A person buys a used 1998 Honda Civic and finds that there is a problem in the drive
train so that the whole set of axles must be replaced. However, the state has a law that
protects the buyer from these kinds of discoveries for 30 days post purchase. These
lemon laws attempt to correct the problem of:
A. monopoly power.
B. adverse selection.
C. resource over-utilization.
D. arbitrage.
The incentive problem within the modern corporation is that the:
A. decision makers have stronger incentives to use assets productively than in small
business where there is big separation of ownership and control.
B. decision makers have weaker incentives to use assets productively than in small
business where there is a big separation of ownership and control.
C. decision makers have stronger incentives to use assets productively than in small
business where there is no separation of ownership and control.
D. decision makers have weaker incentives to use assets productively than in small
business where there is no separation of ownership and control.
For benchmarking, the architecture of other firms should be viewed as:
A. competitive.
B. complements.
C. substitutes.
D. empowerment.
An improvement in product quality leads to an increase in a firm’s value by:
A. reducing inspection cost.
B. reducing the cost of raw materials.
C. reducing labor cost.
D. reducing the opportunity cost of production.
The prisoner’s dilemma and the problem of the cartel are very similar. In both cases,
A. cooperation would improve the outcome, but it rarely happens.
B. cooperation is the only solution.
C. noncooperation would improve the outcome, but it rarely happens.
D. noncooperation is an instable solution.
There is an increase in availability of alternative fuels through research and
development. Which of the following correctly captures the effect of this change on the
market for gasoline?
A. Both equilibrium quantity and price will increase.
B. Both equilibrium quantity and price will decrease.
C. Equilibrium quantity will increase, but equilibrium price will decrease.
D. Equilibrium quantity will decrease, but equilibrium price will increase.
Robert only consumes X and Y, and his indifference curves have the usual convex
shape. Consider the consumption bundles (3, 9), (6, 6), and (9, 3) (Hint: The
consumption bundles completely exhaust Robert’s income). If Robert is indifferent
between (3, 9) and (9, 3), then:
A. he prefers (3, 9) over (6, 6).
B. he prefers (9, 3) over (6, 6).
C. he prefers (6, 6) over both (3, 9) and (9, 3).
D. he prefers (6, 6) over (3, 9) but not over (9, 3).
Finding a way to create and capture value is part of
A. business strategy.
B. cost control systems.
C. management control, but not general management.
D. organizational structure.
Assume that the quantity of apples is measured on the horizontal axis and the quantity
of oranges is measured on the vertical axis. If the budget line rotates upward while
keeping the same horizontal intercept, it implies that
A. the price of apples has decreased.
B. the price of oranges has decreased.
C. the available income has increased.
D. the price of oranges has increased.
Identify a critical aspect of corporate organization.
A. the assignment of decision rights within a company
B. the cost structure of the firm
C. the pricing strategies of the rival firms
D. the capita to labor ratio
Which of the following is essential for the development and implementation of
strategies by a firm?
A. An understanding of the firm’s resources and capabilities
B. An understanding of the professional backgrounds of its managers
C. Investment in physical capital
D. A low tax rate
In the United States, incorporation occurs:
A. initially at the state level and then at the federal level, subject to state approval.
B. initially at the federal level and then at the state level, subject to federal approval.
C. at the federal level only.
D. at the state level only.
Hardware, software, and wetware refer to
A. fixed costs, variable costs, and liabilities.
B. financial resources, buildings, and overhead.
C. buildings, computers, and financial resources.
D. physical assets, “intangible” assets such as its advertising strategies, and human
resources.
