Economics Of Strategy 7th Edition By David Dranove Test Bank

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Economics Of Strategy 7th Edition By David Dranove Test Bank

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WITH ANSWERS
Economics Of Strategy 7th Edition By David Dranove Test Bank

File: ch02, Chapter 2: Economies of Scale and Scope

 

 

 

Multiple Choice

 

 

 

  1. Which of the following is a characteristic of economies of scale?
  2. a) The average cost declines as output increases
  3. b) The average cost increases as output increases
  4. c) The average cost remains constant as output increases
  5. d) The average costs are cheaper when a firm produces a wider variety of goods
  6. e) The average cost curve takes the form of a U-shape

 

Ans: a

Heading: Economies of Scale and Scope Definition of Economies of Scale

Level: Easy

 

 

 

  1. What is the minimum efficient scale (MES) of production?
  2. a) The point on an average cost curve where the cost per unit begins to decline more rapidly
  3. b) The minimum point on a U-shaped average cost curve
  4. c) The minimum level of production at a plant for it to be considered profitable
  5. d) The level of production for a small sized plant
  6. e) The threshold at which capacity is constraining for a firms production

 

Ans: b

Heading: Economies of Scale and Scope Definition of Economies of Scale

Level: Medium

 

 

 

  1. Which of the following is generally a way that LBOs can help a firm realize its potential value?
  2. a) The synergies created allow for cost savings
  3. b) The transaction reduces the disparity between a firms actual and potential share price
  4. c) The acquisition reduces the likelihood of competition in the industry
  5. d) The transaction requires debt repayment with future free cash flow leaving management no discretion over the investment of these funds
  6. e) The buyout gives an opportunity to adjust the management structure and makeup

 

Ans: d

Heading: The Market for Corporate Control and Recent Changes in Corporate Governance

Level: Easy

 

 

 

  1. Which of the following best describes economies of scope?
  2. a) The average cost declines as output increases
  3. b) The average cost increases as output increases
  4. c) The average cost remains constant as output increases
  5. d) Savings are achieved when a firm produces a wider variety of goods
  6. e) Savings are achieved when a firm produces a decreased variety of goods

 

Ans: d

Heading: Economies of Scale and Scope Definition of Economies of Scope

Level: Easy

 

 

 

  1. What measure, that depends on how much of a firms revenues are attributable to product market activities that have shared technological characteristics, production characteristics, or distribution channels, is used to determine how diversified a firm is at a given time?
  2. a) Integration level
  3. b) Rumelt score
  4. c) Conglomerate level
  5. d) Activity share
  6. e) Relatedness

 

Ans: e

Heading: A Brief History

Level: Medium

 

 

 

  1. Which of the following is not a product specific fixed cost?
  2. a) The cost to manufacture a special die to make an aircraft fuselage
  3. b) The cost of developing graphics software to facilitate video game development
  4. c) The cost of a one-week training program preceding the implementation of a specific management initiative
  5. d) The time and expense required to set up a textbook before printing it
  6. e) The cost of administrative expenses

 

Ans: e

Heading: Where do Scale Economies Come From? Indivisibilities and the Spreading of Fixed Costs

Level: Medium

 

 

 

  1. What kind of economies come from reductions in cost due to adoption of technology that has high fixed costs, but lower variable costs?
  2. a) Short-run economies of scale
  3. b) Short-run economies of scope
  4. c) Long-run economies of scale
  5. d) Long-run economies of scope
  6. e) Partially automated economies

 

Ans: c

Heading: Where do Scale Economies Come From? Indivisibilities and the Spreading of Fixed Costs

Level: Hard

 

 

  1. Examining which of the following is broadly considered one of the easiest ways to measure diversifying activity?
  2. a) Joint Ventures
  3. b) Mergers and acquisitions
  4. c) Internal Business Development
  5. d) Strategic Alliances
  6. e) Collaborative agreements

 

Ans: b

Heading: A Brief History

Level: Medium

 

 

 

  1. What force does Manne indicate constrains the actions of managers so that they stay focused on the goals of owners?
  2. a) Market for corporate control
  3. b) SEC
  4. c) Corporate board
  5. d) Corporate governance
  6. e) CEO

 

Ans: a

Heading: Managerial Reasons for Diversification The Market for Corporate Control and Recent Changes in Corporate Governance

Level: Medium

 

 

 

  1. What kind of economies come from reductions in average costs due to increases in capacity utilization?
  2. a) Short-run economies of scale
  3. b) Short-run economies of scope
  4. c) Long-run economies of scale
  5. d) Long-run economies of scope
  6. e) Fully automated economies

 

Ans: a

Heading: Where do Scale Economies Come From? Indivisibilities and the Spreading of Fixed Costs

Level: Hard

 

 

 

