Manageria Economics Chapter 01.docVIP

GWMBA Short Quiz-- Chapter 1 1.?Economic profit?A.?Is a theoretical measure of a firms performance and has little value in real world decision making.B.?Can be calculated by subtracting implicit costs of using owner-supplied resources from the firms total revenue.C.?Is negative when costs exceed revenues.D.?Is generally larger than accounting profit. ? 2.?Consider a firm that employs some resources that are owned by the firm. When accounting profit is zero, economic profit?A.?Must also equal zero.B.?Is sure to be positive.C.?Must be negative and shareholder wealth is reduced.D.?Cannot be computed accurately, but the firm is breaking even nonetheless. ? 3.?Suppose Marv, the owner-manager of Marvs Hot Dogs, earned $72,000 in revenue last year. Marvs explicit costs of operation totaled $36,000. Marv has a Bachelor of Science degree in mechanical engineering and could be earning $30,000 annually as mechanical engineer.?A.?Marvs implicit cost of using owner-supplied resources is $36,000.B.?Marvs economic profit is $36,000.C.?Marvs implicit cost of using owner-supplied resources is $30,000.D.?Marvs economic profit is $6,000.E.?Both c and d. ? 4.?The principal-agent problem arises when?A.?The principal and the agent have different objectives.B.?The principal cannot enforce the contract with the agent or finds it too costly to monitor the agent.C.?The principal cannot decide whether the firm should seek to maximize the expected future profits of the firm or maximize the price for which the firm can be sold.D.?Both a and b.E.?Both a and c. ? 5.?Moral hazard?A.?Occurs when managers pursue maximization of profit without regard to the interests of society in general.B.?Exists when either party to a contract has an incentive to cancel the contract.C.?Occurs only rarely in modern corporations.D.?Is the cause of principle-agent problems. ? 6.?When a firm earns less than a normal profit,?A.?The revenues generated cannot pay all explicit costs and the opportun