Economics of Strategy 7th Edition by David Dranove Test Bank

,File: ch01, Chapter 1: The Power of Principles: A Historical Perspective



Multiple Choice



1. Which of the following did not contribute to the high transaction related risks for U.S. potato sales in
1840?
a) Infrequency of transactions
b) Changing transaction partners
c) Lack of availability of sales and prices for comparable goods
d) Competition from European merchants
e) Geographic distance between buyers and sellers

Ans: d
Heading: The World in 1840 – Doing Business in 1840
Level: Medium



2. What was a key contribution to the dominance of the family-run small business in 1840?
a) Factories
b) Infrastructure
c) Raw Materials
d) Management
e) Laws

Ans: b
Heading: The World in 1840 – Conditions of Business in 1840: Life without a Modern Infrastructure
Level: Easy


3. Matchmakers between manufacturers and sellers are called:
a) Agents
b) Factors
c) Brokers
d) Merchants
e) None of the Above

Ans: c
Heading: Doing Business in 1840
Level: Easy



4. What significant transportation event brought about the first significant growth of the Great Lakes
region?
a) Harnessing of the steam engine
b) Invention of the screw propeller

,c) Opening of the Erie Canal
d) Integration of railway system
e) Invention of the railway system

Ans: c
Heading: The World in 1840 – Conditions of Business in 1840: Life without a Modern Infrastructure –
Transportation
Level: Medium



5. What is throughput?
a) The movement of inputs and outputs through a production process
b) Assets that assist in the production or distribution of goods and services
c) A condition that determines the horizontal and vertical boundaries of business firms
d) An investment in the acquisition of raw materials
e) The amount of time for a good to travel between metropolitan areas

Ans: a
Heading: Example 4.1 – The Emergence of Chicago
Level: Hard



6. What mode of long-distance communication first laid the groundwork for today’s modern
communication forms?
a) U.S. Postal Service
b) Private mail service
c) Telegraph
d) Telephone
e) Railroad

Ans: d
Heading: The World in 1840 – Conditions of Business in 1840: Life without a Modern Infrastructure –
Communications
Level: Easy



7. What was the major role of private banks in the early 1800s?
a) Serve as an institution for deposits
b) Issue credit
c) Reduce the risk of price fluctuation
d) Create futures markets
e) Sell stocks

Ans: b
Heading: The World in 1840 – Conditions of Business in 1840: Life without a Modern Infrastructure –
Finance
Level: Medium

, 8. 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

Ans: a
Heading: The World in 1840 – Conditions of Business in 1840: Life without a Modern Infrastructure –
Production Technology
Level: Medium



9. What economics game theory concept is demonstrated by the Erie Canal public works project?
a) Nash equilibrium
b) Lock-in
c) Backwards induction
d) Fair division
e) Prisoner’s dilemma

Ans: e
Heading: The World in 1840 – Conditions of Business in 1840: Life without a Modern Infrastructure -
Government
Level: Easy



10. What was the most significant development to the evolution of business circa 1910?
a) Railroad integration
b) Telegraph communication expansion
c) Banking and accounting standard practices
d) Mass-production technology
e) Advent of steam technology in railroads and shipping

Ans: d
Heading: The World in 1910 – Doing Business in 1910
Level: Medium



11. Which of the following led to overbuilding of railroads in the 1860’s and 1870’s?
a) Reduction of taxes on railroads by the federal government
b) The success of railroads in Europe
c) The availability of financing due to public optimism
d) The low cost of labor to construct railroads
e) Increases in regulated freight rates by the Interstate commerce Commission

Ans: c