  1. What are economies of density as referred to in the airline industry?
  2. a) Reducing the size of an aircraft used to increase load factor
  3. b) Economies achieved by an airline flying from spoke to spoke in a hub-and-spoke network
  4. c) Economies of scope along a given route
  5. d) Economies of scale along a given route
  6. e) Reductions in average cost as traffic volume decreases

 

Ans: d

Heading: Example 2.1 Hub-and-Spoke Networks and Economies of Scope in the Airline Industry

Level: Medium

 

 

 

  1. Which of the following is not generally a potential benefit of diversification?
  2. a) Control systems rewarding/penalizing division managers based on business unit objective
  3. b) Economies of scale and scope
  4. c) Economizing on transaction costs
  5. d) Diversifying shareholder portfolios
  6. e) Identifying undervalued firms

 

Ans: a

Heading: Why Do Firms Diversify? Efficiency Based Reasons for Diversification

Level: Easy

 

 

 

  1. Which of the following benefits of diversification explains the idea that mergers are more likely when there is an expectation of positive changes in market share?
  2. a) Use of internal capital markets
  3. b) Economies of scale and scope
  4. c) Economizing on transaction costs
  5. d) Diversifying shareholder portfolios
  6. e) Identifying undervalued firms

 

Ans: b

Heading: Why Do Firms Diversify? Efficiency Based Reasons for Diversification

Level: Medium

 

 

 

  1. How does carrying inventories contribute to economies of scale?
  2. a) Increases the interest on the expenses to produce the inventory
  3. b) Inventory depreciates in value while waiting to be used or sold
  4. c) Increases the storage facilities necessary
  5. d) Increases competition with rivals for customers
  6. e) Minimizes the chance of stock-out

 

Ans: e

Heading: Where do Scale Economies Come From? Inventories

Level: Medium

 

 

 

  1. Which of the following benefits of diversification explains the idea that combining unrelated businesses can allow firms to finance projects through cross-subsidization when they previously were unable to finance the same projects externally?
  2. a) Use of internal capital markets
  3. b) Economies of scale and scope
  4. c) Economizing on transaction costs
  5. d) Diversifying shareholder portfolios
  6. e) Identifying undervalued firms

 

Ans: c

Heading: Why Do Firms Diversify? Efficiency Based Reasons for Diversification

Level: Medium

 

 

 

  1. Which of the following is not a reason a supplier might seek to sell in bulk?
  2. a) Each sale incurs a fixed cost in writing a contract
  3. b) The purchaser is likely to switch over a small price due to the gains over the large number of units ordered
  4. c) Each sale involves setting up a different production run
  5. d) The cost of delivery is a fixed on a per unit basis
  6. e) The supplier fears uneven sales

 

Ans: c

Heading: Special Sources of Economies of Scale and Scope Economies of Scale and Scope in Purchasing

Level: Easy

 

 

 

  1. How does umbrella branding aid economies of scale and scope?
  2. a) Increases effectiveness of advertising due to a greater presence
  3. b) Increases effectiveness of advertising due to national advertising
  4. c) Increases effectiveness of advertising due to offering a broad product line under one name
  5. d) Increased cost effectiveness through purchasing as a cooperative
  6. e) Increased cost effectiveness through bulk purchasing

 

Ans: c

Heading: Special Sources of Economies of Scale and Scope Economies of Scale and Scope in Advertising

Level: Medium

 

 

 

  1. Which of the following benefits of diversification explains the idea that a firm with many business lines can reduce swings in value because it receives only a small percentage of its revenue from any one of those business lines?
  2. a) Use of internal capital markets
  3. b) Economies of scale and scope
  4. c) Economizing on transaction costs
  5. d) Diversifying shareholder portfolios
  6. e) Identifying undervalued firms

 

Ans: d

Heading: Why Do Firms Diversify? Efficiency Based Reasons for Diversification

Level: Easy

 

 

  1. Which of the following practices does not contribute to the strategic fit of Southwest Airlines?
  2. a) No in-flight catering
  3. b) Use of multiple types of planes
  4. c) No use of congested airports
  5. d) Re-engineered boarding process
  6. e) No first class section on plane

 

Ans: b

Heading: Special Sources of Economies of Scale and Scope Complementarities and Strategic Fit

Level: Easy

 

 

 

  1. What type of research looks at the changes in market valuations in response to the announcement of diversifying acquisitions to assess the success of diversification?
  2. a) Event studies
  3. b) Valuation studies
  4. c) Diversification studies
  5. d) Market studies
  6. e) Acquisition studies

 

Ans: a

Heading: Performance of Diversified Firms Valuation and Event Studies

Level: Hard

 

 

 

  1. Which of the following is a source of diseconomies of scale at a large firm?
  2. a) Labor costs
  3. b) Spreading specialized resources too thin
  4. c) Conflicts of interest
  5. d) Incentive processes
  6. e) All of the above

 

Ans: e

Heading: Sources of Diseconomies of Scale

Level: Easy

 

 

 

