ARE 112- Midterm 1 Exam Questions and Answers 100% Verified Correct!!

MECE - ANSWER--Mutually Exclusive (each issue is separate & distinct) Collectively Exhaustive (every aspect comes under only one issue) -McKinsey Tool --know all the facts/details -guard against making early selection of solutions before all other facts are known Mother City - ANSWER--Caral, Peru; "mother city" of Incan civilization -complexity and scope -hierarchy of living arrangements -served as a major trade area -- rise of class divisions Transaction Costs - ANSWER--Williamson interview -cost associated with the time and effort needed to search out, negotiate, and consummate an exchange (cost of doing business) --must economize --have detailed knowledge of attributes of transactions Cost of Uncertainty - ANSWER--Williamson interview -making agreements in the context of uncertainty --hostage situation --develop bilateral dependency (mutual advantages) --introduces a kind of deterrence -reduce uncertainty -- reduce costs Bounded Rationality - ANSWER--Williamson interview -can't choose the convenient assumption --adhere closely to reality and behavior that intends to be rational -- not capable of maximizing in all situations --limitation on ability to work towards the right answer Incomplete contracts - ANSWER--Williamson interview -transaction costs, cost of uncertainty, and bounded rationality all cause incomplete contracts -cannot maximize all benefits of a transaction because they are not aware of all the factors --complex contracts --disallowed by old apparatus --both parties are not equal