Question 1

The divorce of ownership and control tends to occur in

Accepted Answer

A)  partnerships. 
B)  co- operatives. 
C)  monopolies. 
D)  sole proprietors. 
E)  public limited companies. 
A)  partnerships. 
B)  co- operatives. 
C)  monopolies. 
D)  sole proprietors. 
E)  public limited companies. E

Question 2

What is a producer co- operative?

Accepted Answer

A producer co- operative refers to a firm that is owned by its workers. They will share in the firm's profits. A producer co- operative can be formed by people in the same trade or if workers buy out the factory from the original owners.

Question 3

If a business uses production sites in different countries to supply components, business economists call this an integrated international enterprise.

Accepted Answer

A) True 
 B)False  FALSE

Question 4

Transaction costs are

Accepted Answer

A)  the costs of making economic arrangements for production, distribution and sales. 
B)  taxes on sales revenues that firms are required to pay to the government. 
C)  commission charges paid to sales representatives. 
D)  none of the above 
A)  the costs of making economic arrangements for production, distribution and sales. 
B)  taxes on sales revenues that firms are required to pay to the government. 
C)  commission charges paid to sales representatives. 
D)  none of the above

Question 5

The traditional theory of the firm assumes that firms aim to

Accepted Answer

A)  maximise profits. 
B)  maximise sales revenue. 
C)  maximise utility. 
D)  minimise costs. 
A)  maximise profits. 
B)  maximise sales revenue. 
C)  maximise utility. 
D)  minimise costs.

Question 6

Which of the following decisions would you associate with a very cautious firm?

Accepted Answer

A)  Fast expansion 
B)  A quick decision- making process 
C)  Diversifying into new markets 
D)  Using tried and tested approaches 
A)  Fast expansion 
B)  A quick decision- making process 
C)  Diversifying into new markets 
D)  Using tried and tested approaches

Question 7

M- form organisational structures should give the most senior managers more time for overall strategic planning.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following are advantages of being a partnership as opposed to being a sole trader?

Accepted Answer

A)  Specialists, such as accountants can be brought in 
B)  Injection of extra capital 
C)  The partners are liable for the debts of the firm 
D)  Shared responsibility 
E)  All of the above F) None of the above 
A)  Specialists, such as accountants can be brought in 
B)  Injection of extra capital 
C)  The partners are liable for the debts of the firm 
D)  Shared responsibility 
E)  All of the above F) None of the above

Question 9

How can business owners attempt to reduce the principal- agent problem?

Accepted Answer

Owners can create incentives for agents

Question 10

The divorce of ownership and control causes a problem usually referred to by economists as

Accepted Answer

A)  adverse selection. 
B)  profit myopia. 
C)  moral hazard. 
D)  principal- agent problem. 
E)  merger mania. 
A)  adverse selection. 
B)  profit myopia. 
C)  moral hazard. 
D)  principal- agent problem. 
E)  merger mania.

Question 11

Asymmetric information refers to the fact that agents have superior knowledge and can, therefore, act against the interests of principals.

Accepted Answer

A) True 
 B)False

Question 12

According to R. Coase, the key advantage of organising production and distribution through firms rather than markets is that

Accepted Answer

A)  goods purchased in a free market are often sold at very high prices. 
B)  markets are subject to possible dishonesty. 
C)  it can involve lower transaction costs. 
D)  it allows the firm to grow. 
A)  goods purchased in a free market are often sold at very high prices. 
B)  markets are subject to possible dishonesty. 
C)  it can involve lower transaction costs. 
D)  it allows the firm to grow.

Question 13

Managers may not want to maximise profits because

Accepted Answer

A)  they may prefer to raise their salary at the expense of profits. 
B)  it may involve high risk decisions which could fail and bankrupt the company. 
C)  they are more interested in meeting society's needs 
D)  A and B 
A)  they may prefer to raise their salary at the expense of profits. 
B)  it may involve high risk decisions which could fail and bankrupt the company. 
C)  they are more interested in meeting society's needs 
D)  A and B

Question 14

The integrated international enterprise is an organisational structure where

Accepted Answer

A)  the business headquarters holds little equity investment in its subsidiaries. 
B)  the managing director makes independent decisions for all the subsidiaries of the company. 
C)  rather than pursuing independent business strategies, a company's international subsidiaries co- ordinate and integrate their activities in pursuit of shared corporate aims and objectives. 
D)  middle layers of management are cut out. 
A)  the business headquarters holds little equity investment in its subsidiaries. 
B)  the managing director makes independent decisions for all the subsidiaries of the company. 
C)  rather than pursuing independent business strategies, a company's international subsidiaries co- ordinate and integrate their activities in pursuit of shared corporate aims and objectives. 
D)  middle layers of management are cut out.