  1. Which of the following benefits of diversification explains the idea that corporate diversification can provide situations where an acquiring firm determines the stock price for firm they intend to acquire is too low?
  2. a) Use of internal capital markets
  3. b) Economies of scale and scope
  4. c) Economizing on transaction costs
  5. d) Diversifying shareholder portfolios
  6. e) Identifying undervalued firms

 

Ans: e

Heading: Why Do Firms Diversify? Efficiency Based Reasons for Diversification

Level: Easy

 

 

 

  1. Why might a large firm actually be at an advantage over a smaller firm with respect to labor?
  2. a) Large generally pay a compensating differential to attract workers
  3. b) Worker turnover is generally lower
  4. c) Large firms enjoy better scale economies when negotiating with health insurance companies for health benefits
  5. d) Large firms are generally less attractive to qualified, upward mobile workers
  6. e) Large firms often have to draw workers from a greater distance to fill their ranks

 

Ans: b

Heading: Sources of Diseconomies of Scale Labor Costs and Size

Level: Medium

 

 

 

  1. Which of the following is not a way managers generally benefit from acquisitions?
  2. a) Increased compensation
  3. b) Consolidation of other senior executives
  4. c) Shielding against risk
  5. d) Political power
  6. e) Social prominence

 

Ans: b

Heading: Managerial Reasons for Diversification Benefits to Managers from Acquisitions

Level: Medium

 

 

 

  1. What is the approximate observed median learning curve slope for typical firms?
  2. a) .6
  3. b) .7
  4. c) .8
  5. d) .9
  6. e) 1.0

 

Ans: c

Heading: The Learning Curve The Concept of the Learning Curve

Level: Hard

 

 

 

  1. Why is firm specific learning better in general for an organization?
  2. a) Encourages individuality among workers within the organization
  3. b) Keeps unionized workers happy
  4. c) Allows workers to acquire skills they can then shop around
  5. d) Ensures worker knowledge is tied to current employment
  6. e) Increases complexity and creativity in the organization

 

Ans: d

Heading: The Learning Curve Learning and Organization

Level: Medium

 

 

 

  1. What institution within a firm must fail on some level for managers to be motivated to acquire another firm for the purposes of increasing their own compensation, shielding themselves against risk, or gaining prominence by running a larger firm?
  2. a) Legal department
  3. b) Corporate board
  4. c) Mergers and acquisitions program
  5. d) Firm bonus schedule
  6. e) Corporate governance

 

Ans: e

Heading: Managerial Reasons for Diversification Problems with Corporate Governance

Level: Hard

 

 

 

  1. If a firm enjoys lower costs due to a complex labor-intensive process, which of the following statements would then be true?
  2. a) Cutbacks in volume will always raise unit costs
  3. b) The firm is unconcerned with labor turnover
  4. c) An example of this process could be the practice of anti-trust law
  5. d) The firms average cost rises due to moving down the learning curve
  6. e) The process is likely a repetitive manufacturing process such as two-piece aluminum can manufacturing

 

Ans: c

Heading: The Learning Curve The Learning Curve versus Economies of Scale

Level: Easy

 

 

  1. By satisfying which of the following conditions can shareholders prevent management driven acquisitions?
  2. a) If shareholders could determine which acquisitions will lead to increased profits and which will not
  3. b) If shareholders could direct management to undertake only those acquisitions that will increase shareholder value
  4. c) If shareholders could provide management with the appropriate steps to conduct when performing acquisitions
  5. d) a & b
  6. e) None of the above

 

Ans: d

Heading: Managerial Reasons for Diversification Problems with Corporate Governance

Level: Hard

 

Short Answer

 

 

 

  1. Suppose the cost of producing a 30 second commercial for television is $100,000. If airtime on the evening news costs $200,000 and is viewed by 5 million people, what is the advertising cost per potential customer?

 

Ans: $.06 per potential customer, or $6.00 per 1000 customers

Heading: Special Sources of Economies of Scale and Scope Economies of Scale and Scope in Advertising

Level: Medium

File: ch08, Chapter 8: Industry Analysis

 

 

 

Multiple Choice

 

 

 

  1. Which of the following is not a potential limitation of the five-forces framework?
  2. a) It pays little attention to factors that might affect demand
  3. b) It focuses on a whole industry rather than on individual firms that may occupy unique positions that insulate them from some competitive forces
  4. c) The framework does not explicitly account for the role of government, except when government is a supplier or buyer
  5. d) The framework provides a structured way to systematically work through wide-ranging and often complex issues
  6. e) The framework is a qualitative analysis method

 

Ans: d

Heading: Industry Analysis

Level: Easy

 

 

 

  1. Which of the following is not a part of the five-forces framework?
  2. a) Supplier Power
  3. b) Internal rivalry
  4. c) Regulation
  5. d) Buyer Power
  6. e) Substitutes and Complements

 

Ans: c

Heading: Performing a Five-Forces Analysis

Level: Easy

 

 

 

