Question 1

The obligations and prohibitions present in a contract between a franchiser and the franchisee are called vertical restraints.

Accepted Answer

A) True 
 B)False

Question 2

A firm that controls both the upstream as well as the downstream stages of production is said to be:

Accepted Answer

A) functionally integrated. 
B) perpendicularly integrated. 
C) vertically integrated. 
D) horizontally integrated. 
A) functionally integrated. 
B) perpendicularly integrated. 
C) vertically integrated. 
D) horizontally integrated.

Question 3

The arrival of inexpensive information technology, such as personal computers and inexpensive telecommunications:

Accepted Answer

A) discouraged de-integration. 
B) increased the optimal size of firms. 
C) shifted the long-run average cost (LRA
C)  curve of firms downward. 
D) shifted the marginal cost of firms upward. 
A) discouraged de-integration. 
B) increased the optimal size of firms. 
C) shifted the long-run average cost (LRA
C)  curve of firms downward. 
D) shifted the marginal cost of firms upward.

Question 4

When the ownership of the different stages of production of a commodity lies with different individuals, it becomes difficult to take decisions on capacity expansion because of all the following reasons, EXCEPT:

Accepted Answer

A) differences in attitudes toward risk. 
B) differences in motivation. 
C) different degrees of risk exposure. 
D) different abilities to hedge themselves. 
A) differences in attitudes toward risk. 
B) differences in motivation. 
C) different degrees of risk exposure. 
D) different abilities to hedge themselves.

Question 5

_____ improves exchangeability, and reduces the cost of obtaining information about a good and about the parties involved in the transaction.

Accepted Answer

A) De-integration 
B) Outsourcing 
C) Vertical integration 
D) Standardization 
A) De-integration 
B) Outsourcing 
C) Vertical integration 
D) Standardization

Question 6

A thin market usually does not allow the use of futures contracts or other hedging tools.

Accepted Answer

A) True 
 B)False

Question 7

The figure given below represents two monopolists James and Jerry.James produces Good A using the input Good B which is produced by Jerry and has no other variable costs.James is the only consumer of Good B, and the marginal cost incurred by Jerry to produce Good B is zero.DA and DB represent the demand curves for Good A and Good B respectively.MRA and MRB represent the marginal revenue received from Good A and Good B respectively.It takes one unit of A to produce a unit of B.

-Refer to Figure.What would be Jerry's profit maximizing price-output combination if the two monopolists do not cooperate?

Accepted Answer

A) 4 units at $9 each 
B) 4 units at $3 each 
C) 4 units at $6 each 
D) 8 units at $6 each 
A) 4 units at $9 each 
B) 4 units at $3 each 
C) 4 units at $6 each 
D) 8 units at $6 each

Question 8

_____ is a monthly payment made by a franchisee to the franchisor usually a certain percentage of the former's gross revenue.

Accepted Answer

A) Royalty 
B) Annuity 
C) Contingent fee 
D) Capitation fee 
A) Royalty 
B) Annuity 
C) Contingent fee 
D) Capitation fee

Question 9

Suppose a parent company producing sportswear decides take back some formerly franchised outlets and operate them with its own employees.This form of vertical integration will allow the parent company:

Accepted Answer

A) to practice price discrimination. 
B) to charge a uniform price for its products across the globe. 
C) to lower its costs of operation and increase sales. 
D) to test operating techniques that might make the franchisees bettor competitors. 
A) to practice price discrimination. 
B) to charge a uniform price for its products across the globe. 
C) to lower its costs of operation and increase sales. 
D) to test operating techniques that might make the franchisees bettor competitors.

Question 10

It is more efficient for a mini-mill to use the worldwide market for scrap steel than to integrate upstream.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following exemplifies a vertical restraint imposed by a franchisor in a contract?

Accepted Answer

A) A clause prohibiting a franchisee from using the company trademark to support a political candidate. 
B) A clause prohibiting a franchisee from announcing special offers during Christmas to attract customers. 
C) A clause prohibiting a franchisee from bundling two products of the same company. 
D) A clause stating the target sales to be achieved by the company during an accounting year. 
A) A clause prohibiting a franchisee from using the company trademark to support a political candidate. 
B) A clause prohibiting a franchisee from announcing special offers during Christmas to attract customers. 
C) A clause prohibiting a franchisee from bundling two products of the same company. 
D) A clause stating the target sales to be achieved by the company during an accounting year.

Question 12

What are the advantages of vertical integration?

Accepted Answer

By putting activities under the same man

Question 13

If assets are relatively _____, and uncertainty is _____, transactions usually take place in markets.

Accepted Answer

A) specific; quite low 
B) nonspecific; quite low 
C) specific; quite high 
D) nonspecific; quite high 
A) specific; quite low 
B) nonspecific; quite low 
C) specific; quite high 
D) nonspecific; quite high

Question 14

Iron mining, coal mining, and coke production constitute the _____ steps in steel making.

Accepted Answer

A) intermediate 
B) upstream 
C) final 
D) introductory 
A) intermediate 
B) upstream 
C) final 
D) introductory

Question 15

Firms generally prefer not to outsource product design and manufacturing because:

Accepted Answer

A) these activities are common and standardized. 
B) these operations are more or less static. 
C) these operations involve a low investment. 
D) these operations require investment in highly specific assets. 
A) these activities are common and standardized. 
B) these operations are more or less static. 
C) these operations involve a low investment. 
D) these operations require investment in highly specific assets.

Question 16

Which of the following is an advantage of mini-mills over vertically integrated giant mills?