Question 15

If a business is owned by _________it is called a_________.

Accepted Answer

A)  customers; public limited company 
B)  shareholders; public corporation 
C)  two or more people; partnership 
D)  one person; co- operative 
A)  customers; public limited company 
B)  shareholders; public corporation 
C)  two or more people; partnership 
D)  one person; co- operative

Question 16

What are the advantages running a business as a partnership over a sole proprietorship?

Accepted Answer

A partnership allows more finance to be

Question 17

Bounded rationality refers to the inability of a manager to act in the owner's best interests.

Accepted Answer

A) True 
 B)False

Question 18

If a business holds interests in a number other companies or subsidiaries, business economists call this a holding company.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is not an advantage of being a sole trader?

Accepted Answer

A)  Easy to establish 
B)  Unlimited liability - losses borne by owner 
C)  Independence 
D)  You receive all of the profit 
A)  Easy to establish 
B)  Unlimited liability - losses borne by owner 
C)  Independence 
D)  You receive all of the profit

Question 20

The existence of transaction costs on an activity means that

Accepted Answer

A)  it will always be cost- effective to organise this activity within the firm. 
B)  banks are financially viable. 
C)  it may be preferable to organise the activity within the firm. 
D)  external contracts are a bad way of organising this business activity. 
A)  it will always be cost- effective to organise this activity within the firm. 
B)  banks are financially viable. 
C)  it may be preferable to organise the activity within the firm. 
D)  external contracts are a bad way of organising this business activity.

Exam 3: Business Organisations

The divorce of ownership and control tends to occur in

What is a producer co- operative?

If a business uses production sites in different countries to supply components, business economists call this an integrated international enterprise.

Transaction costs are

The traditional theory of the firm assumes that firms aim to

Which of the following decisions would you associate with a very cautious firm?

M- form organisational structures should give the most senior managers more time for overall strategic planning.

Which of the following are advantages of being a partnership as opposed to being a sole trader?

How can business owners attempt to reduce the principal- agent problem?

The divorce of ownership and control causes a problem usually referred to by economists as

Asymmetric information refers to the fact that agents have superior knowledge and can, therefore, act against the interests of principals.

According to R. Coase, the key advantage of organising production and distribution through firms rather than markets is that

Managers may not want to maximise profits because

The integrated international enterprise is an organisational structure where

If a business is owned by _________it is called a_________.

What are the advantages running a business as a partnership over a sole proprietorship?

Bounded rationality refers to the inability of a manager to act in the owner's best interests.

If a business holds interests in a number other companies or subsidiaries, business economists call this a holding company.

Which of the following is not an advantage of being a sole trader?

The existence of transaction costs on an activity means that

The Business Environment and Business Economics

Economics and the World of Business

The Working of Competitive Markets

Business in a Market Environment

Demand and the Consumer

Demand and the Firm

Products, Marketing and Advertising

Costs of Production

Revenue and Profit

Profit Maximisation Under Perfect Competition and Monopoly

Profit Maximisation Under Imperfect Competition

An Introduction to Business Strategy

Alternative Theories of the Firm

Growth Strategy

The Small-Firm Sector

Pricing Strategy

Labour Markets, Wages and Industrial Relations

Investment and the Employment of Capital

Reasons for Government Intervention in the Market

Government and the Firm

Government and the Market

Globalisation and Multinational Business

International Trade

Trading Blocs

The Macroeconomic Environment of Business

The Balance of Payments and Exchange Rates

Banking, Money and Interest Rates

Business Activity, Employment and Inflation

Demand-Side Policy

Supply-Side Policy

International Economic Policy

Filters

If a business is owned by _it is called a_.