QUESTION $1$

Which of the following is an accurate statement about the relationship between firm effects and industry effects?

Firm effects deal with the action of competitors; industry effects deal with internal circumstances.

Firm effects deal with a manager's actions; industry effects deal with external circumstances.

Firm effects deal with a manager's actions; industry effects deal with internal circumstances.

Firm effects deal with the action of competitors; industry effects deal with external circumstances. Firm effects deal with a manager's actions, such as the actions that managers take toward employees. On the other hand, industry effects deal with external circumstances, such as types of products and services offered.