  1. Which of the following best describes the term, internal rivalry?
  2. a) Divisions competing within a firm for resources
  3. b) Differing product lines from one manufacturer competing
  4. c) Firms jockeying for share within a market.
  5. d) Firms competing for resources to produce goods
  6. e) Suppliers dividing factors between competing firms

 

Ans: c

Heading: Performing a Five-Forces Analysis Internal Rivalry

Level: Easy

 

 

 

 

  1. Which of the following conditions does not tend to heat up price competition?
  2. a) Many sellers in the market
  3. b) Products are differentiated/buyers have high switching costs
  4. c) Some firms have excess capacity
  5. d) The industry is stagnant or declining
  6. e) There are large/infrequent sales orders

 

Ans: b

Heading: Performing a Five-Forces Analysis Internal Rivalry

Level: Hard

 

 

 

  1. In which of the following ways can entry erode incumbents profits?
  2. a) Entrants divide market demand among fewer sellers
  3. b) Entrants decrease market concentration
  4. c) Entrants usually grow the market for all parties
  5. d) Entrants increase market concentration
  6. e) Entrants reduce internal rivalry

 

Ans: b

Heading: Performing a Five-Forces Analysis Entry

Level: Hard

 

 

 

  1. Which of the following does not tend to affect the threat of entry?
  2. a) Expectations about pre-entry competition
  3. b) Government protection of incumbents
  4. c) Consumers highly valuable reputation/consumers are brand loyal
  5. d) Experience curve
  6. e) Network externalities

 

Ans: a

Heading: Performing a Five-Forces Analysis Entry

Level: Hard

 

 

 

  1. Which of following factors should be considered when assessing complements and substitutes?
  2. a) Availability of close substitutes and/or complements
  3. b) Price-value characteristics of substitutes/complements
  4. c) Price elasticity of industry demand
  5. d) All of the above
  6. e) None of the above

 

Ans: d

Heading: Performing a Five-Forces Analysis Substitutes and Complements

Level: Medium

 

 

  1. Substitutes erode profits because of which of the following factor?
  2. a) Substitutes compete for similar inputs driving up production costs
  3. b) Substitutes divide demand and drive up internal rivalry
  4. c) Firms producing substitutes use similar worker skills dividing the labor pool
  5. d) Manufacturers of substitutes enter markets later and have lower sunk costs
  6. e) None of the above

 

Ans: b

Heading: Performing a Five-Forces Analysis Substitutes and Complements

Level: Medium

 

 

 

 

  1. Why are suppliers in a competitive upstream market said to have indirect power?
  2. a) They can sell their services to the lowest bidder
  3. b) They are always concentrated
  4. c) Their customers are always locked into relationships with them
  5. d) The price they charge never depends on supply and demand in the upstream market
  6. e) The can sell their services to the highest bidder

 

Ans: e

Heading: Performing a Five-Forces Analysis Supplier Power and Buyer Power

Level: Hard

 

 

 

  1. What term refers to the ability of individual customers to negotiate purchase prices that extract profits from sellers?
  2. a) Substitutes and Complements
  3. b) Competition
  4. c) Customer power
  5. d) Seller power
  6. e) Buyer power

 

Ans: e

Heading: Performing a Five-Forces Analysis Supplier Power and Buyer Power

Level: Easy

 

 

 

  1. Which of the following factors requires the least consideration when assessing supplier power relative to the downstream industry it sells to?
  2. a) Competitiveness of the output market
  3. b) Purchase volume of downstream firms
  4. c) Availability of substitute inputs
  5. d) Threat of forward integration by suppliers
  6. e) Ability of suppliers to price discriminate

 

Ans: a

Heading: Performing a Five-Forces Analysis Supplier Power and Buyer Power

Level: Hard

 

 

 

  1. What concept developed by Brandenburger and Nalebuff as a counterpart to Porters five-forces consists of suppliers, customers, competitors and complementors?
  2. a) McKinsey 7-S Framework
  3. b) Value net
  4. c) BCG Market Share Matrix
  5. d) 6 Cs of Marketing
  6. e) 4 Ps of Marketing

 

Ans: b

Heading: Coopetition and the Value Net

Level: Easy

 

 

 

  1. Which of the following is not a component of the Value Net?
  2. a) Suppliers
  3. b) Customers
  4. c) Competitors
  5. d) Supplementors
  6. e) Complementors

 

Ans: d

Heading: Coopetition and the Value Net

Level: Easy

 

 

 

  1. Which of the following is not a factor that could intensify internal rivalry in the Chicago hospital market?
  2. a) Relatively large number of hospitals
  3. b) Considerable variation in production costs
  4. c) Relatively small number of doctors
  5. d) Excess capacity
  6. e) Aging baby boomers increasing demand for admissions

 

Ans: c

Heading: Applying the Five Forces: Some Industry Analysis Chicago Hospital Markets Then and Now

Level: Medium

 

 

 

