Organization and Management

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What is the primary function of institutions in shaping economic activities?

To allocate resources based on supply and demand

To provide a framework for economic interactions (correct)

To regulate the prices of goods and services

To redistribute wealth from the rich to the poor

What is the primary characteristic of a market-based economy?

Voluntary transactions and competition (correct)

Collective ownership of resources

Centralized planning and resource allocation

State-owned enterprises

What is the primary goal of firms in a market-based economy?

To maximize social welfare

To minimize environmental impact

To earn profits (correct)

To provide employment opportunities

What was the primary outcome of the capitalist revolution?

The replacement of traditional agrarian societies with capitalist institutions Signup and view all the answers

What is the primary characteristic of private property?

Exclusive control over resources by individuals or non-governmental entities Signup and view all the answers

What is the primary role of democracy in a market-based economy?

To protect individual rights and property Signup and view all the answers

What is the primary difference between a price-taking firm and a firm with market power?

The ability to influence the market price Signup and view all the answers

What is the purpose of measuring the elasticity of demand?

To quantify the degree to which consumers adjust their demand for a product Signup and view all the answers

What is the result of a competitive equilibrium in a perfectly competitive market?

No tendency for the market price to change Signup and view all the answers

What is an example of an exogenous shock that can impact the economy or a specific market?

A natural disaster Signup and view all the answers

What is the primary purpose of taxation?

To impose a financial charge or levy on individuals, businesses, or goods and services Signup and view all the answers

What is the relationship between the revenue earned from selling a good or service and the total costs incurred in producing it, in terms of profit margin?

The revenue earned is greater than the total costs incurred Signup and view all the answers

What is a key benefit of dividing the production process into specific tasks and assigning them to different individuals or groups?

Improved efficiency and productivity Signup and view all the answers

What is a potential consequence of the separation of ownership and control?

Agency problems and conflicts of interest Signup and view all the answers

What type of asset is specialized machinery?

Firm-specific asset Signup and view all the answers

What is an incomplete contract?

A contract that leaves room for interpretation Signup and view all the answers

What is employment rent?

The additional wage or compensation earned by a worker above their reservation wage Signup and view all the answers

What is the minimum wage or level of compensation that an individual is willing to accept to engage in employment?

Reservation wage Signup and view all the answers