30 Questions
What is the main reason for sales being an important goal for all firm members?
To ensure stable and survival of the firm
How might sales goals and profit goals conflict in terms of pricing strategy?
Profit goals require lower prices
In what scenario might a firm prioritize market share goal over sales goal?
When market growth is a priority
Why might a large corporation not have profit maximization as its primary objective?
Because of separation of management from ownership
How does the form of business influence the choice of goal or motive to be pursued by the firm?
It shapes the strategic goals and motivations of the firm
Based on institutional pattern, how can firms be classified according to the text?
By their pattern of ownership
In the context of market structures, what is the main concern of Structure-Conduct-Performance (SCP) studies?
Market performance and structure relationship
Why does a monopolist in a monopoly market charge a price higher than its additional costs of production?
To maximize profits
What aspect of a monopoly's product demand leads to the monopolist charging higher prices?
Elasticity of demand
What does the term 'Conduct' refer to in the context of monopoly market structure?
Pricing behavior of firms
Which factor primarily determines the competitiveness of a market according to the text?
Barriers to entry for new firms
What is the main focus of an SCP study when analyzing market performance?
Consumer benefits
What is the main argument of the transaction cost school according to the text?
Lowering the costs of transactions is key to economic performance
Which of the following are considered key transaction costs according to the text?
Coordination and negotiation expenses
How do environmental factors like uncertainty and number of firms affect transaction costs according to the text?
They increase the costs of transactions
What are the key human factors affecting transaction costs as mentioned in the text?
Bounded rationality and opportunism
When uncertainty is combined with bounded rationality, what potential problem arises?
Increase in problems
What is the objective of Chapter Two based on the text?
Understand firm ownership and control
What is the main goal of firms as economic entities?
Maximizing profits
In a business organization, which of the following is NOT typically considered a member?
Judges
What does market structure refer to?
The pattern in which the constituent parts are arranged together
What does 'seller concentration' in market structure refer to?
The number and size distribution of producing firms in the market
What is 'monopsony' an example of?
Monopoly
What does 'product differentiation' in market structure refer to?
The difference in products of firms in the market
What does unbounded rationality refer to in the context of contract design?
Considering all possible future events
What is the primary problem addressed by principal-agent theory?
Ensuring the interests of shareholders are advanced by the manager
What does moral hazard refer to in the context of contracts?
Possibility of agent behaving differently due to the contract
In the context of controlling moral hazard, what is bonding?
Agents promise to pay a sum if inappropriate behavior is detected
How does transaction cost theory define transaction costs?
Costs incurred in enforcing property rights and carrying out transactions
When is transaction cost theory considered inappropriate according to the text?
When property rights over the good cannot be established
Explore the concept of institutional economics and how institutional arrangements impact transactions and costs in an economy. Learn about transaction costs and the role of institutions in enhancing economic performance.
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