The primary objective of a for-profit firm is to ___________.
a. maximize agency costs
b. minimize average cost
c. maximize total revenue
d. set output where total revenue equals total cost
e. maximize shareholder value
QUESTION 2The best way to ensure that the sales agents are working in the firm's best interests is to
a. Tell the agent what he should be doing
b. Provide the agent an incentive to work in your best interest
c. Force the agent to work in your best interest
d. Fire the agent
QUESTION 3A research firm finding concluded that the price elasticity of demand for movie tickets is elastic in the afternoon but inelastic in the evenings. Given this information, to increase overall revenue the theatre owners should
a. Reduce the ticket prices for the afternoon shows and reduce the ticket prices for the evening shows
b. Increase the ticket prices for the afternoon shows and reduce the ticket prices for the evening shows
c. Reduce the ticket prices for the afternoon shows and increase the ticket prices for the evening shows
d. Increase the ticket prices for the afternoon shows and increase the ticket prices for the evening shows
QUESTION 4Which of the following will increase (V0), the shareholder wealth maximization model of the firm: V0(shares outstanding) = t=1 ( t ) / (1+ke)t + Real Option Value.
a. Decrease the required rate of return (ke).
b. Decrease the stream of profits (t).
c. Decrease the number of periods from to 10 periods.
d. Decrease the real option value.
e. All of the above.
QUESTION 5Assume Coke and Pepsi are substitutes. Holding other things constant, if the price of Coke increases
a. Demand for Pepsi falls
b. Demand for Pepsi increases
c. Quantity demanded for Pepsi falls
d. Quantity demanded for Pepsi increases
QUESTION 6By switching its sales agents to a sales neutral profit commission, the firm is trying to convince the agents
a. To not change their sales patterns, as it would not change their compensation
b. Improve their compensation by pricing less aggressively
c. Improve their compensation by pricing more aggressively (lowering prices)
d. None of the above
QUESTION 7A Real Option Value is:
a. An option that been deflated by the cost of living index makes it a real option.
b. An opportunity cost of capital.
c. An opportunity to implement cost savings or revenue expansion in a flexible business plan.
d. An objective function and a decision rule that comes from it.
e. Both a and b.
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