Test Bank For Introduction to Industrial Organization, second
edition 2nd Edition By Luis M. B. Cabral 9780262035941
Chapter 1-16 Complete Guide .
What are the types of firms? - ANSWER: Sole Proprietorship
Partnership
Corporations
Who is responsible for debt in each type of firm? - ANSWER: Sole Proprietorship - owners
Partnership - owners
Corporations - liability does not extend to personal assets
Why were corporations created? - ANSWER: In response to the need to increase in size and raise
money
What do corporations separate? - ANSWER: Ownership and control
How do corporations solve the incentive incompatibility program? - ANSWER: Tie the compensation
of the manager to the performance of the firm
What does a increase in a firm size bring? - ANSWER: Lower transaction, transportation, and
communication costs.
What do pros do mergers bring? - ANSWER: Economies of scale
q (2L,2K) > 2q (L,K)
q= ouput
L= Labor
K= Capital
economies of scope
Saving in management costs
What are economies of scope? - ANSWER: Cheaper to produce when producing several types of
output
What is a con of mergers? - ANSWER: A decrease in taxes
What are the two types of coordinations within corporations? - ANSWER: Voluntary Cooperation -
due to social sanctions
Involuntary Cooperation - forced through contracts
How do you determine if you should buy a capital asset? - ANSWER: If The PV of the marginal product
of the asset is greater than the sticker price
Are a firm's cost fixed or variable in the long run? - ANSWER: Variable
edition 2nd Edition By Luis M. B. Cabral 9780262035941
Chapter 1-16 Complete Guide .
What are the types of firms? - ANSWER: Sole Proprietorship
Partnership
Corporations
Who is responsible for debt in each type of firm? - ANSWER: Sole Proprietorship - owners
Partnership - owners
Corporations - liability does not extend to personal assets
Why were corporations created? - ANSWER: In response to the need to increase in size and raise
money
What do corporations separate? - ANSWER: Ownership and control
How do corporations solve the incentive incompatibility program? - ANSWER: Tie the compensation
of the manager to the performance of the firm
What does a increase in a firm size bring? - ANSWER: Lower transaction, transportation, and
communication costs.
What do pros do mergers bring? - ANSWER: Economies of scale
q (2L,2K) > 2q (L,K)
q= ouput
L= Labor
K= Capital
economies of scope
Saving in management costs
What are economies of scope? - ANSWER: Cheaper to produce when producing several types of
output
What is a con of mergers? - ANSWER: A decrease in taxes
What are the two types of coordinations within corporations? - ANSWER: Voluntary Cooperation -
due to social sanctions
Involuntary Cooperation - forced through contracts
How do you determine if you should buy a capital asset? - ANSWER: If The PV of the marginal product
of the asset is greater than the sticker price
Are a firm's cost fixed or variable in the long run? - ANSWER: Variable