  1. Which of the following is not a feature of selective contracting (used by Managed Care Organizations) that intensified internal rivalry?
  2. a) Had infrequent (contract lengths of two to three years) and lumpy (one insurer may have represented over 5% of a hospitals business) sales
  3. b) Treated all hospitals as identical
  4. c) Kept price negotiations between insurers and hospitals secret, encouraging hospitals to lower prices to win contracts
  5. d) Contracted with hospitals that patients were most loyal to
  6. e) Created pressure for hospitals to win each individual contract with no thought of future consequences

 

Ans: d

Heading: Applying the Five Forces: Some Industry Analysis Chicago Hospital Markets Then and Now

Level: Medium

 

 

 

  1. Which of the following trends or methods has since helped reduce the pricing rivalry that had intensified by the late 1990s?
  2. a) Patients began accepting MCOs with narrow networks and MCOs had the upper hand in negotiating with hospitals for inclusion in networks
  3. b) Hospitals removed brand identities
  4. c) Hospitals dropped centers of excellence from their hospitals
  5. d) Hospitals consolidating away from related products
  6. e) Hospitals consolidated (conducted mergers)

 

Ans: e

Heading: Applying the Five Forces: Some Industry Analysis Chicago Hospital Markets Then and Now

Level: Medium

 

 

 

  1. What type of entrant would be described as a new entrant with no current brand identity, distribution channels or presence within an industry?
  2. a) Fast follower
  3. b) Passive
  4. c) Aggressive
  5. d) Innovator
  6. e) De novo

 

Ans: e

Heading: Applying the Five Forces: Some Industry Analysis Chicago Hospital Markets Then and Now

Level: Easy

 

 

 

  1. Which of the following is generally thought of as a buyer in the hospital industry?
  2. a) Pharmaceutical drug houses
  3. b) Medical equipment companies
  4. c) Technician
  5. d) Patients
  6. e) Nurse

 

Ans: d

Heading: Applying the Five Forces: Some Industry Analysis Chicago Hospital Markets Then and Now

Level: Easy

 

 

 

  1. Which of the following is generally thought of as a supplier in the hospital industry?
  2. a) Medicaid
  3. b) Admitting physicians
  4. c) Hospital-based physician
  5. d) Patients
  6. e) Medicare

 

Ans: c

Heading: Applying the Five Forces: Some Industry Analysis Chicago Hospital Markets Then and Now

Level: Easy

 

 

 

  1. Which of the following is true about hospital industry profits from 1980 to 2000 and a five forces analysis?
  2. a) Virtually every factor caused profits to increase
  3. b) Virtually every factor caused profits to decrease
  4. c) Most factors are not applicable to the industry
  5. d) The Value Net cannot be used to evaluate the industry
  6. e) None of t he above

 

Ans: b

Heading: Applying the Five Forces: Some Industry Analysis Chicago Hospital Markets Then and Now

Level: Easy

 

 

 

  1. Which of the following is a trend that Chicago area hospitals should least likely be worried about with respect to pricing?
  2. a) The FTC recently won an antitrust case that forced the members of the Evanston Northwestern Healthcare system to negotiate independently with insurers
  3. b) There has been considerable consolidation (hospital mergers) in regional submarkets, including the city of Chicago and the important North Shore suburbs
  4. c) Employers are asking employees to bear more of their own health care costs. At the same time some employers are reconsidering the decision to opt for wide, but costly MCO networks
  5. d) If regulatory barriers fall, entry by specialty hospitals in wealthier communities could skim off some of the areas most profitable patients
  6. e) Employers, payers, regulators and patients are demanding and getting more information about hospital quality

 

Ans: b

Heading: Applying the Five Forces: Some Industry Analysis Chicago Hospital Markets Then and Now

Level: Hard

 

 

 

  1. How did European governments help Airbus aggressively pursue a 50% market share in its early years of operation?
  2. a) Subsidies
  3. b) High-interest loans
  4. c) Helping to ensure scope economies from military aircraft division
  5. d) Paying in excess of cost for military aircraft
  6. e) Guaranteeing a set level of annual aircraft purchases

 

Ans: a

Heading: Applying the Five Forces: Some Industry Analysis Commercial Airframe Manufacturing

Level: Medium

 

 

 

  1. Which of the following is not a significant entry barrier in the commercial airframe manufacturing market?
  2. a) High development costs
  3. b) Learning curve in production
  4. c) Raw materials and labor
  5. d) Airlines prefer to purchase from the same manufacturer
  6. e) Airlines are reluctant to purchase from startups

 

Ans: c

Heading: Applying the Five Forces: Some Industry Analysis Commercial Airframe Manufacturing Level: Hard

 

 

 

  1. Which of the following is the most likely substitute for commercial aircraft travel between Chicago and Tokyo?
  2. a) Bicycle
  3. b) Teleconferencing
  4. c) Automobile
  5. d) Commuter train
  6. e) Walking

 

Ans: b

Heading: Applying the Five Forces: Some Industry Analysis Commercial Airframe Manufacturing Level: Easy

