Chapter 13

Question 1

The challenge a firm faces as it grows, such as the increasing number of employees a firm needs, finding the right employees, placing them in appropriate positions, and providing adequate supervision.

Answer 1

Adverse selection

Question 2

A specific factor or capability that supports a firm’s business model and sets it apart from its rivals. Core competencies are what the firm does particularly well and largely determine the details of its core strategy.

Answer 2

Core competencies

Question 3

When mass-producing a product results in lower average costs.

Answer 3

economies of scales

Question 4

The advantage a firm accrues through the scope (or range) of its operations rather than from the scale of its production.

Answer 4

economies of scope

Question 5

The expenses that remain the same for a company despite the volume of products or services it produces. Firms incur fixed costs whether they sell something or not

Answer 5

fixed costs

Question 6

Costs that vary proportionally with the volume of production; firms incur these costs to generate sales.

Answer 6

variable costs

Question 7

A bottleneck that occurs when a firm’s managerial resources are insufficient to take advantage of the opportunities available to it.

Answer 7

managerial capacity problem

Question 8

A problem meaning that as a firm grows and adds personnel, the new hires typically do not have the same ownership incentives as the original founders. As such, the new hires may lack the same level of motivation as the founders to put in long hours or may even try to avoid hard work.

Answer 8

moral hazard

Question 9

The set of opportunities the firm feels it can pursue.

Answer 9

productive opportunity set

Question 10

Growth in both revenues and profits over an extended period

Answer 10

sustained growth