Which of the following is an important lesson to keep in mind during benchmarking?
A. Benchmarked firms should be made aware of the said firm’s motivation.
B. Differences in environments of the benchmarked firms should be taken into account.
C. Differences in the strength and activities of the labor unions should be taken into
account.
D. Differences in environments of the benchmarked firms are not important.
When employees are offered incentives to find new customers, but the aggregate
economy is so weak (in recession) that the firm loses consumers, then the incentive
plan:
A. suffers from the problem of diminishing reservation utility.
B. must be adjusted to make employees work harder in difficult times.
C. suffers from the problems of external risks that employees cannot overcome.
D. must be adhered to no matter what.
Refer to Figure 7.2. If Happy Times Theater charges one price to day customers and
another price to night customers, then the night price will be
A. $7.50.
B. $5.50.
C. $6.25.
D. $10.00.
If TruLite’s management studied the light fabrication department and found that the
department should assemble 25 lamps per hour per worker and set its piece rate to get
workers to meet output level, then this standard is called the:
A. risk premium.
B. benchmark.
C. incentive adjustment.
D. random element of production.
Relative performance evaluation reduces the labor cost borne by the firm by:
A. ratcheting up each year’s performance targets.
B. focusing on the near term while setting incentive pay.
C. using the employee’s output for setting the compensation.
D. filtering out common shocks from employee incentive pay.
If a manager cannot use his management team to deliver a product profitability to the
marketplace, a solution for the board of directors might be to:
A. shut down the operations of the company.
B. let the manager have more time to figure things out.
C. fire the manager and reorganize the company.
D. increase bonuses for the current management.
The omitted-variable problem in statistical analysis occurs when
A. excluded variables are correlated with explanatory variables that are included in the
analysis.
B. the demand for the product has not been stable over time.
C. the price of the product has been relatively unstable over time.
D. there is no uniform result because the accounted variables are not affected by
changes in other variables.
As opposed to corporate strategy, business strategy is focused on
A. increasing the elasticity of consumer demand.
B. the type of production technique to use.
C. the type of industry to produce in.
D. how to compete with other firms in the industry.
If an important component of a firm’s production process is difficult to specify in a
contract and even more difficult to enforce in its production standards, then it probably
makes sense to:
A. buy the component in the open market.
B. use a simple short-term contract.
C. vertically integrate upstream to build the component.
D. incur information cost.
The Springfield Bank received 1,500 inquiries following its latest advertisement
describing its “establish a Certificate of Deposit (CD)—get a free CD (compact disk)”
promotion in the Springfield Shopper, a local newspaper. The most recent similar ad in
a similar advertising campaign was in the Brockman Business Newsletter. A local
business publication generated 500 inquiries. Each ad in the Springfield Shopper costs
$500. Each ad in the Brockman Business Newsletter costs $125. Inquiries from both
publications have the same success rate in turning inquiries into sales.
(a) Assuming that additional ads will generate similar response rates, is Springfield
Bank running an optimal mix of ads in the Springfield Shopper and the Brockman
Business Newsletter? Why or why not?
(b) If you claim that the Springfield Bank is currently running an optimal mix of ads,
clearly explain why they are using an optimal mix of ads. If you claim that the
Springfield Bank is currently not running an optimal mix of ads, clearly explain how
the Springfield Bank can better manage the ads.
Which of the following observations is true of business norms?
A. They are standards of accepted behavior.
B. They are the same as product quality standards.
C. They are equivalent to contract laws.
D. They are somewhat like a company’s mission.
In pushing decision rights down to the people with the knowledge about processes or
customer preferences, it is important that companies:
A. use their reward systems to reinforce their performance or evaluation systems.
B. integrate production management with production control.
C. keep their reward systems independent of other factors.
D. keep issues of organizational architecture out of the picture.
The ability of a leader to control the distribution and use of resources inside a
corporation provides that leader with:
A. power to declare dividends on company shares.
B. power to introduce change within the organization.
C. the ability to veto voluntary assent to a proposal.
D. the ability to declare all changes emergencies.
In the U.S., combined wealth losses by firms from litigation have been estimated to
be___________ per lawsuit.
A. $200 million
B. $20 billion
C. $2 billion
D. $21 million
The costs of recruiting new employees, training the new employees, and suffering the
initial low productivity of new employees when old employees leave are called:
A. efficiency wages.
B. benchmark wages.
C. turnover costs.
D. marginal costs of long-term training.
When a company is very dependent on firm-specific human capital, it makes sense for
the company to:
A. use only benchmark competitive wage rates.
B. offer compensating differentials for unpleasant jobs.
C. develop programs for sending employees to the local university.
D. create an extensive internal labor system for career advancement.
Franklin D. Roosevelt pointed out that the New Deal was a series of experiments and
that one could learn the good and bad from trying. His leadership reveals:
A. commitment.
B. clever marketing.
C. distribution awareness.
D. flexibility.
A price ceiling on a good will usually
A. shift both the demand and supply curves to the right.
B. shift both the demand and supply curves to the left.
C. shift the demand curve to the left and the supply curve to the right.
D. shift neither the demand curve nor the supply curve.
Decision management is made up of:
A. initiation and ratification of projects.
B. implementation and monitoring of projects.
C. ratification and monitoring of projects.
D. initiation and implementation of projects.
Which of the following is a benefit of a competitive market structure?
