Question

A firm’s profits are more likely to __________ when manager compensation is linked to

the firm’s performance.

a. be unaffected

b. increase

c. decrease

d. increase, then decrease

e. None of the above.

An example of a downstream activity is:

a. aluminum foil production in relation to bauxite mining.

b. the production of computer-generated animated films in relation to their

presentation in theaters.

c. oil exploration and drilling in relation to the refining of home heating oil.

d. All of the above.

e. None of the above.

A rationale for merging horizontally is:

a. diversifying shareholder investment.

b. cross subsidization.

c. economies of scale.

d. access to internal capital markets.

e. All of the above.

A problem with a joint venture is:

a. firms lose control over proprietary information.

b. coordination problems between parent companies.

c. disputes must be resolved through the legal system.

d. Answers a and b are correct.

e. All of the above.

A firm’s architecture refers to:

a. its organizational structure and culture.

b. the design of its physical plant.

c. the way it is vertically integrated.

d. its supply chain.

e. None of the above.

Monopolistic competition is characterized by:

a. a relatively small number of firms.

b. difficult entry and exit conditions.

c. differentiated products.

d. pure price competition.

e. All of the above.

Oligopolies differ from monopoly in that:

a. oligopolies advertise and monopolies do not.

b. entry by new firms into an oligopoly is very easy while entry into a monopoly

is impossible.

c. oligopolies involve a few large firms and monopolies have only one firm.

d. oligopolies are best described as “price takers” while monopolies are best

described as “price makers.”

e. All of the above.

Answer 1

Answers- 1) B)Increase- The firms profit is very much likely to increase when mangers compensation is linked to firms performance because in order to increase own compensation the manager will motivate his/her team to deliever more which will eventually accelerate the firms performance.

2) A) Aluminum foil production in relation to bauxite mining- The production of aluminium foil from bauxite is a downstream activity as the aluminium foil produced is the end product of the bauxite minining.

3)D) All of the above- The horizantal merger facilitates diversifying shareholder investment, cross subsidization, economies of scale, access to internal capital markets.

4)D) Answers A and B are correct- When any company undergoes Joint venture with other firm then it may lose control over proprietary information and coordination problems between both companies might happen in early stages.

5)A)its organizational structure and culture - Firms architecture means its organizational structure and culture.

6)E) All of the above- Characterstics of monopolistic competition are a relatively small number of firms in the market,  difficult to entry and exit market conditions, differentiated products and pure price competition.

7)E) All of the above - All the characterstics in options states the correct diffrentiation betweeen monopoly and oligopoly.