Managing in Complex Environments Professor Robert Atkin FINAL EXAM 1 2 In this course we assume that firms are corporations with at least some concern with the creation of wealth a b false true B In the notes I provide detailed examples of change in the domestic airlines and banking industries Both of these are examples of the long run effect of B a diversification and focus c both of the above d none of the above b deregulation 3 Leapfrogging is commonly observed among providers of cell phones leading to the conclusion that some environments change more quickly than others bad a b false true 4 In market economies prices product mix and distribution decisions can be regulated by governments A a b false true 5 Extremely complex environments D increase the likelihood that existing firms fail increase the likelihood that existing firms find new growth opportunities increase the likelihood that new firms find new growth opportunities a b c d all of the above 6 Sole proprietorships B a are publicly traded their owners c have unlimited life 7 Positions in the firm C b convey unlimited liability to d none of the above a are deliberately structured sets of activities b are all charged with some type of responsibility c both of the above d none of the above 8 Using target return as a profitability objective is an example of C a a governance rule c satisficing b solving an agency problem d all of the above 9 Bureaucracies are effective in relatively unchanging environments A a true b false 10 The Balanced Scorecard is method to respond to B a new accounting obligations under the Sarbanes Oxley Act b c excessive executive compensation the existence of multiple performance criteria d all of the above 11 Over time money tends to grows in value B 2 a true b false 12 The multiple goals of a firm in a given industry tend to C a be similar to other firms in the same industry b be responsive to the interest of all stakeholders c change over time d all of the above 13 An exchange among parties freely entered and of benefit to each requires a high level of interpersonal trust among the parties a b false true B 14 One implication of the open system hypothesis is that a firm in order to assure long term survival and growth must engage in future transactions B a true b false 15 To start a firm the entrepreneur may require a loan In this situation the lender and the entrepreneur usually share transaction costs more or less equally a b false true B 16 Although accounting profit and economic profit are generally different this is usually not true for sole proprietorships because they are very small B a b false true 17 In this course we assume that the goals of the firm D reflect the best interests of the stockholders reflect the best interests of the senior managers of the firm a b c both of the above d none of the above 18 Stakeholders have incentives to influence the governance structures of the choice and relative importance of the goals of the firm firms because governance affects C a b how the profit stream of the firm is allocated c both of the above d none of the above 19 The dominant coalition in a sole proprietorship consists only of the owner of the firm true a b false B 20 In raw material markets firms can be D a buyers c third parties b sellers d all of the above 2 Purchase transactions always increase the firm s revenue B a true b false 21 The price system assumes that sellers have unique private information which gives them advantages over buyers B 3 a true b false 4 22 Since most markets in advanced economies are relatively stable most of the time D a firms generally have no incentive to product differentiate b firms generally have no incentive to increase productivity c both of the above d none of the above 23 Mature industries tend to become B a perfect competitions c monopolies determine 24 The cost of striking a contract D is typically borne by the buyer each other a b oligopolies d insufficient information to b is zero if both parties trust c both of the above d none of the above 25 Regulatory mechanisms may C increase cost to the seller a c both of the above b increase price to the buyer d none of the above 26 Early adopters tend to be the first firms to D a process enhance c diversify b product differentiate d none of the above 27 Focused firms are typically vertically integrated B a true b false 28 In class we considered the issue of the boundaries on an industry industries can be nested concluding that A a b backwards integration by rivals has no effect on competitive advantage c both of the above d none of the above within industries 29 Assume two industries In X costs to enter are low while in Y costs to exit are low Other things equal we can conclude D a X and Y are equally attractive b X is probably a perfect competition c Y is probably a perfect competition d none of the above 2 Assume we conduct a Porter type analysis on two industries A and B Both are in the early stages of the growth phase of the product life cycle In A we observe many fast second movers while in B we see none All other things equal the likely results of this analysis is that D a A is more attractive since second movers would not enter if it were not attractive b A is more attractive since demand is likely to be growing faster c B is more attractive since there is no evidence of branding effects d B is more attractive since there are apparently barriers to entry 5 30 If switching costs are high rivals have strong incentive to vertically integrate B true a b false 31 Assume you have the following information about an industry Demand is falling there is excess capacity exit costs are high customers are not brand loyal entry barriers are low supplier power is high and there is an abundance of attractively priced substitutes Given just this information our best guess is that A a b c both of the above the industry is currently unattractive the industry has always been unattractive d none of the above 32 The Porter model is particularly useful for analyzing C a stable oligopolies c both of the above b mature markets d none of the above 33 A firm s potential economic performance is dependent on C its unique competitive advantages the attractiveness of the industry in which it participates a b c both of the above d none of the above 34 The risk faced by a focused firm is that if one business of the firm has the firm s other businesses will probably also have problems problems D a b product differentiation is