A division of a firm is
a. a logical sub-organization of the firm
b. a level within the firm in which a large degree of autonomy is vested
c. a level of hierarchy within a firm that defines the scope of a manager
d. all of the above
QUESTION 2Insurance works best in situations where there is
a. a high probability of a small loss.
b. a low probability of a small loss.
c. a high probability of a large loss.
d. a low probability of a large loss.
e. the level of probability and the size of the loss are irrelevant.
QUESTION 3The slope of the production possibility frontier shows
a. how inputs must be changed to keep them fully employed.
b. the technically efficient combinations of the two goods.
c. how demanders are willing to trade one good for another.
d. the opportunity cost of one good in terms of the other.
QUESTION 4In a franchising relationship
a. the franchisor is the local businessman or businesswoman
b. the trademark holder contracting with local operations is the franchisor
c. the franchisor is the trademark holder contracting with local operations
d. the trademark holder contracting with local operations is the franchisee
QUESTION 5The goal of health insurance is to
a. redistribute income from the sick to the healthy.
b. spread risk over a large group of people.
c. equally distribute the probability of loss over a large number of people.
d. collect sufficient premiums to cover all possible losses.
e. equalize the availability of medical care across population groups.
QUESTION 6If society is producing a combination of goods on its production possibilities frontier
a. it must be employing all available resources.
b. it must be growing.
c. it is using all the available natural resources but may not be using all available labor resources.
d. Both a and b.
QUESTION 7In a franchising relationship
a. the franchisor is the principal
b. the agent is the franchisor
c. the franchisor is the agent
d. the principal is the franchisee
QUESTION 8Insurers try to minimize moral hazard by
a. only selling policies to individuals with high ethical standards.
b. requiring advance payments of premiums.
c. charging higher premiums to individuals than to groups.
d. charging deductibles and coinsurance.
e. refusing to sell insurance to individuals with chronic illnesses.
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