Which of the following is not a result of the holdup problem?
a) More difficult contract negotiations and more frequent renegotiations
b) Investments to improve ex post bargaining positions
c) Reduction in the transaction costs of arm’s length market exchanges
d) Distrust
e) Reduced investment in relationship-specific investments
Which of the following is a method firms can use to counteract price fluctuations and
eliminate income risk?
a) Manufacture all needed inputs internally
b) Acquire upsteam firms in the vertical chain
c) Enter into futures contracts to hedge the price of raw materials
d) Eliminate competitors by under-cutting their price
e) None of the above
The steepness (slope) of an indifference curve indicates which of the following?
a) The tradeoff a consumer is willing to make between price and quality
b) The change in price holding product benefit constant
c) The change in benefit holding price constant
d) The tradeoff between consumer surplus and producer surplus
e) None of the above
What term describes existing firms in a monopolistically competitive market?
a) Anchors
b) Primaries
c) Base
d) Incumbents
e) Pioneers
Which of the following is generally a way that LBOs can help a firm realize its
potential value?
a) The synergies created allow for cost savings
b) The transaction reduces the disparity between a firm’s actual and potential share price
c) The acquisition reduces the likelihood of competition in the industry
d) The transaction requires debt repayment with future free cash flow leaving
management no discretion over the investment of these funds
e) The buyout gives an opportunity to adjust the management structure and makeup
Which of the following terms best describes an individual actor’s ability to accomplish
his or her goals by using resources obtained through noncontractual exchange
relationships?
a) Power
b) Authority
c) Culture
d) Influence
e) Contracts
What term best characterizes the battle between firms to innovate first?
a) Market for new ideas
b) New product competition
c) R&D race
d) Innovation competition
e) Patent race
What significant transportation event brought about the first significant growth of the
Great Lakes region?
a) Harnessing of the steam engine
b) Invention of the screw propeller
c) Opening of the Erie Canal
d) Integration of railway system
e) Invention of the railway system
Which of the following is a potential risk of a brand umbrella?
a) The brand umbrella reduces the incumbents sunk cost of introducing a new product
b) The umbrella brand may help the incumbent navigate the vertical chain
c) The brand umbrella allows an incumbent offset uncertainty about the quality of a
new product
d) A brand umbrella may make suppliers and distributors more willing to enter
relationship specific investments in or sell credit to incumbents
e) If a new product under the umbrella fails, consumers may become disenchanted with
the entire brand
Which of the following in the late 19th century was predicted by the asset-specificity
hypothesis?
a) Forward integration was most likely to occur for products that require specialized
investments in human capital
b) Increases in the size of manufacturing firms led to independent wholesale and
marketing agents losing scale/scope cost advantages and in turn led to manufacturers
forward integrating into marketing and distribution
c) Forward integration was most likely to occur for products that do not require
specialized investments in equipment and facilities
d) For industries with small manufacturers, marketing relied on specialized assets
e) For industries with small manufacturers, distribution relied on specialized assets
Which of the following is another term for “teaching to the test?”
a) Sample bias
b) Test variance
c) Teaching discrimination
d) Multitasking
e) None of the above