11.The most efficient way to overcome the principal-agent problem in a firm is to: 
 
 

A. increase the level of vertical integration within the firm.

B. provide stock options to managers.

C. downsize the existing workforce.

D. organize economic activities within the firm.

12._____ is best described as a situation in which one party is more informed than another, because of the possession of private information. 
 
 

A. Information governance

B. Information asymmetry

C. Information deregulation

D. Information piracy

13.In the market for used cars, which of the following is a reason behind the crowding out of desirable cars by lemons or inferior ones? 
 
 

A. Experience-curve effects

B. Time compression diseconomies

C. Principal-agent problem

D. Information asymmetry

14.Bill is in an interview for a sales job that requires no experience. He is trying to portray himself as a highly enthusiastic, energetic person with high-level communication and interpersonal skills. The interviewer is convinced that Bill should be hired as a sales person in the company. However, in his resume, Bill had not mentioned his previous work experience as he was fired from that job on the account of using illegal drugs. Which of the following does this scenario best illustrate? 
 
 

A. Information asymmetry

B. Principal-agent problem

C. Experience-curve effect

D. Learning-curve effect

15.When approaching a bank for a loan, the borrower has better knowledge than the lender about his or her own ability to repay the loan without defaulting. What is this situation referred to as? 
 
 

A. Principal-agent problem

B. Information asymmetry

C. Experience-curve effect

D. Learning-curve effect

16.A drawback of short-term contracting as an alternative to making a component in-house is that: 
 
 

A. it is the most-integrated alternative to performing an activity so the principal company has no control over the agent.

B. the supplying firm has no incentive to make any transaction-specific investments to increase performance or quality.

C. it fails to allow a long planning period that individual market transactions provide.

D. the buying firm cannot demand lower prices due to the lack of a competitive bidding process.

17.Which of the following firms is least integrated? 
 
 

A. A firm that enters a joint venture with another company to develop a new technology

B. A firm that owns production subsidiaries across the globe

C. A firm that makes equity investments in its supplier’s company

D. A firm that buys all the required raw materials from multiple external vendors

18._____ are best described as voluntary arrangements between firms that involve the sharing of knowledge, resources, and capabilities with the intent of developing processes, products, or services to lead to competitive advantage. 
 
 

A. Embargos

B. Cartel agreements

C. Strategic alliances

D. Corporate acquisitions

19._____ is best described as a form of long-term contracting in the manufacturing sector that enables firms to commercialize intellectual property. 
 
 

A. Lean manufacturing

B. Licensing

C. Crowdsourcing

D. Bootlegging

20.Hitoro Inc. developed a superior touchscreen technology for tablet computers that enabled multiple users to operate the screen at the same time. The technology was leased to Revox Inc., a consumer electronics company, for five years. Which of the following alternatives to integration does this best illustrate? 
 
 

A. Licensing

B. Franchising

C. Crowdsourcing

D. Bootlegging