The principal agent and economic disincentive

To find economic profit from accounting profit, it is necessary to

Select one:

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A. subtract dividends.

B. add depreciation expense.

C. subtract the opportunity cost of capital.

D. add retained earnings.

 

 

Question 2

The present value of expected future profits will _____ if the discount rate increases and will_____ if expected future profits increase.

Select one:

A. increase; not change

B. increase; increase

C. not change; decrease

D. decrease; increase

E. decrease; decrease

 

Question 3

Managerial economics draws upon all of the following EXCEPT:

Select one:

A. finance

B. microeconomics

C. accounting

D. marketing

E. sociology

 

Question 4

Managers may make decisions that are not consistent with the goals of stockholders. This is referred to as the _____ problem.

Select one:

A. principal-agent

B. economic disincentive

C. incentive-compromise

D. efficiency-inefficiency

E. equilibrium

 

 

 

 

 

 

 

Question 5

Marginal revenue can be defined as the:

Select one:

A. percent increase in total revenue resulting from a one percent increase in output

B. increase in total revenue resulting from a one unit increase in output

C. total revenue divided by output

D. average revenue multiplied by output

E. average revenue multiplied by output divided by 4

 

 

Question 6

The cross-price elasticity of demand is defined as the:

Select one:

A. percentage change in the quantity demanded of a good divided by the percentage change in the good’s price

B. percentage change in the quantity demanded of a good divided by the percentage change in a different good’s price

C. percentage change in a good’s price divided by the percentage change in a different good’s price

D. change in the quantity demanded of a good divided by the change in its price

E. change in the quantity demanded of a good divided by the change in income

 

 

Question 7

Consumer surplus is defined as:

Select one:

A. the quantities of a good or service that bring equal utility to the consumer

B. the quantity of a good or service that is utility maximizing for the consumer

C. the difference between what a consumer is willing to pay and what he or she actually pays for a good or service

D. the difference between the market price and the marginal cost of producing a good or service

E. none of the above

 

 

 

 

 

 

Question 8

The demand for a product is more inelastic the:

Select one:

A. longer the time period covered

B. lower the average income of consumers

C. better the available substitutes

D. poorer the available substitutes

 

 

Question 9

If one day it was discovered that lime juice caused cancer, which of the following would likely result?

Select one:

A. The supply curve of lime juice would shift to the right.

B. The demand curve for lime juice would shift to the right.

C. The demand curve for lime juice would shift to the left.

D. The supply curve of lime juice would shift to the left.

 

 

Question 10

The demand curve’s usual slope implies that consumers:

Select one:

A. buy more as the price of a good is increased

B. buy more as a good is advertised more

C. buy more at higher average incomes

D. buy less as the price of a good is increased

E. have tastes that sometimes change

 

 

 

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