Managing in Complex Environments

Name:______________________________________
Fall, 2009
Professor Atkin
Quiz #1
My lecture time is: _______
This is a closed-book, closed-note quiz with 35 3-point questions. Place answers on optical
scanning sheets. A project peer evaluation is on the last page. To earn a grade, you must return
(a) the quiz, (b) the answer sheet, and (c) the completed peer evaluation. All electronics off
and out-of-sight. Best wishes !

1.
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In this course, we assume that firms

a. are social inventions
b. maximize profit
c. both of the above
d. none of the above
To be successful, firms must recognize the interests of all stakeholders equally.
a. true
b. false
As the number of drivers of environmental change increase, change becomes more rapid.
a. true
b. false
The open systems hypothesis implies that publicly-traded firms must report net income to
the SEC.
a. true
b. false
Since the environment of a firm contains all other firms
a. all firms in the same industry have the same environment
b. the governance rule of all firms are virtually identical
c. both of the above
d. none of the above
As the complexity of the environment increases
a. the evaluation by the firm of alternative sets of actions becomes more difficult
b. the likelihood of failure of existing firms increases
c. the likelihood of new opportunities for existing firms increases
d. all of the above
Positions in the firm can be grouped into four general types based on the authority vested in
them.
a. true
b. false
Bureaucracies
a. have a single chain-of-command
b. use impersonal, competency-based promotion
d. both of the above
d. none of the above
Maximizing is to satisficing as ____________ .
a. optimizing is to acceptable
b. game theory is to agency theory
e. both of the above
d. none of the above
Since monopolists have no rivals, they are less likely to experience agency problems than
are firms in oligopolies.
a. true
b. false
The claims of various stakeholder groups can be be thought of as
a. claims on the profit stream of the firm
b. claims on the capital appreciation of the value of a publicly-held firm
c. claims on the revenue generated by the transfer transactions of the firm
d. all of the above
The net income of a firm in one period is a good estimate of
a. the firms economic rent in the previous period
b. the firms economic rent in the same period
c. the firms economic rent in the next period
d. none of the above
In raw material markets, firms are

a. sellers
b. buyers
f. third parties
d. all of the above
14. In the short run, the Starbucks CSR policy
a. probably reduces returns that could be paid to stockholders in the form of
dividends
probably contributes to price increases to customers
both of the above
d. none of the above
15. Governance at a firm such as Starbucks concerns
a. an inherently political process b. the distribution of the profit stream of the firm
g. both of the above
d. none of the above
16. Since brokers are third parties who bring buyers and sellers together, brokers have no rivals.
a. true
b. false
17. An exchange among parties, freely entered and of benefit to each, is either
a. a spot or a future transaction b. a market or a transfer transaction
h. both of the above
d. none of the above
18. In market economies, prices, product mix, and distribution decisions
a. can be regulated by governments b.
are influenced by the actions of firms and
consumers
i. both of the above
d. none of the above
19. Assume that the steel making unit of US Steel purchases iron ore from the ore processing
unit of US Steel. Given only this information, we can conclude that this transaction
a. increases the revenue of the ore processing unit b. increases the revenue the firm
j. increases the profit of the firm
d. all of the above
20. A firm such as Starbucks derives its revenues from
a. purchase transactions
b. market transactions

k. both of the above

d. none of the above
21. We observed that most markets in developed economies are reasonably stable most of the

22.
23.

24.

25.

time. This implies that

a. prices cannot change faster than the rate of inflation
b. firms cannot escape perfect competition in the long run
c. both of the above
d. none of the above
The cost of striking a contract
a. is typically borne by the buyer
b. is zero if both parties trust each other
l. is typically borne by the seller d. none of the above
Self-interest among parties to a transaction
a. is an incentive for sellers to acquire or build asymmetric information
b. can lead to the break-down of trust among parties
c. both of the above
d. none of the above
Assume the firm choses to pursue a long-term project in which the expected benefits exceed
the expected costs (where both are adjusted for the time value of money, cost of capital.
etc). Other things equal, this project would
a. be expected to generate positive economic profit
b. have little or no risk
m. most likely be funded by the sale of assets
d. all of the above
Market share is the firms portion of total supply offered.
a. true
b. false

Next questions are from Chapter 3 NOT on your quiz !

26. Most globalized firms are conglomerates.
a. true
b. false
27. If a firm is successful, it is most likely a focused firm.
a. true
b. false

28. Consider two firms, A and B. A competes in an attractive industry, while B competes in an
unattractive industry. From just this information, we can conclude that the net income of A
is probably greater than the net income of B.
a. true
b. false

29. The risk faced by a focused firm is that if one business of the firm has problems
a. the firms other businesses will probably also have problems
b. product differentiation is difficult to accomplish
c. both of the above
d. none of the above
30. Assume we did a Porter type analysis on an perfectly competitive industry. Our most likely
31.

