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Questions and Answers
Managers have unlimited time and finances to explore all possible alternative solutions.
Managers have unlimited time and finances to explore all possible alternative solutions.
False
A programmed decision is made in response to unique and novel situations.
A programmed decision is made in response to unique and novel situations.
False
The first step in the decision-making process is to evaluate decision effectiveness.
The first step in the decision-making process is to evaluate decision effectiveness.
False
Structured problems are straightforward and can be easily defined.
Structured problems are straightforward and can be easily defined.
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Allocating weights to decision criteria is only necessary when the criteria are equally important.
Allocating weights to decision criteria is only necessary when the criteria are equally important.
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Unstructured problems typically arise as managers ascend the organizational hierarchy.
Unstructured problems typically arise as managers ascend the organizational hierarchy.
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A rule provides detailed steps to handle a well-structured problem.
A rule provides detailed steps to handle a well-structured problem.
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Certainty in decision-making means the decision-maker has incomplete information.
Certainty in decision-making means the decision-maker has incomplete information.
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H.Fayol developed twelve principles of management that can be applied to all organizations.
H.Fayol developed twelve principles of management that can be applied to all organizations.
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The scalar chain principle emphasizes the line of authority from top management to the lowest ranks.
The scalar chain principle emphasizes the line of authority from top management to the lowest ranks.
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The bureaucratic model proposed by Max Weber is characterized by a flexible approach to rules and regulations.
The bureaucratic model proposed by Max Weber is characterized by a flexible approach to rules and regulations.
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M.P. was an early advocate of the behavioral approach which emphasizes the technical aspects of work over individual attitudes.
M.P. was an early advocate of the behavioral approach which emphasizes the technical aspects of work over individual attitudes.
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Unity of direction entails that employees should only have one plan of action to guide their work efforts.
Unity of direction entails that employees should only have one plan of action to guide their work efforts.
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The principle of equity suggests that managers should be harsh and demanding towards their subordinates.
The principle of equity suggests that managers should be harsh and demanding towards their subordinates.
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Münsterberg is known for developing the behavioral approach to management which focuses solely on technical efficiency.
Münsterberg is known for developing the behavioral approach to management which focuses solely on technical efficiency.
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According to the principle of division of work, tasks should be divided among employees to increase efficiency.
According to the principle of division of work, tasks should be divided among employees to increase efficiency.
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Economic profit is calculated solely based on a firm's operational costs.
Economic profit is calculated solely based on a firm's operational costs.
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The classical view of social responsibility advocates for management to prioritize societal welfare over profit maximization.
The classical view of social responsibility advocates for management to prioritize societal welfare over profit maximization.
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Economic profit can help in comparing shareholder returns across companies with similar risks.
Economic profit can help in comparing shareholder returns across companies with similar risks.
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Dividends are not considered in the calculation of economic profit.
Dividends are not considered in the calculation of economic profit.
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Management's social responsibility only extends to legal obligations and economic interests.
Management's social responsibility only extends to legal obligations and economic interests.
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Employees are considered a key stakeholder in the area of social responsibility.
Employees are considered a key stakeholder in the area of social responsibility.
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The socioeconomic view of social responsibility includes as its primary goal the maximization of short-term profits.
The socioeconomic view of social responsibility includes as its primary goal the maximization of short-term profits.
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Increasing shareholder value is synonymous with value creation for firms.
Increasing shareholder value is synonymous with value creation for firms.
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Scientific management principles suggest that management should be responsible for all work better suited to them than the workers.
Scientific management principles suggest that management should be responsible for all work better suited to them than the workers.
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The Gilbreths were known for developing a classification scheme for labeling hand and body motions called 'therbligs'.
The Gilbreths were known for developing a classification scheme for labeling hand and body motions called 'therbligs'.
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Frank and Lillian Gilbreth used only static photographs to study body motions in order to increase productivity.
Frank and Lillian Gilbreth used only static photographs to study body motions in order to increase productivity.
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Henry Gantt is best known for his innovations in time management techniques, including the Gantt chart.
Henry Gantt is best known for his innovations in time management techniques, including the Gantt chart.
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Taylor's scientific management principles were founded on the idea of decreasing efficiency in the workplace.
Taylor's scientific management principles were founded on the idea of decreasing efficiency in the workplace.
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Henri Fayol identified seven functions that managers perform in effective management practice.
Henri Fayol identified seven functions that managers perform in effective management practice.
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A Gantt chart visually represents tasks with time on the vertical axis and activities to be scheduled on the horizontal axis.
A Gantt chart visually represents tasks with time on the vertical axis and activities to be scheduled on the horizontal axis.
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The elimination of inefficient hand motions was a key focus for the Gilbreths in their work studies.
The elimination of inefficient hand motions was a key focus for the Gilbreths in their work studies.
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Mechanistic organizations are characterized by high formalization and narrow spans of control.
Mechanistic organizations are characterized by high formalization and narrow spans of control.
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Centralization involves distributing decision-making authority to lower levels of management.
Centralization involves distributing decision-making authority to lower levels of management.
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Unity of command states that each individual in an organization should report to multiple managers.
Unity of command states that each individual in an organization should report to multiple managers.
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Organic organizations are typically rigid and characterized by specialized roles.
Organic organizations are typically rigid and characterized by specialized roles.
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The design of human resource management focuses on optimizing human talent to meet organizational goals.
