Deck 15: The World of the Large Corporation

Question 1

Which is NOT a form of corporate linkage?

A)management control
B)bank ownership of firms
C)commercial subcontracting
D)interlocking directorates
E)industrial subcontracting

Answer 1

A

Question 2

Which of the following is a public concern about corporate power?

A)That they will impose race quotas on all jobs.
B)That they will fail to create enough wealth for shareholders.
C)That they exercise concentrated political power.
D)That they are overly sensitive to radical environmentalists.
E)That they are indifferent to legislation that might affect the national economy.

Answer 2

C

Question 3

How are targets identified for corporate merger?
I technological compatibility
II shifting consumer preferences
III desire to control resources critical to the acquiring company's survival
IV appraisal by financial experts as a "good buy"

A)I and II
B)I, II, and IV
C)II, III, and IV
D)I, II, and III
E)I, II, III, and IV

Answer 3

B

Question 4

A successful company with a secure market niche but low growth potential may be targeted for acquisition by a conglomerate.This target company would be considered a:

A)cash cow.
B)gray knight.
C)safe harbor.
D)seed partner.
E)spinning jenny.

Question 5

According to the textbook, which is the most important aspect of corporate power?

A)degradation of the environment
B)corporate economic power
C)the exploitation of consumers
D)corporate political power
E)evading government regulation

Question 6

Which is the correct chronological sequence for mergers (time sequence from earliest type to latest type)?

A)Diversification, Megamerger, Vertical Integration, Conglomeration
B)Vertical Integration, Diversification, Megamerger, Conglomeration
C)Vertical Integration, Diversification, Conglomeration, Megamerger
D)Diversification, Vertical Integration, Conglomeration, Megamerger
E)Conglomeration, Vertical Integration, Diversification, Megamerger

Question 7

____ holds a dominant position in the market for the goods it produces.

A)A monopoly firm
B)An oligopoly
C)A multi-national corporation
D)A conglomerate
E)A parent firm

Question 8

Which of the following is NOT a reason for the megamerger wave?

A)weak antitrust law enforcement
B)a renewed emphasis on production not finance
C)cheap plants available due to international competition
D)breaks in the tax law to encourage "write offs"
E)expense of building new plants

Question 9

Which of the following is NOT characteristic of the small firm sector of the economy?

A)Small firms have an important influence in the service sector.
B)A significant part of the labor force is employed in businesses having fewer than 100 persons.
C)Small firms have profit rates similar to their larger counterparts.
D)A significant percentage of new jobs are created by small businesses.
E)Small firms often have long-term relationships with large firms.

Question 10

Intentionally underbidding competitors to drive them from the market is called

A)good business.
B)backward linkage.
C)predatory pricing.
D)conglomerate power.
E)the sphere of influence.

Question 11

The greatest innovation in technology is found in

A)small firms.
B)large firms.
C)conglomerates
D)multi-national corporations.
E)multi-establishment firms.

Question 12

Which is the name for a firm's control over wholesale and retail outlets for its goods?

A)vertical integration
B)forward linkage
C)backward linkage
D)predatory pricing
E)economies of scale

Question 13

Shareholders cannot be sued for the actions of the corporation.This is called

A)monopoly power.
B)antitrust.
C)oligopolistic pricing.
D)strategic cover.
E)limited liability.

Question 14

In merger jargon, white knights are

A)companies that provide aid to the target firm in a takeover battle.
B)aggressive acquirers.
C)executives of target companies who offer only token resistance against a takeover.
D)acquirers preferred to an unfriendly takeover.
E)a large shareholder who always votes as management wishes.

Question 15

About what proportion of the labor force is employed in the largest firms?

A)one-tenth
B)one-fifth
C)one-third
D)one-half
E)three-fourths

Question 16

How do mergers typically affect employees?

A)Employee morale and productivity increase with the injection of new resources into previously stagnant companies.
B)Top management of acquired firms are frequently fired without compensation and replaced by management of the acquiring company.
C)Employee job security is not threatened because existing labor contracts are recognized by the acquiring company.
D)Ambiguity in role expectation may decrease employee motivation.
E)There is a legal requirement that the employees receive 120 days notice before a layoff.

