Which of the following terms best describes a transfer between two or more parties or
resources, or rights to control resources, which occurs outside the terms of a market
context?
a) Power exchange
b) Social exchange
c) Authority exchange
d) Knowledge exchange
e) Formal exchanges
Which of the following is not a significant entry barrier in the commercial airframe
manufacturing market?
a) High development costs
b) Learning curve in production
c) Raw materials and labor
d) Airlines prefer to purchase from the same manufacturer
e) Airlines are reluctant to purchase from startups
What institution within a firm must fail on some level for managers to be motivated to
acquire another firm for the purposes of increasing their own compensation, shielding
themselves against risk, or gaining prominence by running a larger firm?
a) Legal department
b) Corporate board
c) Mergers and acquisitions program
d) Firm bonus schedule
e) Corporate governance
What type of entry exists if structural barriers are so high the incumbent need do
nothing to deter entry?
a) Deterred Entry
b) Judo Entry
c) Stealth Entry
d) Accommodated Entry
e) Blockaded Entry
What are economies of density as referred to in the airline industry?
a) Reducing the size of an aircraft used to increase load factor
b) Economies achieved by an airline flying from spoke to spoke in a hub-and-spoke
network
c) Economies of scope along a given route
d) Economies of scale along a given route
e) Reductions in average cost as traffic volume decreases
Which of the following benefits of diversification explains the idea that mergers are
more likely when there is an expectation of positive changes in market share?
a) Use of internal capital markets
b) Economies of scale and scope
c) Economizing on transaction costs
d) Diversifying shareholder portfolios
e) Identifying undervalued firms
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 of the following conclusions can we make about vertical integration with
regards to asset specificity?
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
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
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
What term best describes a resource that cannot ‘sell itself’ to the highest bidder?
a) Isolated
b) Value-creating
c) Scarce
d) Imperfectly mobile
e) Profit maximizing
Which of the following is not a component of the Value Net?
a) Suppliers
b) Customers
c) Competitors
d) Supplementors
e) Complementors
What kind of strategy is one by which a firm exploits its benefit or cost advantage
through a higher market share rather than through high price-cost margins?
a) Pricing strategy
b) Share strategy
c) Margin strategy
d) Focus strategy
e) Generic strategy
What type of organizational structure is one in which employees are subject to two or
more sets of managers at once?
a) Unitary functional structure
b) Multidivisional structure
c) Matrix structure
d) Network structure
e) Individual structure
When contracts are incomplete, what must be well defined and enforceable to allow for
smooth transactions to occur?
a) Contract performance measures
b) Contract roles
c) Contract costs
d) Contract triggers
e) Contract law