Chapter 2 MC.docx - 1 Which of the following does NOT...

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1. Which of the following does NOT affect the way in which the firm allocates its resources? Your Answer: All of the above will affect the firm's allocation of resources. CONGRATULATIONS! Productive technology, degree of supplier competition, and transactions costs are among the many factors which affect the firm's allocation of resources. Read the discussion on page 25 and learn more. 2. Which of the following is the most important characteristic of transactions costs? Your Answer: The inability to predict the future perfectly. Correct Answer: Asset specificity. Can the future of a market be predicted with any high degree of accuracy? Read the discussion on page 25 and try again. 3. Which of the following is NOT a method firms use to promote employee efficiency? Your Answer: Fixed salary. WAY TO GO! Fixed salaries act as a disincentive for employee efficiency. Read the discussion on page 26 and learn more. 4. Transactions costs of a good or service, being higher than internal provision: Your Answer: Result in the firm providing the good or service for itself. GOOD CALL! If transactions costs are greater than the cost of internal
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provision, the firm will produce the good or service for itself. Read the discussion on page 25 and learn more. 5. Which of the following is a venue for outsourcing in business? Your Answer: All of these are venues for outsourcing. CONGRATULATIONS! All of these are venues for outsourcing. Read the discussion on page 27 and learn more. 6. Which of the following would represent an appropriate course of action if a firm wished to maximize its market share? Your Answer: Reduce the selling price. WELL DONE! If the firm's goal is to maximize market share, it should reduce its price. Read the discussion on page 29 and learn more. 7. Which of the following will result in the firm maximizing its profits? Your Answer: Production of the quantity of output which equates the revenue generated with the costs incurred of the last unit produced. GIVE YOURSELF A PAT ON THE BACK! This is the "Produce quantity for which Marginal Cost equals Marginal Revenue" profit maximization condition. Read the discussion on page 29 and learn more. 8. Which of the following best describes the production period 'short run'?
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