BUS 10 multiple choice questions
While CEO of General Electric, Jack Welch, was a very successful corporate manager. He also loaded up his retirement program with numerous unusual benefits such as rented apartments, free airplanes, and numerous club memberships. The owners (stockholders) were generally unaware of these benefits. This conflict between owners and managers involved:
A choice of effort of Mr. Welch while he was CEO.
B perquisite taking on the part of Mr. Welch.
C differential risk exposure between Mr. Welch and the typical stockholder.
D overinvestment in company offices by Mr. Welch.
If consumers find that there are substantial transactions costs to purchasing a product, then:
A overall consumer demand is greater at each price.
B overall consumer demand is the same at each price.
C overall consumer demand is less at each price.
D equilibrium price and quantity both fall.
As opposed to corporate strategy, business strategy is focused on:
A cost control of fixed costs.
B demand management.
C the choice of industries in which to produce.
D the choice of how to compete with other firms in the industry.
Wal-Mart, like many companies in the new economy, uses a hub-and-spoke distribution system to:
A increase costs of stocking and inventory.
B change consumer attitudes toward warehouse shopping.
C shift consumer demand to the left.
D decrease costs of stocking and inventory.
Sealed bid construction contracts are examples of market games that are:
A simultaneous and non-repeated.
B simultaneous and repeated.
C sequential and non-repeated.
D sequential and repeated.
If transactions costs can be reduced in a marketplace, then total producer and consumer surplus will:
B stay the same.
D first increase and then decrease.
Negotiations and binding contracts are not possible between rivals in:
A noncooperative games.
B cooperative games.
D single firm monopolies.
J.T. Smith’s company, Gamemaker, sells gambling equipment to gaming service companies. Since the quality of the equipment is difficult to monitor and gamblers are often the source of machine failure, Smith could cheat on the level of machine quality. However, Smith has a strong quality assurance program. A primary reason for that may be:
A cost containment.
B company reputation.
C the need for reinforcement.
D the asymmetric information Smith holds on quality.
If two firms exist in the market, it is often expected that the Cournot (Nash) equilibrium will occur. If the firms have significant excess capacity, then it is likely that corporate strategy will emphasize:
A competition and high prices.
B competition and low prices.
C cooperation and low prices.
D cooperation and high prices.
Adverse selection in bargaining comes from:
A lying to one party or another.
B principals in the bargaining process.
C agents in the bargaining process.
D asymmetric information held by the principal or agent.
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