Industrial Economics
Test Preparation
Course Introduction
Industrial Economics explores the structure, behavior, and performance of firms and industries within the economy. The course examines how markets are organized, the dynamics of competition and monopoly, pricing strategies, barriers to entry, and the regulatory environment affecting businesses. Students will analyze various market forms, including perfect competition, oligopoly, and monopoly, and assess issues such as innovation, technological change, and the role of government policies in shaping industrial outcomes. The course provides theoretical frameworks and empirical tools to understand how firms operate and interact, equipping students with insights crucial for careers in business strategy, policy analysis, and economic consultancy.
Recommended Textbook
Economics of Strategy 5th Edition by David Besanko
Available Study Resources on Quizplus
18 Chapters
450 Verified Questions
450 Flashcards
Source URL: https://quizplus.com/study-set/1330 Page 2
Chapter 1: Basic Microeconomic Principles
Available Study Resources on Quizplus for this Chatper
25 Verified Questions
25 Flashcards
Source URL: https://quizplus.com/quiz/26554
Sample Questions
Q1) Suppose a factory is producing 100 units and the price of each unit is $10.If raising the price to $12 per unit results in a drop in sales of 12 units,what is the price elasticity of demand, ?
A)6
B).6
C)1.67
D).8
E).17
Answer: B
Q2) Which of the following variables does not influence the quantity of product that a firm is able to sell?
A)Price of the product
B)Price of related products
C)Plant production costs
D)Incomes and tastes of consumers
E)Advertising
Answer: C
To view all questions and flashcards with answers, click on the resource link above. Page 3
Chapter 2: Economies of Scale and Scope
Available Study Resources on Quizplus for this Chatper
25 Verified Questions
25 Flashcards
Source URL: https://quizplus.com/quiz/26555
Sample Questions
Q1) Which of the following practices does not contribute to the strategic fit of Southwest Airlines?
A)No in-flight catering
B)Use of multiple types of planes
C)No use of congested airports
D)Re-engineered boarding process
E)No first class section on plane
Answer: B
Q2) How does carrying inventories contribute to economies of scale?
A)Increases the interest on the expenses to produce the inventory
B)Inventory depreciates in value while waiting to be used or sold
C)Increases the storage facilities necessary
D)Increases competition with rivals for customers
E)Minimizes the chance of stock-out
Answer: E
Q3) Suppose the cost of advertising in a local newspaper is $5 per thousand papers.If the circulation for the paper is 1.5 million and the cost of preparing an ad for a company is $2500,what is the advertising cost per potential customer?
Answer: $.0067 per potential customer,or $6.67 per 1000 customers
To view all questions and flashcards with answers, click on the resource link above.
Page 4
Chapter 3: Agency and Coordination
Available Study Resources on Quizplus for this Chatper
25 Verified Questions
25 Flashcards
Source URL: https://quizplus.com/quiz/26556
Sample Questions
Q1) What term describes situations in which aspects of the productive environment that are important to the principal cannot be observed?
A)Unobservable action
B)Hidden action
C)Covert information
D)Unobservable information
E)Hidden information
Answer: E
Q2) Which of the following is a tool a firm can use to combat agency problems?
A)Monitoring
B)Performance-Based Incentives
C)Bureaucracy
D)a, b & c
E)None of the above
Answer: D
To view all questions and flashcards with answers, click on the resource link above. Page 5
Chapter 4: The Power of Principles - an Historical Perspective
Available Study Resources on Quizplus for this Chatper
25 Verified Questions
25 Flashcards
Source URL: https://quizplus.com/quiz/26557
Sample Questions
Q1) What was one of the first plant/factory types to use the "American System" of manufacturing?
A)Firearms
B)Steel
C)Oil
D)Automobiles
E)Chemicals
Q2) What does it mean for a manufacturing firm to vertically integrate?
A)Expand using established product technologies to offer a wider variety of products
B)Reorganize management into semi-autonomous divisions
C)Produce raw materials and distribute finished goods on their own
D)Geographic distance between buyers and sellers
E)Use management consultants to optimize processes
Q3) What is a benefit of alliances and joint ventures over mergers and acquisitions?
