1. Matching Definitions
Please match each terms with the definition
given below:
accounting
profit microeconomics
business
practices and tactics moral hazard
economic
profit opportunity cost
equity
capital owner-supplied resources
explicit
costs price-setting firm
globalization
of markets price-taking firm
implicit
costs principal-agent problem
industrial
organization risk premium
marginal
analysis strategic decisions
market
total economic cost
market
power transaction costs
market
structure value of a firm
market-supplied
resources
1.
___________________ Source of most of the advances over the past 30 years in
strategic
decision making.
2.
___________________ Resources owned by others and hired, rented, or leased
in
resource markets.
3.
___________________ Resources owned and used by a firm.
4.
___________________ Sum of opportunity costs of market-supplied resources
plus
opportunity costs of owner-supplied resources.
5.
___________________ Monetary opportunity costs of using market-supplied
resources.
6.
___________________ Nonmonetary opportunity costs of using owner-supplied
resources.
7.
___________________ Money provided to businesses by the owners.
8.
___________________ Amount that total revenue exceeds total economic cost.
9.
___________________ Decisions that attempt to alter the conditions of
competition
in order to increase long-run profits.
10.
___________________ Price for which a firm can be sold, or equivalently, the
present
value of the expected future profits of the firm.
11.
___________________ Amount added to the riskless discount rate to account for
uncertainty
associated with the expected future profits.
12.
___________________ Conflict arising when the objectives of the agent differ
from
those of the principal, and the principal has
difficulty
enforcing and monitoring the agent.
13.
___________________ Exists when either party to an agreement has an
incentive
not to abide to the agreement and one party
cannot
cost-effectively monitor the agreement or cannot
effectively
enforce the agreement.
14.
___________________ A firm that cannot set the price of the product it sells,
since
market forces determine the price.
15.
___________________ A firm that has the ability to raise the price of its
product
without
losing all of its sales.
16.
___________________ Routine business decisions based on marginal analysis.
17.
___________________ Any arrangement through which buyers and sellers
interact
to exchange products, services, resources for
production,
or in general, anything of value.
18.
___________________ Additional costs over and above the price paid that arise
in
the process of making transactions.
19.
___________________ Swiss army knife for explaining most business practices
and
tactics.
20.
___________________ Economic integration of markets located in nations
around
the world.
21.
___________________ What a firm’s owners give up to use resources to
produce
goods or services.
22.
___________________ Difference between total revenue and explicit costs.
23.
___________________ Set of characteristics that determines the economic
environment
in which a firm does business.
24.
___________________ Key to the kingdom of microeconomics.
25.
___________________ Ability to raise price without losing all sales.
2.
For each of the following managers,
decide whether the manager is likely to be a
price-setter
(possesses market power) or a price-taker (does not possess market
power).
a.
The loan officer at a bank decides what interest rate to charge on car loans
made
to Chicago-area buyers of new cars.
b.
The manager of FastCo Inc., a manufacturer of standardized fasteners, such
as
screws and machine bolts.
c.
The CEO of Bombardier, a manufacturer of a popular brand of jet skis.
d.
The owner-manager of a McDonald’s hamburger restaurant, which is the first
hamburger restaurant to open in a new
suburban neighborhood.
3.
For each of the firms below, identify the
market structure that best matches the
competitive
characteristics found in that firm’s market.
a.
Microsoft Corporation, in the market for business-application software, such
as
word processing, spreadsheet, and database.
b.
Becker Brothers Farms, a 1,000-acre wheat farm near Beaver City, Nebraska.
c.
Robo Wash, the only coin-operated car wash in Monroe, Louisiana.
d.
The Jumping Bean, a family-owned Mexican food restaurant in San Antonio,
Texas.
e.
Après Ski, one of only two restaurants licensed to operate at the base of the
main ski lift in Park City, Utah.
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