Managerial Economics Practice
Test Questions and Answers All
Correct
The idea that a central authority should be performing only those tasks which cannot be
performed effectively at a more immediate or local level was described in lecture as:
a) The tyranny of the "or"
b) Subsidiarity
c) The economics of decentralization
d) The 21st Century Management Challenge. - Answer-b) Subsidiarity
In well-managed firms, problems lead to employee initiative and presentation to
management their solution, at which time the management team may grant permission
for employees to implement their solution within the context of management monitoring.
This process was discussed in class as:
a) Delegation
b) Decentralization
c) Chartering
d) Empowerment. - Answer-c) Chartering
Promoting the formulation of well-understood, well-defined objectives before work
begins, clarifying formerly vague or poorly defined initiatives early on, breaking down
problems/projects too large or costly for any given team and combining market-based
decision rights with management oversight are elements of what we discussed in class
as:
a) The genius of the "and"
b) The tyranny of the "or"
c) The 21st Century Management Solution
d) The genius of chartering. - Answer-a) The genius of the "and"
Human organizations have a tendency to run down over time. Their resources and
capabilities can lose their original effect on sustainable competitive advantage. We
called this:
a) Competitive Disadvantage
b) Competitive Parity
c) Organizational Entropy
,d) Parkinson's syndrome. - Answer-c) Organizational Entropy
To achieve a sustainable competitive advantage, effective executives build and
maintain strong competitive positions, invest and re-invest in unique and valuable
resources and capabilities that are difficult to:
a) Imitate
b) Import
c) Reverse engineer
d) Purchase in the underground economy. - Answer-a) Imitate
Tangible and intangible resources are rare to the extent that only one or a few
organizations in an industry possess them and control their use. This statement is:
c) True
d) False. - Answer-c) True
Resources and capabilities are strategic if they are (simultaneously) rare, inimitable,
well organized and:
a) Developed over a long time period by the same team of managers
b) Valuable
c) Consumer oriented
d) Intangible. - Answer-b) Valuable
Firms form or join cartels to improve their performance. Defecting to improve individual
performance is rational and common. This is because managers of cartels are rational
actors and believe that:
a) Defection will be difficult to prove in court
b) Defection results in above-normal returns and they will be rewarded for these returns
by investors
c) They may be charged with collusion, but can plead guilty to a lesser charge
d) The regulation of collusion will be ended in the near future. - Answer-b) Defection
results in above-normal returns and they will be rewarded for these returns by investors
Valuable and rare resources or capabilities may sometimes be based on such things as
interpersonal relationship, culture and other social phenomena that make them difficult
for other firms to copy. Which one of the following terms is associated with this source
of sustainable competitive advantage?
a) Causal ambiguity
b) Rent seeking behavior
c) Social complexity
d) Behavioral barriers to entry (BTE). - Answer-c) Social complexity
The value of a given resource or capability must be reassessed periodically to ascertain
if the firm's business model and strategy are still relevant. If not reassessed periodically,
a once- valuable resource or capability may become:
a) less valuable, and no longer strategic
, b) more valuable, but remain strategic
c) less valuable but remain strategic
d) more value and more strategic. - Answer-a) less valuable, and no longer strategic
**A capitalist firm's residual claimants bear risk and uncertainty since they have a legal
claim to economic profit, but that profit can be zero or negative. Residual claimants can
diversify their portfolios, but expect:
a) Above normal returns on the investments in companies they own, over time
b) At least normal returns on the investments they have made, in the short run
c) Positive accounting profits in both the short and long run
d) Returns equal to the sum of explicit and implicit costs. - Answer-a) Above normal
returns on the investments in companies they own, over time
The organizational architectural process that specifies the criteria that will be used to
judge the contribution of decision agents (employees or associates) within the
organization is known as:
a) The Authority Boundary
b) The Nike Zone
c) The reward system
d) The performance measurement and evaluation system. - Answer-d) The
performance measurement and evaluation system.
Judicious delegation of decision rights to those with tacit knowledge, and accurate
measurement and evaluation of individual and unit contribution to the firm's success are
two of the components of a firm's:
a) Governance structure
b) Standing operating procedures
c) Organizational Architecture
d) Value chain. - Answer-c) Organizational Architecture
In the reading "The Rational Actor Model," the rational agent or actor is assumed to take
account of available information, probabilities of events, and potential costs and benefits
in determining preferences, and to act consistently in choosing the self-determined best
choice of action. This statement is:
a) True
b) False. - Answer-a) True
The element of organizational architecture that specifies how compensation and other
benefits and penalties will be distributed among agents within the organization is known
as the performance measurement process. This statement is:
a) True
b) False. - Answer-b) False
**Customers are the ones with the money and credit. Investors are the ones with the
capital and votes. Associates are the ones with the skills and purchased inputs. These
three important groups comprise what was in class called a firm's:
Test Questions and Answers All
Correct
The idea that a central authority should be performing only those tasks which cannot be
performed effectively at a more immediate or local level was described in lecture as:
a) The tyranny of the "or"
b) Subsidiarity
c) The economics of decentralization
d) The 21st Century Management Challenge. - Answer-b) Subsidiarity
In well-managed firms, problems lead to employee initiative and presentation to
management their solution, at which time the management team may grant permission
for employees to implement their solution within the context of management monitoring.
