
The market called monopolistic competition is
A.   A market dominated by a large firm
B.   A market in which firms a price takers
C.   A market that produces a differentiated products
D.   A market that produces homogeneous product
Question #4
Hierarchy is the means of coordination in which independent agents adjust their actions in response to information and incentives from their immediate environment.
A.   False
B.   True
Question #5
The means of coordinating economic activity in which individuals are guided by instructions from a central authority is known as
A.   Partnership
B.   Hierarchy
C.   Cooperative
D.   Spontaneous order
Question #6
Sole proprietorships and partnerships have tax advantages over corporations.
A.   True
B.   False
Question #7
The monopolistic competitive firm will produce
A.   At the point where MR=MC
B.   At the point where MR=AVC
C.   At the point where AFC=MC
D.   At the point where MC=P
Question #8
Cartels in the United States are illegal under antitrust laws, legal in other countries.
A.   True
B.   False
Question #9
Collusion is the cooperating of firms to increase profits by increasing prices and dividing markets.
A.   False
B.   True
Question #10
Not-for-profit firms are typically organized as proprietorships.
A.   True
B.   False
Question #11
A cartel is a group of producers that act as one firm.
A.   False
B.   True
Question #12
The advantages of a corporation include
A.   There are limits to how many different people can own a part of the corporation.
B.   The owners benefit from limited liability.
C.   It is relatively easy to dissolve a corporation.
D.   It is a legal entity that cannot be separated from its owners.
Question #13
Markets coordinate economic activity through spontaneous order.
A.   False
B.   True
Question #14
Cheating among members of the cartel is a major problem.
A.   False
B.   True
Question #15
The advantage of a partnership over a sole proprietorship is
A.   They are voluntary.
B.   The owners have limited liability.
C.   They allow owners to pool their skills to create a stronger business.
D.   They have tax advantages over proprietorships.
Question #16
Patents and copyrights are legal barriers to entry.
A.   False
B.   True
Question #17
Assume the following: sales price is $9, output is 5,000 units, average total cost is $15, and average variable cost is $7.50. What should the firm do and why?
A.   Shut down, because Average total cost is greater than price
B.   Continue to produce, because price is greater than average variable cost
C.   Shut down, because of a loss of $5,000
D.   Continue to produce because price is greater than average total cost
Question #18
If the marginal revenue is below average variable cost, the firms should
A.   Shut down
B.   Continue to operate
C.   Increase the price
D.   Increase production
Question #19
The majority of firms in the U.S. are corporations.
A.   True
B.   False
Question #20
An attempt by one party to seek an advantage at the expense of another is known as
A.   Opportunism
B.   Cooperative
C.   Spontaneous order
D.   Partnership
Question #21
A partnership is a firm that is owned by two or more people who operate as a business under a voluntary legal agreement.
A.   False
B.   True
Question #22
The oligopoly market is comprised of
A.   Many small firms
B.   Companies selling services only
C.   A few larger firms
D.   One firm
Question #23
A firm, in a perfectly competitive market, produces and sells child car seats. The sales price is $600, the fixed cost are $3,000 and the variable cost are $300 per unit. What is the marginal revenue for the 10th seat sold?
A.   $590
B.   $625
C.   $600
D.   $480
Question #24
Cartels do all of the following, except
A.   collaborate as a group of firms that act as one
B.   collaborate as a group of firms that limit output
C.   collaborate as a group of firms that act without collusion
D.   collaborate as a group of firms that jointly maximize profits
Question #25
Cartel have problems enforcing output quotas on the members.
A.   True
B.   False
Question #26
If the marginal revenue is below average variable cost, the firms should
A.   Shut down
B.   Continue to operate
C.   Increase the price
D.   Increase production
Question #27
Assume the following: sales price is $9, output is 5,000 units, average total cost is $15, and average variable cost is $7.50. What should the firm do and why?
A.   Shut down, because of a loss of $5,000
B.   Continue to produce, because price is greater than average variable cost
C.   Shut down, because Average total cost is greater than price
D.   Continue to produce because price is greater than average total cost
Question #28
Which of the following is a drawback of sole proprietorship?
A.   All of these.
B.   It is more difficult to attract outside funding sources because the business is linked to the sole owner.
C.   They are difficult to dissolve.
D.   The owner has limited financial liability.
Question #29
Cartel have problems enforcing output quotas on the members.
A.   False
B.   True

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