ECO MCQ Test 2 - 2015: Market Structures, Incentives, and Profit Maximization

A fully solved multiple-choice test covering key economic concepts, including market structures and profit strategies.

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ECO MCQ TEST 2 2015Report this Question as Inappropriate1. Which of the following forms of payment is not an incentive plan?A. Commission plans for salesmanB. Flat salary for a plant managerC. Bounses for managers that increase as profits increaseD. None of the above2. When relationship-specific exchange occurs in complex contractural environments, the bestway to purchase inputs is through:A. Spot marketsB. Vertical integrationC. Short-term agency agreementsD. Long-term contracts3. Suppose compensation is given by W = 512,000 + 217X(Profits)+ 10.08S, where W = totalcompensation of the CEO, X = company profits (in millions) = $200, and S = Sales (in millions)= $400. How much will this CEO be compensated?A. $812,431B. $43,400C. $555,400D. $559,4324.Long-term contracts are not efficient if:A. A firm engages in relationship-specific exchangeB. Specialized investments are unimportantC. The contractural environment is simpleD. A and C, only5. The solutions to the principal-agent problem ensures that the firm is operatingA. On the production functionB. Above the production functionC. Below the production functionD. Above the isoquant curve6. Spot exchange typically involves

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