Deck 18: Organization Structure and Corporate Governance

Question 1

In 2008, M and M's candy maker Mars teamed up with billionaire Warren Buffett to buy chewing gum manufacturer Wm Wrigley Jr.Co.to create the world's largest confectionery company.This was a:

A)market extension merger.
B)conglomerate merger.
C)horizontal merger.
D)vertical merger.

Answer 1

C

Question 2

The Coase Theorem does not suggest that:

A)firms exist because they are an effective means for minimizing transaction costs.
B)are well-equipped to deal with negative externalities, such as pollution.
C)it would be prohibitively expensive for each of us to organize production of all goods and services that we desire.
D)resource allocation remains inefficient so long as property rights can be freely assigned and exchanged.

Answer 2

D

Question 3

A business combination between companies at the same point in the production-distribution chain but in different geographic markets is called a:

A)market extension merger.
B)vertical merger.
C)conglomerate merger.
D)horizontal merger.

Answer 3

A

Question 4

The informal relationship between Dell, Inc.and its independent suppliers is:

A)vertical.
B)virtual.
C)conglomerate.
D)horizontal.

Question 5

An efficiently functioning internal labour market rewards the CEO for:

A)the company's stock-price performance.
B)firm-specific human capital only.
C)general human capital only.
D)firm-specific and general human capital.

Question 6

The high quality-control potential of huge S and P 500 companies like GE tends to result in:

A)low institutional ownership.
B)high institutional ownership.
C)high inside ownership.
D)none of these.

Question 7

To combat the managerial myopia problem, corporations tie a significant portion of total compensation for top executives to:

A)short-term stock-price performance.
B)stock options tied to long-term stock-price performance.
C)short-term accounting net income performance.
D)short-term accounting ROE performance.

Question 8

Small high-tech firms tend to display:

A)high inside ownership with low institutional ownership.
B)high inside ownership with high institutional ownership.
C)low inside ownership.
D)none of these.

Question 9

Benefits from use of the Internet marketing channel tend to be limited in the case of companies with:

A)low transaction costs.
B)high search costs.
C)high enforcement costs.
D)a vertical organization structure.

Question 10

Decision costs include expenses encountered in:

A)securing necessary raw materials.
B)discovering the type and quality of goods and services demanded by consumers.
C)successfully negotiating production agreements.
D)making sure that all parties live up to their contractual commitments.