Accepted Answer

A) The small size of mini-mills ensures economies of scale in steel production. 
B) The small furnaces used in mini-mills depend less on coal and more on electricity. 
C) The mini-mills do not require integration of casting and milling activities. 
D) The small furnaces used by mini-mills can be operated as per the producer's will. 
A) The small size of mini-mills ensures economies of scale in steel production. 
B) The small furnaces used in mini-mills depend less on coal and more on electricity. 
C) The mini-mills do not require integration of casting and milling activities. 
D) The small furnaces used by mini-mills can be operated as per the producer's will.

Question 17

When are businesses likely to outsource some of their activities?

Accepted Answer

Like decisions to integrate, decisions t

Question 18

Does U.S.Steel prefer to own coal mines? Give reason for your answer.

Accepted Answer

U.S.Steel is integrated into iron mining

Question 19

Which of the following changes can facilitate the transfer or outsourcing of formerly internal activities of a firm?

Accepted Answer

A) Changes in technology and market structure 
B) Decline in domestic input prices 
C) Decline in net exports 
D) Rapid pace of industrialization 
A) Changes in technology and market structure 
B) Decline in domestic input prices 
C) Decline in net exports 
D) Rapid pace of industrialization

Question 20

If the assets used during the various stages of production are relatively nonspecific but the markets are highly uncertain, a short-term contract is likely to be the most efficient.

Accepted Answer

A) True 
 B)False

The obligations and prohibitions present in a contract between a franchiser and the franchisee are called vertical restraints.

A firm that controls both the upstream as well as the downstream stages of production is said to be:

The arrival of inexpensive information technology, such as personal computers and inexpensive telecommunications:

When the ownership of the different stages of production of a commodity lies with different individuals, it becomes difficult to take decisions on capacity expansion because of all the following reasons, EXCEPT:

_____ improves exchangeability, and reduces the cost of obtaining information about a good and about the parties involved in the transaction.

A thin market usually does not allow the use of futures contracts or other hedging tools.

_____ is a monthly payment made by a franchisee to the franchisor usually a certain percentage of the former's gross revenue.

Suppose a parent company producing sportswear decides take back some formerly franchised outlets and operate them with its own employees.This form of vertical integration will allow the parent company:

It is more efficient for a mini-mill to use the worldwide market for scrap steel than to integrate upstream.

Which of the following exemplifies a vertical restraint imposed by a franchisor in a contract?

What are the advantages of vertical integration?

If assets are relatively _, and uncertainty is _, transactions usually take place in markets.

Iron mining, coal mining, and coke production constitute the _____ steps in steel making.

Firms generally prefer not to outsource product design and manufacturing because:

Which of the following is an advantage of mini-mills over vertically integrated giant mills?

When are businesses likely to outsource some of their activities?

Does U.S.Steel prefer to own coal mines? Give reason for your answer.

Which of the following changes can facilitate the transfer or outsourcing of formerly internal activities of a firm?

If the assets used during the various stages of production are relatively nonspecific but the markets are highly uncertain, a short-term contract is likely to be the most efficient.

Reasoning With Economics: Models and Information

Transactions and Institutions: the Building Blocks

Markets

Cost and Production

Extreme Markets I: Perfect Competition

Extreme Markets II: Monopoly

Between the Extremes: Interaction and Strategy

Competition and Strategy

Beyond Markets; Property and Contracts

The Economics of Contracts

Risk and Information in Contracts

Organizations in Concept and Practice

Organizational Design

Employment Relationships

Time, Risk and Options

Conflict, Negotiation and Group Choice

Filters

Exam 14: Vertical Relationships

The obligations and prohibitions present in a contract between a franchiser and the franchisee are called vertical restraints.

A firm that controls both the upstream as well as the downstream stages of production is said to be:

The arrival of inexpensive information technology, such as personal computers and inexpensive telecommunications:

When the ownership of the different stages of production of a commodity lies with different individuals, it becomes difficult to take decisions on capacity expansion because of all the following reasons, EXCEPT:

_____ improves exchangeability, and reduces the cost of obtaining information about a good and about the parties involved in the transaction.

A thin market usually does not allow the use of futures contracts or other hedging tools.

_____ is a monthly payment made by a franchisee to the franchisor usually a certain percentage of the former's gross revenue.

Suppose a parent company producing sportswear decides take back some formerly franchised outlets and operate them with its own employees.This form of vertical integration will allow the parent company:

It is more efficient for a mini-mill to use the worldwide market for scrap steel than to integrate upstream.

Which of the following exemplifies a vertical restraint imposed by a franchisor in a contract?

What are the advantages of vertical integration?

If assets are relatively _____, and uncertainty is _____, transactions usually take place in markets.

Iron mining, coal mining, and coke production constitute the _____ steps in steel making.

Firms generally prefer not to outsource product design and manufacturing because:

Which of the following is an advantage of mini-mills over vertically integrated giant mills?

When are businesses likely to outsource some of their activities?

Does U.S.Steel prefer to own coal mines? Give reason for your answer.

Which of the following changes can facilitate the transfer or outsourcing of formerly internal activities of a firm?

If the assets used during the various stages of production are relatively nonspecific but the markets are highly uncertain, a short-term contract is likely to be the most efficient.

Reasoning With Economics: Models and Information

Transactions and Institutions: the Building Blocks

Markets

Cost and Production

Extreme Markets I: Perfect Competition

Extreme Markets II: Monopoly

Between the Extremes: Interaction and Strategy

Competition and Strategy

Beyond Markets; Property and Contracts

The Economics of Contracts

Risk and Information in Contracts

Organizations in Concept and Practice

Organizational Design

Employment Relationships

Time, Risk and Options

Conflict, Negotiation and Group Choice

Filters

If assets are relatively _, and uncertainty is _, transactions usually take place in markets.