AE11 Reviewer for Final Exam PDF

**AE11: REVIEWER FOR FINAL EXAM** **A** 1. When one party has limited information on other party. **Adverse Selection** **B** 2. The volume level that separates the range with economic loss from the range with economic profit. **Breakeven Point** C. 3. This model alters a diff...

**AE11: REVIEWER FOR FINAL EXAM** **A** 1. When one party has limited information on other party. **Adverse Selection** **B** 2. The volume level that separates the range with economic loss from the range with economic profit. **Breakeven Point** C. 3. This model alters a different assumption of the other models: the existence of many sellers, each of which is a barely discernible portion of all sales in the market. **Contestable Market Model** 4. A combination of skills, resources, and processes that give an organization a competitive advantage. **Core Competencies** 5. A type of organizational unit is primarily responsible for controlling and minimizing expenses, without generating revenue directly. **Cost Center** 6. An observable actions that a potential employee takes that help distinguish him or her as a high-quality worker. **Concept of Signalling** 7. Start with the goods and services that a firm intends to provide and then decide what production configuration will achieve the intended output at the lowest cost. **Cost Approach to Production Planning** **D.** 8. This states the relationship between two or more variables is used to measure how sensitive demand is to changes in the level of one of the determinants. **Demand Function** 9. Relationship between the price charged and the maximum number that customers would purchase. **Demand Curve** 10. When the expansion is to a later stage of the value chain in the vertical integration. **Downstream Integration** **E.** 11. This argument in the multiple theories for high executive salaries postulates that talented executives, like star athletes and art performers, being in relatively short supply, compels corporations to pay well above their opportunity cost to have their services?  **Economic Rent (in the context of Executive Salaries)** 12. The difference between the amount a provider can charge for a limited input and the minimum amount they would accept. **Economic Rent** 13. A compensation that is set somewhat above the marginal revenue product of the employee to give the employee an incentive to be productive and retain his job.  **Efficiency Wage** 14. A situation where a firm can produce multiple products at a lower cost than producing them separately. **Economies of Scope** 15. A type of measurement used in assessing the ratio of percentage change in demand to the percentage change in its determinant factor. **Elasticity of Demand** 16. Study of the production, distribution, and consumption of goods and services. (Study of choice related to the allocation of scarce resources. **Economics** **F.** 17. A company expanding into after-sales service and maintenance is engaging into what type of value chain expansion? **Forward Integration** 18. When there is a risk of discovering production or planning secret as a result of exchanging transactions. **Free Rider Problem** **H.** 19. An expansion strategy where a firm either increases the volume of current production activities or expands to similar kinds of production activities. **Horizontal Integration** **I.** 20. The situation where a change in price has a relatively small impact on quantity demanded. **Inelastic Demand** 21. What are implicit costs? Cite examples. **Opportunity Costs** 22. A type of return to scale when inputs (labor and capital) increase by 100%, and the increase in output is greater than 100%. **Increasing Return to Scale** 23. The failure of key information to arrive to the right person at the right time. **Information Overload** 24. The equivalent change in purchasing power. **Income Effect** **J.** 25. When multiple products occur at the result of combined process. **Joint Products** **L.** 26. The fundamental concept in economics that describes the relationship between efficiency and experience. It demonstrates that as more experience is gained in performing tasks, their efficiency increases, leading to lower costs and faster production times. **Learning Curve** 27. It is the improvement in overall productivity from the increased knowledge of management on how to employ productive resources better. **Learning By Doing** **M.** 28. What is the most profitable production level? **Marginal Profit Is Equals to Zero** 29. The balance point at which a company can produce goods at a competitive price and used to determine the ideal output quantity at the lowest average cost. **Minimum Efficient Scale** 30. A subfield of economics that places special emphasis on the study of choice related to the allocation of scarce resources. **Managerial Economics** 31. The market value created by using one additional unit of resources. **Marginal Revenue Product** 32. The point at which a firm's long-run average total cost is minimized. **Minimum Efficient Scale** 33. In the principle for profit maximization, when does the optimal output level occur? **Marginal Revenue Equals Marginal Cost (MR = MC)** 34. If the market demand curve and market supply curve are displayed on the same graph, it occurs at the point where the two curves intersect. **Market Equilibrium** **P.** 35. When the values of price elasticity of demand is between 0 and -1, it means we are dealing with: **Price Inelastic Demand** 36. When the values of price elasticity of demand is more negative than -1: **Price Elastic Demand** 37. The gap between what the sellers are willing to accept as the selling price of a product and the price that they actually receive by selling at the market price. **Producer Surplus.** 38. A means of tracking improvements and in comparing their operations to those of other firms. **Productivity** 39. Considered as the gold standard of a market. **Perfect Competition Model** 40. Goal is to create the most value in terms of the difference between its revenues and costs. **Profit Center** 41. In the economies of scope, what opportunity is the common attraction? **Per Unit Cost Reduction** 42. A situation where an employer is unable to monitor employees' actions and thus has insufficient information about whether employees are performing tasks the employer would want. **Principal-Agent Problem** 43. The charging of different prices to different customers. **Price Discrimination** **R.** 44. An approach to production planning where core competencies are recognized to determine what kind of goods and services would give them an opportunity for improved profitability. **Resource Approach to Production Planning** **S.** 45. The consumer's response to a changing price to restore balance in the ratios of marginal utility to price. **Substitution Effect** 46. States that if the selling price per unit is at least as large as the average variable cost per unit, the firm should continue to operate for at least a while; otherwise, the firm would be better to stop operations immediately. **Shutdown Rule** 47. Ignored in the computation of economic profit or loss. **Sunk Cost** **T.** 48. Which of the following theories for high executive pay applies to large enterprises with sizeable team of executives outperforming each other to become the future Chief Executive Officer? **Tournament Theory** 49. The established value assigned to the exchanged items in the same enterprise if some divisions are providing goods and services to other divisions. **Transfer Price** 50. This theory was based on the assumption that the goal or objective of the firm is to maximize current or short-term profit or to maximize the wealth of the value of the firm. **Theory of the Fir**m 51. This theory posits that a consumer plans his purchase, the timing of those purchases, and borrowing and savings to maximize satisfaction. **Theory of the Consumer** 52. This theory suggests when a firm should expand and when it should not, or even when the firm would do better to either break apart or sell off some of its business units? **Transaction Cost Economics** 53. This concept tells us that a sum of money is worth more now than the same sum will be at a future date due to its earnings potential in the interim. **Time Value of Money** **U.** 54. When the expansion is to an earlier stage of the value chain in the vertical integration. **Upstream Integration** **V.** 55. Economists refer to this measure as the collective value of all economic profits into the future and approximately the amount the owners should expect to receive if they sold the business to a different set of owners. **Value of the firm** 56. The network of operations that account for the creation of a product often represented by a sequence of stages. **Value Chain** **Formula** 57. What is the formula for calculating the price elasticity of demand? **%ΔQ / %ΔP** 58. What is the demand equation for a linear demand curve? **Q = a - bP** 59. What is the formula of breakeven point? **FC / (Selling Price per unit - VC per unit)** 60. What is the formula for revenue? **Price times Quantity**