Growth and Survival of Firms
108 questions· page 1 of 11
What is likely to prevent the development of an effective cartel in an industry?
Options
A a high concentration ratio
B a limit-pricing policy
C high fixed costs
D low barriers to entry
Which combination of statements about small firms and large firms is most likely to be correct?
Options
| small firms | large firms | |
|---|---|---|
| A | are more common in manufacturing than in services | face high barriers to exit |
| B | are more numerous than large firms | do not experience diseconomies of scale |
| C | can do well when each item produced is different | may arise from internal growth or mergers |
| D | cannot have any monopoly power | cannot earn supernormal profits |
Two manufacturing firms in the same industry, producing similar products, are considering merging together.
What would be the least convincing reason for merging?
Options
A It would enable greater bargaining power when buying raw materials.
B It would enable technical economies of scale.
C It would produce savings in management and administration costs.
D It would reduce the dependence of the firms on the suppliers of raw materials.
Which combination of statements about small firms and large firms is most likely to be correct?
Options
| small firms | large firms | |
|---|---|---|
| A | are more common in manufacturing than in services | face high barriers to exit |
| B | are more numerous than large firms | do not experience diseconomies of scale |
| C | can do well when each item produced is different | may arise from internal growth or mergers |
| D | cannot have any monopoly power | cannot earn supernormal profits |
What is likely to lead to the principal-agent problem?
Options
A a manager of a business makes decisions on behalf of the owner
B music festival tickets are purchased by a person who intends to sell them at a large profit
C the government is the only buyer of a pharmaceutical product
D there is only one firm that manufactures the product
What is an example of forward vertical integration?
Options
A A firm manufacturing computers merges with a firm that manufactures furniture.
B A firm manufacturing computers merges with a firm that manufactures silicon chips for computers.
C A firm manufacturing computers merges with a retail outlet that sells computers.
D A firm manufacturing computers merges with another firm that also manufactures computers.
Two firms selling the same type of product find it more efficient to merge.
Which combination describes how the merged firm's average costs of production and demand curve are expected to change?
Options
| average costs | demand curve | |
|---|---|---|
| A | fall | more elastic |
| B | fall | more inelastic |
| C | rise | more elastic |
| D | rise | more inelastic |
Which type of employment contract is most likely to overcome the principal agent problem?
Options
A increasing monthly salaries of waiters in a restaurant to decrease their dependence on tips from customers
B linking workers' pay with the profits of the firm to motivate them to raise the profitability of the firm
C making full fee payment in advance to a lawyer to motivate him to prepare a legal case well
D offering permanent contracts to give workers job security
Company R manufactures steel. Company S produces ships. Company T operates oil tankers. Company V operates cruise liners.
Which statement is correct?
Options
A If R takes over S, this is an example of forwards vertical integration.
B If S takes over V, this is an example of backwards vertical integration.
C If T takes over S, this is an example of diversification.
D If V takes over S, this is an example of horizontal integration.
A major UK chemical firm was bought by its rival, a Dutch chemical firm.
What definitely occurred when the Dutch firm bought the UK firm?
Options
A a partnership
B economies of scale
C horizontal integration
D increased profits