Instructions
This midterm exam consist of 25 multiple choice questions and covers the material in Chapters 1 through 4.
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?
Answer
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?
Answer
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
Economic profit is defined as the difference between revenue and ____.
Answer
Selected Answer: total economic cost
Correct Answer: total economic cost
Question 4
4 out of 4 points
The primary objective of a for-profit firm is to ___________.
Answer
Selected Answer: maximize shareholder value
Correct Answer: maximize shareholder value
Question 5
4 out of 4 points
Which of the following will increase (V0), the shareholder wealth maximization model of the firm: V0∙(shares outstanding) = Σ∞t=1 (π t ) / (1+ke)t + Real Option Value.
Answer
Selected Answer: Decrease the required rate of return (ke).
Correct Answer: Decrease the required rate of return (ke).
Question 6
0 out of 4 points
The moral hazard in team production arises from
Answer
Selected Answer: lack of proper assignment of individual tasks
Correct Answer: a conflict between tactically best interest and one’s