Which are social costs associated with the inability of shareholders to observe an executive's effort? (You may choose more than one.)
a. Excessive insurance offered
b. The executive has to be exposed to risk to induce effort, and risk is costly.
c. The executive ends up exerting less than first-best effort.
d. Excessive effort induced.
b, c
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Outsourcing allows a company to take advantage of the ________ of other countries, and in doing so it can produce its products at a lower cost
A) trade imbalances B) comparative advantages C) market failures D) diminishing returns
We shouldn't be concerned about U.S. currency held abroad because
A) the currency will never return to the United States. B) foreigners use it to buy U.S. bonds. C) it represents an interest-free loan to the United States. D) foreigners can't spend it in their own countries.
The ________ elastic a firm's demand curve, the greater its ________
A) less; monopoly power B) less; output C) more; monopoly power D) more; costs
When revenue is less than total cost but more than variable cost it implies that:
a. the firm is enjoying positive economic profits. b. the firm is earning normal profits. c. the firm can cover its variable cost and a part of its fixed costs. d. the firm is unable to cover its costs and should shut down. e. the firm is able to cover both its fixed and variable costs.