A)Better organizational structure
B)Scale savings
C)Less vertical integration
D)Less horizontal integration
E)Lower likelihood of antitrust scrutiny
To view all questions and flashcards with answers, click on the resource link above. Page 6
Chapter 5: The Vertical Boundaries of the Firm
Available Study Resources on Quizplus for this Chatper
25 Verified Questions
25 Flashcards
Source URL: https://quizplus.com/quiz/26558
Sample Questions
Q1) Suppose you manufacture 10 million hard drives per year specifically for Dell laptop computers.Suppose your average variable cost C=$20/unit and annualized cost of investment to build a hard drive factory I=$30 million.If Dell agrees to purchase the 10 million hard drives at a price P*=$25/unit,what is your company's "rent?
Q2) Suppose you manufacture 10 million hard drives per year specifically for Dell laptop computers.Suppose your average variable cost C=$20/unit,annualized cost of investment to build a hard drive factory I=$30 million,and the market price (bailout market price in the event Dell does not buy)Pm=$22/unit.If Dell agrees to purchase the 10 million hard drives at a price P*=$25/unit and subsequently renegotiates to only purchase for $22.50/unit,what is your company's new "rent"?
Q3) What primary agency cost problem plagued the partnership between Sony's hardware and software from 1998-2008 with regards to digital music?
A)High infrastructure costs
B)Contract disputes
C)High transaction costs
D)Overlapping distribution channels
E)Manager/worker slacking
To view all questions and flashcards with answers, click on the resource link above. Page 7
Chapter 6: Organizing Vertical Boundariesvertical
Integration and Its Alternatives
Available Study Resources on Quizplus for this Chatper
25 Verified Questions
25 Flashcards
Source URL: https://quizplus.com/quiz/26559
Sample Questions
Q1) What Japanese term describes a labyrinth of firms with long-term semi-formal relationships up and down the vertical chain?
A)Kaizen
B)Keiretsu
C)Kanban
D)Karõshi
E)Mochibun kaisha
Q2) Suppose we have two firms (Firm 1 & Firm 2)enter into a transaction where Firm 1 is upstream of firm 2 in a vertical chain.What term best describes the organization of the transaction where Firm 1 owns the assets of Firm 2?
A)Backward Integration
B)Forward integration
C)Nonintegration
D)Contractually unbound
E)Contractually bound
To view all questions and flashcards with answers, click on the resource link above. Page 8
Chapter 7: Diversificationpart Threemarket and Competitive Analysis
Available Study Resources on Quizplus for this Chatper
25 Verified Questions
25 Flashcards
Source URL: https://quizplus.com/quiz/26560
Sample Questions
Q1) Which of the following is generally a way that LBOs can help a firm realize its potential value?
A)The synergies created allow for cost savings
B)The transaction reduces the disparity between a firm's actual and potential share price
C)The acquisition reduces the likelihood of competition in the industry
D)The transaction requires debt repayment with future free cash flow leaving management no discretion over the investment of these funds
E)The buyout gives an opportunity to adjust the management structure and makeup
Q2) After American Can's initial transition from only producing manufacturing tin cans and other metal containers (1950)to diversifying with businesses that included paper products,printing,record distribution,and direct mail marketing,what Rumelt relatedness classification best described the firm (1980)?
A)Conglomerated-business
B)Single-business
C)Dominant-business
D)Related-business
E)Unrelated-business
To view all questions and flashcards with answers, click on the resource link above. Page 9
Chapter 8: Competitors and Competition
Available Study Resources on Quizplus for this Chatper
25 Verified Questions
25 Flashcards
Source URL: https://quizplus.com/quiz/26561
Sample Questions
Q1) What kind of competition is generally described as quantity competition?
A)Bertrand competition
B)Cournot competition
C)Perfect competition
D)Chamberlin competition
E)Monopolistic competition
Q2) Which of the following is a reason other than concentration that price-cost margins may vary across industries?
A)Accounting practices
B)Regulation
C)Product differentiation
D)Nature of sales transactions
E)All of the above
Q3) Suppose two hot dog stands,Al's & Bob's,position themselves at different ends of a 1000 yard stretch of beach.Assume there are 100 beach goers evenly distributed along the stretch of beach and travel costs are $.01 per yard.If Al charges $1 for his hot dogs and Bob charges $2 for his hot dogs,what is the cost of purchasing a hot dog from each stand for a hungry beachgoer situated at a position D yards from Al's end of the beach? How many consumers will go to Al's and how many will go to Bob's?
To view all questions and flashcards with answers, click on the resource link above.