 

 

 

  1. What entity as a supplier has the most substantial power over manufacturers in the commercial aircraft market?
  2. a) Raw materials suppliers
  3. b) Airlines
  4. c) Aircraft leasing companies
  5. d) Unions
  6. e) Passengers

 

Ans: d

Heading: Applying the Five Forces: Some Industry Analysis Commercial Airframe Manufacturing Level: Medium

 

 

 

  1. Which of the following is not a way teams collude within professional sports markets?
  2. a) Agreeing on ticket prices
  3. b) Agreeing on rules and schedules
  4. c) Employing the same pool of referees
  5. d) Sharing national broadcast revenues
  6. e) Agreeing on rookie drafts

 

Ans: a

Heading: Applying the Five Forces: Some Industry Analysis Professional Sports

Level: Medium

 

 

 

  1. Which of the following is not a barrier to entry in professional sports markets?
  2. a) Each league has rules governing the addition of new franchises
  3. b) Potential new owners must pay current owners hundreds of millions of dollars
  4. c) Most potential owners must offer to build new stadiums
  5. d) Incumbent teams have rights to veto franchises in their own geographic markets
  6. e) Because the number of potential billionaire owners has risen dramatically, the purchase prices have dropped

 

Ans: e

Heading: Applying the Five Forces: Some Industry Analysis Professional Sports

Level: Easy

 

 

 

  1. What professional sports complement poses the biggest dilemma?
  2. a) Cheerleaders
  3. b) Mascots
  4. c) Gambling
  5. d) Television
  6. e) Radio

 

Ans: c

Heading: Applying the Five Forces: Some Industry Analysis Professional Sports

Level: Easy

 

 

 

  1. Which of the following is a complement to professional sports?
  2. a) Merchandise sales
  3. b) Gambling
  4. c) Luxury Boxes at stadiums
  5. d) Food and beverage sales
  6. e) None of the above

 

Ans: b

Heading: Applying the Five Forces: Some Industry Analysis Professional Sports

Level: Easy

  1. Who are the most powerful suppliers in professional sports?
  2. a) Players unions
  3. b) Referees
  4. c) Owners
  5. d) Politicians
  6. e) Cities

 

Ans: a

Heading: Applying the Five Forces: Some Industry Analysis Professional Sports

Level: Medium

 

File: ch14, Chapter 14: Environment, Power, and Culture

 

 

 

Multiple Choice

 

 

 

  1. Which of the following is an example of informal regulations with respect to a firms social context?
  2. a) Contracting
  3. b) Employment practices
  4. c) Pricing
  5. d) Entry-deterring behaviors
  6. e) Cultural norms

 

Ans: e

Heading: The Social Context of Firm Behavior

Level: Easy

 

 

 

  1. Which of the following is the most visible example of a firms social context?
  2. a) Employment practices
  3. b) Contracting
  4. c) Regulation
  5. d) Entry-deterring behaviors
  6. e) Formal controls

 

Ans: c

Heading: The Social Context of Firm Behavior

Level: Easy

 

 

 

  1. What aspect(s) of internal context are important in situations of chronic goal conflict?
  2. a) Formal authority
  3. b) Formal controls
  4. c) Contracts
  5. d) Power and culture
  6. e) Exclusive dealings

 

Ans: d

Heading: Internal Context

Level: Easy

 

 

 

  1. Which of the following terms best describes an individual actors ability to accomplish his or her goals by using resources obtained through noncontractual exchange relationships?
  2. a) Power
  3. b) Authority
  4. c) Culture
  5. d) Influence
  6. e) Contracts

 

Ans: a

Heading: Power

Level: Easy

 

 

 

  1. What term best describes exchanges of goods, services, or promises on terms that take place outside of traditional economic markets and are not enforceable in court?
  2. a) Handshake agreement
  3. b) Noncontractual exchange relationship
  4. c) Internal context
  5. d) External context
  6. e) Exclusive dealing

 

Ans: b

Heading: Power

Level: Medium

 

 

 

  1. Which of the following terms best describes ability that stems from the explicit contractual decision-making and dispute-resolution rights that a firm (or some other source) grants to an individual?
  2. a) Power
  3. b) Authority
  4. c) Culture
  5. d) Influence
  6. e) Contracts

 

Ans: b

Heading: Power

Level: Medium

 

 

 

  1. Which of the following terms best refers to the exercise or use of power in a given situation by an individual?
  2. a) Control
  3. b) Authority
  4. c) Culture
  5. d) Influence
  6. e) Contracts

 

Ans: d

Heading: Power

Level: Hard

 

 

 

  1. What is the source from which a person derives legitimate or formal power?
  2. a) Due to status
  3. b) Possession of specialized knowledge
  4. c) Ability to punish
  5. d) Ability to grant rewards
  6. e) Position within a hierarchy

 

Ans: e

Heading: Power The Sources of Power

Level: Easy

 

