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Mock exam 1Which of the following is a reason for a firm to buy rather than make?  Upstream firms aggregate the demands of many buyers and provide economies of scale.Suppose we have two firms (Firm 1 & Firm 2) enter into a transaction where Firm 1 is upstream of firm 2 in a vertical chain. What...

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Mock exam 1 Which of the following is a reason for a firm to buy rather than make?  Upstream firms aggregate the demands of many buyers and provide economies of scale. Suppose we have two firms (Firm 1 & Firm 2) enter into a transaction where Firm 1 is upstream of firm 2 in a vertical chain. What term best describes the organization of the transaction where Firm 1 owns the assets of Firm 2?  Forward integration What do the vertical boundaries of a firm refer to?  The activities the firm itself performs versus purchases from independent firms What empirical method generally is used to measure the degree to which products substitute for each other?  Cross-price elasticity What type of entry exists if structural entry barriers are low, and either (1) entry-deterring strategies will be ineffective or (2) the cost to the incumbent of trying to deter entry exceeds the benefits it could gain from keeping the entrant out?  Accommodated Entry Which of the following is the definition of “competitors?”  Firms whose strategic choices directly affect one another Which of the following best describes economies of scope?  Savings are achieved when a firm produces a wider variety of goods How does umbrella branding aid economies of scale and scope?  Increases effectiveness of advertising due to offering a broad product line under one name

Which of the following cost line items would be a fixed cost?  Rent Which of the following cost line items would be a variable cost?  Raw materials If TC(Q)=1000Q2+100Q+10, AC(Q)?  1000Q+100+10/Q

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Which of the following is a characteristic of economies of scale?  The average cost declines as output increases What are agency costs?  Costs associated with poor effort and with the administrative controls to deter it What are the two types of barriers to entry?  Structural and strategic The basic law of demand says that all other things being the same, _______________________.  The lower the price of a product, the more of it consumers will purchase

Mock exam 2 Which of the following terms refers to the practice whereby an incumbent firm discourages entry by charging a low price before entry occurs?  Limit pricing 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 Which of the following best describes marginal revenue?  Rate of change in total revenue that results from the sale of ΔQ additional units of output What type of firm is one that is already operating in a particular market?  Incumbent Suppose we have two firms (Firm 1 & Firm 2) enter into a transaction where Firm 1 is upstream of firm 2 in a vertical chain. What term best describes the organization of the transaction where Firm 2 owns the assets of Firm 1?  Backward Integration Which of the following is a true argument regarding the make-or-buy decision process?  None of the above, they are all make-or-buy fallacies Which of the following processes is most representative of a less integrated firm on the “buy” end of the make-orbuy continuum?  Length market transactions What is defined by the number and size distribution of the firms in a market?  Market structure Which of the following is not a product specific fixed cost  The cost of administrative expenses Which of the following asset specificity forms describes why glass container production requires molds custom tailored to particular container shapes and glass making machines?  Physical asset specificity What is a sunk cost?  A cost incurred no matter what the decision is and cannot be avoided

At what point can a firm achieve a profit maximizing quantity?  MR=MC Which of the following statements is true regarding the relationship between average and marginal cost functions?  When average cost neither increases or decreases (because it is constant or at a minimum point), marginal cost is equal to average cost Which of the following would be the range of elasticity for a product with an “elastic” demand?  η>1 What is a reason that companies might want to “buy” instead of “make” talent from the market when looking to acquire employees with a particular skill set?  Scale economies can result in fixed education costs while in house education methods may be more expensive...