question 1. 1.

1. A firm that owns a wheat farm, a grain elevator, a flour mill, a commercial bakery, and a grocery store chain is (Points : 1)

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horizontally integrated.

vertically integrated.

a monopoly.

an imperfect competitor.

a conglomerate.

Question 2. 2. The short-run marginal cost curve falls and then rises because of (Points : 1)

fixed costs.

diseconomies of scale.

diseconomies and economies of scale.

the principle of diminishing returns.

Question 3. 3. Firms exist for all but which one of the following reasons? (Points : 1)

To reduce transactions costs

To produce things

To organize teams

To monitor shirking

To reduce the costs of buying

Question 4. 4. A firm exists to (Points : 1)

make money.

organize information.

make resources.

transform inputs into marketable outputs.

transform products into commodities.

Question 5. 5.The long-run decision is to select (Points : 1)

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.

6. Nonprofit firms, both private and governmental, may differ in behavior from profit-seeking private firms because (Points : 1)

there is no residual claimant.

the demand for the products is inherently different.

government managers seek more capital-intensive means of production.

government firms are more difficult to manage.

private firms do not compete with government firms.

Question 7. 7. Ralph’s Travel Agency had accounting profits of $50,000 and implicit costs of $30,000. What were economic profits? (Points : 1)




The amount cannot be determined from the information given.

Question 8. 8. A vertically integrated firm might own (Points : 1)

a ski factory, an Alpine resort hotel, and an emergency medical center.

several plants that manufacture different qualities of skis.

a ski factory, a cigar manufacturer, and a carpet factory.

several plants in different countries that manufacture skis.



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Question 9. 9. The technical relationship between inputs and outputs, which is needed to understand the difference between the short run and the long run, is called (Points : 1)

technical efficiency.

economic efficiency.

a production function.

a time and motion study.

supply and demand.

Question 10. 10. Last spring, Coil Spring Co. reported that average fixed costs had increased, but average variable costs were unchanged. This indicates that (Points : 1)

marginal costs are less than average variable cost but greater than average cost.

fixed costs have increased.

output is declining.


marginal costs have increased.