Chapter 1: Basic Microeconomic Principles
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Q1) Which of the following best describes marginal cost?
A)The per-unit-of-output cost for a product
B)The incremental cost of producing one more unit of output.
C)A cost invariant to the firm's output
D)The sum of all costs associate with the production of a product
E)The cost of fixed items such as general and administrative expenses
Answer: B
Q2) Which characteristic does not describe a perfectly competitive market?
A)Firms produce identical or nearly identical products
B)Market price is beyond the control of any individual firm
C)A firm's demand curve is perfectly horizontal at the market price
D)Industry-level price elasticity is finite
E)Firm-level price elasticity of demand facing another perfect competitor is infinite
Answer: D
Q3) Suppose a firm's plant produces Q units in any given year.The plant itself operates with annualized costs of $10M and other annual fixed expenses totaling $3M.In addition,the firm's variable costs depend on Q and are given by the formula 5Q²+3Q.What is the formula for the firm's Average Variable Costs?
Answer: AVC(Q)= 5Q+3
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Chapter 4: The Power of Principles - an Historical Perspective
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Q1) What significant transportation event brought about the first significant growth of the Great Lakes region?
A)Harnessing of the steam engine
B)Invention of the screw propeller
C)Opening of the Erie Canal
D)Integration of railway system
E)Invention of the railway system
Q2) What was a key contribution to the dominance of the family-run small business in 1840?
A)Factories
B)Infrastructure
C)Raw Materials
D)Management
E)Laws
Q3) What is the gaizhi process?
A)Valuing assets according to their earnings
B)A state-owned enterprise and private enterprise entering a joint venture
C)An increase of profitability prior to sale
D)Acquisition of large firms by private organizations
E)Restructuring whereby small firms are leased or sold
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Chapter 5: The Vertical Boundaries of the Firm
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Q1) Suppose you manufacture 10 million hard drives per year specifically for Dell laptop computers.Suppose your average variable cost C=$20/unit,annualized cost of investment to build a hard drive factory I=$30 million,and the market price (bailout market price in the event Dell does not buy)Pm=$22/unit.If Dell agrees to purchase the 10 million hard drives at a price P*=$25/unit and the deal subsequently falls apart,what is your company's "quasi-rent"?
Q2) What term describes features that need to relate to each other in a precise fashion otherwise they lose a significant portion of their economic value?
A)Design attributes
B)Critical components
C)Contract factors
D)Coordination factors
E)Relationship attributes
Q3) Suppose you manufacture 10 million hard drives per year specifically for Dell laptop computers.Suppose your average variable cost C=$20/unit and annualized cost of investment to build a hard drive factory I=$30 million.If Dell agrees to purchase the 10 million hard drives at a price P*=$25/unit,what is your company's "rent?
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Chapter 7: Diversificationpart Threemarket and Competitive Analysis
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Q1) Which of the following benefits of diversification explains the idea that a firm with many business lines can reduce swings in value because it receives only a small percentage of its revenue from any one of those business lines?
A)Use of internal capital markets
B)Economies of scale and scope
C)Economizing on transaction costs
D)Diversifying shareholder portfolios
E)Identifying undervalued firms
Q2) Which of the following benefits of diversification explains the idea that corporate diversification can provide situations where an acquiring firm determines the stock price for firm they intend to acquire is too low?
A)Use of internal capital markets
B)Economies of scale and scope
C)Economizing on transaction costs
D)Diversifying shareholder portfolios
E)Identifying undervalued firms
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Chapter 14: Sustaining Competitive Advantage
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Q1) Which of the following is not an isolating mechanism that falls under the heading of early-mover advantage?
A)Learning curve
B)Reputation and buyer uncertainty
C)Buyer switching costs
D)Network effects
E)Superior access to inputs or customers
Q2) What term refers to the costs incurred by buyers when they change to a different supplier?
A)Switching costs
B)Buyer costs
C)Reputation costs
D)Learning costs
E)Customer costs
Q3) Which of the following is not a Legal Restriction?
A)Patent
B)Copyright
C)Trademark
D)Intellectual property
E)Operating rights
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