32.

33.

34.

35.

conclusion is that it is attractive.

a. true
b. false
Assume we conduct a Porter type analysis and determined the industry of interest were very
attractive. From this finding we can conclude that
a. barriers to entry are high
b.
switching costs are high
n. both of the above
d. none of the above
Assume we learn the following about an industry: Entry and exit are inexpensive, there are
no economies of scale, demand is shrinking, there is overcapacity, and existing customers
are not brand loyal. Given just this information
a. the industry is probably highly attractive b. most rivals in the industry are profitable
c. both of the above
d. none of the above
Weve analyzed two industries, X and Y and learned that (a) competition among rivals is
similar, (b) neither faces significant threats of new entrants, (c) neither faces significant
threats from subsitutues, (d) suppliers have more power over X than over Y,and (e)
customers have more power over X than over Y. Given this analysis a good conclusion is
a. firms in industry X are probably more diversified than Y
b. demand is probably growing faster in industry X than in Y
c. branding is more effective in industry Y or switching costs are higher in Y or both
d. none of the above
Consider two industries. In Industry 1, demand is growing and there is no excess capacity.
In Industry 2, demand is shrinking and there is excess capacity. From just this information,
we can conclude that
a. industry 1 has more new entrants than industry 2
b. switching costs in industry 2 are higer than in industry 1
c. both of the above
d. none of the above
What is your best guess about your performance on this quiz?
a. I think I got at least 90% correct
b. I think I got at least 80% correct
c. I think I got at least 70% correct
d. I think I got less than 70% correct

Thank you. Now please complete the Peer Evaluation form on the next
page

Peer Evaluation Form

My lecture section meets at _________________
Our project assignment is (what firm?) ________________________
PLEASE: DONT FORGET TO RATE YOURSELF

Please PRINT your name

and the names of your
teammates (First and
last name if known)

MY
NAM
E

Other members names

On a 1 to 10 scale (10
being best) PLEASE USE
WHOLE NUMBERS
Has this person
regularly attended team
meetings ?
Has this person
regularly delivered work
effort on a timely basis ?
Has this person
regularly delivered work
effort of high quality ?
Has this person
stepped up during
crunch time ?
My overall evaluation of
this person is
Please TOTAL each
column
(max = 50)

Managing in Complex Environments

Name:______________________________________
Fall, 2009
Professor Atkin
Quiz #1
My lecture time is: _______
This is a closed-book, closed-note quiz with 35 3-point questions. Place answers on optical
scanning sheets. A project peer evaluation is on the last page. To earn a grade, you must return
(a) the quiz, (b) the answer sheet, and (c) the completed peer evaluation. All electronics off
and out-of-sight. Best wishes !

36. In this course, we assume that firms A

a. are social inventions
b. maximize profit
c. both of the above
d. none of the above
37. To be successful, firms must recognize the interests of all stakeholders equally. B
a. true
b. false
38. As the number of drivers of environmental change increase, change becomes more rapid.
B

a. true
b. false
39. The open systems hypothesis implies that publicly-traded firms must report net income to
40.

41.

42.
43.
44.
45.
46.

47.

the SEC. B
a. true
b. false
Since the environment of a firm contains all other firms
D
a. all firms in the same industry have the same environment
b. the governance rule of all firms are virtually identical
c. both of the above
d. none of the above
As the complexity of the environment increases
D
a. the evaluation by the firm of alternative sets of actions becomes more difficult
b. the likelihood of failure of existing firms increases
c. the likelihood of new opportunities for existing firms increases
d. all of the above
Positions in the firm can be grouped into four general types based on the authority vested in
them. B
a. true
b. false
Bureaucracies
C
a. have a single chain-of-command
b. use impersonal, competency-based promotion
c. both of the above
d. none of the above
Maximizing is to satisficing as ____________ . A
a. optimizing is to acceptable
b. game theory is to agency theory
c. both of the above
d. none of the above
Since monopolists have no rivals, they are less likely to experience agency problems than
are firms in oligopolies. B
a. true
b. false
The claims of various stakeholder groups can be be thought of as
A
a. claims on the profit stream of the firm
b. claims on the capital appreciation of the value of a publicly-held firm
c. claims on the revenue generated by the transfer transactions of the firm
d. all of the above
The net income of a firm in one period is a good estimate of
D
a. the firms economic rent in the previous period
b. the firms economic rent in the same period
c. the firms economic rent in the next period
d. none of the above

