Chapter One Vocab

Question 1

Asymmetric information

Answer 1

The relative holdings of data by individuals; when at least one party to an agreement has superior knowledge of some dimension of the agreement

Question 2

bounded rationality

Answer 2

A property common to parties involved in economic exchange which implies that economic agents act with less than perfect information; arises because information is costly to acquire and preocess; that is, transaction costs will prevent parties form becoming fully informed

Question 3

business reengineering

Answer 3

the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical contemporary modern measures of performance, such as cost, quality, service, and speed.”… leads to unemployment of those least likely to get hired already, which increases poverty.

Question 4

concentration

Answer 4

importance of large producers in a market

Question 5

Contract

Answer 5

an agreement between two or more people that specifies actions that each will take or assigns decision-making powers.

Question 6

core competencies

Answer 6

An area of business in whichan organization has a competitive advantage not only in producing a good or service but also in developing new and related products

Question 7

corporation

Answer 7

….

Question 8

decentralization

Answer 8

“a reduction in the importance of a command and control hierarchy and the emergence of more independent business units
“

Question 9

economic rents

Answer 9

“A term used used by economist to describe ““extra payments going to a resource; more specifically the benefits from an activity going to a resource in excess of what is needed to attract that resource to that activity; in a sense representing ““something for nothing””

”

Question 10

economies of scale

Answer 10

reduction in average unit cost as output expands

Question 11

economies of scope

Answer 11

cost advantage from producing related yet different goods

Question 12

Efficient

Answer 12

if it is impossible, given available resources, to implement an alternative arrangement under which all parties involved are at least as well off.

Question 13

external contract

Answer 13

An agreement between the fimr and parties lacking an ownership or employment interest

Question 14

final goods

Answer 14

Outputs produced in an economic system sold directly to consumers without further processing

Question 15

Firm / Organization

Answer 15

A conscious, willful effort to organize economic activity that consists of a collection of contracts when more than one party is involved…. a legal entity, recognized by law, which is permitted to enter into binding contracts with other persons and firms.

Question 16

flexible manufacturing systems

Answer 16

systems that could produce a wide variety of products. Not as focused on high volume as on specialized high value goods… organized horizontally with consideral synthesis and overlap amond units….priority placed on innovation requires stong supplier relations

Question 17

Gross Domestic Product (GDP)

Answer 17

total money value of the goods and services produces by the residents of a country in a given period

Question 18

Gross National Produc (GNP)

Answer 18

measure of the incomes of the residents of a country including incomes earned abroad but excluding payments made to those abroad…. An economic statistic that includes GDP, plus any income earned by residents from overseas investments, minus income earned within the domestic economy by overseas residents.

Question 19

intermediate goods

Answer 19

Output subject to later processing before ultimately being sold to consumers

Question 20

internal contract

Answer 20

An agreement limited to parties within a firm; typically vague with some amount of latitude given to each of the involved parties

Question 21

junk bonds

Answer 21

a high-yield, high-risk security, typically issued by a company seeking to raise capital quickly in order to finance a takeover.

Question 22

make-or-buy decision

Answer 22

The choice a firm must make as to whether it should make an intermediate good in house or secure in in some market

Question 23

moral hazard

Answer 23

An ex post contracting situation and source of transaction costs that occurs when one party’s actions are imperfectly observable and when the incentives of the parties may be less than perfectly aligned.

Question 24

opportunistic behavior

Answer 24

Action taken when one party to an agreement acts in his or her own selfish interests, even at the expense of other parties involved in the agreement

Question 25

partnership

Answer 25

“A type of firm in the economic system that consists of two or more person associating to conduct non-corporate business
“

Question 26

perfect information

Answer 26

Every participant (and potential participant in a market becomes aware of every price, product specification, and buyer and seller location at no cost.

Question 27

Real

Answer 27

adjusted for inflation

Question 28

sole proprietorship

Answer 28

“A type of firm in the economic system owned by a single individual
“

Question 29

Taylorism

Answer 29

scientific management that involved specialization of jobs (through simplifying tasks), managers coordinating tasks through rules, managers evaluating performance…. vertically integrated in rigid hierarcy… look for lowest cost supplier that can provide the part

Question 30

total quality management

Answer 30

a philosophy practiced by an entire organization working together with an interdepartmental collective responsibility for the quality of products and services.

Question 31

transaction costs

Answer 31

Costs incurred in exchange, either explicit or implicit, above and beyond contracted prices including the acquisition of costly information, monitorig performance, and committing specific assets

Question 32

vertical integration

Answer 32

when one business enterprise gains control over more than one stage in the production and sale of goods and services

Question 33

virtual corporation

Answer 33

temporary network of companies that come together quickly to exploit changin market conditions and the, possibly disband