Multiple Choice Quiz

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1		The hold-up problem means that
			A)	ex post a larger share of the surplus is claimed than ex ante agreed upon.
			B)	ex ante under-investment occurs due to fear of ex post haggling.
			C)	insufficient safeguards are provided.
			D)	hostages are needed to facilitate exchange.
2		Quasi-surplus is defined as the sum of
			A)	consumer and producer surplus.
			B)	transaction costs and profits.
			C)	sunk costs and surplus.
			D)	profits and welfare.
3		The fundamental transformation in transaction cost economics means that
			A)	a competitive situation is transformed into a bilateral monopoly.
			B)	the main ideas of Coase have been overthrown.
			C)	complete contracts are nowadays changed in incomplete contracts.
			D)	there is a strong tendency to switch from ‘make’ to ‘buy’.
4		Which of the following is not an exogenous variable, explaining the choice of governance structure according to transaction cost economics?
			A)	Asset specificity.
			B)	Frequency.
			C)	Wealth.
			D)	Uncertainty.
5		Market governance is predicted by transaction cost economics when
			A)	frequency is high.
			B)	wealth is low.
			C)	uncertainty is low.
			D)	asset specificity is low.
6		Transaction cost economics predicts equity financing when
			A)	asset specificity is high.
			B)	frequency is low.
			C)	wealth is high.
			D)	uncertainty is high.
7		Influence costs are defined as the costs of
			A)	using hostages to facilitate exchange.
			B)	splitting decision rights between various parties.
			C)	lobbying the central government in order to obtain exclusive rights.
			D)	activities aimed at capturing organizational rents.
8		Which of the following is not an example of influence costs?
			A)	Investing in collateral in order to signal sincerity.
			B)	Non-productive use of time and effort.
			C)	Bad decisions for the organization due to distorted information and advice.
			D)	Costly organizational precautions in order to limit rent-seeking activities.
9		Selective intervention
			A)	is a way of hiring new employees.
			B)	means that the employer can decide to a certain extent what the employee has to do.
			C)	means that a menu of contracts is formulated.
			D)	means that the judicial practice of forbearance applies to transactions between companies.
10		Bureaucracy may be attractive from an influence perspective because it
			A)	restores the attractiveness of complete contracts.
			B)	discourages rent-seeking activities.
			C)	economizes on the cognitive activities involved in internal exchange.
			D)	facilitates the choice of the course of action in highly uncertain situations.