Econ Final Exam (PDF)

Which of the following types of businesses consist of two or more people that pool their resources and knowledge together? Which of the following types of businesses consist of two or more people that pool their resources and knowledge together? - Partnerships What is one of the primary benefits...

Which of the following types of businesses consist of two or more people that pool their resources and knowledge together? Which of the following types of businesses consist of two or more people that pool their resources and knowledge together? - Partnerships What is one of the primary benefits with forming a corporation? - Limited liability Not-for-profits are similar to other types of businesses however, their main advantage is that - Profits are not taxed In what year was the Internal Revenue Code amended to prevent non-profits from endorsing or opposing political candidates? - 1954 Which church took out a full-page ad in the USA Today and the Washington Times newspapers advocating against voting for a president? - The Church at Pierce Creek. Which of the following types of costs are not related to production costs and include the cost of negotiating an agreement, and enforcing compliance? - Transaction cost Ronald Coase created one of his most important pieces of work titled "The Problem of Social Cost" in what year? - 1960/1961 For simple, repetitive transactions that involve no commitment to specialized resources, the transaction costs of market coordination tend to be - Low The primary gains from expansion include a stable framework, reduction of opportunism, and the ability to - Adjust to unexpected changes The primary losses from expansion include the loss of economies of scale, greater bureaucratization, and - The loss of higher power incentives. High-power incentives are incentives that take the form of a - Claim to the residual profit, resulting from a task, combined with bearing the risk of any loss.  What are the mechanisms through which the market economy selects superior ways of doing things and rejecting inferior ways? - Losses and profits According to Schumpeter, the source of innovation and technological change is derived from competition among - Entrepreneur Both reasons for regulation, the theory of market failure and the public-choice theory of rent-seeking, explain the value of those regulations in terms of the public benefit of those government interventions. - True What two theories does the text cite for government regulation of markets? - market failure effects on efficiency and public choice rent seeking. Static efficiency measures how well an economy performs at a given time with given resources and technology; dynamic efficiency measures the rate of growth in production possibilities and prosperity. - True Much of traditional economic theory accepts that perfectly competitive markets are the most efficient in the static sense. - True Joseph Schumpeter explained that competition among actual entrepreneurs encourages dynamic efficiency through innovation and technological change. - True Traditional antitrust policy tends to oppose a Jeffersonian preference for dispersed economic power. - True  Antitrust laws attempt to regulate market structure and the competitive behavior of firms. - True According to antitrust reformers, traditional antitrust theory ignores static economic efficiency. - False An industry where one producer can serve the entire market and also minimize costs of production is a  - Natural monopoly What is the problem of an unregulated natural monopoly, in terms of economic efficiency? Its profit-maximizing price is \_\_\_\_\_ - Above marginal cost In the real world (compared to in theory), which method of regulating a natural monopolist is more practical? - regulating its price What is the text's opinion of limitations of rate-of-return regulation? - two main limitations include the difficulty of avoid avoiding regulatory, capture and setting wrong rates. Which of these is the most accurate statement about regulation of industries in the US? - natural monopolies are not the only industries to come under regulations in the US. As opposed to regulation of a natural monopoly, the goal of regulation to reduce competition in the trucking and airline industries is to have \_\_\_\_\_ - Higher pricing and less competition among firms. Which of these did NOT occur in the US policy of business regulation after 1980? - Regulators encourage the rights of big Tech monopoly without having worries about their anti-competitive practice. Which agency is NOT involved in regulating health and safety in the US, according to the text - SEC securities and exchange commission. Which of these questions is easiest to answer without argument when it comes to US health and safety regulations? - Are the goals of regulation reasonable? When the EPA issued a 1984 study of costs and benefits of banning lead in gasoline, Ethyl Corporation (producer of the lead additive) said that the EPA \_\_\_\_\_ - Underestimated the cost of regulation, ignoring repair cost of engine value damage. 1890 - Sherman antitrust act, the act Fosters commerce by giving our government the authority to remove constraints and discourage, monopolies or act of conspiracy. It also gave the government the authority to hand out injections, fines, or gel sentences to guilty parties. 1914 - Clayton act, it evolved from the Sherman act and its goal was to stop anti-competitive trend before they start. It focused on mergers, tying contracts and interlocking directorates. 1936 - Robertson -- Pat man act, This law evolved from the Clayton act it's goal is to straighten the log against price discrimination. 1950 - Caller- Kefauver Act, it amend the Clayton act by including mergers. This act allows the government to scrutinize any merger under antitrust law. Even though not all mergers are approved, firms can be approved if they discriminate clear and convincing evidence that the merger will result in expectancy in production, non-production, operation, or show that the firm will fall if it's not allowed to merge. What is price fixing? - Refers to an agreement among competing firms to set price at a certain level rather than allowing the market to determine prices through competition. This practice is often illegal as it undermines free market principle, and can lead to higher prices for consumers. What are mergers? - refers to the combination of two or more companies into the single entity, typically to enhance competitiveness , achieve synergies or expand market reach. Types of mergers - Horizontal merger, companies in the same industry at the same stage of production combine. Vertical merger, are mergers of firms with supplier, customer relationship. Conglomerate merger, our mergers of firms in unrelated markets have been frequent targets of antitrust enforcement. Vertical restraints, like vertical mergers, vertical restraints on trade, involve agreements between a supplier and a customer. Public choice theory and rent seeking - It's an economic theory that applies to principles economics to political science, analyzing how individuals in the political spear make decisions based on self interest. Rent seeking refers to the practice of individuals or groups attempting to gain economic benefit through manipulation or exportation of the political environment rather than through productive economic activities. What are interlocking directors? - refers to the situation where a member of a board of directors of one company also serves the board of another company. This can create a network of influencer control across multiple companies, potentially leading to a conflict of interest or reduce competition. What is OSHA - OSHA stands for the Occupational Safety and Health Administration, which is a part of the US Department of labor. It was created to ensure safe and healthy work conditions by setting and enforcing standards and providing training outreach, education and assistance. Proprietorship - also know as sole proprietorship is a type of business structure, where an individual owns and manages the business. It is the simplest and most common form of business ownership, and it does not require any formal registration or legal documentation to start. The owner has complete control over the business and is solely responsible for the debt liabilities and profits. Partnership - refers to a business arrangement in which two or more individuals or entities collaborate to manage and operate a business sharing, profit, losses, and responsibilities. Corporation - Is a legal entity that is separate from its owners, allowing it to own assets, incur liabilities and engage in business activities. It is typically created to a conduct business profit and can enter contract Sue or be sued and pay taxes. Nonprofit - It's an entity that operates for purposes, other than generating profit for owners or shareholders. Instead, it aims to fulfill a social mission provide public benefit or specific community needs.