A natural monopoly exists when
A. economies of scale occur.
B. the firm holds a patent.
C. there are governmental entry restrictions.
D. the firm owns all of the raw materials needed to produce the product.
Answer: A
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To reduce the principal-agent problem
A) boards-of-directors can tie the salaries of top management to the profitability of the firm. B) managers can inflate profits on financial statements. C) managers can take on more risk than they disclose to investors. D) managers can hide liabilities by not disclosing them on financial statements.
The industry most closely associated with perfect competition is
a. manufacturing. b. banking. c. mining. d. farming.
If you are willing to purchase a house for $500,00 . and you purchase the house for $500,00 . , this transaction will generate:
a. There is no surplus created b. $0 worth of seller surplus and unknown amount of buyer surplus c. $0 worth of buyer surplus and unknown amount of seller surplus d. Not information provided
Which of the following statements is not true?
a. Price elasticity of demand for basic foods is low. b. When price elasticity of demand is very high, we say there is brand loyalty. c. The availability and price of substitutes affect the elasticity of demand for a good or service. d. When goods have very low prices, the elasticity of demand is usually quite low. e. Elasticities increase as the price of the good increases.