Question 1

In a successive monopoly structure, the profit- maximizing wholesale price is equal to the difference between the and the of distribution.

Accepted Answer

A) marginal revenue; marginal cost 
B) wholesale demand; marginal cost 
C) retail demand; marginal revenue 
D) wholesale demand; marginal revenue

Question 2

Slick Shades has a constant marginal cost of production equal to $40 and the distributors have a constant marginal cost of distribution equal to $20. If Slick Shades is producing the profit- maximizing number of sunglasses (in hundreds), what is the profit- maximizing wholesale price?

Accepted Answer

A) $110 
B) $120 
C) $130 
D) $140

Question 3

If the mangers of Golden Bread, a large bakery, acquire a wheat farm to produce the flour for their bread, the managers of Golden Bread are likely to experience all of the following except which one?

Accepted Answer

A) the hold- up problem 
B) an increase in managerial diseconomies 
C) an increase in their required areas of expertise 
D) an increase in the complexity of coordination of Golden Bread

Question 4

If View Your World, a high- end window manufacturer, sells its glass door division, this is an example of ______.

Accepted Answer

A) forward integration 
B) outsourcing 
C) divestiture 
D) backward integration

Question 5

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

Accepted Answer

A) establishing a partnership between the two firms 
B) decreasing the incentive for litigation 
C) increasing information and control 
D) creating managerial diseconomies

Question 6

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

Accepted Answer

A) increasing the complexity of coordination 
B) eliminating the hold- up problem 
C) reducing information costs 
D) creating synergies

Question 7

If Luxury Cabinets, a kitchen cabinet manufacturer, builds a cabinet plant near Big Woods, a timber harvesting farm, to reduce the costs of transporting lumber, _______ potentially faces a hold- up problem as the firm invested in a ______.

Accepted Answer

A) Luxury Cabinets; transaction- specific asset 
B) Big Woods; transaction- specific asset 
C) Luxury Cabinets; negotiation asset 
D) Big Woods; negotiation asset

Question 8

Vertical integration is not an economically sound decision in a successive monopoly situation.

Accepted Answer

A) True 
 B)False

Question 9

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)and charging the profit- maximizing wholesale price, what is Slick Shades' profit (in hundreds)?

Accepted Answer

A) $4,800 
B) $3,600 
C) $6,400 
D) $2,400

Question 10

If Slick Shades has a constant marginal cost of production equal to $40 and the distributors have a constant marginal cost of distribution equal to $20, what is the profit- maximizing number of sunglasses (in hundreds)for Slick Shades to produce?

Accepted Answer

A) 50 
B) 80 
C) 70 
D) 90

Question 11

In a ______monopoly structure, the wholesale demand for a monopoly retailer depends on the retailer's______ .

Accepted Answer

A) dual; demand 
B) successive; demand 
C) successive; marginal revenue 
D) dual; marginal revenue

Question 12

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 vertically integrates with the perfectly competitive distributors, the profit- maximizing quantity will be _______ the profit- maximizing quantity if they did not vertically integrate and the combined firm will earn______
Profit if they did not vertically integrate.

Accepted Answer

A) greater than; the same 
B) the same as; the same 
C) greater than; greater 
D) the same as; greater

Question 13

All of the following are true regarding transfer prices except which one?

Accepted Answer

A) The transfer price is the internal firm price on an input that input- producing division charges the input- using division. 
B) The transfer price is the internal firm price on an input that input- using division charges the input- producing division. 
C) Law in many nations state that a transfer price must equal the price charged to an independent customer. 
D) Transfer prices can affect the taxes a firm must pay.

Question 14

If a firm requires a standardized raw material to produce its output,______ is often the least expensive option to purchase the raw materials.

Accepted Answer

A) divestiture 
B) the spot market 
C) backward integration 
D) forward integration

Question 15

If the mangers of Special Cakes, a large bakery, acquire an egg farm to produce the eggs for their cakes, the managers of Special Cakes are likely to experience all of the following except which one?

Accepted Answer

A) a decrease in managerial diseconomies 
B) an increase in their required areas of expertise 
C) an increase in the complexity of coordination of Special Cakes 
D) an increase in managerial diseconomies

Question 16

If Happy Cows, a dairy firm, merges with Best Cartons, a manufacturer of dairy cartons, the merger can alter the relationship between Happy Cows and Best Cartons from a(n)______to a(n) ______.

Accepted Answer

A) partnership; managerial relationship 
B) adversarial relationship; partnership 
C) managerial relationship; partnership 
D) partnership; adversarial relationship

Question 17

If Fast Prints has a contract with local couriers to deliver their products to customers located throughout the city, this is an example of______ .

Accepted Answer

A) forward integration 
B) a market transaction 
C) outsourcing 
D) backward integration

Question 18

If the managers of Happy Avocados, a ready- made guacamole firm, spend considerable time researching different prices and quality measures offered by multiple avocado farmers, the time spent is considered to be a(n)______cost.

Accepted Answer

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

Question 19

Vertical integration can increase and decrease a firm's costs.