Page 10
Chapter 9: Strategic Commitment
Available Study Resources on Quizplus for this Chatper
25 Verified Questions
25 Flashcards
Source URL: https://quizplus.com/quiz/26562
Sample Questions
Q1) Suppose a firm has $50 million to invest in a new market.Given market uncertainties,the firm forecasts a high-scenario where the present value of the investment is $200 million and a low-scenario where the present value of the investment is $20 million.Suppose that by waiting a year,the firm can learn with certainty which scenario will arise.Assume a 10% annual discount rate.If the firm waits one year and learns that the high-scenario will happen,what is the firm's expected net present value of the investment?
Q2) Which of the following commitment strategies involves soft commitment postures,strategic complements for the stage 2 tactical variables,a refrain commitment action and an acceptance of the status quo out of fear thus waiting to follow the leader?
A)Top Dog
B)Lean and Hungry Look
C)Mad Dog
D)Puppy-Dog Ploy
E)Fat-Cat Effect
To view all questions and flashcards with answers, click on the resource link above. Page 11
Chapter 10: The Dynamics of Pricing Rivalry
Available Study Resources on Quizplus for this Chatper
25 Verified Questions
25 Flashcards
Source URL: https://quizplus.com/quiz/26563
Sample Questions
Q1) Which of the following terms describes the situation created by a large dominant firm where smaller firms can find buyers as long as they sustain a lower price?
A)Price umbrella
B)Price leading
C)Predatory pricing
D)Premium pricing
E)Price lining
Q2) Suppose that a firm offers secret discounts to 200 customers in a particular industry to attract those customers from a competitor firm.If there is a 2% probability that any one of those customers will disclose the pricing,what is the probability that the firms competitors will hear from one of those 200 customers? Suppose there are instead 20 buyers to which discounts are offered.What is the probability then that the competitors may find out about one of the discounts?
Q3) In a six-firm market,if all firms charge the monopoly price,the profit equals $120,000.In that same six-firm market,if all firms instead charge the prevailing price,the profit is $60,000.If the pricing period is one-month long,what is the maximum monthly discount rate implied for each firm to still have an incentive to independently price at the monopoly level?
To view all questions and flashcards with answers, click on the resource link above. Page 12
Chapter 11: Entry and Exit
Available Study Resources on Quizplus for this Chatper
25 Verified Questions
25 Flashcards
Source URL: https://quizplus.com/quiz/26564
Sample Questions
Q1) What type of entry exists if (1)the incumbent can keep the entrant out by employing an entry-deterring strategy and (2)employing the entry-deterring strategy boosts the incumbent's profits?
A)Deterred Entry
B)Judo Entry
C)Stealth Entry
D)Accommodated Entry
E)Blockaded Entry
Q2) What type of firm is one that is already operating in a particular market?
A)Market leader
B)Entrant
C)Incumbent
D)Market follower
E)Monopolist
Q3) Which of the following is not an exit barrier for firms in an industry?
A)Sunk costs
B)Labor agreements or commitments to purchase raw materials
C)Obligations to input suppliers
D)Excess capacity
E)Government restrictions
To view all questions and flashcards with answers, click on the resource link above. Page 13
Chapter 12: Industry Analysispart Fourstrategic Position and Dynamics
Available Study Resources on Quizplus for this Chatper
25 Verified Questions
25 Flashcards
Source URL: https://quizplus.com/quiz/26565
Sample Questions
Q1) Which of the following is not a potential limitation of the five-forces framework?
A)It pays little attention to factors that might affect demand
B)It focuses on a whole industry rather than on individual firms that may occupy unique positions that insulate them from some competitive forces
C)The framework does not explicitly account for the role of government, except when government is a supplier or buyer
D)The framework provides a structured way to systematically work through wide-ranging and often complex issues
E)The framework is a qualitative analysis method
Q2) Which of the following is generally thought of as a buyer in the hospital industry?
A)Pharmaceutical drug houses
B)Medical equipment companies
C)Technician
D)Patients
E)Nurse
To view all questions and flashcards with answers, click on the resource link above. Page 14
Chapter 13: Strategic Positioning for Competitive Advantage
Available Study Resources on Quizplus for this Chatper
25 Verified Questions
25 Flashcards
Source URL: https://quizplus.com/quiz/26566
Sample Questions
Q1) What term coined by Michael Porter describes a firm that pursues elements of cost leadership and benefit leadership at the same time and in the process fails to achieve either a cost advantage or a benefit advantage?
A)Five forces
B)Value creation
C)Value chain
D)Stuck in the middle
E)Generic strategy
Q2) What kind of strategy is one by which a firm maintains price parity with its competitors and profits from its benefit or cost advantage primarily through high price-cost margins,rather than through a higher market share?