The design of human resource management focuses on optimizing human talent to meet organizational goals.
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In a highly formalized organization, employees have significant discretion in their roles.
In a highly formalized organization, employees have significant discretion in their roles.
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Functional departmentalization groups jobs based on the product being produced.
Functional departmentalization groups jobs based on the product being produced.
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Span of control defines how many levels of management exist in an organization.
Span of control defines how many levels of management exist in an organization.
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Sustainability focuses solely on financial outcomes without concern for environmental impact.
Sustainability focuses solely on financial outcomes without concern for environmental impact.
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Managerial ethics is strictly about conforming to laws and regulations without regard to personal beliefs.
Managerial ethics is strictly about conforming to laws and regulations without regard to personal beliefs.
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The triple bottom line assesses an organization's performance based on financial, social, and environmental criteria.
The triple bottom line assesses an organization's performance based on financial, social, and environmental criteria.
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In a SWOT analysis, identifying threats pertains to recognizing the firm's internal weaknesses.
In a SWOT analysis, identifying threats pertains to recognizing the firm's internal weaknesses.
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A code of ethics is an informal collection of guidelines for ethical behavior within an organization.
A code of ethics is an informal collection of guidelines for ethical behavior within an organization.
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Strategic management process involves strategic planning, implementation, and evaluation at different levels of the organization.
Strategic management process involves strategic planning, implementation, and evaluation at different levels of the organization.
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Corporate strategy focuses on the operational tactics used within a specific department of the organization.
Corporate strategy focuses on the operational tactics used within a specific department of the organization.
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Employees are expected to maintain secrecy and confidentiality as part of their ethical obligations to the organization.
Employees are expected to maintain secrecy and confidentiality as part of their ethical obligations to the organization.
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Study Notes
Topic 1: The Nature of the Firm
- An organization is a structured group of people working towards a common goal.
- Organizations have three key characteristics:
- A distinct purpose
- Composed of people
- A deliberate structure
- A firm is a profit-seeking organization transforming inputs into outputs to satisfy customer needs.
- Firms operate within an economic and social reality, creating value for stakeholders and society.
- Inequality in income, caused by unemployment, can hinder economic growth and necessitate inclusive growth initiatives that firms can play a role in.
- Neoclassical theory of the firm views firms as "black boxes" that maximize profit.
- Transaction cost theory highlights the costs associated with market transactions (information costs, negotiation costs, and contract enforcement). Firms exist because markets aren't always efficient.
- Agency theory emphasizes the potential for conflicts of interest between owners and managers.
Topic 2: Theoretical Approaches to Management
- Classical approach emphasizes rationality and efficiency.
- Behavioural approach focuses on individual attitudes and group dynamics.
- Quantitative approach uses mathematical and statistical techniques for decision-making.
- Contemporary approaches are broader, integrating aspects from other approaches.
Topic 3: Business Environment
- The environment comprises external forces (political, economic, socio-cultural, technological, environmental, and legal) that affect organizational performance.
- Environmental uncertainty includes both the degree of change and complexity within an environment.
- General environment encompasses factors impacting all organizations (e.g., political, economic, socio-cultural, demographic, technological and legal factors).
- Competitive environment includes factors specific to an industry (e.g., competitors, customers, suppliers).
- Key forces within the general environment include economic conditions, technology advancements, political/legal frameworks, social and cultural trends, and environmental pressures.
Topic 4: Information
- Data are raw, unanalyzed facts. Information is processed and analyzed data.
- Quality information is accurate and reliable.
- Timeliness of information is crucial for timely decision-making.
- Information completeness and relevance are vital for effective decisions.
- Risks associated with information include uncertainty, ambiguity, and time constraints.
Topic 5: Business Administrators and Managers
- Management is essential for effective organizational functioning at all levels.
- Owners are responsible for leadership in the firm.
- Top managers focus on strategic decisions and overall company direction.
- Middle managers translate strategy into action and oversee specific departmental functions.
- First-line managers oversee and supervise non-managerial employees.
- Managers need a combination of technical, interpersonal, and conceptual skills.
- A manager's job includes various roles, such as interpersonal, informational, and decisional.
Topic 6: Economic Goal and Value Creation
- Firms explicitly aim to maximize accounting profit.
- Profitability compares a firm's generated income against expenses.
- Shareholder profitability can be a useful metric for comparing returns across different firms.
- Economic profit is a concept that goes beyond accounting profits to consider risk.
Topic 7: Organizational Culture
- Organizational culture encompasses shared values, principles, traditions, and ways of doing things.
- A strong culture is evident when shared values are widely recognized and embraced by employees who feel a sense of belonging and camaraderie. A weak culture lacks a strong sense of shared identity.
- Culture is composed of visible artifacts (e.g., manner of dress, ceremonies).
- Culture can also be composed of invisible elements like values and beliefs that shape behavior.
- Management's leadership and actions play a pivotal role in defining and shaping organizational culture.
Topic 8: Innovation
- Creativity is the ability to combine ideas in novel ways.
- Innovation is the process of turning creative ideas into practical applications.
- There are radical and incremental forms of innovation.
- External factors like strategic alliances between firms can also boost innovation.
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Description
Test your understanding of the characteristics of firms and their role in the economy. Explore crucial theories such as transaction cost theory and agency theory that explain why firms operate the way they do. This quiz covers key concepts from economic principles related to organizations and profit-seeking firms.
