1. Firms exist for all but which one of the following reasons?
To reduce transactions costs
To produce things
To organize teams
To monitor shirking
To reduce the costs of buying


Question 2. Nonprofit firms, both private and governmental, may differ in behavior from profit-seeking private firms because
A) there is no residual claimant.
B) the demand for the products is inherently different.
C) government managers seek more capital-intensive means of production.
D) government firms are more difficult to manage.
E) private firms do not compete with government firms.


Question 3. The long-run decision is to select
the desired long-run AC curve.
the desired short-run AC curve.
the desired long-run MC curve.
the desired quantity of labor to go with fixed capital.
the plant size to go with the fixed quantity of labor.


Question 4. A firm exists to :
make money.
organize information.
make resources.
transform inputs into marketable outputs.
transform products into commodities.


Question 5. Last spring, Coil Spring Co. reported that average fixed costs had increased, but average variable costs were unchanged. This indicates that :
A) marginal costs are less than average variable cost but greater than average cost.
B) fixed costs have increased.
C) output is declining.
D) marginal costs have increased.


Question 6. In the short run, :
all inputs are variable.
some inputs are variable and some are fixed.
all inputs are fixed.
the time period cannot exceed one year.


Question 7. Which of the following is most likely to be an implicit cost of production?
Wages paid to skilled workers
Payments for inputs purchased from other companies
Interest paid on a loan
Rental income from real property
Rental income not received from use of a self-owned piece of land


Question 8. Ralph's Travel Agency had accounting profits of $50,000 and implicit costs of $30,000. What were economic profits?
$50,000
$30,000
$20,000
The amount cannot be determined from the information given.


Question 9. An example of a horizontally integrated firm is one that :
owns several plants, each handling a different stage of production.
produces a variety of goods and sells them in widely disparate markets.
owns several plants, each manufacturing the same product.
owns several plants in the same state.
uses highly automated assembly line techniques.


Question 10. Because of diminishing marginal product in the short run, a tripling of the total product (assuming input prices are constant) requires :
a tripling of marginal cost.
a tripling of total cost.
less than a tripling of total variable cost.
increased average fixed cost.
more than a tripling of total variable cost.