ExtraThe problem of principle agent can be reduced if it is possible to pay the workera) weekly salaryb) a wage based on the number of units producedc) an hourly waged) out of retained earningsThe law of diminishing returns results ina) an eventually rising marginal product curveb) a total product curve that eventually increases at a decreasing ratec) an eventually failing marginal cost curved) a total product curve that rises indefinitely Which of the following is an example of the prinicipal/agent problem?a) A consumer buys a defective good because she does not know the quality of the goodb) A sports agent invests money for a client and the company he invests in goes busy so the athlete doesnt get back the principal on his investmentc) a worker shirks off while his boss is on vacationd) a company continues to produce despite losses because of fixed costs **17. The elasticity of demand:**A) is infinitely large for a perfectly inelastic demand curve. B) tends to be inelastic in high-price ranges and elastic in low-price ranges. C) tends to be elastic in high-price ranges and inelastic in low-price ranges. D) is the same at each price-quantity combination on a stable demand curve. **18. A perfectly inelastic demand curve:**A) has a price elasticity coefficient greater than unity. B) has a price elasticity coefficient of unity throughout. C) graphs as a perfectly vertical line. D) graphs as a perfectly horizontal line. **19. The elasticity of demand for a product is likely to be greater:**A) if the product is a necessity, rather than a luxury good. B) the greater the amount of time over which buyers adjust to a price change. C) the smaller the proportion of one's income spent on the product. D) the smaller the number of substitute products available. **20. Compared to coffee, we would expect the cross elasticity of demand for:**A) tea to be negative, but positive for cream. B) tea to be positive, but negative for cream. C) both tea and cream to be negative. D) both tea and cream to be positive. **21. Which of the following is a short-run adjustment?**A) A local bakery hires two additional bakers. B) Six new firms enter the plastics industry. C) The number of farms in the United States declines by 5 percent. D) BMW constructs a new assembly plant in South Carolina. **22. To economists the main difference between the short run and the long run is that:**A) the law of diminishing returns applies in the long run, but not in the short run. B) in the long run all resources are variable, while in the short run at least one resource is fixed. C) fixed costs are more important to decision making in the long run than they are in the short run. D) in the short run all resources are fixed, while in the long run all resources are variable. **Transcription of Educational Content:****Questions with Multiple Choice Answers:**23. If a firm decides to produce no output in the short run, its costs will be:- A) its marginal costs.- B) its fixed plus its variable costs.- C) its fixed costs.- D) zero. *(Correct Answer: C)*24. If average total cost is declining, then:- A) marginal cost must be greater than average total cost.- B) the average fixed cost curve must lie above the average variable cost curve.- C) marginal cost must be less than average total cost.- D) total cost must also be declining. *(Correct Answer: C)***Graph Explanation:**The graph below the question represents the Long-Run Average Total Cost (ATC) curve. It is U-shaped, illustrating economies and diseconomies of scale over different levels of output:- On the horizontal axis is "Output," with specific outputs labeled as Q1, Q2, and Q3.- The vertical axis represents "Unit Costs."- The section of the curve from 0 to Q1 shows declining costs, indicating economies of scale. - The flat section from Q1 to Q3 suggests constant returns to scale.- Beyond Q3, costs rise, indicating diseconomies of scale.25. Refer to the above diagram. Constant returns to scale:- A) are evident over the entire range of output.- B) occur over the 0Q1 range of output.- C) begin at output Q3.- D) occur only over the Q1Q3 range of output. *(Correct Answer: D)*26. Refer to the above diagram. Diseconomies of scale:- A) begin at output Q1.- B) occur over the Q1Q3 range of output.- C) begin at output Q3.- D) are in evidence at all output levels. *(Correct Answer: C)*27. A luxury good is a good for which of the following is true?- A) The price elasticity is 1.- B) The income elasticity is greater than 1.- C) The income elasticity is less than 0.- D) The price elasticity is greater than 1. *(Correct Answer: B)*28. "Consumer surplus" is:- A) the excess of what would be willingly paid over

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Answered: Extra The problem of principle agent…

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC