Firms with internal labor markets have more flexibility in deciding the level and time
profile of wages because
A. individuals tend to base their employment decisions on their entire career earnings.
B. they have to pay the wage rate that equals the marginal revenue product of labor.
C. compensating wage differentials do not have to be paid in internal job markets.
D. firm-specific human capital is less costly than general human capital.
Agri-Tech supplies a patented sweetener to various food processors. It has noticed that
the value of the sweetener varies dramatically from one buyer to another, depending on
the end-use demand. But its experiments with charging higher prices to some buyers
have failed because:
A. price discrimination is illegal.
B. of market arbitrage.
C. the cost of production is always the same.
D. outsourcing is compromised by contracting costs.
Bob is given the right to make all the important decisions in an organization. This is an
example of:
A. decentralized decision making.
B. centralized decision making.
C. bundling.
D. a nonstandard practice within a hierarchy.
Assume Pyrotex Inc. estimates the demand for its fireworks to be linear. If the current
price charged by Pyrotex is such that the elasticity of demand is equal to 2.5, which of
the following statements is true?
A. Pyrotex will increase its revenues by decreasing the price of fireworks.
B. Pyrotex will increase its revenues by increasing the price of fireworks.
C. Pyrotex cannot increase its revenues by changing the price of fireworks.
D. Not enough information is provided to determine whether or not Pyrotex is currently
maximizing its revenues.
Which of the following is not a lower-cost benefit of an internal labor market?
A. Promoting only insiders to higher-level jobs
B. The development of firm-specific human capital
C. The cultivation of long-term employee motivation
D. Management’s ability to learn about employees’ best attributes
Setting up a hub-and-spoke distribution towards inventory and retail delivery is an
example of
A. increased consumer transactions cost.
B. increased producer transactions cost.
C. reduced consumer transactions cost.
D. reduced producer transactions cost.
Suppose Sam and Kevin can produce pens and pencils as shown in the table below.
<<PM: Global: Delete period following letter in parens?>>(a) Who has a comparative
advantage in producing pens? Who has a comparative advantage in producing pencils?
(b) Suppose Sam and Kevin have to each give Flip, a common friend, 10 pens and 10
pencils. Is there a trade that will make both of them better off? If a trade that would make
both of them better off exists, describe such a trade. If there is no such trade that would
make both of them better off, explain why.
Based on a historical perspective, we can say that the architecture of publicly traded
corporations:
A. will continue operating in their current state and become stagnant.
B. will become highly vulnerable to fraud and scandals.
C. will soon become too powerful and unmanageable.
D. will continue to evolve and change over time.
Always Round Tire has been in the tire business since 1963. It has several plants with
different levels of technology. Over the years, the company has worked with its
employees to figure out how to produce a tire for less. This incumbent advantage the
firm has over potential newcomers is the
A. result of scale economies.
B. impact of licenses and patents.
C. clear threat of using its excess capacity.
D. effect of its learning curve.
Effective leadership requires the proper use of symbols. Which of these is a symbol
used to inform employees what is valued in the company?
A. Formal creed
B. Nepotism
C. Logrolling
D. Reneging
Transfer price refers to the price at which:
A. goods are transferred from one location to another.
B. services are transferred overseas for a cheaper rate.
C. goods are sold to loyal customers without shipping and delivery cost.
D. goods and services are transferred within a business.
Profits will be
A. high, regardless of the degree of rivalry if there are no entry barriers.
B. high, when the degree of rivalry is high.
C. low, when the degree of rivalry is low.
D. low, when the degree of rivalry is high.
Refer to Figure 9.5.
If GMB were required to submit a single sealed bid to supply buses to MetroTravel, it
would
A. submit a low price.
B. submit a high price.
C. submit neither a high nor low price.
D. split the bid—half high and half low.
Assume SeatComfy Inc. manufactures table and chairs with the following total cost
function, TC = 10,000 + 10Q + 0.1Q2, where Q = quantity of chairs produced. If
SeatComfy can sell as many chairs as it wishes at the current market price of $45, how
many chairs should it produce to maximize its short-run profits?
A. 350
B. 700
C. 175
D. 45
Identify the statement that best defines Nash equilibrium.
A. It is a set of strategies in which a firm does the best it can, given the action of its
rival.
