Managing in Complex Environments

Quiz #1 Name (Please

print)_______ANSWERS___________________
Spring, 2008
Professor Atkin
My lecture time is: ______
Closed-book/closed-note. Below please find 35 3-point questions. Answers go on optical
scanning answer sheets. Please note that the last page of the quiz is your project peer evaluation.
For a grade to be recorded you must return (a) the quiz, (b) the answer sheet, and (c) the
completed peer evaluation. Good luck!
ITEMS IN RED ARE GIMMES i.e., QUESTION WE SHOULD BE GETTING 90%CORRECT. THE ACTUAL
% CORRECT IN THE CLASS IS NOTED FOR THESE ITEMS. Quiz statistics at end.
1.

In this course, we assume that firms B (% CORRECT 38%)

a. have a legal existence established by national law
b. have rights and responsibilities
c. both of the above
d. none of the above
2. The open system hypothesis implies that a firm such as Starbucks D
a. will product differentiate
b. will have a CSR policy
c. both of the above
d. none of the above
3. Wealth is the B (86%)
a. excess of revenue over expenses in a given accounting period
b. accumulation of profit over time
c. both of the above
d. none of the above
4. Transfer transactions C (82%)
a. are usually priced above the cost of production
b. are usually priced below market price
c. both of the above
d. none of the above
5. Mr. Nardelli from Home Depot, Mr. ONeill from Merrill Lynch, and Mr. Prince from Citibank
have all been recently hired as CEOs with missions to improve the financial performance of
their respective firms. B
a. true
b. false
6. As environmental change becomes more rapid A (76%)
a. the likelihood of failure of existing firms increases
b. the likelihood of new firms entering decreases
c. both of the above
d. none of the above
7. In market economies, decisions concerning prices, product mix, and product distribution A
a. are substantially influenced by the actions of buyers and sellers
b. are made without the involvement of governments
c. both of the above
d. none of the above
8. Corporations C (59%)
a. are publicly traded
b. convey unlimited liability to their owners
c. have unlimited life
d. all of the above
9. Positions in the firm C (80%)
a. are deliberately structured sets of activities
b. are all charged with some type of responsibility
c. both of the above
d. none of the above
10. Using target return as a profitability objective is an example of C
a. a governance rule
b. solving an agency problem
c. satisficing
d. all of the above
11. Heuristics A (83%)
a. provide a structured and low cost approach to routine problems
b. provide weak solutions exactly because of their low cost
c. both of the above
d. none of the above
12. The capital budgeting problem, the make, buy, lease problem, and the break-even problem
are all
a. examples of governance rules b. examples of agency problems
C (70%)
c. examples of standard problems d. examples of regulatory mechanisms

13. Which of the following statements is accurate? C (80%)

a. The environment of each firm is unique.
b. Each firm is unique.
c. both are accurate
d. neither is accurate
14. Firms such as Starbucks A
a. are required to report accounting profit
b. are required to report CSR activities
c. are required to report economic value added
d. all of the above
15. Over time money tends to grows in value. B (85%)
a. true
b. false
16. The multiple goals of a firm in a given industry tend to C
a. be similar to other firms in the same industry
b. be responsive to the interest of all stakeholders
c. change over time
d. all of the above
17. Although accounting profit and economic profit are generally different, this is usually not true
for sole proprietorships because they are very small. B (94%)
a. true
b. false
18. For each dollar of revenue generated by a firm, a reasonable estimate of the NI earned is D
a. > 60b. 30-60
c. 10-30
d. <10
19. The Balanced Scorecard is method to respond to B
a. new accounting obligations under the Sarbanes-Oxley Act
b. the existence of multiple performance criteria
c. excessive executive compensation
d. all of the above
20. The interests of various stakeholder groups D (97%)
a. may conflict
b. may have common goals
c. reflect some claim on the profit stream of the firm
d. all of the above
21. Bureaucracies are reasonably effective in relative unchanging environments. A
a. true
b. false
22. Since sole proprietorships are usually quite small, they have very little impact of the US
economy. B
a. true
b. false
23. In intellectual property markets, firms are D (87%)
a. sellers
b. buyers
c. brokers
d. all of the above
2. An exchange among parties, freely entered and of benefit to each, requires a high level of
interpersonal trust among the parties. B
a. true
b. false
3. One implication of the open system hypothesis is that a firm, in order to assure long term
survival and growth, must engage in future transactions. B
a. true
b. false
24. In a future transaction the striking of the deal and the consummating it are separated by
time, while in a spot transaction these tend to occur more or less at the same time.
Therefore, spot transactions are more likely also D (49%)
a. legal transactions
b. domestic transactions
c. both of the above
d. none of the above
25. Purchase transactions increase the firms revenue. B (67%)
a. true
b. false
26. The price system assumes that sellers have unique private information which gives them
advantages over buyers. B
a. true
b. false
27. Since most markets in advanced economies are relatively stable most of the time, D
a. firms generally have no incentive to product differentiate
b. firms generally have no incentive to increase productivity
c. both of the above
d. none of the above

28. As industries mature they tend to become (CORRECT IS B, BUT I THROUGH THIS
QUESTION OUT AS IT REQUIRES INFORMATION NOT YET DEVELOPED IN CLASS
EVERYONE GOT CREDIT)
a. perfect competitions
b. oligopolies
c. monopolies
d. insufficient information to determine
29. The cost of striking a contract D (79%)
a. is typically borne by the buyer
b. is zero if both parties trust each other
c. both of the above
d. none of the above
30. More expensive regulatory mechanisms may D (83%)
a. cause supply to decrease
b. cause increase tax to the general public
c. cause demand to decrease
d. all of the above
31. Cost of capital refers to D
a. the size of the investment a firms needs to make to product differentiate
b. inflationary effects
c. both of the above
d. none of the above
32. Data from the Starbucks case suggests that revenue is increasing, net income is increasing,
global presence is increasing, and number of stores is increasing. In spite of these positive
performance indicators, stock price has trended down for several years. This suggests B
a. stock price movement is irrational
b. future economic profit is not expected to grow under the firms current strategy
c. investors believe that Starbucks has no future without Mr. Schultz as CEO
d. coffee is overpriced
33. My best estimate of my score on this quiz is (ANY ANSWER GOT FULL CREDIT)
a. 90% correct or above
a. 80 -90% correct
b. 70 80% correct
c. less than 70% correct
Quiz Statistics:
76.68
78.00
12.08
105
45

AVG
MEDIAN
SD
MAX
MIN

Also, about 20 questions lost due to no answer, multiple answers, etc