Quiz 12

Question 1 (1 point)

A business connection between companies at different points in the production-distribution chain is called a:

market extension merger. vertical relation. conglomerate merger horizontal relation.

Question 2 (1 point)

The merger between Proctor & Gamble, maker of products like Tide, Crest, and Pampers, and Gillette, the Boston-based maker of razors and batteries, was a:

market extension merger. conglomerate merger. horizontal merger. vertical merger.

Question 3 (1 point)

The Coase Theorem argues that resource allocation is:

inefficient if transaction costs are low and property rights are freely traded. inefficient if transaction costs are low. inefficient if property rights are freely traded. efficient if transaction costs are low and property rights are freely traded.

Question 4 (1 point)

The natural conflict between owners and managers is called the:

end-of game problem. incentive problem. agency problem. capture problem.

Question 5 (1 point)

Expenditures necessary to overcome owner-manager conflicts are called:

decision costs. search costs. information costs. agency costs.

Question 6 (1 point)

The managerial myopia problem:

causes excessive risk-taking. is caused by excessive risk-taking. is reflected in a managerial preference for short-term performance. is the tendency by agents to be careless with the principal's resources.

Question 7 (1 point)

The inefficient preference for stable performance is called the:

information asymmetry problem. information sharing problem. managerial myopia problem. stockholder myopia problem.

Question 8 (1 point)

A "flat" organization design reflects a(n):

"close-to-the-customer" management style. U-form organization. centralized decision authority. "top-down" management style.

Question 9 (1 point)

A vertical organization has:

one level of decision authority. few levels of decision authority. none of these. multiple levels of decision authority.

Question 10 (1 point)

The reservation wage includes a return to:

risk-avoidance behavior. special capabilities within the firm. firm-specific human capital. general human capital.

Question 11 (1 point)

A franchise agreement is:

a formal contractual arrangement specifying a parent-subsidiary relationship. an informal voluntary arrangement specifying a parent-subsidiary relationship. between independent sub-units of a single corporation with decision-making authority. a control system that helps corporations effectively manage, administer and direct economic resources within the firm.

Question 12 (1 point)

Ownership value derived from the ability to control the type of output produced gives rise to high:

debt levels. ownership dispersion. institutional ownership. inside ownership.

Question 13 (1 point)

Rate of return regulation tends to reduce:

inside ownership. institutional ownership. outside ownership. none of these.

Question 14 (1 point)

The quality-control potential of high-tech firms tends to result in:

low institutional ownership. high inside ownership. high institutional ownership. significant financial leverage.

Question 15 (1 point)

High inside ownership at Microsoft reflects the company's:

low amenity potential. low quality-control potential. regulatory potential. high quality-control potential.

Question 16 (1 point)

Bank debt financing has control implications most similar to:

institutional equity. inside equity. outside equity. none of these.

Question 17 (1 point)

The fiduciary responsibility of institutional investors can cause mutual funds to act like:

debt financing. outside equity. inside equity. none of these.

Question 18 (1 point)

The emergence of the virtual corporation can be explained by the:

feather-bedding practices of unions. low cost of capital. high cost of capital. Coase Theorem.

Question 19 (1 point)

The emerging business use of the Internet increases:

transaction costs. search costs. enforcement costs. none of these.

Question 20 (1 point)

The Sarbanes-Oxley Act does not significantly tighten accountability standards for:

directors and officers. stockholders. auditors and legal counsel. securities analysts.