Question 1

A hierarchy is usually a group of people who issue orders to subordinates.

Accepted Answer

False

Question 2

Independent workers using specialized capital save the costs of contracting but risk:
A)generalization.
B)opportunism.
C)inefficiency.
D)over-utilization.

Accepted Answer

Independent workers using specialized capital may be at risk of opportunism. This means that the other party involved may take advantage of their specialized tools or equipment, leaving the independent worker with little bargaining power. This can result in lower pay or a reduced demand for their services.

Question 3

In business organizations, the specialization of workers and their assignments to different tasks is called:
A)division of labor.
B)capital efficiency.
C)product differentiation.
D)labor productivity.

Accepted Answer

Division of labor is the process of dividing a complex task into smaller tasks and assigning those tasks to different workers who specialize in those tasks. This helps to increase efficiency and productivity by allowing workers to focus on specific skills and tasks, and reducing the time and effort required to switch between tasks. Capital efficiency and product differentiation relate to other aspects of business operations, while labor productivity is a measure of the output of each worker and does not specifically refer to assignments or specialization.

Question 4

In a merger, the outsider buys the shares of a target firm with debt collateralized by its other assets and sometimes by the target's assets.

Accepted Answer

The answer of In a merger, the outsider buys the...

Question 5

Risk-averse people prefer to hold assets whose returns are positively correlated.

Accepted Answer

Risk-averse people prefer to hold assets whose returns are negatively correlated or uncorrelated to minimize the overall risk of their portfolio.

Question 6

Which of the following is an advantage of having a marketing cooperative?
A)Sellers get a steady supply of raw materials for their produce.
B)Buyers get a steady supply of finished products.
C)Sellers can save resources they would have spent on marketing and instead specialize in production.
D)Buyers face lower risks of opportunism.

Accepted Answer

Marketing cooperatives allow sellers to pool their resources for marketing and distribution, allowing individual farmers or producers to specialize in production. This can lead to cost savings and higher quality products.

Question 7

If the owners of different types of resources, which are combined to produce an output, agree on organizational relationships that define their responsibilities toward one another they have formed a _____.
A)group
B)company
C)distribution network
D)team

Accepted Answer

The scenario described suggests the formation of a team, where owners of different resources (such as employees or departments) collaborate to produce an output. The mention of organizational relationships and defined responsibilities further supports this interpretation. While the other options (group, company, distribution network) may all involve collaboration, they don't necessarily imply the same level of coordination and shared responsibilities as a team.

Question 8

In a perfectly competitive market, traders bear the risk of opportunism because they are not in a position to choose from numerous potential counterparties while making a deal.

Accepted Answer

In a perfectly competitive market, traders do not bear the risk of opportunism because there are numerous potential counterparties to choose from, which promotes competition and discourages opportunistic behavior.

Question 9

When a single individual performs all the steps involved in the production process he/she incurs:
A)the costs of labor division.
B)the costs of being a generalist.
C)the cost of specialization.
D)the costs of over-utilization of resources.

Accepted Answer

When a single individual performs all the steps involved in the production process, they incur the costs of being a generalist, as they cannot take advantage of the efficiencies and expertise that come with specialization in specific tasks.

Question 10

Partnership can function as an efficient organizational form when partners have similar backgrounds and skills, and each of their income is largely determined by individual effort.

Accepted Answer

Partnership allows for shared decision making, division of labor, and pooling of resources. When partners have similar backgrounds and skills, they are more likely to work well together and complement each other's strengths. If each partner's income is determined largely by their own individual efforts, there is less potential for conflict over unequal contributions to the partnership.

Question 11

A residual claimant with supervisory powers resolves the difficulties independent workers have in arriving at choices that affect the entire group.

Accepted Answer

A residual claimant with supervisory powers can make decisions for the group and ensure that the interests of the entire group are taken into account, overcoming the difficulties that independent workers may have in making collective decisions.

Question 12

It is possible for a team member to monitor the activities of all other team members without affecting his/her own productivity.

Accepted Answer

Monitoring the activities of all other team members can significantly distract and reduce the productivity of the individual tasked with this monitoring, as it diverts focus from their own responsibilities and tasks.

Question 13

Centralizing responsibility for a firm's investments in a single person resolves problems of continuity.

Accepted Answer

Centralizing responsibility for a firm's investments in a single person ensures that there is a clear line of accountability and decision-making, which can help to avoid confusion and delays.

Question 14

Large shareholders can sometimes influence a corporation's decisions without making efforts to replace its management.

Accepted Answer

Large shareholders often hold enough voting power to sway decisions made by a corporation's management, without necessarily having to replace them. They can do this by leveraging their voting power to influence the company's strategy or use other means to communicate their expectations or demands to management.

Question 15

If a market is informationally efficient, the current price of a corporation's common stock shares is the best predictor of its future performance because it incorporates all of the information currently known about its prospects.

Accepted Answer

The answer of If a market is informationally efficient, the...

Question 16

A sole proprietor has limited liability and cannot be forced to pay its creditors from his/her personal resources.

Accepted Answer

A sole proprietorship does not have limited liability, meaning the owner is personally responsible for the debts and liabilities of the business. This means a creditor can go after the personal assets of the owner to pay off any outstanding debts.

Question 17

The separation of corporate ownership and control removes most executive decisions from shareholder scrutiny, but offers an efficient division of labor between persons with differing skills, goals, and wealth.

Accepted Answer

The statement accurately reflects the theory of separation of ownership and control, which posits that corporate ownership (shareholders) and control (management) are separate and distinct, allowing for efficient delegation of tasks and decision-making. While this separation may limit shareholder scrutiny of management decisions, it also enables managers to specialize in running the day-to-day operations of the company, while shareholders can focus on providing capital and expecting returns on their investment.

Question 18

Unless the specialists involved in the different stages of production coordinate among themselves, specialization and division of labor can result in unused capacities and investment mismatches.

Accepted Answer

Coordination among specialists is essential to ensure that the different stages of production are integrated and aligned with each other. Without coordination, specialization and division of labor can lead to inefficiencies, idle capacities, and mismatches in investments, which can ultimately impact the overall productivity and profitability of the organization.

Question 19

We call a group a team if the total output produced by the group can be separated into individual outputs.

Accepted Answer

A group is typically called a team when the total output produced is interdependent and cannot easily be separated into individual outputs. Teams work collaboratively towards a common goal, and their success is measured by collective achievements rather than individual contributions.

Question 20

A single individual performing all of the steps involved in the production of a commodity is usually less productive compared to one who performs only one task.

Accepted Answer

This is known as the division of labor and is a principle of economics. By specializing in one task, individuals can become more efficient and productive in that task, leading to increased overall productivity.

Quiz 12: Organizations in Concept and Practice