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.   The owner has limited financial liability.
B.   All of these.
C.   It is more difficult to attract outside funding sources because the business is linked to the sole owner.
D.   They are difficult to dissolve.
Question #2
A market in which a homogenous product is sold is
A.   Monopolistic competition
B.   Oligopoly
C.   Monopoly
D.   Perfect competition
Question #3
The market called monopolistic competition is
A.   A market that produces a differentiated products
B.   A market in which firms a price takers
C.   A market dominated by a large firm
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.   Cooperative
B.   Spontaneous order
C.   Partnership
D.   Hierarchy
Question #6
Sole proprietorships and partnerships have tax advantages over corporations.
A.   False
B.   True
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.   False
B.   True
Question #9
Collusion is the cooperating of firms to increase profits by increasing prices and dividing markets.
A.   True
B.   False
Question #10
Not-for-profit firms are typically organized as proprietorships.
A.   False
B.   True
Question #11
A cartel is a group of producers that act as one firm.
A.   True
B.   False
Question #12
The advantages of a corporation include
A.   The owners benefit from limited liability.
B.   It is a legal entity that cannot be separated from its owners.
C.   It is relatively easy to dissolve a corporation.
D.   There are limits to how many different people can own a part of the corporation.
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.   True
B.   False
Question #15
The advantage of a partnership over a sole proprietorship is
A.   They are voluntary.
B.   They have tax advantages over proprietorships.
C.   The owners have limited liability.
D.   They allow owners to pool their skills to create a stronger business.
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.   Continue to produce because price is greater than average total cost
B.   Continue to produce, because price is greater than average variable cost
C.   Shut down, because Average total cost is greater than price
D.   Shut down, because of a loss of $5,000
Question #18
If the marginal revenue is below average variable cost, the firms should
A.   Shut down
B.   Increase production
C.   Continue to operate
D.   Increase the price
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.   Partnership
C.   Spontaneous order
D.   Cooperative
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.   True
B.   False
Question #22
The oligopoly market is comprised of
A.   A few larger firms
B.   Many small firms
C.   Companies selling services only
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.   $600
B.   $625
C.   $480
D.   $590
Question #24
Cartels do all of the following, except
A.   collaborate as a group of firms that limit output
B.   collaborate as a group of firms that jointly maximize profits
C.   collaborate as a group of firms that act as one
D.   collaborate as a group of firms that act without collusion
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.   Continue to operate
B.   Shut down
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 Average total cost is greater than price
B.   Continue to produce because price is greater than average total cost
C.   Continue to produce, because price is greater than average variable cost
D.   Shut down, because of a loss of $5,000
Question #28
Which of the following is a drawback of sole proprietorship?
A.   All of these.
B.   The owner has limited financial liability.
C.   It is more difficult to attract outside funding sources because the business is linked to the sole owner.
D.   They are difficult to dissolve.
Question #29
Cartel have problems enforcing output quotas on the members.
A.   False
B.   True

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