Deck 18: Internal Markets

Question 1

Internal markets

A)are used to determine a transfer price.
B)are common in corporate America.
C)are part of a firm's vertical network.
D)all of these choices.

Answer 1

are used to determine a transfer price.

Question 2

Firms have started to use ____ to solicit information about event that are important to them

A)internal markets
B)external networks
C)prediction markets
D)none of these choices.

Answer 2

prediction markets

Question 3

Internal markets

A)do not have the same problems as external markets.
B)have externalities but do not fail.
C)have the same problems as external markets.
D)are more useful relative to external markets.

Answer 3

have the same problems as external markets.

Question 4

Internal markets

A)can be useful suppliers of information.
B)suffer from some of the same problems that external markets suffer.
C)are becoming increasingly popular.
D)all of these choices.

Question 5

A market based firm

A)still needs structure.
B)needs no structure.
C)is really not a firm.
D)none of these choices.

Question 6

A new approach to management that uses market structures is

A)CAPM.
B)market based management.
C)total quality management.
D)networking.

Question 7

In an unfettered free market, price is ____ predictor(s)of an event.

A)the best
B)only of many
C)not a very useful
D)a marginal

Question 8

In a market based firm

A)headquarters is really only interested in external business relationships.
B)headquarters still needs total budget control.
C)headquarters assigns property rights.
D)a focus on manufacturing is appropriate.

Question 9

Transfer prices should be set to so

A)to maximize profits for only one unit in a multi-unit firm.
B)allow arbitrage with the external market place.
C)to maximize profits for the overall firm.
D)none of these choices.

Question 10

The way one unit of a firm relates to another in the same firm is referred to as being

A)upstream or downstream.
B)latitudinal or longitudinal.
C)left or right.
D)competitor or conspirator.

Question 11

To create a market

A)roles must be assigned.
B)agents need instructions.
C)property rights must be defined.
D)transactions costs must be zero.

Question 12

BP has

A)only used external markets.
B)used internal markets successfully to reduce emissions.
C)used internal markets to deal with a network externality.
D)none of these choices.

Question 13

The market process is a

A)path to discovery.
B)simple process.
C)theoretical concept that reveals little useful information.
D)none of these choices.

Question 14

Market prices

A)are limited in their information content.
B)contain all available information.
C)contain only past information.
D)none of these choices.

Question 15

An external market

A)should always replace internal markets.
B)have problems that internal markets do not.
C)should be used to discipline the internal market.
D)fewer economies of scope.

Question 16

In general, the structure of a business firm

A)looks like a market.
B)looks like a flat network.
C)is largely determined by legal considerations.
D)seems more like a central planning agency than a market.

Question 17

Central planners

A)know more than the market.
B)know less than the market knows.
C)process information more efficiently than the market.
D)can predetermine equilibrium prices.

Question 18

All the costs of a transaction are referred to as

A)transfer costs.
B)transactions costs.
C)marketing expenditures.
D)accounting costs.

Question 19

PAM

A)was a prediction market used to predict terrorist attacks.
B)is another cost of capital model like CAPM
C)stands for Pricing Assets Management
D)none of these choices

Question 20

If a firm decides to produce a product that it once purchased from a firm upstream it has made a

A)horizontal decision.
B)make or buy decision.
C)downstream decision.
D)sell or service decision.

Question 21

The set of collectively held beliefs, values, and norms among the members of a firm that influence individual behavior is referred to as

A)network values.
B)horizontal values.
C)implicit contracts.
D)corporate culture.

Question 22

Market-based management firms do not have structures like headquarters.

Question 23

Research seems to suggest that corporate culture

A)is unrelated to stock performance.
B)is closely related to stock performance.
C)helps determine the cost of capital.
D)is easily transferable across organizations.

Question 24

Prediction market in Scotland have been used to effectively forecast the outcome of elections in the United States.

Question 25

Transfer prices can be set in such a way so as to maximize profits for an entire business.

Question 26

Amazon.com claims that its average costs fall as it adds new product lines to its website.Amazon.com is experiencing

A)network externalities.
B)diseconomies of scale.
C)economies of scope
D)all of these choices.

Question 27

Managers need to enforce property rights inside a firm.

Question 28

Internal markets cannot suffer market failure like an external market.

Question 29

Net marginal product is the reciprocal of marginal cost.

Question 30

There is no need to allocate property rights in a market-based firm.

Question 31

Price is the best predictor of an event.

Question 32

Free competitive markets do not process information effectively.

Question 33

Relational contracts contract for every possible contingency

Question 34

Organizational structure forms evolved based on

A)new theories of management.
B)the ability of new forms to add accounting profits.
C)the ability of new forms to cover the cost of capital.
D)the ability of new forms to add value.

Question 35

Organizational structure can be a strategic asset if it

A)adds value.
B)adds value and can be duplicated.
C)adds value and cannot be duplicated.
D)can be franchised.