Question 17

Which of the following is NOT a reason for the current wave of mega-mergers?

A)the easy identification of companies with secure market niches
B)recent changes in the interpretation of anti-trust laws
C)tax laws that encourage the depreciation of purchased assets
D)the ease of building new physical plants as opposed to purchasing existing plants
E)the use of cash reserves from an acquired company to fund expansion in other areas

Question 18

What is the correct historical sequence of the types of merger activity through the mid-1970s?

A)vertical integration, diversification, industrial conglomeration, and expansion within product lines
B)diversification, vertical integration, expansion within product lines, and industrial conglomeration
C)expansion within product lines, vertical integration, diversification, and industrial conglomeration
D)industrial conglomeration, expansion within product lines, diversification, and vertical integration
E)industrial conglomeration, vertical integration, diversification, and expansion within product lines

Question 19

Which of the following is NOT a barrier to keep competing firms out of a monopoly market?

A)vertical integration
B)economies of scale
C)high research and development costs
D)geographic dispersion
E)access to extensive credit

Question 20

How do satellite firms differ from "loyal opposition" firms?

A)Satellite firms are subcontractors.
B)Satellite firms "float" among many different industries.
C)Satellite firms compete with loyal opposition firms.
D)Satellite firms have less access to foreign markets than do loyal opposition firms.
E)Satellite firms vie with loyal opposition firms for subcontracts from the large firms.

Question 21

Lean production results in

A)reduced core labor force.
B)intensification of work for remaining employees.
C)changing the core technology.
D)both a and b
E)a, b, and c

Question 22

James knows that his company has been making illegal payoffs to an elected official to insure favorable treatment for the company in pending legislation.James notifies the public prosecutor and the media about the payments.James is

A)now unemployed.
B)a tattletale.
C)a whiner.
D)a whistleblower.
E)a profiteer.

Question 23

Golden parachutes protect

A)shareholders.
B)executives in the acquiring firm.
C)executives in the acquired firm.
D)workers.
E)production middle managers.

Question 24

An argument in favor of mergers is

A)that they move money from stagnant areas of the economy to growing areas.
B)they tie up large lines of credit that would otherwise be misused by consumers.
C)they encourage further international competition.
D)they reduce the prices of manufactured goods.
E)the complexity of organizations is reduced.

Question 25

Which of the following happens in the workplace after a merger?

A)Trust in the organization improves.
B)Communication among workers improves.
C)Role ambiguity increases.
D)Morale in the company increases dramatically.
E)Voluntary participation in the local community increases.

Question 26

Which of the following activities are distinctive of oligopolies?
I)Collaboration in price setting.
II)Division of markets into spheres of influence.
III)Use of reciprocal buying agreements with purchasers.
IV)Avoidance of advertising.

A)I, II, III
B)I, II, IV
C)I, III
D)II, III
E)II, III, IV

Question 27

Airlines diversified when they acquired

A)hotels, restaurants, and car rental companies.
B)airports.
C)aerospace engineering firms.
D)aircraft manufacturing companies.
E)banks.

Question 28

Economic theory suggests market share is what confers power on large firms.Which alternative does the textbook suggest also confers power on large corporations?

A)Profitability
B)Innovation
C)Size
D)Stability
E)Leadership

Question 29

Claiborne Manufacturing Company produces table lamps.When they have a number of orders, they subcontract the electrical cord orders to a smaller firm located nearby.Claiborne's workers then incorporate the electrical cord into the finished lamps.This arrangement is a form of

A)commercial subcontracting.
B)industrial subcontracting.
C)overflow management.
D)externality.
E)peripheral support.

Question 30

The case of Enron illustrates

A)how communities compete to lure jobs to their areas.
B)how fraud by executives may lead to ordinary workers losing their jobs and pensions.
C)how outsourcing has affected price levels.
D)how the obligation to bargain works in favor of union members
E)how large corporations can affect the local community.

Question 31

Which kind of concentration has recently increased?

