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Firms may suffer from X-inefficiency because of organizational slack. All of the following would lead to organizational slack except which one?

A.

Uncertainty about future demand

B.

Managers become more cautious

C.

A complex organizational structure in the firm

D.

The number of rival firms increases

Which of the following is NOT a characteristic of a pure public good?

A.

It is not possible to exclude non-payers from enjoying the good

B.

It is always provided by the state or public sector

C.

It does not get used up by more people enjoying it

D.

It has no price

Which of the following statements about public goods is correct?

A.

Public goods are defined as those goods provided by the state

B.

Public goods are examples of free goods

C.

Public goods are characterized by the free-rider problem

D.

The problem of scarcity does not affect the provision of public goods

i-Songs is about to launch a service that sells downloaded music and video files. Downloads have MC = 0 . Which ONE of the following would maximize i-Songs' profits?

A.

Sell as many downloads as possible

B.

Increase download sales to the point where price elasticity of demand = 1

C.

Produce add- ons that have a marginal cost in order to charge a price

D.

Do not produce in order to avoid losses

Total economic welfare derived from an activity will be maximized if the activity is undertaken up to the point at which

A.

Marginal private benefit exceeds marginal private cost

B.

Marginal social benefit equals marginal social cost

C.

Marginal social benefit equals marginal private benefit

D.

Marginal private benefit equals marginal private cost

Which of the following statements most accurately describes the role of an agent as defined in principal-agent theory?

A.

An employee of the organization

B.

An owner of the organization

C.

One who is paid by the owners of the organization

D.

One who is responsible for ensuring the organization pursues the interests of its owners

Which ONE of the following is NOT an Internal stakeholder?

A.

Director

B.

Manager

C.

Worker

D.

Investor

All of the following will tend to increase the number of firms in any one industry except which one?

A.

Decreasing returns to scale

B.

High transport costs

C.

Low barriers to entry

D.

Product differentiation

A shift in the supply curve for a good will have the biggest effect on the market price when the demand curve for the good

A.

is highly price elastic

B.

is highly price inelastic

C.

has unit price elasticity

D.

is perfectly price elastic

The demand for salt is generally regarded as price inelastic. Which ONE of the following factors would not contribute to making demand for salt price inelastic?

A.

There are few close substitutes for salt

B.

Salt is a small proportion of household expenditure

C.

Salt is a necessity

D.

Supply rises quickly if demand rises because salt is easy to make