48. In raw material markets, firms are

D
a. sellers
b. buyers
c. third parties
d. all of the above
49. In the short run, the Starbucks CSR policy
C
a. probably reduces returns that could be paid to stockholders in the form of
dividends
b. probably contributes to price increases to customers
c. both of the above
d. none of the above
50. Governance at a firm such as Starbucks concerns
C
a. an inherently political process b. the distribution of the profit stream of the firm
c. both of the above
d. none of the above
51. Since brokers are third parties who bring buyers and sellers together, brokers have no rivals.
B

a. true
b. false
52. An exchange among parties, freely entered and of benefit to each, is either
C
a. a spot or a future transaction b. a market or a transfer transaction
c. both of the above
d. none of the above
53. In market economies, prices, product mix, and distribution decisions
C
a. can be regulated by governments b.
are influenced by the actions of firms and
consumers
both of the above
d. none of the above
54. Assume that the steel making unit of US Steel purchases iron ore from the ore processing
unit of US Steel. Given only this information, we can conclude that this transaction
A
a. increases the revenue of the ore processing unit b. increases the revenue the firm
c. increases the profit of the firm
d. all of the above
55. A firm such as Starbucks derives its revenues from C
a. purchase transactions
b. market transactions

c.

c. both of the above

d. none of the above
56. We observed that most markets in developed economies are reasonably stable most of the

57.
58.

59.

60.
61.
62.

time. This implies that D

a. prices cannot change faster than the rate of inflation
b. firms cannot escape perfect competition in the long run
c. both of the above
d. none of the above
The cost of striking a contract
D
a. is typically borne by the buyer
b. is zero if both parties trust each other
o. is typically borne by the seller d. none of the above
Self-interest among parties to a transaction C
a. is an incentive for sellers to acquire or build asymmetric information
b. can lead to the break-down of trust among parties
c. both of the above
d. none of the above
Assume the firm choses to pursue a long-term project in which the expected benefits exceed
the expected costs (where both are adjusted for the time value of money, cost of capital.
etc). Other things equal, this project would
A
a. be expected to generate positive economic profit
b. have little or no risk
c. most likely be funded by the sale of assets
d. all of the above
Market share is the firms portion of total supply offered.
B
a. true
b. false
Most globalized firms are conglomerates.
B
a. true
b. false
If a firm is successful, it is most likely a focused firm. B
a. true
b. false

63. Consider two firms, A and B. A competes in an attractive industry, while B competes in an
unattractive industry. From just this information, we can conclude that the net income of A
is probably greater than the net income of B. B
a. true
b. false

64. The risk faced by a focused firm is that if one business of the firm has problemsD
a. the firms other businesses will probably also have problems
b. product differentiation is difficult to accomplish
c. both of the above
d. none of the above
65. Assume we did a Porter type analysis on an perfectly competitive industry. Our most likely
66.

67.

68.

69.

70.

conclusion is that it is attractive.

B
a. true
b. false
Assume we conduct a Porter type analysis and determined the industry of interest were very
attractive. From this finding we can conclude that D
a. barriers to entry are high
b.
switching costs are high
c. both of the above
d. none of the above
Assume we learn the following about an industry: Entry and exit are inexpensive, there are
no economies of scale, demand is shrinking, there is overcapacity, and existing customers
are not brand loyal. Given just this information
D
a. the industry is probably highly attractive b. most rivals in the industry are profitable
c. both of the above
d. none of the above
Weve analyzed two industries, X and Y and learned that (a) competition among rivals is
similar, (b) neither faces significant threats of new entrants, (c) neither faces significant
threats from subsitutues, (d) suppliers have more power over X than over Y,and (e)
customers have more power over X than over Y. Given this analysis a good conclusion is
I decided to throw this out everyone got credit (on my scoresheet)
a. firms in industry X are probably more diversified than Y
b. demand is probably growing faster in industry X than in Y
c. branding is more effective in industry Y or switching costs are higher in Y or both
d. none of the above
Consider two industries. In Industry 1, demand is growing and there is no excess capacity.
In Industry 2, demand is shrinking and there is excess capacity. From just this information,
we can conclude that
a. industry 1 has more new entrants than industry 2
b. switching costs in industry 2 are higer than in industry 1
c. both of the above
d. none of the above
What is your best guess about your performance on this quiz?
a. I think I got at least 90% correct
b. I think I got at least 80% correct
c. I think I got at least 70% correct
d. I think I got less than 70% correct

Thank you. Now please complete the Peer Evaluation form on the next
page

Peer Evaluation Form

My lecture section meets at _________________
Our project assignment is (what firm?) ________________________
PLEASE: DONT FORGET TO RATE YOURSELF

Please PRINT your name

and the names of your
teammates (First and
last name if known)

MY
NAM
E

Other members names

On a 1 to 10 scale (10
being best) PLEASE USE
WHOLE NUMBERS
Has this person
regularly attended team
meetings ?
Has this person
regularly delivered work
effort on a timely basis ?
Has this person
regularly delivered work
effort of high quality ?
Has this person
stepped up during
crunch time ?
My overall evaluation of
this person is
Please TOTAL each
column
(max = 50)

10