Managerial Economics Test 1 Review
What is the approximate observed median learning curve slope for typical firms?
0.8
Matchmakers between manufacturers and sellers are called:
Brokers
Which of the following is NOT a source of diseconomies of scale at a large firm?
Capital intensive production processes
Which of the following is NOT a reason a supplier might seek to sell in bulk?
Each sale involves setting up a different production run
Why is firm specific learning better in general for an organization?
Ensures worker knowledge is tied to current employment
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?
Event studies
Which of the following encouraged firms to develop through internal R&D (research and development) rather than through M&A (mergers and acquisitions) in the 20th century?
Federal antitrust policies
What was one of the first plant/factory types to use the "American System" of manufacturing?
Firearms
What firm is generally regarded as being the first to extensively use mass production processes?
Ford
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?
Identifying undervalued firms
By satisfying which of the following conditions can shareholders prevent management driven acquisitions?
If shareholders could determine which acquisitions will lead to increased profits and which will not
What was a key contribution to the dominance of the family-run small business in 1840?
Infrastructure
What was the major role of private banks in the early 1800s?
Issue credit
According to the Besanko textbook, what was the most significant development to the evolution of business around time of 1910?
Mass-production technology
Examining which of the following is broadly considered one of the easiest ways to measure diversifying activity?
Mergers and acquisitions
What significant transportation event brought about the first significant growth of the Great Lakes region?
Opening of the Erie Canal
What caused the market conditions facing the telephone to be uncertain until the 1880's?
Patent conflicts
What was a key factor that aided foreign steel producers in penetrating U.S. markets?
Shifting demand in the economy to "lighter" products
Which of the following led to overbuilding of railroads in the 1860's and 1870's?
The availability of financing due to public optimism
What is the minimum efficient scale (MES) of production?
The minimum point on a U-shaped average cost curve
Which of the following practices does NOT contribute to the strategic fit of Southwest Airlines?
Use of multiple types of planes
Why might a large firm actually be at an advantage over a smaller firm with respect to labor?
Worker turnover is generally lower
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?
$.06 per potential customer, or $60.00 per 1000 customers
Which of the following did NOT contribute to the high transaction related risks for U.S. potato sales in 1840?
Competition from European merchants
Which of the following is NOT a way managers generally benefit from acquisitions?
Consolidation of other senior executives
Which of the following is NOT generally a potential benefit of diversification?
Control systems rewarding/penalizing division managers based on business unit objective
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?
Corporate governance
How have late 20th and 21st century communications technologies directly created global markets from products and services?
Created seamless and instantaneous communications
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 revenues from an one of those business lines?
Diversifying shareholder portfolios
What are the economies of density as referred to in the airline industry?
Economies of scale along a given route
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?
Economies of scale and scope
How does umbrella branding aid economies of scale and scope?
Increases effectiveness of advertising due to offering a broad product line under one name
What kind of economies come from reductions in cost due to adoption of technology that has high fixed costs, but lower variable costs?
Long-run economies of scale
What is a benefit of alliances and joint ventures over mergers and acquisitions?
Lower likelihood of antitrust scrutiny
What force does Henry Manne indicate constrains the actions of managers so that they stay focused on the goals of the owners
Market for corporate control
How does carrying inventories contribute to economies of scale?
Minimizes the change of stock-out
What economics game theory concept is demonstrated by the Erie Canal public works project?
Prisoner's dilemma
What does it mean for a manufacturing firm to vertically integrate?
Produce raw materials and distribute finished goods on their own
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?
Relatedness
What is the gaizhi process?
Restructuring whereby small firms are leased or sold
Which of the following best describes economies of scope?
Savings are achieved when a firm produces a wider variety of goods
Which of the following government regulations on business conditions did NOT increase around the time 1910?
Securities markets regulation
What forms of communication was integral to the growth of multistory headquarter buildings?
Telephone
What mode of long-distance communication first laid the groundwork for today's modern communication forms?
Telephone
What caused railway transportation to remain the primary transportation source over trucking until World War II?
The U.S. did not have an interstate highway system
Which of the following facets of modern financial infrastructure came as a result of deregulation in the 1970s and 1980s?
The availability of large investment funds facilitating M&A (mergers and acquisitions) to flourish
Which of the following is a characteristic of economies of scale?
The average cost declines as output increases
What is a key issue facing managers of the 2000s with respect to production technology?
The choice between reformulating strategies and reorganizing or using the technologies for incremental improvements
Which of the following is not a product specific fixed cost?
The cost of administrative expenses
What is throughput?
The movement of inputs and outputs through a production process
Which of the following led to the development of the financial infrastructure pre-1910?
The systemization and circulation of credit information
Which of the following is generally a way that LBOs (leveraged buyouts) can help a firm realize its potential value?
The transaction requires debt repayment with future free cash flow leaving management no discretion over the investment of these funds
A firm produces two products, gasoline and plastic. The firm produces x units of gasoline, and y units of plastic. The production technology displays the following costs, TC is the total cost function: TC (x = 0, y = 50) = 100 TC (x = 0, y = 100) = 210 TC (x = 5, y = 0) = 150 TC (x = 10, y = 0) = 320 TC (x = 5, y = 50) = 240 TC (x = 10, y = 100) = 500 Which of the following is true?
This production function displays economies of scope, but does not have increasing returns to scale for gasoline or plastic.
What is the accounting concept inventory turnover as developed by Sears in the late 19th century?
To link profits to fluctuations in sales volume
What significant government infrastructure project led to the development of national stock and commodity markets?
Transcontinental Railroad
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?
Use of internal capital markets
How was Atlanta been able to grow as a center of commerce despite its poor water and rail connections?
Widespread air transportation
Relaxing of government regulation of economic activities occurred during the second half of the 20th century for all of the following EXCEPT:
Workplace safety