Question 1

To gain market share a firm should

Accepted Answer

A) maximize marginal revenue. 
B) maximize profit. 
C) maximize revenue. 
D) minimize marginal cost. 
A) maximize marginal revenue. 
B) maximize profit. 
C) maximize revenue. 
D) minimize marginal cost. C

Question 2

Business executives are more honest that other groups because

Accepted Answer

A) they serve customers. 
B) they serve the market. 
C) they are regulated. 
D) because they want to earn accounting profits. 
A) they serve customers. 
B) they serve the market. 
C) they are regulated. 
D) because they want to earn accounting profits. A

Question 3

To protect economic profits

Accepted Answer

A) a firm should try to acquire a barrier to entry. 
B) a firm should limit substitutes. 
C) a firm should have a patent if possible. 
D) all of these choices. 
A) a firm should try to acquire a barrier to entry. 
B) a firm should limit substitutes. 
C) a firm should have a patent if possible. 
D) all of these choices. D

Question 4

Suppressed technologies

Accepted Answer

A) is what lead to the development of internet search engines. 
B) means that price controls are needed for corporate control. 
C) means that new inventions always are introduced by entrepreneurs. 
D) means that firms often hide threatening new inventions. 
A) is what lead to the development of internet search engines. 
B) means that price controls are needed for corporate control. 
C) means that new inventions always are introduced by entrepreneurs. 
D) means that firms often hide threatening new inventions.

Question 5

When a firm acquires another,

Accepted Answer

A) the acquired firm suffers a winner's curse. 
B) the acquiring firm may suffer a winner's curse. 
C) neither firm suffers from a winner's curse. 
D) a winner's curse only applies if a patent is lost. 
A) the acquired firm suffers a winner's curse. 
B) the acquiring firm may suffer a winner's curse. 
C) neither firm suffers from a winner's curse. 
D) a winner's curse only applies if a patent is lost.

Question 6

Diversified companies show above average performance because risk is better managed.

Accepted Answer

A) True 
 B)False

Question 7

The market for corporate takeovers

Accepted Answer

A) helps disciplines the behavior of CEOs. 
B) forces CEOs to focus on market share. 
C) had nothing to do with the monitoring of CEO behavior. 
D) is not efficient. 
A) helps disciplines the behavior of CEOs. 
B) forces CEOs to focus on market share. 
C) had nothing to do with the monitoring of CEO behavior. 
D) is not efficient.

Question 8

The tournament effect

Accepted Answer

A) may help explain why CEO are highly paid. 
B) why most golfers are below average. 
C) explains why the behavior of total revenue often patterns lottery sales. 
D) may help explain why CEOs are generally viewed as dishonest by the public. 
A) may help explain why CEO are highly paid. 
B) why most golfers are below average. 
C) explains why the behavior of total revenue often patterns lottery sales. 
D) may help explain why CEOs are generally viewed as dishonest by the public.

Question 9

In a cash acquisition

Accepted Answer

A) cash is transferred from one firm to another. 
B) the acquired firm must issue new stock. 
C) the acquiring firm buys stock. 
D) the acquiring firm buys the acquired firm's bonds. 
A) cash is transferred from one firm to another. 
B) the acquired firm must issue new stock. 
C) the acquiring firm buys stock. 
D) the acquiring firm buys the acquired firm's bonds.

Question 10

A firm must stress market share to be successful.

Accepted Answer

A) True 
 B)False

Question 11

Globalization raises the standard of living of all countries.

Accepted Answer

A) True 
 B)False

Question 12

The performance of diversified companies

Accepted Answer

A) is always greater than the performance of more narrowly focused firms. 
B) can be seen in greater economic profits. 
C) usually is greater than the overall economy. 
D) often simply mirrors the general economy. 
A) is always greater than the performance of more narrowly focused firms. 
B) can be seen in greater economic profits. 
C) usually is greater than the overall economy. 
D) often simply mirrors the general economy.

Question 13

To maximize total revenue

Accepted Answer

A) should produce where MR=MC. 
B) should produce where MR=P. 
C) a firm should produce where MR=0. 
D) should produce where P=ATC. 
A) should produce where MR=MC. 
B) should produce where MR=P. 
C) a firm should produce where MR=0. 
D) should produce where P=ATC.

Question 14

Market power and market concentration

Accepted Answer

A) are directly related. 
B) are indirectly related. 
C) are inversely related. 
D) are not related. 
A) are directly related. 
B) are indirectly related. 
C) are inversely related. 
D) are not related.

Question 15

Studies show that

Accepted Answer

A) mergers create considerable shareholder value. 
B) mergers lead to economic profit. 
C) mergers generally do not create shareholder value. 
D) 'dogs' and 'cash cow' do not need to be merged. 
A) mergers create considerable shareholder value. 
B) mergers lead to economic profit. 
C) mergers generally do not create shareholder value. 
D) 'dogs' and 'cash cow' do not need to be merged.

Question 16

CEOs must create value for shareholders to be successful.

Accepted Answer

A) True 
 B)False

Question 17

To gain market share

Accepted Answer

A) a firm needs to be in a competitive market. 
B) a firm needs to limit substitutes. 
C) a firm needs to produce a commodity. 
D) a firm needs to be a substitute for other products 
A) a firm needs to be in a competitive market. 
B) a firm needs to limit substitutes. 
C) a firm needs to produce a commodity. 
D) a firm needs to be a substitute for other products

Question 18

Diversification makes sense as a business strategy if it

Accepted Answer

A) creates job security for workers. 
B) creates value for stockholders. 
C) creates accounting profits. 
D) creates greater market share. 
A) creates job security for workers. 
B) creates value for stockholders. 
C) creates accounting profits. 
D) creates greater market share.

Question 19

Studies show that business executives are generally more dishonest than the average professional.

Accepted Answer

A) True 
 B)False

Question 20

Mergers often do not lead to value creation.

Accepted Answer

A) True 
 B)False

Exam 21: Strategy Myths

To gain market share a firm should

Business executives are more honest that other groups because

To protect economic profits

Suppressed technologies

When a firm acquires another,

Diversified companies show above average performance because risk is better managed.

The market for corporate takeovers

The tournament effect

In a cash acquisition

A firm must stress market share to be successful.

Globalization raises the standard of living of all countries.

The performance of diversified companies

To maximize total revenue

Market power and market concentration

Studies show that

CEOs must create value for shareholders to be successful.

To gain market share

Diversification makes sense as a business strategy if it

Studies show that business executives are generally more dishonest than the average professional.

Mergers often do not lead to value creation.

Economics and Management

The Power of Markets and the Wealth of Nations

Spontaneous Order, Markets, and Market Failure

Spontaneous Order and the Firm

Organization of the Firm

Market Failures and Incentive Issues Inside the Firm

When Other Firms Dont Respond

When Other Firms React

The Entrepreneur and the Market Process

Strategies With Respect to Government

What Should the Firm Do

Demand and Revenue Management

Costs

The Mechanics of Profit Maximization

Pricing

The Knowledge Economy

The Corporate Form and the Cost of Capital

Internal Markets

Measuring Economic Profit

The Firm in a National and a Global Setting

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