Which of the following is a characteristic of economies of scale?
a) The average cost declines as output increases
b) The average cost increases as output increases
c) The average cost remains constant as output increases
d) The average costs are cheaper when a firm produces a wider variety of goods
e) The average cost curve takes the form of a U-shape
Which of the following statements is least true regarding the accumulation of power?
a) The accumulation of power is helpful when there are high agency costs in
coordinating among managers and lower-level workers
b) The accumulation of power is helpful when the firm’s environment is relatively
stable
c) The accumulation of power is harmful when there are high agency costs in
coordinating among levels of upper management
d) The accumulation of power is harmful when the firm’s environment is relatively
unstable
e) The major purpose of corporate governance is not to reign in the accumulation of
power by CEOs
Which of the following is not a characteristic of a complete contract?
a) The contract allows for a party to exploit weaknesses in another party’s position as
the transaction unfolds
b) Elimination of opportunistic behaviors
c) Stipulation of each party’s responsibilities and rights
d) Binding instruction for each party on courses of action as the transaction unfolds
e) Must be enforceable
Which of the following is not a way firms suffering from dependence relationships can
take action to reduce their dependence on buyers or suppliers?
a) Vertical integration
b) Using a monopolist buyer/supplier
c) Long-term contracting
d) Joint ventures
e) Alliances
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
Which of the following is true about culture?
a) Culture increases agency costs
b) Culture reduces bargaining costs
c) Culture reduces transactions costs
d) Culture increases economic costs
e) culture has no effect on costs
Which of the following generally accompanies firms that survive as market entrants?
a) Precipitous growth
b) Lower marginal costs than incumbents
c) Higher average revenue than incumbents
d) Small size allowing fast decision making
e) None of the above
What term describes when a firm is using the least-cost production process?
a) Agency efficiency
b) Technical efficiency
c) Lean compliant
d) Economizing
e) Six sigma compliant
Which of the following is a tool a firm can use to combat agency problems?
a) Monitoring
b) Performance-Based Incentives
c) Bureaucracy
d) a, b & c
e) None of the above
When multiple firms’ price-quality positions line up along the same indifference curve
offering a consumer the same amount of consumer surplus, what term describes the
situation?
a) Price-quality parity
b) Price matching
c) Maximum willingness-to-pay
d) Consumer surplus parity
e) Consumer surplus
Which of the following statements is least true regarding the conditions John Barney
identifies under which culture can be a source of sustained competitive advantage?
a) Culture should be imitable
b) Culture must be valuable for the firm
c) If culture is common to most firms in the market, so that it reflects the influence of
the national or regional culture, then it is unlikely to lead to a relative competitive
advantage
d) If factors of a firm’s culture are easy to copy, other firms will begin to do so, which
will nullify any advantage for the firm where the culture first developed
e) Something about the firm’s culture and values must be linked to the value the firm
creates for customers
Which of the following conditions does not tend to heat up price competition?
a) Many sellers in the market
b) Products are differentiated/buyers have high switching costs
c) Some firms have excess capacity
d) The industry is stagnant or declining
e) There are large/infrequent sales orders
Which of the following causes finished goods prices not to maximize the joint profits of
a manufacturer and its supplier?
a) Inefficient asset specificity
b) Lack of coordinated scope economies
c) Incomplete contracting
d) Double marginalization
e) None of the above
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
Which of the following terms involves the location of decision making rights and rule
making authority within a hierarchy?
a) Complex hierarchy
b) Coordination
c) Control
d) Hierarchy of authority
e) Departmentalization
Which of the following processes is most representative of a vertically integrated firm
on the ‘make’ end of the make-or-buy continuum?
a) Arm’s length market transactions
b) Long-term contracts
c) Strategic alliances and joint ventures
d) Parent/subsidiary relationships
e) Perform activity internally
Which of the following best describes the consumer’s shopping problem?
a) Having enough money to purchase all necessary goods and services
b) Finding the seller that offers the highest value of B – P
c) Determining the quality of products
d) Locating sellers that provide the required products
e) Selecting between brand products and non-brand products.