1. Explain the distinction between a command system and an incentive system in business organizations.

2. What is the principal-agent problem and what are the ways in which firms try to cope with it?

3. What are the three types of firm? Explain their advantages and disadvantages.

4. Why do all three types of firm survive and in which sectors is each type most prominent?

5.Explain how the marginal product of labor and the average product of labor change as the quantity of labor employed increases.

6. Why does marginal product eventually diminish?

7. Explain how average product changes when marginal product exceeds average product and when average product exceeds marginal product.

8.Describe the relationship between a firm's short-run cost curves.

9. How does marginal cost change as output increases (a) initially, and (b) eventually?

10. What does the law of diminishing returns imply for the shape of the marginal cost curve?

11. What is the shape of the average total cost curve and why?

12 .What are the shapes of the average variable cost curve and average total cost curve and why?

13. What does a firm's production function show and how is it related to a total product curve?

14. Does the law of diminishing returns apply to capital as well as labor? Explain.

15. What does a firm's long-run average cost curve show? How is it related to the firm's short-run average cost curve?