A. efficient decision making
B. a low tax rate
C. high cost of production
D. high market power
The text quotes W. Edwards Deming as saying that “pay is not a motivator.” The history
of incentive pay plans shows that:
A. they rarely work.
B. incentives work in every instance.
C. there is a mixed record in success of incentive pay plans.
D. incentives must be non-monetary to work.
Which of the following is a factor that can motivate changes in the costs of transferring
knowledge?
A. Changes in technology
B. The nature of knowledge to be transferred
C. The prevailing tax rates
D. The form of government in the country
Industrial engineer Frederick Winslow Taylor was particularly rude in his
recommendation that jobs be kept simple. He argued that the characteristics of
lower-level workers were such that they should be assigned very limited decision rights
and a narrow set of tasks. While certainly crude by today’s standards, Taylor recognized
that:
A. broad task assignment is necessary for complex jobs.
B. simple task assignment is always dehumanizing.
C. broad task assignment eliminates the need for coordination.
D. simple task assignment may improve overall productivity.
Which of these motivate a firm to use nonmarket transactions to acquire inputs and
downstream services?
A. Zero transaction costs in the spot market
B. Absence of market power
C. Steady supply of the key input used in production
D. Imposition of low tax rates on a particular production unit
Assume the generic production function Q = f (K, L) displays both decreasing returns to
capital (K) and decreasing returns to labor (L). Then
A. this production function will certainly display decreasing returns to scale.
B. this production function will certainly display constant returns to scale.
C. this production function will certainly display increasing returns to scale.
D. this production function may display increasing returns to scale.
When asset specificity is very low and there is no market uncertainty, it is best for a
firm to:
A. buy in the open market.
B. use a long-term contract.
C. vertically integrate.
D. engage in a joint venture.
Offering a product at a price below marginal cost is a more effective pricing strategy if
A. information costs are higher.
B. opportunity costs are higher.
C. sunk costs are higher.
D. information costs are lower.
LightCo sells fairly standard light bulbs to Bodyworks, while BodyWorks sells
components that can only be used by AutoCorp. LightCo is only interested in price
while BodyWorks hires a law firm to negotiate its contracts with AutoCorp because:
A. LightCo and BodyWorks both have significant alternatives in the marketplace.
B. LightCo has market alternatives while BodyWorks does not.
C. BodyWorkshas market alternatives while LightCo does not.
D. neither LightCo nor BodyWorks have market alternatives.
Outsourcing is a management innovation that emphasizes:
A. vertical integration of production and service.
B. assignment of management and production responsibilities to another firm.
C. reduction in the purchase of resources to the bare essentials.
D. hiring only managers educated in another state.
One way to market a proposal for a new business venture, especially when architectural
changes are ruled out and the opposition seems strong is to:
A. replace the Board of Directors.
B. emphasize the level of crisis that exists inside the firm.
C. pretend that architectural changes will be made.
D. withdraw the proposal.
Degree of rivalry is
A. high when excess capacity of existing firms is low.
B. low when fixed costs of existing firms are high.
C. high when fixed costs of existing firms are low.
D. high when fixed costs of existing firms are high.
Economists believe the free rider problem is very important in complex business
organizational structures. Still, businesses continue to build teams to solve problems or
to deliver products to consumers. Often special rewards or bonuses are provided to the
team rather than to the individuals in the team. Write a brief essay that either defends
the economists’ concern or explains why economists are wrong on this issue.
Why do innovations in management techniques fail so often?
The case study in the chapter uses World Motors Corporation (WM). This company,
headquartered in Atlanta, is faced with two major regulatory thrusts. One, emission
standards, places WM at a competitive disadvantage as its major competitor has an
efficient patented emission control device. The second, miles-per-gallon standards,
finds WM in the same position as its competitors. Where would WM put its lobbying
effort, assuming that conservation groups are currently lobbying strongly for higher
emission standards?
What are the factors that favor high incentive pay for an employee? Explain which of
the five factors is the most important.
What do you mean by a specialized task assignment and what are its advantages?
You are assigned a group project for the class, and you will be graded as a group, and
your individual grade will be decided on the group’s performance relative to other
groups. Would you like this arrangement?
Plain Truth Adverting employs KPR, a large accounting firm, to audit its books each
year. This involves considerable expense for the advertising firm, since its sales account
managers are very independent and each maintains his separate record-keeping systems.
Should the CEO at Plain Truth cancel the audit and rely on a brief year-end summary
from each sales account manager? Why or why not?
P = 50 – 1/500Q is the demand curve for tickets. MC = $10 per ticket. What is the
optimal price? Calculate the consumer surplus at this price.
What is managerial power theory and what are its implications?
While many managers and lawyers might claim that implicit contracts “aren’t worth the
paper that they are not written on,” most understandings between companies and their
customers and employees are implicit. Why?
What roles do human capital and compensating differentials play in shaping the wage
that a firm will pay a new employee?
A moves first and can go L or R. B moves second and can go R or L. If both of them
end up at L or at R, A gets $1 and B gets $0. If one ends up at L and the other at R, then
B gets $1 and A gets $0. What will be the equilibrium in this game?
What are the measures of performance for investment centers? How do they work?
What are influence costs, and why do they inhibit efficient organizational design?
The case study on Software Development, Inc. (SDI) reviews the introduction of
thirty-eight new or revised software packages for the costs of defects. Do an analysis of
Table 23.2. If you look at the software introductions with more than fifty defects and
those with fewer than twenty-five defects, what general conclusions can you come to
concerning the product costs, training costs, prevention costs, and maintenance/service
costs of SDI?
Are organizational changes always needed?