A)Pricing strategy
B)Share strategy
C)Margin strategy
D)Focus strategy
E)Generic strategy
To view all questions and flashcards with answers, click on the resource link above.
Page 15
Chapter 14: Sustaining Competitive Advantage
Available Study Resources on Quizplus for this Chatper
25 Verified Questions
25 Flashcards
Source URL: https://quizplus.com/quiz/26567
Sample Questions
Q1) What term describes a framework used in strategy based on resource heterogeneity which posits that for a competitive advantage to be sustainable,it must be underpinned by resource capabilities that are scarce and imperfectly mobile?
A)Persistence of profitability for the firm
B)Capability-based theory of the firm
C)Regression to the mean
D)Resource-based theory of the firm
E)Five-forces framework
Q2) What term refers to the costs incurred by buyers when they change to a different supplier?
A)Switching costs
B)Buyer costs
C)Reputation costs
D)Learning costs
E)Customer costs
To view all questions and flashcards with answers, click on the resource link above.
16
Available Study Resources on Quizplus for this Chatper
25 Verified Questions
25 Flashcards
Source URL: https://quizplus.com/quiz/26568
Sample Questions
Q1) What term describes the achievement of long-term growth and technological improvement?
A)Creative destruction
B)Static efficiency
C)Dynamic efficiency
D)Efficient allocation
E)Resource efficiency
Q2) What term describes the optimal allocation of society's resources at a given point in time?
A)Creative destruction
B)Static efficiency
C)Dynamic efficiency
D)Efficient allocation
E)Resource efficiency
Q3) Which of the following is not an example of disruptive technologies?
A)Computer workstations
B)Ink-jet printers
C)Electronic mail
D)Downloadable MP3 recordings
E)Segway human transporters
17
To view all questions and flashcards with answers, click on the resource link above.
Page 18
Chapter 16: Performance Measurement and Incentives in Firms
Available Study Resources on Quizplus for this Chatper
25 Verified Questions
25 Flashcards
Source URL: https://quizplus.com/quiz/26569
Sample Questions
Q1) Which of the following is least likely a technique firms can use to mitigate the free-rider problem?
A)Firms can reduce the repeated interactions among team members so that actions depend less on what other members may have done in the past
B)Firms can keep teams small
C)Firms can allow employees to work together for long periods
D)Firms can structure teams so that their members can monitor one another's actions
E)Firms can use future periods of interaction and let natural team dynamics of peer pressure and social isolation take place as punishment for team members who have failed to contribute in the past
Q2) Which of the following terms describes a contract by which the value of the compensation depends on the measured performance of the employee?
A)Explicit incentive contract
B)Implicit incentive contract
C)Risk sharing contract
D)Compensation contract
E)Pay-for-performance contract
To view all questions and flashcards with answers, click on the resource link above.
19
Chapter 17: Strategy and Structure
Available Study Resources on Quizplus for this Chatper
25 Verified Questions
25 Flashcards
Source URL: https://quizplus.com/quiz/26570
Sample Questions
Q1) Which of the following structures best describes a small group of people where one member of the group specializes in monitoring and coordinating the work of other members?
A)Complex hierarchy
B)Individually
C)Self-managed team
D)Hierarchy of authority
E)Divisional
Q2) What term best defines a complex set of behavior patterns that Nelson and Winter view the actions of firms to be a result of?
A)Routines
B)Decisions
C)Heuristics
D)Relationships
E)Resolutions
To view all questions and flashcards with answers, click on the resource link above.
Page 20
Chapter 18: Environment, power, and Culture
Available Study Resources on Quizplus for this Chatper
25 Verified Questions
25 Flashcards
Source URL: https://quizplus.com/quiz/26571
Sample Questions
Q1) What technique did Google use to preserve its "evil-free" culture when going public with an initial public offering in 2004?
A)Used an IPO underwriter
B)Allow clients to purchase underpriced IPO shares
C)Used a "Dutch auction"
D)Committed to sell a certain number of shares at a set price
E)Drastically underpriced its shares (by 200%)
Q2) Which of the following is not a way firms suffering from dependence relationships can take action to reduce their dependence on buyers or suppliers?
A)Vertical integration
B)Using a monopolist buyer/supplier
C)Long-term contracting
D)Joint ventures
E)Alliances
To view all questions and flashcards with answers, click on the resource link above.