A display of a game in a tree diagram with nodes for every move by the players is a(n)
A. part of strategic moves.
B. representation of Prisoner’s Dilemma.
C. simultaneous-move game.
D. extensive-form game.
Often people in business work in teams, each using specialized knowledge to get the
tasks done. If one member of the team does no work, this is called:
A. signaling
B. bargaining
C. free-riding.
D. costless contracting
The choice of transfer-pricing method:
A. merely reallocates total company profits among its smaller units.
B. does nothing to profits of sub-units.
C. merely reallocates total company profits among its bigger units.
D. affects the firm’s total profits.
Logrolling is the:
A. building of a coalition of individuals who support one another’s proposals.
B. art of marketing a business proposal with external resources.
C. process of changing the organizational architecture.
D. process of evaluating the performance of the top management.
The economic theory of regulation treats politicians as:
A. public-spirited individuals who work for public welfare.
B. corrupt individuals who sell contracts to the highest bidders.
C. self-interested individuals who benefit themselves by supplying legislation.
D. people who only represent the minority segment of the population.
A firm can capture value through market power or through superior factors of
production. The rent earned through the use of superior factors of production is
A. housing rent.
B. monopoly rent.
C. Ricardian rent.
D. Bushian rent.
J. L. Pratt noted of the old General Motors that, “When one of them had a project, why
he would get the vote of his fellow members, if they would vote for his project, he
would vote for theirs.” This is called:
A. logrolling.
B. hypertension.
C. reneging.
D. proposal marketing.
The general rule for profit maximization in a firm is to
A. set average cost at its minimum.
B. reduce fixed costs by expanding output.
C. maximize sales revenue.
D. set marginal revenue equal to marginal cost.
The text makes it clear that the management innovations of the 1980s and 1990s:
A. were almost all instant successes.
B. waxed and waned in use and popularity.
C. were indispensable for improving returns on business investments.
D. were creations of the press and were never implemented in business.
Which of the following can be used to predict the outcome of a game if there are no
dominant strategies in the game?
A. Secure strategy
B. Nash equilibrium
C. First-mover advantage
D. Prisoner’s dilemma
Which ONE of the following correctly expresses the elasticity formula for Edt?
A.
B.
C.
D.
We have two players, A and B, where A moves first and can go L or R, and B moves
next and can go T, B, or R. A moves again and can go L, R, or M. The payoffs are
decided after this. The best approach to solve such games is through
A. dominant strategies.
B. mixed strategies.
C. forward induction.
D. backward induction.
If a corporation operates two divisions that supply one another, and each division is
located in a different country, then transfer prices are:
A. set to allocate profit to the low tax rate country.
B. set to allocate all costs to the low tax rate country.
C. set to allocate profit to the high tax rate country.
D. not allowed between most countries.
The Occupational Safety and Health Administration (OSHA) is charged with enforcing
workplace safety regulations in the United States. Employees are not allowed to waive
these safety rights or to trade them off for higher salaries. That means the safety
standards are:
A. uniform globally.
B. inalienable.
C. negotiable.
D. transferable.
The movement of goods and resources within a corporation is done on the basis of:
A. market allocation.
B. administrative decisions.
C. technological innovation.
D. government regulation.
If a competitive firm can sell its product at $1,600 per unit and the marginal cost of the
firm is MC = 1,100 + 2Q, then the firm will produce
A. 1,084 units.
B. 250 units.
C. 160 units.
D. 1,100 units.
Kevin Freeman is the head of a team developing plastic knee replacements. Each
member of the team brings specialized knowledge to the innovation process. Without
both engineers and materials specialists, the project could not be successful. This is an
example of the:
A. benefits of the use of dispersed specific knowledge.
B. costs of employee buy-in.
C. costs of collective-action problems.
D. free-rider problem.
The shape of a perfectly elastic demand curve is
A. horizontal, Ed = infinity.
B. horizontal, Ed = 0.
C. horizontal, Ed = -1.
D. vertical, Ed = 0.
When a firm makes verbal promises about future working conditions, benefits and
raises, and promotions, it is offering a(n):
A. implicit labor contract.
B. explicit labor contract.
C. human capital contract.
D. compensating wage differential.
Just-in-time production and inventory control can result in:
A. a fall in inventories and an increase in efficiency.
B. excess inventories that mess up production schedules.
C. a lack of coordination between suppliers and retailers.
D. decreased risk bearing on the part of retailers.