Questions and Answers of Business Economics And Managerial

What factors might be considered in making the case for replacing a railway level crossing with a bridge?
How might the social costs of large lorries be evaluated?
What are the di¡erences between the appropriate discount rate for a private and a public investment?
How might a shadow price for time savings and deaths avoided be determined?
What are shadow prices? How might they be measured?
What problems are there with using market prices to value social bene¢ts?
Why do public and private valuation of costs and bene¢ts di¡er?
What is an externality? How might they be valued?
What is the social value of a bene¢t compared with actual amount paid for a purchase?
Which bene¢ts/costs should be included in a cost^bene¢t analysis?
In what ways does investment appraisal in the private sector di¡er from the public sector?
Distinguish between commercial investment appraisal and cost^bene¢t analysis.
Find out how the quasi-market works in higher education. Would it be more e⁄cient for each university and college to set a fee for each separate course which more closely re£ected the costs of
Explain the principles of quasi-markets. Evaluate their success or failure in the NHS.
What problems does a grant-funded agency face when its consumers do not pay for its services?
Appraise critically the exit^voice^loyalty approach of consumers putting pressure on public agencies to improve the supply of public and merit goods
Why does representative democracy favour producer groups rather than consumers?
Why does representative democracy fail to identify citizen-consumer preferences?
Appraise critically the assumption of voters and politicians seeking to maximize their utility in the political marketplace.
What are the shortcomings of referenda in determining the quality and level of supply of merit and public goods?
Why do communities choose not to sell merit goods and public goods at a price to consumers?
What di⁄culties do consumers face in in£uencing the level and quality of the supply of merit and public goods?
What objectives should a government set for a public enterprise selling a product or service with external bene¢ts or costs and one selling a product where there are no externalities?
Explain why economists suggest that a bureaucrat’s utility function can be summed into one that maximizes his budget. What are the implications or the size of the organization?
Is it possible to reconcile the concepts of ‘‘public’’ and ‘‘enterprise’’ in a single organization?
Why are clearly speci¢ed property rights important in determining the performance of a public enterprise?
Why should public sector enterprises be less e⁄cient than private sector enterprises?
What factors determine whether a product or service produced by a public sector organization should be available ‘‘free’’ or at a cost-related price?
What are the main economic arguments for certain goods and services to be produced in the public sector?
What problems does the concept of ‘‘free riding’’ create for public sector organization?
Explain the concepts of excludability and rivalry in consumption and explain how they can be used to de¢ne private, public and merit goods.
Explain the concept of externalities. What are the sources of social bene¢ts and social costs? Why do markets misallocate resources in the presence of externalities?
What do you understand by the term ‘‘market failure’’? What are the main causes?
Explain the methodology of competition policy and why outcomes are uncertain.Are there ways to reduce the degree of uncertainty that ¢rms ¢nd unsettling?
Using the EC’s (or Competition Commission’s) website select speci¢c case studies of a cartel, an anti-competitive practice and a merger. Critically examine the reasons the Commission came to its
What are the main tests used by European competition authorities to decide whether a cartel, anti-competitive practice or merger is a good or a bad thing?
What behavioural practices might a dominant ¢rm adopt in pursuit of pro¢t maximization which might be unacceptable to the competition regulators?
Explain price capping regulation. What are its main advantages and disadvantages?
Explain rate of return regulation. What are its advantages and disadvantages?
What methods might a regulator use to ensure a utility breaks even but does least damage to economic welfare?
What problems does pursuing marginal cost pricing create in a monopoly where there are increasing returns to scale?
Compare and contrast the welfare gains and losses between monopoly and competition.
Why might the government seek to regulate utilities?
Was the acquisition of Coach USA in pursuit of growth a major strategic error?
Has Stagecoach reached a barrier to its further growth?
Why did the company successfully integrate acquisitions into the enterprise?
What factors motivated Stagecoach to make acquisitions?
What factors account for Stagecoach’s rapid growth?
What are the main characteristics of the supply side of the bus industry? What are the advantages for a multi-bus operator over a single-bus operator?
What are the main characteristics of the demand function for bus journeys?
Why did the company see opportunities in a declining bus industry?
What cost advantages have led to the emergence of large enterprises in the bus industry?
Are economies of scale important in the bus industry?
