Which of the following best describes a focus strategy?
a) When a firm either offer a narrow set of varieties, serve a narrow set of customers, or
do both
b) When a firm sells products manufactured with raw materials from monopoly
suppliers
c) When a firm is the only one selling specific products
d) When a firm faces many competitors and charges a lower price
e) None of the above
Which of the following terms describes a phenomenon whereby individuals ignore their
own information about the best course of action and instead simply do what everyone
else is doing?
a) Relative performance
b) Absolute performance
c) Herding
d) Risk sharing
e) Pay-for-performance
What term refers to the costs incurred by buyers when they change to a different
supplier?
a) Switching costs
b) Buyer costs
c) Reputation costs
d) Learning costs
e) Customer costs
Which of the following modes of task interdependence exists when two or more
positions are not directly dependent on each other but are associated through their
independent contributions to the success of the firm?
a) Technology interdependence
b) Environment interdependence
c) Reciprocal interdependence
d) Sequential interdependence
e) Pooled interdependence
Which of the following is false with respect to the strategy of cost leadership?
a) A firm following a strategy of cost leadership is following a generic strategy narrow
in scope
b) A firm can follow a cost leadership strategy through achieving benefit parity by
making products with the same B, but at a lower C than its rivals
c) A firm can follow a cost leadership strategy through achieving benefit proximity by
offering a B that is not much less than those of competitors
d) A firm following a strategy of cost leadership creates more value than its competitors
by offering products that have a lower C than those of its rivals
e) A firm can follow a cost leadership strategy by offering a product that is qualitatively
different from that of its rivals
What problem preventing complete contracts refers to a lack of transparency/equal
access to the details surrounding a contract?
a) Agency costs
b) Bounded rationality
c) Performance measurement difficulties
d) Asymmetric information
e) Contract body of law
Which of the following are the costs associated with slack effort and with the
administrative controls to deter it?
a) Administrative costs
b) Coordination costs
c) Agency Costs
d) Overhead costs
e) Market costs
Recent studies have shown that increases in market concentration lead to which of the
following?
a) Reduction in prices
b) No measurable change in prices
c) Increases in prices
d) More firms entering the market
e) More innovation
Which of the following is a reason for a firm to Buy rather than make?
a) To eliminate competition among upstream suppliers
b) Upstream firms aggregate the demands of many buyers and provide economies of
scale.
c) To prevent downstream competitors from reducing their prices
d) Tax advantages for purchasing upstream rather than making internally
e) None of the above
What is the minimum efficient scale (MES) of production?
a) The point on an average cost curve where the cost per unit begins to decline more
rapidly
b) The minimum point on a U-shaped average cost curve
c) The minimum level of production at a plant for it to be considered profitable
d) The level of production for a small sized plant
e) The threshold at which capacity is constraining for a firm’s production
Products for which consumers cannot easily evaluate quality even after purchasing and
using the product are called:
a) Experience goods
b) Search goods
c) Retail goods
d) Consumer goods
e) Credence Goods
Which of the following is a characteristic of an implicit contract?
a) It is an understanding between parties in a business relationship
b) It is generally enforceable in court
c) The threat of losing future business makes implicit contracts not viable
d) They are typically used in firms that have little relationship with one another
e) It is an alternative agreement method to the Keiretsu understandings between
members
Self-containment emphasizes which of the following when developing coordination?
a) Cost structures
b) Agency costs
c) Strong lateral relations
d) Autonomy across units
e) Unitary alignment
Which of the following firms maintains a monopoly or cartel by controlling essential
inputs thus creating a barrier to entry?
a) DeBeers in diamonds
b) Nike in shoes
c) Pepsi in beverages
d) Subway in sandwich fast food
e) Levis in denim jeans
Which U.S. agency is responsible for preventing anticompetitive conduct?
a) Securities and Exchange Commission
b) Department of Justice
c) Office of Fair Trading
d) Competition Commission
e) Competition Authority
Why is firm specific learning better in general for an organization?
a) Encourages individuality among workers within the organization
b) Keeps unionized workers happy
c) Allows workers to acquire skills they can then ‘shop around”
d) Ensures worker knowledge is tied to current employment
e) Increases complexity and creativity in the organization
Which of the following cost line items would be a variable cost?
a) Office salaries
b) Rent
c) Raw Materials
d) Insurance
e) None of the above
Which of the following is not a product specific fixed cost?
a) The cost to manufacture a special die to make an aircraft fuselage
b) The cost of developing graphics software to facilitate video game development
c) The cost of a one-week training program preceding the implementation of a specific
management initiative
d) The time and expense required to set up a textbook before printing it
e) The cost of administrative expenses
Which of the following is a resource?
