Question

7. A newer theory of the corporation, based upon finance, is that the organization behaves in a way that is designed to maximize

1. number of jobs in their communities
2. profit (earnings)
3. total operating revenue from sales
4. market share
5. shareholder wealth maximization

8. Recent surveys of hundreds of CEOs have noted that most said the primary goal of their firm was to maximize

1. profit (earnings)
2. bonuses to senior managers
3. the well-being of a broad list of stakeholders including customers and the community
4. the financial value of the company (number of shares x share price)

9. An example of the “principal agent” problem is

1. hiring and listening to an expert who knows less than some current employees of the firm
2. outside experts are likely to disagree from one to another over any major decision
3. outside experts may be more interested in their own income than the company they are hired to serve
4. a contracting officer who tells hired experts in advance what conclusion their study should reach

10. An implicit cost often overlooked in Total Quality Management is

1. while mangers may do so, not all employees view the well-being of the organization as the same as their own well-being as highly related
2. recommending employees complete the job satisfactorily by putting in more of their own time is free to the firm but has an opportunity cost to the employees
3. many customers are swayed by lower price rather than higher quality
4. the “wow” factor and brand image imply that getting the product to market quickly is more important than solving minor quality problems.
5. Senior managers are likely to expect bonuses if the total quality management initiative works

11. The out of pocket costs of a firm are ________.

1. Sunk costs
2. Marginal costs
3. Explicit costs
4. Social costs

12. Under perfect competition, price is determined by the interaction of total demand and ________.

1. Total supply
2. Total cost
3. Total utility
4. Total production

Answer 1

ANS

Option E. Shareholder wealth maximization. The new theory of the corporation is based upon to maximize the shareholders wealth. This is the modern theory of corporate management, it tells that if teh corporate works efficiently then only the shareholders wealth can be maximized.

ANS

Option D. the financial value of the company (number of shares x share price. Certain studies have showed that the top level management put their focus on maximizing the financial value of the company as it benefits teh firm in the long run.

ANS

Option C. outside experts may be more interested in their own income than the company they are hired to serve. Is the example of pricipal agent problem as in this the problem arises due to conflict of interest between principal and agent involved.

ANS

Option D.The “wow” factor and brand image imply that getting the product to market quickly is more important than solving minor quality problems. The total quality management is about detecting and reducing the errors in manufacturing and production management. In this situation the implicit cost involved is that though TQM stands to reduce the errors and reducing the errors would take time but it is putting negative impact on consumers as they want goods and services at earliest.