A drawback of separating ownership from control by creating a firm is:
A. synergies of team production.
B. the principal-agent problem.
C. the losses of specialization.
D. increased transaction costs.
Answer: B
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Suppose that a monopolist must choose between two points on its demand curve; it can sell 100 units for $3 each, or it can sell 160 units for $2 each. Which of the following is true?
a. The monopolist is facing an elastic demand. b. The monopolist is facing unit elastic demand. c. The monopolist is facing inelastic demand. d. The monopolist is facing perfectly elastic demand. e. The elasticity of demand cannot be determined with the information given.
The relationship that shows how much buyers of a product want to buy at each possible price, holding fixed all other factors is called:
A. a demand curve. B. elasticity of demand. C. demand function. D. an indifference curve.
John takes 10 minutes to iron a shirt and 20 minutes to type a paper. Harry takes 10 minutes to iron a shirt and 30 minutes to type a paper. Which of the following statements is correct?
a. Harry has a comparative advantage in ironing.
b. Harry has a comparative advantage in typing.
c. Harry has an absolute advantage in typing.
d. Harry has an absolute advantage in ironing.
e. Neither can gain from specialization and exchange.
Refer to Figure 21.3. The best estimate of where diminishing marginal returns begin is at an output level of
A. 10. B. 40. C. 20. D. 30.