Question 1

All of the following are true regarding a long- term contract between an upstream firm and a downstream firm except which one?

Accepted Answer

A) The downstream firm can incur opportunity costs. 
B) Both firms have increased flexibility. 
C) The upstream firm can incur opportunity costs. 
D) Changes in market conditions can impose new costs to either firm. 
A) The downstream firm can incur opportunity costs. 
B) Both firms have increased flexibility. 
C) The upstream firm can incur opportunity costs. 
D) Changes in market conditions can impose new costs to either firm.

Question 2

If a German firm owns a U.S.- based firm that is domiciled in the U.S., the combined firm is subject to the corporate tax laws in _______ and income tax laws in _______.

Accepted Answer

A) U.S.; U.S. 
B) Germany; U.S. 
C) U.S.; Germany 
D) Germany; Germany 
A) U.S.; U.S. 
B) Germany; U.S. 
C) U.S.; Germany 
D) Germany; Germany

Question 3

In general, if two stages in a supply chain are making an economic profit by setting prices that exceed their marginal cost of production, managers can increase profit through vertical integration.

Accepted Answer

A) True 
 B)False

Question 4

If Slick Shades, a sunglasses manufacturer, merges with Best Lens, a lens manufacturer, and the combined firm is able to reduce the number of human resource departments from two to one, the merger created _ _______.

Accepted Answer

A) technological interdependencies 
B) synergies 
C) a hold- up problem 
D) managerial diseconomies 
A) technological interdependencies 
B) synergies 
C) a hold- up problem 
D) managerial diseconomies

Question 5

All of the following are true if both the upstream and downstream firm have market power except which one?

Accepted Answer

A) This situation is referred to as double marginalization. 
B) Both the upstream firm and the downstream firm set a price that exceeds their respective marginal costs. 
C) If the two firms were to merge, the combined firm would earn the same profit than if they did not merge. 
D) This situation is referred to as a successive monopoly. 
A) This situation is referred to as double marginalization. 
B) Both the upstream firm and the downstream firm set a price that exceeds their respective marginal costs. 
C) If the two firms were to merge, the combined firm would earn the same profit than if they did not merge. 
D) This situation is referred to as a successive monopoly.

Question 6

If the vertical integration between two firms creates greater managerial diseconomies than cost savings, the merger will increase the combined firm's overall costs.

Accepted Answer

A) True 
 B)False

Question 7

If a merger allows managers to reduce duplicate operations, the merger ______.

Accepted Answer

A) eliminated the hold- up problem 
B) created synergies 
C) created managerial diseconomies 
D) created technological interdependencies 
A) eliminated the hold- up problem 
B) created synergies 
C) created managerial diseconomies 
D) created technological interdependencies

Question 8

Vertical integration can reduce transaction costs through all of the following ways except which one?

Accepted Answer

A) decreasing search cost 
B) increasing the complexity of coordination 
C) increasing information and control 
D) decreasing the incentive for litigation 
A) decreasing search cost 
B) increasing the complexity of coordination 
C) increasing information and control 
D) decreasing the incentive for litigation

Question 9

If a monopoly firm sells to competitive distributors and the distributors have a constant marginal cost of $2 and they are paying the profit- maximizing wholesale price of $8, what is the retail price of the product?

Accepted Answer

A) $10 
B) $2 
C) $6 
D) $8 
A) $10 
B) $2 
C) $6 
D) $8

Question 10

The manager of Slick Lens, a sunglasses manufacturer, notices that the cost to purchase lenses for their sunglasses in the spot market has fallen. As a result of the change, which of the following is true?

Accepted Answer

A) The manager has less of an incentive to integrate forward. 
B) The manager has more of an incentive to integrate forward. 
C) The manager has less of an incentive to integrate backward. 
D) The manager has more of an incentive to integrate backward. 
A) The manager has less of an incentive to integrate forward. 
B) The manager has more of an incentive to integrate forward. 
C) The manager has less of an incentive to integrate backward. 
D) The manager has more of an incentive to integrate backward.

Question 11

If Happy Cows, a dairy firm, merges with Best Cartons, a manufacturer of dairy cartons, and the combined firm is able to reduce the number of executive managers, the merger created______ .

Accepted Answer

A) managerial diseconomies 
B) technological interdependencies 
C) a hold- up problem 
D) synergies 
A) managerial diseconomies 
B) technological interdependencies 
C) a hold- up problem 
D) synergies

Question 12

If production technological interdependency exists, the______ integration of the successive production stages______ production costs.

Accepted Answer

A) vertical; can reduce 
B) horizontal; can reduce 
C) horizontal; doubles 
D) vertical; increases 
A) vertical; can reduce 
B) horizontal; can reduce 
C) horizontal; doubles 
D) vertical; increases

Question 13

If a firm has a monopoly in both the production and distribution of a product and the managers of both the production and distribution divisions maximize profits, all of the following are true except which one?

