The disadvantage of vertical integration is that:
A. long-term contracts may be inflexible.
B. the principal-agent problem causes shirking.
C. firms no longer specialize in what they do best.
D. relationship-specific exchange may cause hold-up.
Answer: C
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Before it became illegal, cigarette manufacturers once relied heavily on TV advertising. According to the textbook, when the government banned TV advertising, the cigarette manufacturers:
A. were made worse off because the ban significantly reduced cigarette sales. B. thought their First Amendment rights were being violated. C. supported the ban due to their concern over health effects of smoking. D. benefited because the decision about whether to advertise on TV was a prisoner's dilemma.
How can we determine separately the cost of producing ham hocks from the cost of producing bacon?
A) By separately estimating the labor time it takes to butcher the hocks and the bacon B) By separately calculating the weight of the hocks and the bacon as percentages of total useable meat C) By consulting the average industry costs of ham hocks and bacon D) There is no way to determine the specific costs of joint products.
A virtuous cycle refers to the development of new products that follows when a monopoly earns economic profits
Indicate whether the statement is true or false
Refer to Figure 24-2. Ceteris paribus, an increase in workers and firms adjusting to having previously underestimated the price level would be represented by a movement from
A) SRAS1 to SRAS2. B) SRAS2 to SRAS1. C) point A to point B. D) point B to point A.