A)four-firm concentration ratios
B)concentration of credit resources
C)economic power concentrated in diversified conglomerates
D)concentration of distribution networks
E)concentration of warehouse facilities

Question 32

Fordism refers to

A)buying American cars, and by extension, other goods made in America.
B)a financial method for bridging fiscal years, similar to fording a stream.
C)economic policies enacted under President Gerald Ford.
D)the production of large numbers of standardized products.
E)the production of specialized, small-batch products.

Question 33

A characteristic of the typical large corporation is that

A)its workers are more satisfied than those at smaller firms.
B)ownership is separated from management.
C)its workers are paid less than those at smaller firms.
D)specialization remains low.
E)its workers have more opportunity to develop their skills.

Question 34

Which employees fare best in a merger?

A)top executives
B)middle managers
C)clerical workers
D)front-line supervisors
E)production workers

Question 35

In the United States, corporate transactions can be enacted in privacy because:

A)corporate lobbyists have had laws enacted to protect corporations.
B)a court decision recognized corporations as legal "persons."
C)corporate decisions affect national security.
D)corporations are not legally recognized.
E)price-fixing requires secrecy.

Question 36

Bank control

A)removes ownership and investment decisions from the production site.
B)compensates for the large size of corporations.
C)compensates for weak antitrust enforcement.
D)requires a level of concentration that is not yet possible.
E)remains impossible.

Question 37

The movement toward ____ is based on the pursuit of profits through financial manipulation rather than through producing products or services of economic value.

A)mergers
B)monopoly
C)golden parachutes
D)Fordism
E)limited liability

Question 38

Which of the following is an advantage for corporations of increased size and concentration?

A)increased division of labor and specialization
B)reduced identification with employer
C)more bureaucratic rules and procedures
D)higher compensation for employees
E)fewer opportunities to develop worker skills

Question 39

A high four-firm concentration ratio is an indication of

A)downsizing.
B)industrial restructuring.
C)profitability of firms.
D)oligopolistic power.
E)conglomerate structure.

Question 40

Which of the following conclusions is correct?

A)Employment is spread relatively evenly across small, medium and large firms.
B)Recent research has shown that most employment is in small firms.
C)Small firms are responsible for the creation of two thirds of all permanent new jobs in the U.S.
D)Workers in large firms report higher morale.
E)Workers in small firms have better fringe benefits.

Question 41

If most companies would like to become monopolies, why do they not do so?

A)They are unable to acquire the economic power to drive out their competitors.
B)The public is hostile to monopolies.
C)Their competitors will reduce access to credit.
D)Governments seek to prevent monopolies.
E)Bureaucracies are not sufficiently efficient to function as monopolies.

Question 42

Outsourcing and downsizing are solutions that managers have sought to the problem of

A)exploitation of workers.
B)environmental damage.
C)high prices for consumers.
D)high labor costs.
E)low pay for managers.

Question 43

An advantage of the small-firm sector is its ability to

A)pay higher wages to its workers.
B)provide more job security to its workers.
C)control its relationships with large corporations.
D)develop technological innovations.
E)escape local taxes.

Question 44

Millie Millions has been for many years the CEO of Got Rocks Corporation, and for ten years she has also been a member of the Board of Directors of the Giant Huge Corporation.As it happens, Ronnie Rich, who is the CEO of Giant Huge, is also a director of Got Rocks.This relationship is called

A)cumulative advantage.
B)an interlocking directorate.
C)the shrinking middle.
D)corporate mobility.
E)a merger.

Question 45

Results of political power exercised by corporations are known to include all of the following EXCEPT

A)favorable legislation.
B)subsidies.
C)control of regulatory bodies.
D)shaping national foreign or military policy.
E)bribing Supreme Court justices.

Question 46

Alternator Company, Inc.is outsourcing some peripheral support functions.This outsourcing is most likely to result in downsizing and the layoff of

A)everyone.
B)top executives only.
C)line managers only.
D)staff managers and workers reporting to them.
E)front-line supervisors.

Question 47

One consequence of Fordism has been

A)upgrading workers' skills.
B)increasing the availability of custom-made products.
C)increasing international competition for mass-produced goods.
D)reducing the competitiveness of developing countries in manufacturing.
E)reducing the availability of manufactured goods.