a) Brand promotion skills
b) Yield management capabilities
c) Ability to manage sourcing and procurement functions
d) Workers with firm-specific expertise or know-how
e) Ability to integrate order-taking, procurement, manufacturing and out-bound logistics
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 is defined by the number and size distribution of the firms in a market?
a) Herfindahl index
b) Market share
c) Market structure
d) SSNIP
e) Numbers-equivalent of firms
Which of the following is the most visible example of a firm’s social context?
a) Employment practices
b) Contracting
c) Regulation
d) Entry-deterring behaviors
e) Formal controls
Which of the following variables does not influence the quantity of product that a firm
is able to sell?
a) Price of the product
b) Price of related products
c) Plant production costs
d) Incomes and tastes of consumers
e) Advertising
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
Long term contracts with suppliers can help a firm with which of the following?
a) Manufacture all needed inputs internally
b) Acquire upstream firms in the vertical chain
c) Acquire downstream firms in the vertical chain
d) Counteract raw material price fluctuations and eliminate income risk
e) None of the above
Which of the following terms describes when efforts to promote improvements on one
dimension of performance are confounded by changes in other dimensions of
performance?
a) Multitasking
b) Co-linearity
c) Test bias
d) Dimension bias
e) Linking
Which of the following methods is believed to be used by Brazilian cement makers to
prevent entry into the market?
a) Limit pricing
b) Price leading
c) Predatory pricing
d) Quality pricing
e) Capacity expansion
Why does a Nash equilibrium represent a plausible outcome for a game?
a) If Party A chooses first, the outcome is the same as its expectation regardless of B’s
choice
b) If Party B chooses first, the outcome is the same as its expectation regardless of A’s
choice
c) Regardless of which party chooses first, if they both expect the other to choose a its
Nash equilibrium, then both parties expectations will equal the outcome.
d) Neither party needs to make a choice, the market forces an agreeable equilibrium
outcome
e) None of the above are correct
What is a key issue facing managers of the 2000s with respect to production
technology?
a) Using the technology while maintaining an adequate level of complexity vs.
simplicity
b) Balancing price of the technology with the benefits of its use
c) The choice between reformulating strategies and reorganizing or using the
technologies for incremental improvements
d) Integrating CAD/CAM into their factories
e) Ensuring all parties understand the technology
What term is defined as a firm selling goods at a price below their normal price (and
generally below cost) usually as an export in international trade?
a) Predatory pricing
b) Cost plus pricing
c) Dumping
d) Marginal cost pricing
e) Price leading
What term describes the differentiation of a product when it is unambiguously better or
worse than competing products?
a) Horizontal differentiation
b) Vertical differentiation
c) Idiosyncratic differentiation
d) Spatial differentiation
e) Non-price differentiation
Why is advertising an effective signal of quality in an experience good?
a) Consumers are uninformed and need advertising to provide information
b) Advertising lists the qualities of a product
c) Consumers believe firms that can afford to heavily advertise sell quality products
d) Sellers can ignore low quality issues in their advertisements
e) Consumers believe advertising more than word of mouth information
In what special situation might the law of demand not hold?
a) In a perfectly competitive market
b) When there is a high price elasticity of demand
c) When MR=MC
d) At the Nash Equilibrium
e) If high prices confer prestige
In what type of market structure do sellers set identical prices and are prices generally
driven down to marginal costs?
a) Perfect competition
b) Monopolistic competition
c) Oligopoly
d) Monopoly
e) Diversified
What type of pricing involves a firm quoting a single delivered price for all buyers with
the firm absorbing any freight charges itself?
a) Uniform delivered pricing
b) Uniform FOB pricing
c) Uniform customer pricing
d) Uniform favored pricing
e) Uniform competitive pricing
Suppose Firm #1 dominates a market for widgets priced at $100/unit with a marginal
cost of $60/unit. If Firm #2 enters the market and offers comparable widgets at a 3%
discount, extending a price umbrella optimal as long as Firm #1 loses no more than
what portion of its market share?
Suppose the demand for a product faces by a monopolist firm is given by Q=60-P/2. If
the marginal cost of producing the product is $20, what is the profit maximizing price
the firm should charge for the product? What are the firm’s profits?
In a two firm market, let the marginal cost of producing a product be $20, the market
demand be given by the function Q=60-P/2 and the market quantity be equal to Q1+Q2.
What is the Cournot equilibrium quantity each firm would produce in this market?
Given an employee cost of effort function (where e is given in hours worked per week
and each unit of e produces an extra $100 in sales):
c(e) = 0 if e<=40
(1/3)*(e-40)2 if e>40
If the firm offers a salary-plus-commission job of $500 per week plus 20% of sales,
what is the employee’s marginal benefit of effort? How much more will the employee
work than the standard 40 hour work week? What is the employee’s actual salary when
they work to maximize their payoff?