The Fact That U

question 40

Multiple Choice

The fact that U.S. managers' salaries are about four times higher than those of comparable managers in Japan, where banks control firms more closely, is probably:

• A) an example of the monitoring problem in the United States.
• B) an example of X-inefficiency in Japan.
• C) due to the fact that the U.S. economy is much less competitive.
• D) due to the fact that there are more natural monopolies in the United States.

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Definitions:

Short Run

A period in economics where the output is influenced by the level of production capacity, and certain economic conditions or costs cannot change.

Long Run

In economics, a period in which all inputs can be adjusted by firms, and there are no fixed costs, allowing for full industry adjustment.

Diminishing Returns

An economic principle stating that as investment in a particular area increases, the rate of profit from that investment, after a certain point, begins to decrease.

Marginal Cost

The change in total production cost that arises when the quantity produced is incremented by one unit.