Accepted Answer

A) A successive monopoly will occur within the firm. 
B) Double marginalization will occur within the firm. 
C) The firm will maximize its total profit. 
D) The firm will not earn the maximum total profit. 
A) A successive monopoly will occur within the firm. 
B) Double marginalization will occur within the firm. 
C) The firm will maximize its total profit. 
D) The firm will not earn the maximum total profit.

Question 14

Vertical integration can lower firms' costs through each of the following except which one?

Accepted Answer

A) lowering transaction costs 
B) accommodating technological interdependencies 
C) creating synergies 
D) creating managerial diseconomies 
A) lowering transaction costs 
B) accommodating technological interdependencies 
C) creating synergies 
D) creating managerial diseconomies

Question 15

If a monopoly firm sells to competitive distributors, all of the following are true regarding the demand for the monopoly's product except which one?

Accepted Answer

A) It is the wholesale demand. 
B) It is the consumers' market demand. 
C) It is the distributors' demand. 
D) It is a derived demand. 
A) It is the wholesale demand. 
B) It is the consumers' market demand. 
C) It is the distributors' demand. 
D) It is a derived demand.

Question 16

If a monopoly firm sells to competitive distributors and the distributors have a constant marginal cost of $4 and they are charging the profit- maximizing retail price of $12, what is wholesale price of the product?

Accepted Answer

A) $8 
B) $16 
C) $12 
D) $4 
A) $8 
B) $16 
C) $12 
D) $4

Question 17

If Mario's Pizza, a large frozen pizza distributor, builds a tomato sauce plant near Red Tomatoes, a large tomato farm, to reduce the costs of transporting fresh tomatoes, the tomato sauce plant is a(n)______ .

Accepted Answer

A) negotiation cost 
B) information asset 
C) transaction- specific asset 
D) monitoring cost 
A) negotiation cost 
B) information asset 
C) transaction- specific asset 
D) monitoring cost

Question 18

The manager of Steel Works learns of a new technological interdependency between the intermediate stage and the final stage of production. If Steel Works currently contracts with another firm for the intermediate stage of production, which of the following is true?

Accepted Answer

A) The manager has less of an incentive to integrate backward. 
B) The manager has more of an incentive to integrate forward. 
C) The manager has more of an incentive to integrate backward. 
D) The manager has less of an incentive to integrate forward. 
A) The manager has less of an incentive to integrate backward. 
B) The manager has more of an incentive to integrate forward. 
C) The manager has more of an incentive to integrate backward. 
D) The manager has less of an incentive to integrate forward.

Question 19

Slick Shades has a constant marginal cost of production equal to $80 and the distributors have a constant marginal cost of distribution equal to $30. If Slick Shades is producing the profit- maximizing number of sunglasses (in hundreds), what is the profit- maximizing wholesale price?

Accepted Answer

A) $120 
B) $150 
C) $140 
D) $160 
A) $120 
B) $150 
C) $140 
D) $160

Question 20

If Slick Shades, a sunglasses manufacturer, has a contract with Best Lens, a lens manufacturer, to supply lenses needed to make the sunglasses, and the managers of the two firms both paid lawyers' fees to prepare the contract, the lawyer fees are considered to be a(n)______cost.

Accepted Answer

A) information 
B) negotiation 
C) monitoring 
D) enforcement 
A) information 
B) negotiation 
C) monitoring 
D) enforcement

All of the following are true regarding a long- term contract between an upstream firm and a downstream firm except which one?

If a German firm owns a U.S.- based firm that is domiciled in the U.S., the combined firm is subject to the corporate tax laws in _ and income tax laws in _.

In general, if two stages in a supply chain are making an economic profit by setting prices that exceed their marginal cost of production, managers can increase profit through vertical integration.

If Slick Shades, a sunglasses manufacturer, merges with Best Lens, a lens manufacturer, and the combined firm is able to reduce the number of human resource departments from two to one, the merger created _ _______.

All of the following are true if both the upstream and downstream firm have market power except which one?

If the vertical integration between two firms creates greater managerial diseconomies than cost savings, the merger will increase the combined firm's overall costs.

If a merger allows managers to reduce duplicate operations, the merger ______.

Vertical integration can reduce transaction costs through all of the following ways except which one?

If a monopoly firm sells to competitive distributors and the distributors have a constant marginal cost of $2 and they are paying the profit- maximizing wholesale price of $8, what is the retail price of the product?

The manager of Slick Lens, a sunglasses manufacturer, notices that the cost to purchase lenses for their sunglasses in the spot market has fallen. As a result of the change, which of the following is true?

If Happy Cows, a dairy firm, merges with Best Cartons, a manufacturer of dairy cartons, and the combined firm is able to reduce the number of executive managers, the merger created______ .

If production technological interdependency exists, the integration of the successive production stages production costs.

If a firm has a monopoly in both the production and distribution of a product and the managers of both the production and distribution divisions maximize profits, all of the following are true except which one?

Vertical integration can lower firms' costs through each of the following except which one?

If a monopoly firm sells to competitive distributors, all of the following are true regarding the demand for the monopoly's product except which one?

If a monopoly firm sells to competitive distributors and the distributors have a constant marginal cost of $4 and they are charging the profit- maximizing retail price of $12, what is wholesale price of the product?

