Exam 14: Alternative Theories of the Firm

Behavioural theories of the firm suggest that managers will try to avoid conflict by agreeing targets between them, rather than setting them 'from the top down'.

Williamson argues that managers will pursue their own utility and maximise their job security, salary, prestige and professional status.

Which of the following will tend to lead to less organisational slack?

Sales maximisation is likely to take place in markets that are

Increasing profits will always be in a manager's best interests.

When comparing a growth- maximising firm with a short- run profit- maximising firm, which one of the following (in the short run) is likely for the growth- maximising firm?

Explain why a history between firms might lead to a firm deciding not to maximise profits.

Williamson suggests that managers might not try to achieve

The divorce of ownership and control tends to occur in

Theories that attempt to predict the actions of firms by studying the behaviour of various groups within the firm are usually called

It is claimed that growth through diversification is beneficial for a firm because it allows the spreading of risks. Explain why.

When economists say that firms have multiple targets, they mean that firms

Williamson argues that managers would often have the discretion to pursue their own interests and so would seek to maximise their own utility. Which one of the following was not said to be a feature of this situation?

Define organisational slack.

According to managerial theories of the firm, which of the following would not cause a managerial utility to increase?

The (profit- satisficing) sales revenue- maximising output will always be greater than the profit- maximising output.

Firms build in organisational slack in order to

Why does an unwanted take- over become more likely when a firm expands rapidly?

How could consumer welfare be influenced by firms satisficing?

The fact that firms may not maximise profits could be an indication of irrational behaviour.