Which of the following best describes marginal cost?
a) The per-unit-of-output cost for a product
b) The incremental cost of producing one more unit of output.
c) A cost invariant to the firm’s output
d) The sum of all costs associate with the production of a product
e) The cost of fixed items such as general and administrative expenses
What empirical method generally is used to measure the degree to which products
substitute for each other?
a) Cross-price elasticity
b) Price comparison
c) Relatedness factor
d) Standard Industrial Classification
e) SSNIP
Which of the following is not a way managers generally benefit from acquisitions?
a) Increased compensation
b) Consolidation of other senior executives
c) Shielding against risk
d) Political power
e) Social prominence
Which of the following is measured by a report card that assesses the quality of finished
products?
a) Process time
b) Input costs
c) Warranty claims
d) Competitor pricing
e) Total cost of manufacture
What professional sports complement poses the biggest dilemma?
a) Cheerleaders
b) Mascots
c) Gambling
d) Television
e) Radio
What significant government infrastructure project led to the development of national
stock and commodity markets?
a) Transcontinental Railroad
b) Erie Canal
c) Union Pacific Railroad
d) Prime Meridian Conference
e) Central Pacific Railroad
Which of the following terms does not involve the location of decision making rights
and rule making authority within a hierarchy?
a) Centralization
b) Authority
c) Control
d) Departmentalization
e) None of the above
Which of the following is not a way in which consumers can benefit from report cards?
a) Easy identification of high quality sellers
b) Increases in demand elasticity incent sellers to improve quality
c) Good report cards lead to more advertising
d) Report cards improve sorting by consumers
e) Consumers can more easily identify quality sellers
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 the ability of a firm to maintain and adapt
the capabilities that are the basis of its competitive advantage?
a) Riskiness of R&D
b) Correlated research strategies
c) Evolutionary economics
d) Dynamic efficiency
e) Dynamic capabilities
If η=.8 and P=$25, what is MR?
a) $20
b) $6.25
c) -$5
d) -$6.25
e) $5
What criterion developed by the DOJ is used to identify all potential competitors within
the market?
a) Market competition criterion
b) DOJ competition criterion
c) SSNIP criterion
d) SIC criterion
e) DOJ market criterion
Which term describes the situation where a smaller firm and potential entrant can use
the incumbent’s size to its own advantage?
a) Jujitsu economics
b) Karate economics
c) Boxing economics
d) Judo economics
e) David and Goliath economics
Which characteristic does not describe a perfectly competitive market?
a) Firms produce identical or nearly identical products
b) Market price is beyond the control of any individual firm
c) A firm’s demand curve is perfectly horizontal at the market price
d) Industry-level price elasticity is finite
e) Firm-level price elasticity of demand facing another perfect competitor is infinite
The causal connection between firms is known as the:
a) Market structure formula
b) Structure, Conduct, Performance paradigm
c) Competition index
d) Herfindahl Iindex
e) Concentration, Profit connection
What Japanese term describes a labyrinth of firms with long-term semi-formal
relationships up and down the vertical chain?
a) Kaizen
b) Keiretsu
c) Kanban
d) Karõshi
e) Mochibun kaisha
What process involves using computer simulations to track the likely competitive
implications of pricing and investment decisions over many years?
a) Regression testing
b) Virtual reality
c) War gaming
d) Commitment testing
e) Scenario testing
What is another term for a “win-win” business opportunity?
a) Economic profit
b) Excess total surplus
c) Gains from trade
d) Consumer surplus excess
e) Benefit ” Benefit transaction
How can incumbents legally erect entry barriers around novel and non-obvious
products or production processes?
a) Collusive pricing
b) Predatory pricing
c) Patents
d) Formation of a cartel
e) Price fixing
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 terms best refers to the exercise or use of power in a given
situation by an individual?
a) Control
b) Authority
c) Culture
d) Influence
e) Contracts
What type of entrant would be described as a new entrant with no current brand
identity, distribution channels or presence within an industry?
a) Fast follower
b) Passive
c) Aggressive
d) Innovator
e) De novo
What kind of economies come from reductions in cost due to adoption of technology
that has high fixed costs, but lower variable costs?
a) Short-run economies of scale
b) Short-run economies of scope
c) Long-run economies of scale
d) Long-run economies of scope
e) Partially automated economies
Which of the following did not contribute to the dominance of the family-run small
business in 1840?
a) Factories
b) Laws
c) Raw Materials
d) Management
e) All of the above
Based on Bresnahan and Reiss’ study of the relationship between concentration and
prices, how many firms did they determine generally need to be in a market for price
competition to be as intense as it would likely get?
a) 1
b) 2
c) 3
d) 4
e) 5
What type of organizational structure is one that is comprised of a set of autonomous
divisions led by a corporate headquarters office, assisted by a corporate staff that
provides information about the internal and external business environment?
a) Unitary functional structure
b) Multidivisional structure
c) Matrix structure
d) Network structure
e) Individual structure
Which of the following should not be considered when selecting organizing
dimensions?
a) Economies of scale
b) Economies of scope
c) Transactions costs
d) Agency costs
e) Sunk costs
Which of the following is least likely a technique firms can use to mitigate the
free-rider problem?
a) Firms can reduce the repeated interactions among team members so that actions
depend less on what other members may have done in the past
b) Firms can keep teams small
c) Firms can allow employees to work together for long periods
d) Firms can structure teams so that their members can monitor one another’s actions
e) Firms can use future periods of interaction and let natural team dynamics of peer
pressure and social isolation take place as punishment for team members who have
failed to contribute in the past
What type of strategy seeks to serve all customer groups in the market by offering a full
line of related products?
a) Generic strategy
b) Margin strategy
c) Focus strategy
d) Share strategy
e) Broad-coverage strategy
In departmentalization, which of the following is a required step?
a) Specifying relationships between chosen dimensions
b) Allocating costs across departments
c) Creating agency alignment between departments
d) Identifying principals
e) None of the above
What situation occurs when a large incumbent sets a low price to drive smaller rivals
from the market?
a) Limit pricing
b) Price leading
c) Predatory pricing
d) Quality pricing
e) Capacity expansion
Unraveling is an economic theory that describes which of the following?
a) Low quality products will be quickly discovered and abandoned by buyers
b) High seller concentration leads to the development of many substitute products
c) Few sellers improve product quality once they have scale in production
d) Even low quality sellers will disclose their product quality
e) Consumers ultimately switch products regardless of quality
If a firm enjoys lower costs due to a complex labor-intensive process, which of the
following statements would then be true?
a) Cutbacks in volume will always raise unit costs
b) The firm is unconcerned with labor turnover
c) An example of this process could be the practice of anti-trust law
d) The firm’s average cost rises due to moving down the learning curve
e) The process is likely a repetitive manufacturing process such as two-piece aluminum
can manufacturing
Which of the following statements is true about a soft commitment?
a) It is bad for competitors
b) It is good for competitors
c) In Cournot competition, capacity expansion is an example of a soft commitment
d) In Betrand competition, a commitment to reduce prices is an example of a soft
commitment
e) Tough commitments are always in the best interest of a firm
Which of the following terms best describes the principle stating that when allocating
effort among a variety of tasks, employees will tend to exert more effort toward those
tasks that are rewarded?
a) Effort allocation principle
b) Premium principle
c) Compensation principle
d) Risk-reward principle
e) Multitask principle