B. It is a sequence of actions, where the actions are taken at each node of the game.
C. It is a set of strategies that gives a player the first-mover advantage.
D. It is a sequence of actions that are taken to influence the actions of rivals.
In a very basic principal-agent model, output is contractible if:
A. output can be observed with some positive cost.
B. the employee produces many products.
C. the employee works in a team.
D. output can be observed at zero cost.
Adolph Berle and Gardiner Means argued that widely held corporations will be run
inefficiently by professional managers. Yet large, publicly-traded corporations continue
to produce the bulk of the free world’s output. A widely held corporation survives
because:
A. it can raise capital from diversified investors.
B. ownership and control are separate.
C. large corporations are given tax sops by the government.
D. its size insulates it from market competition.
When a firm establishes a long-term contract with another firm, whereby the first firm
grants the second independent business the rights to use the former’s name, reputation
and business format, it is referred to as a:
A. standard supply contract.
B. joint venture.
C. lease contract.
D. franchise agreement.
We know that a firm is paying way below the market wage rate if:
A. the number of applications for a job posting is high and the quit rate is low.
B. the number of applications for a job posting and the quit rate are high.
C. the number of applications for a job posting and the quit rate are low.
D. the number of applications for a job posting is low and the quit rate is high.
FarAwayDrive Inc. has recently increased the price of its golf balls from $40 to $6. In
response to this increase in price, sales decreased from 2,200 to 1,800 units. If no other
information concerning the demand is available, which of the following is true about
the sensitivity of demand (using the ARC or midpoints formula) for FarAwayDrive’s
golf balls?
A. The ARC-elasticity (midpoints formula) of demand is 2.0.
B. The ARC-elasticity (midpoints formula) of demand is or .50.
C. The ARC-elasticity (midpoints formula) of demand is 2/3 or .667.
D. The ARC-elasticity (midpoints formula) of demand is 4/11 or .364.
Which of these changes in a division’s architecture can allow a manger to gain support
for a management proposal?
A. Lobbying for tax concessions
B. Outsourcing certain tasks
C. Emphasizing on marketing and brand value
D. Reallocating decision rights
If decision makers do not bear the major wealth effects of their decisions, then:
A. the same person in the management structure must hold decision management and
control.
B. separate decision makers must hold decision management and decision control.
C. decision management is clearly integrated with decision control.
D. the same managers hold initiation and ratification of decisions.
In parts of Eastern Europe, companies maintain special guards to protect payday funds,
to help move products to market, and to enforce immediate payment for products sold
to retailers. All of these features indicate:
A. that property rights are respected and transaction costs are low.
B. that property rights are weak and transaction costs are low.
C. that property rights are weak and transaction costs are high.
D. that property rights are respected and transaction costs are high
A professor wants to convince his department that he would like to develop and teach a
course titled, “Sex and Violence.” The best way to gain the support of the department is
to:
A. say that it will attract more students to the department.
B. say that it will add to the rubric of knowledge.
C. say that it will add to the diversity in the campus.
D. say that it is aligned with the university’s student welfare policy.
While production teams are important sources of productivity in business, they can
suffer from the ______ problem.
A. free rider
B. reneging
C. externality
D. benchmark
Refer to Figure 23.1. The total costs of achieving total quality are:
A. $1,300.
B. $1,040.
C. $250.
D. $1,065.
Economic Value Added is a technique that attempts to make the idea of residual income
the basis for:
A. decision-making authority.
B. risk-bearing capacity.
C. incentive compensation.
D. activity-based costing.
Billy Mac Tailor drives an eighteen-wheeler CG Carriers. He always stops at All Bright
truck stops to buy diesel fuel. He is a preferred customer and gets a free meal and
shower worth $10.00. But All Bright charges $12.00 more for a fill up than most
competitors. Which of the following is true?
A. CG Carriers gets a benefit of $22.00 because Tailor is a preferred customer.
B. CG Carriers has a wealth reduction of $2.00 even though they do not know about
Tailor’s actions.
C. There is a wealth transfer to Billy Mac Tailor and CG Carriers has a wealth reduction
of $12.00.
D. Billy Mac Tailor increases his income by $10.00 and CG Carriers also benefits.
Actions like entering a new market, pricing a new product, or making a bid to buy
another company are all useful Nash-like managerial decisions because they are
A. repeated often and the outcome depends on the coordination of decisions with rivals.
B. not repeated often and the outcome depends on the coordination of decisions with
rivals.
C. repeated often and the outcome depends on the simultaneous decisions of rivals.
D. not repeated often and the outcome depends on the simultaneous decisions of rivals.
In a monopolistically competitive market, the seller maximizes profits by
A. setting P = ATC.
B. setting MC = ATC.
C. setting price where MR = MC.
D. setting price where P = MC.
You can manufacture a product in the US and transfer it to Europe. If the marginal cost
(MC) is $3 per unit, and the market price in Europe is $5 per unit, should the product be
manufactured?
A. No, because the net receipt of $5 is larger than the MC in the US.
B. Yes, because the gross receipt of $3 is larger than the MC in the US.
C. No, because the net receipt of $3 is the same as the MC in the US.
D. Yes, because the net receipts in Europe will exceed the MC in the US.
An efficient allocation of risk among employees and owners must:
A. take into account that performance-based incentives are the sole important
component of an employee’s salary.
B. take into account that attitudes toward risk differ among different people.
C. recognize that employees have full control over their output.
D. recognize that pooling of risks is never appropriate.
A matrix organization is organized on the basis of:
A. functional areas of expertise.
B. geographic region.
C. product line.
D. both functional specialty and product line.