In the very short run:
a. new firms may enter an industry.
b. existing firms may change the quantity they are supplying.
c. price and quantity supplied are absolutely fixed.
d. quantity supplied is absolutely fixed.
QUESTION 2To accomplish its purpose a linear profit-sharing contract must
a. induce the employee to moonlight
b. communicate a code of conduct that will be monitored and enforced
c. meet either the participation or the incentive compatibility constraint
d. establish a separating equilibrium
e. not realign incentives
QUESTION 3Which firm is not dealing with adverse selection
a. a manufacturer requires a 90 day probationary period for new employees
b. a temporary clerical agency requires a typing test
c. a manufacturer contracts with suppliers regardless of ISO 900 . status
d. Smokers get the worse life insurance rates as non-smokers
QUESTION 4A change in the distribution of income that leaves total income constant will not shift the market demand curve for a product providing:
a. everyone has an income elasticity of demand of zero for the product.
b. everyone has the same income elasticity of demand for the product.
c. individuals have differing income elasticities for the product, but the average income elasticity for income gainers is equal to the average income elasticity for income losers.
d. any of the above conditions occur.
QUESTION 5Which of the following are not approaches to resolving the principal-agent problem?
a. ex ante incentive alignment
b. deferred stock options
c. ex post governance mechanism
d. straight salary contracts
e. monitoring by independent outside directors
QUESTION 6Which firm is not dealing with adverse selection
a. a manufacturer requires a 90 day probationary period for new employees
b. a temporary clerical agency hires without verifying typing skills
c. a manufacturer requires suppliers to be ISO 900 . certified
d. Smokers get the worse life insurance rates as non-smokers
QUESTION 7An increase in the price of good x will be accompanied by:
a. a shift in the market demand curve for good x.
b. a shift in the market demand curve for good y (a substitute for good x).
c. a movement along the market demand curve for good x.
d. both b and c.
QUESTION 8When retail bicycle dealers advertise and perform warranty repairs but do not deliver the personal selling message that Schwinn has designed as part of the marketing plan but cannot observe at less than prohibitive cost, the manufacturer has encountered a problem of ____.
a. reliance relationships
b. uncertainty
c. moral hazard
d. creative ingenuity
e. insurance reliance
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