Managing in Complex Environments

Name (LAST, FIRST):_________ANSWERS (at end)

______
Spring, 2013
Quiz #1 5 & 630 pm
Form
Professor Atkin
PeopleSoft # ______________________ My lecture time is:______
This is a closed-book, closed-note quiz with 35 3-point questions. Answers go on optical
scanning sheets. The last page is a project peer evaluation. To earn a grade, you must return
(a) the quiz, (b) the answer sheet, and (c) the completed peer evaluation. All electronics of
and out-of-sight. Good luck!
Questions in RED are relatively easy questions that many of us answered incorrectly.
1. In this course, we assume that firms
a. may have more than one goal
b. have a legal existence and identity
c. both of the above
d. none of the above
2. The open systems hypothesis implies that firms must engage in
a. market economies
b. purchase transactions
c. both of the above
d. none of the above
3. Since the environment of a firm contains all possible customers, firms in the same industry
have identical environments.
a. true
b. false
4. In the typical situation, third party infrastructure providers are monopolists.
a. true
b. false
5. Transactions that cross internal but not external boundaries
a. are usually priced below market price but above the cost of production
b. generate significant revenue and net income for the firm
c. both of the above
d. none of the above
6. As the number of drivers of environmental change increase, change becomes more rapid.
a. true
b. false
7. The open systems hypothesis implies that publicly-traded corporations must report net
income to the SEC.
a. true
b. false
8. The right to make decisions and to commit resources of the firm
a. is what we mean by responsibility
b. is how we distinguish managers from supervisors
c. both of the above
d. none of the above
9. Empowerment is the term used to refer to the process by which some stakeholders
become members of the dominant coalition.
a. true
b. false
10. In the intellectual property market, firms can be
a. sellers
b. buyers
c. brokers
d. all of the above
11. As the complexity of the environment increases, existing heuristics are likely to change.
a. true
b. false
12. A January 28, 2013 article by AP read in part Ford is joining with Daimler and RenaultNissan to speed development of cars that run on hydrogen, with hopes of bringing a
vehicle to market in as little as four years, implying that competitors in one market are
likely to be competitors in all markets.
a. true
b. false
13. Our discussion of the Starbucks case suggests that employees are not represented in the
firms dominant coalition.
a. true
b. false
14. Globalzation involves
a. trade between countries
b. investment by governments to protect domestic jobs
c. both of the above d. none of the above

15. During the past decade or so, we have observed a shift from centrally planned to market
economies. This has resulted in a reduction of transfer transactions and an increase in
market transactions.
a. true
b. false
16. Future transactions are
a. generally less risky than spot b. a means to manage risk
c. both of the above
d. none of the above
17. Governance concerns
a. an inherently political process b. the distribution of the revenue of the firm
c. both of the above
d. none of the above
18. Since brokers are third parties who bring buyers and sellers together, brokers have no
rivals.
a. true
b. false
19. Accounting profit and economic profit are different in part because
a. net income is forward looking while rent is backward and forward looking
b. net income does not consider the time value of money while rent does
c. accounting profit can be maximized while economic profit cannot
d. all of the above
20. Corporations are required by law to disclose their net income to the general public.
a. true
b. false
21. Over time, the interests of different stakeholder groups can
a. converge
b. diverge
c. both of the above
d. none of the above
22. A Wall Street Journal news brief yesterday was titled Yahoo profits drop; share prices
increases 4%, suggesting that investors believe that current net income is a good
predictor of economic profit.
a.
true
b. false
23. We observed that most markets in developed economies were reasonably stable most of
the time. This implies that
a. prices cannot change faster than the rate of inflation
b. firms cannot escape perfect competition in the long run
c. both of the above
d. none of the above
24. The cost of striking a contract
a. is typically borne by the buyer
b. is zero if both parties trust each other
c. is typically borne by the seller d. none of the above
25. Contracts can increase the stability of markets because
a. they tend to place constraints on the behavior of parties to the contract
b. there is a means of redress if one or the other party violates the contract
c. both of the above
d. none of the above
26. Self-interest among parties to a transaction
a. is an incentive for sellers to acquire or build asymmetric information
b. can lead to the break-down of trust among parties
c. both of the above
d. none of the above
27. The existence of multiple performance criteria for the firm usually implies that increasing
the performance on one criterion reduces performance on a different criterion.
a. true
b. false
28. If market are not completely stable, then parties may have incentives to engage in future
transactions.
a. true
b. false
29. We learned from the case that Starbucks was vertically integrated suggesting transactions
between the roasting and retail parts of the firm likely produce significant revenue for the
firm.
a. true
b. false
30. Investment in product differentiation or process enhancement is risky because
a. cost is certain and benefits may never happen

b.
c.
31. If a
a.

benefits and costs tend to occur at the same time

both of the above
d. none of the above
market is orderly, we can conclude that information is symmetric.
true
b. false

32. A first mover is

a. the first firm to differentiate
b. the first firm to process enhance
c. the first firm to pursue futures transactions
d. all of the above
33. Product differentiation is an attempt by the firm to shift the risk associated with perfect
competition to a new risk asociated with developing new products.
a. true
b. false
34. Firms prefer monopoly to perfect competition in all markets in which they participate.
a. true
b. false
35. What is your best guess about your performance on this quiz?
a. I think I got at least 90% correct b. I think I got at least 80% correct
c. I think I got at least 70% correct d. I think I got less than 70% correct

Q1
C

Q2
D

Q3
B

Q4
B

Q5
A

Q6
B

Q7
B

Q8
D

Q9
B

Q
10
D

Q
11
A

Q
12
B

Q
13
B

Q
14
A

Q
15
B

Q
16
B

Q
17
A

Q
18
B

Q
19
B

Q
20
B

Q
21
C

Q
22
B

Q
23
D

Q
24
D

Q
25
C

Q
26
C

Q
27
A

Q
28
A

Q
29
B

Q
30
A

Q
31
B

Q
32
A

Q
33
A

Q
34
B

Q
35
any