 

 

  1. Which of the following refers to when a firm with a patent uses its market power to set a high price cost margin?
  2. a) Cost power
  3. b) Pricing power
  4. c) Legal power
  5. d) Limiting power
  6. e) Structural power

 

Ans: b

Heading: Power The Sources of Power

Level: Easy

 

 

 

  1. What does Chester Barnard mean when he uses the term zone of indifference?
  2. a) The set of issues over which the powerful individual with formal authority usually prevails
  3. b) The set of issues over which the powerful individual with reputation usually prevails
  4. c) The set of issues over which the powerful individual with knowledge usually prevails
  5. d) The set of issues over which the powerful individual with influence usually prevails
  6. e) The set of issues over which the powerful individual with image usually prevails

 

Ans: a

Heading: Power The Sources of Power

Level: Hard

 

 

 

  1. Which of the following terms best describes a transfer between two or more parties or resources, or rights to control resources, which occurs outside the terms of a market context?
  2. a) Power exchange
  3. b) Social exchange
  4. c) Authority exchange
  5. d) Knowledge exchange
  6. e) Formal exchanges

 

Ans: b

Heading: Power The Sources of Power

Level: Medium

 

 

 

 

12.Individuals and firms that seek to gain power by reducing dependence on other actors while increasing the dependence of others on themselves are creating which of the following?

  1. a) Implicit dependence
  2. b) Explicit dependence
  3. c) Resource dependence
  4. d) Formal Dependence
  5. e) Absolute dependence

 

Ans: c

Heading: Power The Sources of Power

Level: Medium

 

 

 

 

  1. What term does Ronald Burt use to describe relationships in social networks in which one actor is the critical link between individuals or entire groups of actors?
  2. a) Mavens
  3. b) Nodes
  4. c) Structural holes
  5. d) Tertius gaudens
  6. e) Brokers

 

Ans: c

Heading: Power Structural Views of Power

Level: Medium

 

 

 

  1. What term does Ronald Burt use to describe a valued relationship between two unconnected parties with a strategy involving spanning a structural hole and bargaining with parties on either side for the most favorable terms?
  2. a) Mavens
  3. b) Nodes
  4. c) Second who benefits
  5. d) Tertius gaudens
  6. e) Brokers

 

Ans: c

Heading: Power Structural Views of Power

Level: Medium

 

 

 

  1. Which of the following is least true with regard to presidential power?
  2. a) Presidential power is the ability to influence the people who make and implement government policies
  3. b) Presidential power only consists of the president taking direct action on some front
  4. c) The bargaining advantage that comes with the presidential office enables the president to persuade others to work in his interest
  5. d) A source of presidential power is professional reputation, which comprises the expectations of professional politicians, bureaucrats, and others in the political community regarding the presidents power and his willingness to use it
  6. e) The presidents prestige among the public is a source of presidential power

 

Ans: b

Heading: Example 14.1 The Sources of Presidential Power

Level: Medium

 

 

 

 

  1. Which one of the following terms describes relationships in social networks in which one actor is the critical link between individuals or entire groups?
  2. a) Structural hole
  3. b) Missing link
  4. c) Social connection
  5. d) Network connection
  6. e) Network link

 

Ans: a

Heading: Power Structural Views of Power

Level: Easy

 

 

 

  1. Which of the following statements is least true regarding the accumulation of power?
  2. a) The accumulation of power is helpful when there are high agency costs in coordinating among managers and lower-level workers
  3. b) The accumulation of power is helpful when the firms environment is relatively stable
  4. c) The accumulation of power is harmful when there are high agency costs in coordinating among levels of upper management
  5. d) The accumulation of power is harmful when the firms environment is relatively unstable
  6. e) The major purpose of corporate governance is not to reign in the accumulation of power by CEOs

 

Ans: c

Heading: Power Do Successful Organizations Need Powerful Managers?

Level: Medium

 

 

 

  1. Which of the following was not one of the power bases that Francis Jack Reith used to push the development of the 1957 Ford Mercury?
  2. a) He was a dynamic and charismatic leader
  3. b) He was intelligent and effective at persuading others
  4. c) He had a track record of success
  5. d) He had position power
  6. e) He threatened punishment to anyone who opposed the idea

 

Ans: e

Heading: Example 18.2 Power and Poor Performance: The Case of the 1957 Mercury

Level: Easy

 

 

 

  1. What term best describes a set of values, beliefs, and norms of behavior shared by a firms members that influence employee preferences and behaviors?
  2. a) Codes
  3. b) Routines
  4. c) Culture
  5. d) Influence
  6. e) Mind-sets

 

Ans: c

Heading: Culture

Level: Easy

 

 

 

  1. 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?
  2. a) Culture should be imitable
  3. b) Culture must be valuable for the firm
  4. 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
  5. d) If factors of a firms 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
  6. e) Something about the firms culture and values must be linked to the value the firm creates for customers