This process was discussed in class as:
a) Delegation
b) Decentralization
c) Chartering
d) Empowerment. - Answer-c) Chartering
Promoting the formulation of well-understood, well-defined objectives before work
begins, clarifying formerly vague or poorly defined initiatives early on, breaking down
problems/projects too large or costly for any given team and combining market-based
decision rights with management oversight are elements of what we discussed in class
as:
a) The genius of the "and"
b) The tyranny of the "or"
c) The 21st Century Management Solution
d) The genius of chartering. - Answer-a) The genius of the "and"
Human organizations have a tendency to run down over time. Their resources and
capabilities can lose their original effect on sustainable competitive advantage. We
called this:
a) Competitive Disadvantage
b) Competitive Parity
c) Organizational Entropy
,d) Parkinson's syndrome. - Answer-c) Organizational Entropy
To achieve a sustainable competitive advantage, effective executives build and
maintain strong competitive positions, invest and re-invest in unique and valuable
resources and capabilities that are difficult to:
a) Imitate
b) Import
c) Reverse engineer
d) Purchase in the underground economy. - Answer-a) Imitate
Tangible and intangible resources are rare to the extent that only one or a few
organizations in an industry possess them and control their use. This statement is:
c) True
d) False. - Answer-c) True
Resources and capabilities are strategic if they are (simultaneously) rare, inimitable,
well organized and:
a) Developed over a long time period by the same team of managers
b) Valuable
c) Consumer oriented
d) Intangible. - Answer-b) Valuable
Firms form or join cartels to improve their performance. Defecting to improve individual
performance is rational and common. This is because managers of cartels are rational
actors and believe that:
a) Defection will be difficult to prove in court
b) Defection results in above-normal returns and they will be rewarded for these returns
by investors
c) They may be charged with collusion, but can plead guilty to a lesser charge
d) The regulation of collusion will be ended in the near future. - Answer-b) Defection
results in above-normal returns and they will be rewarded for these returns by investors
Valuable and rare resources or capabilities may sometimes be based on such things as
interpersonal relationship, culture and other social phenomena that make them difficult
for other firms to copy. Which one of the following terms is associated with this source
of sustainable competitive advantage?
a) Causal ambiguity
b) Rent seeking behavior
c) Social complexity
d) Behavioral barriers to entry (BTE). - Answer-c) Social complexity
The value of a given resource or capability must be reassessed periodically to ascertain
if the firm's business model and strategy are still relevant. If not reassessed periodically,
a once- valuable resource or capability may become:
a) less valuable, and no longer strategic
, b) more valuable, but remain strategic
c) less valuable but remain strategic
d) more value and more strategic. - Answer-a) less valuable, and no longer strategic
**A capitalist firm's residual claimants bear risk and uncertainty since they have a legal
claim to economic profit, but that profit can be zero or negative. Residual claimants can
diversify their portfolios, but expect:
a) Above normal returns on the investments in companies they own, over time
b) At least normal returns on the investments they have made, in the short run
c) Positive accounting profits in both the short and long run
d) Returns equal to the sum of explicit and implicit costs. - Answer-a) Above normal
returns on the investments in companies they own, over time
The organizational architectural process that specifies the criteria that will be used to
judge the contribution of decision agents (employees or associates) within the
organization is known as:
a) The Authority Boundary
b) The Nike Zone
c) The reward system
d) The performance measurement and evaluation system. - Answer-d) The
performance measurement and evaluation system.
Judicious delegation of decision rights to those with tacit knowledge, and accurate
measurement and evaluation of individual and unit contribution to the firm's success are
two of the components of a firm's:
a) Governance structure
b) Standing operating procedures
c) Organizational Architecture
d) Value chain. - Answer-c) Organizational Architecture
In the reading "The Rational Actor Model," the rational agent or actor is assumed to take
account of available information, probabilities of events, and potential costs and benefits
in determining preferences, and to act consistently in choosing the self-determined best
choice of action. This statement is:
a) True
b) False. - Answer-a) True
The element of organizational architecture that specifies how compensation and other
benefits and penalties will be distributed among agents within the organization is known
as the performance measurement process. This statement is:
a) True
b) False. - Answer-b) False
**Customers are the ones with the money and credit. Investors are the ones with the
capital and votes. Associates are the ones with the skills and purchased inputs. These
three important groups comprise what was in class called a firm's:
