Podcast
Questions and Answers
Vertical integration results in reducing transaction costs, ensuring efficient adaptation, and improving incentives for investment.
Vertical integration results in reducing transaction costs, ensuring efficient adaptation, and improving incentives for investment.
True
All production is carried out in one big firm due to the perfect contract enforcement that eliminates the holdup problem.
All production is carried out in one big firm due to the perfect contract enforcement that eliminates the holdup problem.
False
Professional managers always prioritize profit maximization over their own utility maximization.
Professional managers always prioritize profit maximization over their own utility maximization.
False
The separation of ownership and control in firms implies that profit maximization is always the primary objective of the firm.
The separation of ownership and control in firms implies that profit maximization is always the primary objective of the firm.
Signup and view all the answers
Internal factors that limit managers from pursuing their own interests include monitoring and the use of incentive contracts.
Internal factors that limit managers from pursuing their own interests include monitoring and the use of incentive contracts.
Signup and view all the answers
Competition in the product market is an external factor that constrains managers from shirking their responsibilities.
Competition in the product market is an external factor that constrains managers from shirking their responsibilities.
Signup and view all the answers
Outsourcing refers to firms carrying out activities internally rather than purchasing services or output externally.
Outsourcing refers to firms carrying out activities internally rather than purchasing services or output externally.
Signup and view all the answers
Vertical integration means that different production stages are organized within separate firms.
Vertical integration means that different production stages are organized within separate firms.
Signup and view all the answers
In markets with few firms or differentiated products, firms are usually price takers according to the perfectly competitive model.
In markets with few firms or differentiated products, firms are usually price takers according to the perfectly competitive model.
Signup and view all the answers
Firms engaging in non-price competition may focus on aspects like product quality, advertising, and R&D investments.
Firms engaging in non-price competition may focus on aspects like product quality, advertising, and R&D investments.
Signup and view all the answers
Market structures with differentiated products may lead to firms having the freedom to set prices independently.
Market structures with differentiated products may lead to firms having the freedom to set prices independently.
Signup and view all the answers
The de facto standardization on VHS format over Beta technology was an example of price competition dominance.
The de facto standardization on VHS format over Beta technology was an example of price competition dominance.
Signup and view all the answers
In address models, firms compete over both price and quality of their products.
In address models, firms compete over both price and quality of their products.
Signup and view all the answers
Address models assume that consumers' preferences are not based on specific product attributes.
Address models assume that consumers' preferences are not based on specific product attributes.
Signup and view all the answers
The efficient location of products in an address model minimizes transportation costs only.
The efficient location of products in an address model minimizes transportation costs only.
Signup and view all the answers
If transportation costs are relatively large, the market tends to provide a greater variety of brands.
If transportation costs are relatively large, the market tends to provide a greater variety of brands.
Signup and view all the answers
The principle of minimum differentiation in address models implies that firms aim to produce highly distinct products.
The principle of minimum differentiation in address models implies that firms aim to produce highly distinct products.
Signup and view all the answers
In address models, entrants have access to larger markets compared to incumbents.
In address models, entrants have access to larger markets compared to incumbents.
Signup and view all the answers
