Econ 400 Midterm

Whole life would be sold by the insurance company's in-house sales force; term by an independent agent

According to the GHM Theory, the choice between an in-house sales force versus independent agents should turn on the relative importance of investments in developing persistent clients by the agent versus list-building activities by the insurance firm. What would GHM thus predict about the sales of whole life versus term life insurance?

Clinical Research

For what critical aspect of drug development has research (Azoulay & Henderson) shown that major drug houses have chosen tapered integration?

Minimizes the chance of stock-out

How does carrying inventories contribute to economies of scale?

Increases effectiveness of advertising due to offering a broad product line under one name

How does umbrella branding aid economies of scale and scope?

Widespread air transportation

How has Atlanta been able to grow as a center of commerce despite its poor water and rail connections?

Created seamless and instantaneous communications

How have late 20th and 21st century communications technologies directly created global markets from products and services?

Brokers

Matchmakers between manufacturers and sellers are called

Product innovation

The biotechnology industry is seeing a broad pattern of disintegration due to the fact that big pharma companies are less and less doing which of the following core functions?

The Property Rights Theory (PRT)

The concept of who gets to control resources, make decisions and allocate profits is known as:

Governance arrangements

The reduction of co-ordination and hold-up problems depends on:

When performance may be ambiguous or difficult to measure.

Under what circumstance would it be logical to leave contracts vague and open-ended?

Costs associated with slack effort and with the administrative controls to deter it

What are agency costs?

Economies of scale along a given route

What are economies of density as referred to in the airline industry?

The cost of activities aimed at affecting the distribution of benefits in an organization

What are influence costs?

Residual rights of control

What concept describes the situation where the owner of an asset grants another party the right to use that asset, but the owner retains all controlling rights that are not explicitly stipulated in the contract?

The activities the firm itself performs versus purchases from independent firms

What do the vertical boundaries of a firm refer to?

Produce raw materials and distribute finished goods on their own

What does it mean for a manufacturing firm to vertically integrate?

Ford

What firm is generally regarded as being the first to extensively use mass production processes?

Past circumstances could exclude certain possible governance arrangements in the future

What happens when the process by which governance develops exhibits path dependence?

Corporate governance

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?

The choice between reformulating strategies and reorganizing or using the technologies for incremental improvements

What is a key issue facing managers of the 2000s with respect to production technology?

To link profits to fluctuations in sales volume

What is the accounting concept inventory turnover as developed by Sears in the late 19th century?

.8

What is the approximate observed median learning curve slope for typical firms?

The minimum point on a U-shaped average cost curve

What is the minimum efficient scale (MES) of production?

The movement of inputs and outputs through a production process

What is throughput?

Short-run economies of scale

What kind of economies come from reductions in average costs due to increases in capacity utilization?

Relatedness

What measure, that depends on how much of a firm's 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?

Opening of the Erie Canal

What significant transportation event brought about the first significant growth of the Great Lakes region?

Design attributes

What term describes features that need to relate to each other in a precise fashion otherwise they lose a significant portion of their economic value?

Embedded ties

What term does Uzzi use to describe relationships characterized by trust and a willingness to exchange closely held information and work together to solve problems?

Joint venture

What type of strategic alliance involves two or more firms creating and together owning a new independent organization?

Infrastructure

What was a key contribution to the dominance of the family-run small business in 1840?

Shifting demand in the economy to "lighter" products

What was a key factor that aided foreign steel producers in penetrating U.S. markets?

Mass-production technology

What was the most significant development to the evolution of business circa 1910?

Contract law

When contracts are incomplete, what must be well defined and enforceable to allow for smooth transactions to occur?

Physical asset specificity

Which of the following asset specificity forms describes why glass container production requires molds custom tailored to particular container shapes and glass making machines?

Diversifying shareholder portfolios

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?

Identifying undervalued firms

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?

Double marginalization

Which of the following causes finished goods prices not to maximize the joint profits of a manufacturer and its supplier?

Tapered integration

Which of the following describes when a manufacturer produces some of an input quantity itself and purchases the remaining portion from independent firms?

Competition from European merchants

Which of the following did not contribute to the high transaction related risks for U.S. potato sales in 1840?

E

Which of the following features of transactions make those transactions excellent candidates for alliances? a)The transaction involves impediments to comprehensive contracting b)The transaction is complex, not routine. c)The transaction involves the creation of relationship-specific assets by both parties in the relationship, and each party to the transaction could hold up the other d)It is excessively costly for one party to develop all the necessary expertise to carry out all the activities itself e)All of these

Securities markets regulation

Which of the following government regulations on business conditions did not increase circa 1910?

Dealerships

Which of the following has a downstream relationship with a Toyota Motor Corporation?

It is an understanding between parties in a business relationship

Which of the following is a characteristic of an implicit contract?

The average cost declines as output increases

Which of the following is a characteristic of economies of scale?

Firms should buy, rather than make, in general, because market firms are subject to the discipline of the market and must be efficient and innovative to survive

Which of the following is a true argument regarding the make-or-buy decision process?

Changes to Japan's Large-Scale Retail Store Law requiring MITI approval

Which of the following is not a benefit that Toys "R" Us gained through its alliance with McDonald's Japan?

The contract allows for a party to exploit weaknesses in another party's position as the transaction unfolds

Which of the following is not a characteristic of a complete contract?

Upstream competitor acquires downstream competitor and refuses to buy from other suppliers

Which of the following is not a method a firm could use to force vertical foreclosure?

Charging higher prices to limit access to IP

Which of the following is not a method to protect intellectual property?

The cost of administrative expenses

Which of the following is not a product specific fixed cost?

The cost difference is positive for low and negative for high levels of specificity

Which of the following is true with regard to the difference in exchange costs between an item produced internally firm and an item purchased from an outside supplier through an arm's length market transaction as the level of asset specificity increases?

The systemization and circulation of credit information

Which of the following led to the development of the financial infrastructure pre- 1910?

Use of multiple types of planes

Which of the following practices does not contribute to the strategic fit of Southwest Airlines?

Arm's length market transactions

Which of the following processes is most representative of a less integrated firm on the "buy" end of the make-or-buy continuum?

Sequence fit

Which of the following types of fit (used to aide in coordination along all dimensions of production) explains a situation where the steps of a particular process must occur in a particular order?

They both require asset specificity and coordination

Why are the current health care systems on the rise being built around the integration of clinical information technology and disease management systems?

Ensures worker knowledge is tied to current employment

Why is firm specific learning better in general for an organization?

Worker turnover is generally lower

Why might a large firm actually be at an advantage over a smaller firm with respect to labor?