What group/type of preferences describes when tastes differ markedly from one person
to the next and result in horizontal differentiation?
a) Search preferences
b) Horizontal preferences
c) Consumer preferences
d) Spatial preferences
e) Idiosyncratic preferences
What term describes the situation where a firm does exceedingly well due to good luck
or exceedingly poorly due to bad luck, but returns to normal performance following?
a) Regression to the mean
b) Competitive advantage
c) Persistent performer
d) Sustainable firm
e) Predictable performance
What term refers to the ability of individual customers to negotiate purchase prices that
extract profits from sellers?
a) Substitutes and Complements
b) Competition
c) Customer power
d) Seller power
e) Buyer power
What mode of long-distance communication first laid the groundwork for today’s
modern communication forms?
a) U.S. Postal Service
b) Private mail service
c) Telegraph
d) Telephone
e) Railroad
Which of the following conclusions can we make about vertical integration with regard
to product market share and scope?
a) Firms should make an asset, rather than buy it, if that asset is a source of competitive
advantage for the firm
a) If asset specificity is significant enough, vertical integration will be more profitable
than arm’s-length market purchases, even when production of the input is characterized
by strong scale economies or when the firm’s product market scale is small.
b) A firm gains more from vertical integration when outside market specialists are better
able to take advantage of economies of scale and scope
c) A firm with a larger share of the product market will benefit more from vertical
integration than a firm with a smaller share of the product market
d) The more a firm produces, the greater its input and this ultimately decreases the
likelihood that in-house production can take as much advantage of economies of scale
and scope as an outside market specialist
e) If a firm is considering whether to make or buy an input requiring significant
up-front setup costs, and there is a large market outside the firm for the input, then the
firm should buy the input from outside market specialists
Which of the following terms best describes ability that stems from the explicit
contractual decision-making and dispute-resolution rights that a firm (or some other
source) grants to an individual?
a) Power
b) Authority
c) Culture
d) Influence
e) Contracts
Which of the following statements is true regarding the relationship between average
and marginal cost functions?
a) When average cost is a decreasing function of output, marginal cost is greater than
average cost.
b) When average cost neither increases or decreases (because it is constant or at a
minimum point), marginal cost is equal to average cost
c) The average cost function is always smaller than the marginal cost function
d) The average cost function is always greater than the marginal cost function
e) When average cost is an increasing function of output, marginal cost is less than
average cost
What measure, that depends on how much of a firm’s revenues are attributable to
product market activities that have shared technological characteristics, production
characteristics, or distribution channels, is used to determine how diversified a firm is at
a given time?
a) Integration level
b) Rumelt score
c) Conglomerate level
d) Activity share
e) Relatedness
Which of the following terms best describes a type of network structure that involves
relatively self contained organizational subunits tied together through a technology that
focuses on standardized linkages?
a) Unitary functional organization
b) Multidivisional organization
c) Matrix organization
d) Modular organization
e) Hierarchical organization
Which of the following terms best describes an idea, developed by Gary Hamel and C.
K. Prahalad, which combines commitment to the firm’s ambitions with the flexibility to
change with circumstances?
a) Leveraging resources
b) Strategic intent
c) Strategic stretch
d) Hypercompetition
e) Global dominance
Which of the following terms best describes a phenomenon whereby a
profit-maximizing firm sticks with its current technology or product concept even
though the profit-maximizing decision for a firm starting from scratch would be to
choose a different technology or product concept?
a) The replacement effect
b) Strategic intent
c) Strategic stretch
d) Hypercompetition
e) The sunk cost effect
Which of the following factors is an effective tool for companies to use to mitigate
hidden action and hidden information problems in agency relationships?
a) Monitoring
b) Offshoring
c) Coordination
d) Objectives
e) Confrontation
What is the revenue destruction effect?
a) The loss in revenue a firm incurs on units it would have sold at a higher price when
reducing price to sell extra units
b) The loss in revenue a firm incurs as a result of selling fewer units of output when
raising price to increase profit
c) The loss in revenue a firm incurs due to brand level elasticities
d) The loss in revenue a firm incurs due to being in a perfectly competitive market
e) The loss in revenue a firm incurs due to predatory pricing
Which of the following best describes marginal revenue?
a) How sales revenue varies as a function of how much product is sold
b) The incremental sales from producing one more unit of output
c) Rate of change in total revenue that results from the sale of Q additional units of
output
d) The total sales for a given product based on plant output
e) Percentage change in quantity divided by percentage change in price
What is a sunk cost?
a) A cost that can be avoided if certain choices are made
b) A cost that always varies with the output of a factory
c) The average cost of operating a plant
d) The ‘lower envelope’ of short-run average cost functions
e) A cost incurred no matter what the decision is and cannot be avoided
Which of the following is generally thought of as a supplier in the hospital industry?
a) Medicaid
b) Admitting physicians
c) Hospital-based physician
d) Patients
e) Medicare
Which of the following conclusions can we make about vertical integration with regard
to scale and scope economies?
a) If asset specificity is significant enough, vertical integration will be more profitable
than arm’s-length market purchases, even when production of the input is characterized
by strong scale economies or when the firm’s product market scale is small.
b) A firm gains more from vertical integration when outside market specialists are better
able to take advantage of economies of scale and scope
c) A firm with a larger share of the product market will benefit more from vertical
integration than a firm with a smaller share of the product market
d) The more a firm produces, the greater its input and this ultimately decreases the
likelihood that in-house production can take as much advantage of economies of scale
and scope as an outside market specialist
e) If a firm is considering whether to make or buy an input requiring significant
up-front setup costs, and there is a large market outside the firm for the input, then the
firm should buy the input from outside market specialists
How does umbrella branding aid economies of scale and scope?
a) Increases effectiveness of advertising due to a greater presence
b) Increases effectiveness of advertising due to national advertising
c) Increases effectiveness of advertising due to offering a broad product line under one
name
d) Increased cost effectiveness through purchasing as a cooperative
e) Increased cost effectiveness through bulk purchasing
Which of the following led to the development of the financial infrastructure pre- 1910?
a) The use of “Hollerith” or punched cards to storm information
b) The systemization and circulation of credit information
c) The telephone allowing consumers to easily apply for credit
d) The passage of the Federal Fair Credit practices Act
e) None of the above
Which of the following structures best describes a small group of people where a
collection of individuals work together to set and pursue common objectives?
a) Complex hierarchy
b) Individually
c) Self-managed team
d) Hierarchy of authority
e) Divisional