Accepted Answer

A) True 
 B)False

Question 20

If a firm has a monopoly in both the production and distribution, to maximize the overall economic profit of the firm, managers of either the production or distribution center should be instructed to maximize profit and the managers of the other center should be instructed to operate as a competitive market.

Accepted Answer

A) True 
 B)False

Exam 11: Decisions About Vertical Integration and Distribution

In a successive monopoly structure, the profit- maximizing wholesale price is equal to the difference between the and the of distribution.

Slick Shades has a constant marginal cost of production equal to $40 and the distributors have a constant marginal cost of distribution equal to $20. If Slick Shades is producing the profit- maximizing number of sunglasses (in hundreds) , what is the profit- maximizing wholesale price?

If the mangers of Golden Bread, a large bakery, acquire a wheat farm to produce the flour for their bread, the managers of Golden Bread are likely to experience all of the following except which one?

If View Your World, a high- end window manufacturer, sells its glass door division, this is an example of ______.

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

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

If Luxury Cabinets, a kitchen cabinet manufacturer, builds a cabinet plant near Big Woods, a timber harvesting farm, to reduce the costs of transporting lumber, _ potentially faces a hold- up problem as the firm invested in a .

Vertical integration is not an economically sound decision in a successive monopoly situation.

If Slick Shades has a constant marginal cost of production equal to $40 and the distributors have a constant marginal cost of distribution equal to $20, what is the profit- maximizing number of sunglasses (in hundreds) for Slick Shades to produce?

In a monopoly structure, the wholesale demand for a monopoly retailer depends on the retailer's .

All of the following are true regarding transfer prices except which one?

If a firm requires a standardized raw material to produce its output,______ is often the least expensive option to purchase the raw materials.

If the mangers of Special Cakes, a large bakery, acquire an egg farm to produce the eggs for their cakes, the managers of Special Cakes are likely to experience all of the following except which one?

If Happy Cows, a dairy firm, merges with Best Cartons, a manufacturer of dairy cartons, the merger can alter the relationship between Happy Cows and Best Cartons from a(n) to a(n) .

If Fast Prints has a contract with local couriers to deliver their products to customers located throughout the city, this is an example of______ .

If the managers of Happy Avocados, a ready- made guacamole firm, spend considerable time researching different prices and quality measures offered by multiple avocado farmers, the time spent is considered to be a(n) ______cost.

Vertical integration can increase and decrease a firm's costs.

Exam 11: Decisions About Vertical Integration and Distribution

In a successive monopoly structure, the profit- maximizing wholesale price is equal to the difference between the and the of distribution.

Slick Shades has a constant marginal cost of production equal to $40 and the distributors have a constant marginal cost of distribution equal to $20. If Slick Shades is producing the profit- maximizing number of sunglasses (in hundreds) , what is the profit- maximizing wholesale price?

If the mangers of Golden Bread, a large bakery, acquire a wheat farm to produce the flour for their bread, the managers of Golden Bread are likely to experience all of the following except which one?

If View Your World, a high- end window manufacturer, sells its glass door division, this is an example of ______.

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

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

If Luxury Cabinets, a kitchen cabinet manufacturer, builds a cabinet plant near Big Woods, a timber harvesting farm, to reduce the costs of transporting lumber, _______ potentially faces a hold- up problem as the firm invested in a ______.

Vertical integration is not an economically sound decision in a successive monopoly situation.

If Slick Shades has a constant marginal cost of production equal to $40 and the distributors have a constant marginal cost of distribution equal to $20, what is the profit- maximizing number of sunglasses (in hundreds) for Slick Shades to produce?

In a ______monopoly structure, the wholesale demand for a monopoly retailer depends on the retailer's______ .

All of the following are true regarding transfer prices except which one?

If a firm requires a standardized raw material to produce its output,______ is often the least expensive option to purchase the raw materials.

If the mangers of Special Cakes, a large bakery, acquire an egg farm to produce the eggs for their cakes, the managers of Special Cakes are likely to experience all of the following except which one?

If Happy Cows, a dairy firm, merges with Best Cartons, a manufacturer of dairy cartons, the merger can alter the relationship between Happy Cows and Best Cartons from a(n) ______to a(n) ______.

If Fast Prints has a contract with local couriers to deliver their products to customers located throughout the city, this is an example of______ .

If the managers of Happy Avocados, a ready- made guacamole firm, spend considerable time researching different prices and quality measures offered by multiple avocado farmers, the time spent is considered to be a(n) ______cost.

Vertical integration can increase and decrease a firm's costs.

If Luxury Cabinets, a kitchen cabinet manufacturer, builds a cabinet plant near Big Woods, a timber harvesting farm, to reduce the costs of transporting lumber, _ potentially faces a hold- up problem as the firm invested in a .

In a monopoly structure, the wholesale demand for a monopoly retailer depends on the retailer's .

If Happy Cows, a dairy firm, merges with Best Cartons, a manufacturer of dairy cartons, the merger can alter the relationship between Happy Cows and Best Cartons from a(n) to a(n) .