ECO550 Midterm P1 - Question 1 4 out of 4 points The...

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Question 1 4 out of 4 points The flat-screen plasma TVs are selling extremely well. The originators of this technology are earning higher profits. What theory of profit best reflects the performance of the plasma screen makers? Selected Answer: innovation theory of profit Correct Answer: innovation theory of profit Question 2 4 out of 4 points The Saturn Corporation (once a division of GM) was permanently closed in 2009. What went wrong with Saturn? Selected Answer: Saturn sold cars below the prices of Honda or Toyota, earning a low 3% rate of return. Correct Answer: Saturn sold cars below the prices of Honda or Toyota, earning a low 3% rate of return. Question 3 4 out of 4 points The primary objective of a for-profit firm is to ___________. Selected Answer: maximize shareholder value Correct Answer:
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maximize shareholder value Question 4 4 out of 4 points Recently, the American Medical Association changed its recommendations on the frequency of pap- smear exams for women. The new frequency recommendation was designed to address the family histories of the patients. The optimal frequency should be where the marginal benefit of an additional pap-test: Selected Answer: equals the marginal cost of the test Correct Answer: equals the marginal cost of the test Question 5 4 out of 4 points Shirking of one’s duties is often encountered in team production settings because Selected Answer: teammates face a dilemma posed by a dominant strategy to shirk Correct Answer: teammates face a dilemma posed by a dominant strategy to shirk Question 6 4 out of 4 points To reduce Agency Problems, executive compensation should be designed to: Selected Answer:
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create incentives so that managers act like owners of the firm.
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