What is a reason that companies might want to ‘buy’ instead of ‘make’ talent from the
market when looking to acquire employees with a particular skill set?
a) External training methods are better than internal ones
b) Companies are always willing to pay more for external employees
c) External training is more advanced (up-to-date) than internal
d) Scale economies can result in fixed education costs while in house education
methods may be more expensive
e) Externally trained employees are more likely to become better business leaders
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 was not one of the power bases that Francis “Jack” Reith used
to push the development of the 1957 Ford Mercury?
a) He was a dynamic and charismatic leader
b) He was intelligent and effective at persuading others
c) He had a track record of success
d) He had position power
e) He threatened punishment to anyone who opposed the idea
What term describes the optimal allocation of society’s resources at a given point in
time?
a) Creative destruction
b) Static efficiency
c) Dynamic efficiency
d) Efficient allocation
e) Resource efficiency
What kind of strategy is one by which a firm maintains price parity with its competitors
and profits from its benefit or cost advantage primarily through high price-cost margins,
rather than through a higher market share?
a) Pricing strategy
b) Share strategy
c) Margin strategy
d) Focus strategy
e) Generic strategy
Which of the following is the most likely substitute for commercial aircraft travel
between Chicago and Tokyo?
a) Bicycle
b) Teleconferencing
c) Automobile
d) Commuter train
e) Walking
Which of the following terms best describes a review system in which an employee and
a supervisor work together to construct a set of goals for that employee?
a) Traditional top down review system
b) 360-degree peer review system
c) Management-by-objective system
d) Subjective performance evaluation
e) Pay-for-performance
What term best describes the payment which must be offered to a risk-averse individual
to willingly accept a gamble?
a) Certainty equivalent
b) Risk equivalent
c) Risk premium
d) Risk preference payment
e) Certainty payment
Which of the following is not an exit barrier for firms in an industry?
a) Sunk costs
b) Labor agreements or commitments to purchase raw materials
c) Obligations to input suppliers
d) Excess capacity
e) Government restrictions
What term best describes a targeting strategy in which the firm offers a variety or
related products to a particular class of customers?
a) Broad-coverage strategy
b) Focus Strategy
c) Geographic specialization
d) Product specialization
e) Customer specialization
Which of the following terms best describes a contract that guarantees an agent some
payment, but provides enough incentive so that the agent does not shirk?
a) Certainty equivalent contract
b) Risk-sharing contract
c) Risk premium contract
d) Variability reduction contract
e) Risk-averse contract
Which of the following is not a factor that could intensify internal rivalry in the
Chicago hospital market?
a) Relatively large number of hospitals
b) Considerable variation in production costs
c) Relatively small number of doctors
d) Excess capacity
e) Aging baby boomers increasing demand for admissions
Which of the following is true with regard to the difference in exchange costs between
an item produced internally firm and an item purchased from an outside supplier
through an arm’s length market transaction as the level of asset specificity increases?
a) The cost difference is positive for both low and high levels of specificity
b) The cost difference is negative for both low and high levels of specificity
c) The cost difference is negative for low and positive for high levels of specificity
d) The cost difference is positive for low and negative for high levels of specificity
e) As asset specificity increases, the transaction costs of the market exchange decrease
Suppose you manufacture 10 million hard drives per year specifically for Dell laptop
computers. Suppose your average variable cost C=$20/unit and annualized cost of
investment to build a hard drive factory I=$30 million. If Dell agrees to purchase the 10
million hard drives at a price P*=$25/unit, what is your company’s rent?
Suppose you manufacture 10 million hard drives per year specifically for Dell laptop
computers. If your average variable cost C=$20/unit, annualized cost of investment to
build a hard drive factory I=$30 million, and market price (bailout market price in the
event Dell does not buy) Pm=$22/unit, what is your company’s RSI (relationship
specific investment)?
Suppose you manufacture 10 million hard drives per year specifically for Dell laptop
computers. Suppose your average variable cost C=$20/unit, annualized cost of
investment to build a hard drive factory I=$30 million, and the market price (bailout
market price in the event Dell does not buy) Pm=$22/unit. If Dell agrees to purchase the
10 million hard drives at a price P*=$25/unit and the deal subsequently falls apart, what
is your company’s “quasi-rent”?
Suppose a firm has $50 million to invest in a new market. Given market uncertainties,
the firm forecasts a high-scenario where the present value of the investment is $200
million and a low-scenario where the present value of the investment is $20 million.
Suppose that by waiting a year, the firm can learn with certainty which scenario will
arise. Assume a 10% annual discount rate. If the firm waits one year and learns that the
high-scenario will happen, what is the firm’s expected net present value of the
investment?
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?