If Mario's Pizza, a large frozen pizza distributor, builds a tomato sauce plant near Red Tomatoes, a large tomato farm, to reduce the costs of transporting fresh tomatoes, the tomato sauce plant is a(n)______ .

The manager of Steel Works learns of a new technological interdependency between the intermediate stage and the final stage of production. If Steel Works currently contracts with another firm for the intermediate stage of production, which of the following is true?

Slick Shades has a constant marginal cost of production equal to $80 and the distributors have a constant marginal cost of distribution equal to $30. If Slick Shades is producing the profit- maximizing number of sunglasses (in hundreds), what is the profit- maximizing wholesale price?

If Slick Shades, a sunglasses manufacturer, has a contract with Best Lens, a lens manufacturer, to supply lenses needed to make the sunglasses, and the managers of the two firms both paid lawyers' fees to prepare the contract, the lawyer fees are considered to be a(n)______cost.

Managerial Economics and Decision Making

Demand and Supply

Measuring and Using Demand

Production and Costs

Perfect Competition

Monopoly and Monopolistic Competition

Cartels and Oligopoly

Game Theory and Oligopoly

A Managers Guide to Antitrust Policy

Advanced Pricing Decisions

Decisions About Production, Products, and Location

Marketing Decisions: Advertising and Promotion

Business Decisions Under Uncertainty

Managerial Decisions About Information

Using Present Value to Make Multi-Period Managerial Decisions

Filters

Exam 11: Decisions About Vertical Integration and Distribution

All of the following are true regarding a long- term contract between an upstream firm and a downstream firm except which one?

If a German firm owns a U.S.- based firm that is domiciled in the U.S., the combined firm is subject to the corporate tax laws in _______ and income tax laws in _______.

In general, if two stages in a supply chain are making an economic profit by setting prices that exceed their marginal cost of production, managers can increase profit through vertical integration.

If Slick Shades, a sunglasses manufacturer, merges with Best Lens, a lens manufacturer, and the combined firm is able to reduce the number of human resource departments from two to one, the merger created _ _______.

All of the following are true if both the upstream and downstream firm have market power except which one?

If the vertical integration between two firms creates greater managerial diseconomies than cost savings, the merger will increase the combined firm's overall costs.

If a merger allows managers to reduce duplicate operations, the merger ______.

Vertical integration can reduce transaction costs through all of the following ways except which one?

If a monopoly firm sells to competitive distributors and the distributors have a constant marginal cost of $2 and they are paying the profit- maximizing wholesale price of $8, what is the retail price of the product?

The manager of Slick Lens, a sunglasses manufacturer, notices that the cost to purchase lenses for their sunglasses in the spot market has fallen. As a result of the change, which of the following is true?

If Happy Cows, a dairy firm, merges with Best Cartons, a manufacturer of dairy cartons, and the combined firm is able to reduce the number of executive managers, the merger created______ .

If production technological interdependency exists, the______ integration of the successive production stages______ production costs.

If a firm has a monopoly in both the production and distribution of a product and the managers of both the production and distribution divisions maximize profits, all of the following are true except which one?

Vertical integration can lower firms' costs through each of the following except which one?

If a monopoly firm sells to competitive distributors, all of the following are true regarding the demand for the monopoly's product except which one?

If a monopoly firm sells to competitive distributors and the distributors have a constant marginal cost of $4 and they are charging the profit- maximizing retail price of $12, what is wholesale price of the product?

If Mario's Pizza, a large frozen pizza distributor, builds a tomato sauce plant near Red Tomatoes, a large tomato farm, to reduce the costs of transporting fresh tomatoes, the tomato sauce plant is a(n)______ .

The manager of Steel Works learns of a new technological interdependency between the intermediate stage and the final stage of production. If Steel Works currently contracts with another firm for the intermediate stage of production, which of the following is true?

Slick Shades has a constant marginal cost of production equal to $80 and the distributors have a constant marginal cost of distribution equal to $30. If Slick Shades is producing the profit- maximizing number of sunglasses (in hundreds), what is the profit- maximizing wholesale price?

If Slick Shades, a sunglasses manufacturer, has a contract with Best Lens, a lens manufacturer, to supply lenses needed to make the sunglasses, and the managers of the two firms both paid lawyers' fees to prepare the contract, the lawyer fees are considered to be a(n)______cost.

Managerial Economics and Decision Making

Demand and Supply

Measuring and Using Demand

Production and Costs

Perfect Competition

Monopoly and Monopolistic Competition

Cartels and Oligopoly

Game Theory and Oligopoly

A Managers Guide to Antitrust Policy

Advanced Pricing Decisions

Decisions About Production, Products, and Location

Marketing Decisions: Advertising and Promotion

Business Decisions Under Uncertainty

Managerial Decisions About Information

Using Present Value to Make Multi-Period Managerial Decisions

Filters

If a German firm owns a U.S.- based firm that is domiciled in the U.S., the combined firm is subject to the corporate tax laws in _ and income tax laws in _.

If production technological interdependency exists, the integration of the successive production stages production costs.