Seminar 5: Horizontal Boundaries of Firms

Question 1

Which of the following is a term that can best be used to describe a broadly diversified firm?

A. Integrated
B. Merged
C. Mixed
D. Conglomerate
E. Multifaceted

Answer 1

Conglomerate

Question 2

Examining which of the following is broadly considered one of the easiest ways to measure diversifying activity?

A. Joint Ventures
B. Mergers and acquisitions
C. Internal Business Development D. Strategic Alliances
E. Collaborative agreements

Answer 2

Mergers and acquisitions

Question 3

What measure, that depends on how much of a firm’s revenues are attributable to product market activities that have shared technological characteristics, production characteristics, or distribution channels, is used to determine how diversified a firm is at a given time?

A. Integration level
B. Rumelt score
C. Conglomerate level
D. Activity share
E. Relatedness

Answer 3

Relatedness

Question 4

Which Rumelt relatedness classification describes a firm that obtains between 70 and 95 percent of its annual revenues from a principal activity?

A. Conglomerated-business
B. Single-business
C. Dominant-business
D. Related-business
E. Unrelated-business

Answer 4

Dominant-business

Question 5

Increased economies of scale and scope are helped by which of the following?

A. Umbrella branding
B. Market branding
C. Bundling
D. Negotiated branding
E. Strategic branding

Answer 5

Umbrella branding

Question 6

Which of the following is a characteristic of economies of scale?

A. The average cost declines as output increases
B. The average cost increases as output increases
C. The average cost remains constant as output increases
D. The average costs are cheaper when a firm produces a wider variety of
goods
E. The average cost curve takes the form of a U-shape

Answer 6

The average cost declines as output increases

Question 7

What is the minimum efficient scale (MES) of production?

A. The point on an average cost curve where the cost per unit begins to decline more rapidly
B. The minimum point on a U-shaped average cost curve
C. The minimum level of production at a plant for it to be considered profitable
D. The level of production for a small sized plant
E. The threshold at which capacity is constraining for a firm’s production

Answer 7

The minimum point on a U-shaped average cost curve

Question 8

Which of the following is not a way managers generally benefit from acquisitions?

A. Increased compensation
B. Consolidation of other senior executives
C. Shielding against risk
D. Political power
E. Social prominence

Answer 8

Consolidation of other senior executives

Question 9

Which of the following is a source of diseconomies of scale at a large firm?

A. Labor costs
B. Spreading specialized resources too thin
C. Conflicts of interest
D. Incentive processes
E. All of the above

Answer 9

All of the above