What types of pricing strategies might be used to encourage consumer loyalty in a competitive bus market?
In what ways does Brian Souter appear to have the characteristics of a classical entrepreneur?
What factors might encourage a positive change in the income elasticity of demand for bus travel in the near future?
Why might the bus industry be regarded as a hostile environment in which to start a new enterprise?
Evaluate the implications for performance of the M-form and the H-form ¢rm.
Does the empirical evidence support the superiority of the M-form over the U-form?
What impact does diversi¢cation have on the structure of the ¢rm?
Why do management costs increase as a U-form ¢rm grows?
Identify the main characteristics of a M-form ¢rm. What are its advantages and disadvantages?How does an M-form structure allow the ¢rm to increase its size?
Identify the main characteristics of a U-form ¢rm. What are its advantages and disadvantages?How does a U-form structure limit the growth in size of the ¢rm?
If e¡ort and outcomes cannot be clearly measured what problems are created for incentive schemes?
How might owners attempt to alleviate agency problems among senior managers?
What is the source of the agency problem?
What do you understand by the term ‘‘agency theory’’?
Consider a recent merger proposal:^ Identify the main motives of the acquirer.^ Did the acquired company oppose the bid and, if so, why?^ How success or failure might be measured?
Why do managers continue to believe in the e¡ectiveness of mergers when the statistical evidence appears to point to the failure of most mergers?
How might the e⁄cacy of mergers be measured?:^ From the viewpoint of companies?^ From the viewpoint of society?
In the merger process:^ What sort of ¢rms become targets?^ What sort of ¢rms become acquirers?
Why do mergers fail to deliver anticipated bene¢ts?
What are the pro-e⁄ciency arguments in favour of mergers?
What are the anti-e⁄ciency arguments against mergers?
What reasons motivate a ¢rm to acquire another?
For what reasons would a ¢rm seek to be taken over?
Distinguish between horizontal, vertical and conglomerate mergers and give examples of each.
Why should the management of a ¢rm prefer:^ Internal growth to external growth through mergers?^ Growth through mergers to internal growth by organic expansion?
Identify a ¢rm that has recently gone into administration or liquidation. Try to analyse the reasons for failure and the attempts made by administrators/liquidators to keep the company operating
Should the UK introduce a Chapter 11-type procedure to deal with companies in¢nancial di⁄culties?
Explain the terms ‘‘manager-friendly’’ and ‘‘investor-friendly’’ used in bankruptcy proceedings.
Can a ¢rm overdiversify?
How might game theory help to explain the reluctance of ¢rms to exit markets?
Explain the concept of barriers to exit. How do they explain the reluctance of ¢rms to leave industries or markets?
What factors might explain why a ¢rm ceases to be viable?
Why is diversi¢cation a popular strategy with management?
Is it possible to de¢ne an optimal degree of diversi¢cation for a ¢rm?
Scan the newspapers for recent reports on companies either proposing to diversify or to refocus their portfolio of activity. Try to explain the pressures that have brought about the change and the
Explore and explain the following rationales for diversi¢cation:^ Unused resources.^ Economies of scope and size.^ Risk reduction for investors.^ Managerial utility ful¢lment.^ Lower ¢nancial
Explore the main sources of economic gain a ¢rm might expect from pursuing diversi¢cation.
Read a company’s annual report and identify the ¢rm’s main activities in terms of turnover and pro¢tability:^ Assess the ¢rm’s degree of diversi¢cation.^ Assess the relative contribution of
Distinguish between related and unrelated diversi¢cation. Why might the former be more successful than the latter?
What do you understand by the term ‘‘diversi¢cation’’?
Try to identify a recent merger or business venture that might be classi¢ed as vertical integration. In addition, try to identify the main advantages expected from such a strategy.
In what ways does vertical integration increase the monopoly power of the ¢rm?
What alternative arrangements can give the ¢rm the advantages of vertical integration without the disadvantages of ownership?
Consider the relationships between motor car manufacturers and motor dealerships and between brewers and pubs, identifying the nature of their vertical relationship.
In what circumstances does a strategy of vertical integration increase the pro¢ts of the ¢rm?
If a competitor buys a supplier of a key input for your enterprise, what factors should your ¢rm consider in deciding whether to copy the integration?
Explain and evaluate Williamson’s model of vertical integration.

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