ECON 308_ Review Night_ Exam III - Tagged

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Feb 20, 2024

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ECON 308 Exam III Review Night Chapters 18-21 Chapter 18 1) "Corporate governance" refers to aspects of the corporation like a) the corporate tax rate. b) compensation given to the top management. c) decentralization of decision rights to union workers. d) government regulation of corporate health and safety. 2) The principle of Economic Darwinism implies that a) publicly traded corporations have evolved unsuccessfully through the competitive process and are not here to stay and flourish. b) publicly traded corporations have evolved successfully through the competitive process but they are not here to stay and flourish. c) publicly traded corporations have evolved unsuccessfully through the competitive process but will be here to stay and flourish. d) publicly traded corporations have evolved successfully through the competitive process and are here to stay and flourish. 3) In the United States, the board of directors of corporations have a fiduciary responsibility to a) set the prices of the products the corporation produces. b) raise investment capital in their spare time. c) operate the company on a day-to-day basis. d) represent the interest of its shareholders. 4) Which of these groups is an external monitor in a publicly traded company? a) board of directors b) shareholders c) independent auditors d) top managers 5) Essay Question : Explain how each of the following market forces helps reduce incentive conflicts between shareholders and management: a) the market for corporate control, b) the managerial labor market, and c) the product market. 6) Essay Question: The Sarbanes-Oxley Act of 2002 attempts to reduce corporate fraud among top-level executives. Comment on the strengths and weaknesses of this act.

Chapter 19 1) When a corporation participates in more than one successive stage in a multi-stage production process, it is said to be a) vertically integrated. b) completely outsourced. c) engaged in preliminary contracts. d) functionally organized. 2) When a firm establishes a long-term contract with another firm that is characterized by common ownership of a supplier with another firm, it is referred to as a a) standard supply contract. b) joint venture. c) lease contract. d) franchise agreement. 3) When a firm establishes a long-term contract with another firm whereby it acquires an asset such as a machine or a building through a rental agreement, it is called a a) standard supply contract. b) joint venture. c) lease contract. d) franchise agreement. 4) When a firm establishes a long-term contract with another firm, whereby the first firm grants the second independent business the rights to use the former’s name, reputation and business format, it is referred to as a a) standard supply contract. b) joint venture. c) lease contract. d) franchise agreement. 5) When a firm decides to move away from ownership of a vertically integrated production process and begins to purchase supplies or other services from other businesses, it is said to be a) integrating downstream. b) integrating upstream. c) franchising. d) outsourcing. 6) Essay Question : What is outsourcing and what forms does it take? 7) Essay Question : Why are firm-specific assets so important in the decision to build internally, negotiate a long-term contract, or buy on the open market?

Chapter 20 1) To motivate the employees of a company to change and follow a new mission, it is important to a) move overseas for most of the production. b) outsource marketing and advertising. c) change the company's organizational architecture. d) rely on standard U-form organizational structures. 2) Which of these changes in a division’s architecture can allow a manger to gain support for a management proposal? a) lobbying for tax concessions b) outsourcing certain tasks c) emphasizing on marketing and brand value d) reallocating decision rights 3) "Laying the groundwork" before introducing a proposal means a) being able to market the proposal to those employees who will be affected by it. b) beginning to build facility before the ratification of the proposal so that the company cannot back away. c) looking for alternative proposals that can be implemented. d) calculating monitoring costs before implementation. 4) Essay Question: What are the two tasks of good leaders?

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Chapter 21 1) In developed countries, the enforcement of contracts and the adjudication of contract disputes through the court system a) reduces the volume of international trade. b) lowers the comparative advantage enjoyed by producers. c) is an important way to reduce transaction costs. d) weakens the system of property rights. 2) Which of the following regulatory procedures transfers wealth from consumers to producers? a) import quotas and tariffs b) efficiency wages c) transaction costs d) deadweight loss 3) Most governments enforce patents, copyrights, and trademarks. While these are clear restrictions on free trade, it is believed that inventors and investors a) generally oppose these restrictions as they encourage monopolistic competition. b) favor these restrictions since they promote inventive activities. c) prefer high tax rates to patents. d) prefer low prices to patents. 4) Essay Question : The case study in the chapter uses World Motors Corporation (WM). This company, headquartered in Atlanta, is faced with two major regulatory thrusts. One, emission standards, places WM at a competitive disadvantage as its major competitor has an efficient patented emission control device. The second, miles-per-gallon standards, finds WM in the same position as its competitors. Where would WM put its lobbying effort, assuming that conservation groups are currently lobbying strongly for higher emission standards?

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