 

Ans: a

Heading: Culture Culture and Performance

Level: Medium

 

 

 

  1. Which of the following statements is least true regarding how culture can serve as a control within organizations?
  2. a) Culture controls the activities of employees on the basis of monitoring rather than firm attachment
  3. b) Individuals who value belonging to the culture will align their individual goals and behaviors to those of the firm
  4. c) The efficiency of culture as a control can be attributed in part to individuals controlling themselves
  5. d) The efficiency of culture as a control can be attributed in part to monitoring costs being reduced
  6. e) The efficiency of culture as a control can be attributed in part to opportunism being held to a minimum

 

Ans: a

Heading: Market Structure and Competition

Level: Medium

 

 

 

  1. What does Andrew Pettigrew identify to be the key issue that plagued Imperial Chemical Industries that stymied the organizational adaptation that was necessary to keep it successful in the 1970s?
  2. a) Contracts
  3. b) Cultural inertia
  4. c) Pricing
  5. d) Entry-deterring behaviors
  6. e) Employment practices

 

Ans: b

Heading: Example 14.4 Corporate Culture and Inertia at ICI

Level: Hard

 

 

 

  1. Which of the following is true about culture?
  2. a) Culture increases agency costs
  3. b) Culture reduces bargaining costs
  4. c) Culture reduces transactions costs
  5. d) Culture increases economic costs
  6. e) culture has no effect on costs

 

Ans: b

Heading: Culture Increases Cooperation and Reduces Bargaining Costs

Level: Medium

 

 

 

  1. What does Gary Miller identify as the focus for actors around which a consensus can form within an organization?
  2. a) Contracts
  3. b) Incentives
  4. c) Formal controls
  5. d) Norms and Social conventions (culture)
  6. e) Exclusive deals

 

Ans: d

Heading: Culture Culture and Performance

Level: Easy

 

 

 

  1. Which of the following statements is least true regarding institutions?
  2. a) Institutions can involve formal regulation of firms by governmental agencies
  3. b) Institutions can involve formal regulation of firms by nongovernmental regulatory organizations
  4. c) Institutions can be less formal and involve ongoing power/dependence relationships between firms
  5. d) Institutional arrangements may embody general patterns of values, beliefs, ad behavioral norms that motivate and stabilize affected firms
  6. e) None of the above

 

Ans: e

Heading: External Content, Institutions, and Strategies

Level: Medium

 

 

 

  1. Which of the following statements is least true regarding the costs that regulation imposes on firms?
  2. a) Regulation costs include lower prices for goods that consumers pay
  3. b) Regulation costs include costs of compliance
  4. c) Regulation costs include increased business costs due to noncompliance
  5. d) Regulation costs include the costs of strategic options that must be forgone because of regulations
  6. e) Regulation costs include potential distortions to a market that may result from the imperfections of a given regulatory regime

 

Ans: a

Heading: External Content, Institutions, and Strategies Institutions and Regulation

Level: Medium

 

 

 

  1. Which of the following is not a way firms suffering from dependence relationships can take action to reduce their dependence on buyers or suppliers?
  2. a) Vertical integration
  3. b) Using a monopolist buyer/supplier
  4. c) Long-term contracting
  5. d) Joint ventures
  6. e) Alliances

 

Ans: b

Heading: External Content, Institutions, and Strategies Interfirm Resource-Dependence Relationships

Level: Easy

 

 

 

  1. What technique did Google use to preserve its evil-free culture when going public with an initial public offering in 2004?
  2. a) Used an IPO underwriter
  3. b) Allow clients to purchase underpriced IPO shares
  4. c) Used a Dutch auction
  5. d) Committed to sell a certain number of shares at a set price
  6. e) Drastically underpriced its shares (by 200%)

 

Ans: c

Heading: Example 18.5 Preserving Culture in the Face of Growth: The Google IPO

Level: Medium

 

 

 

  1. What term best refers to interrelated beliefs, values, material practices, and norms of behavior that exist in an industry at any given time?
  2. a) Institutional elements
  3. b) Institutional standards
  4. c) Institutional influences
  5. d) Institutional logics
  6. e) Institutional ideas

 

Ans: d

Heading: External Content, Institutions, and Strategies Institutional Logics: Beliefs, Values, and Behavioral Norms

Level: Hard

 

 

 

  1. Which of the following is most true regarding the strategic value of institutional logics?
  2. a) When institutional logics are stable, they have the most strategic importance
  3. b) Institutional logics are coveted by firms (not taken for granted)
  4. c) If firms share an institutional logic, the logic provides a basis for relative advantage among firms
  5. d) Institutional logics are valuable because they raise the costs for firms adapting to their environments
  6. e) Competitive advantage must come on some other dimension than institutional logic if firms share that institutional logic

 

Ans: e

Heading: External Content, Institutions, and Strategies Institutional Logics: Beliefs, Values, and Behavioral Norms

Level: Hard

 

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