Why Are Managers Thought to Engage in Empire Building

question 64

Multiple Choice

Why are managers thought to engage in empire building?

• A) Companies that do not grow stagnate
• B) The pursuit of growth represents the best way of maximizing the long-run profitability of the company.
• C) Growth is designed to increase market share, which in turn increases company profits.
• D) Growth results in large company size, and large size satisfies managers' needs for power, status, income, and job security.
• E) Stockholders would rather invest in large companies than in small ones.

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Definitions:

Nominal Cost

The price of a good or service without adjustment for inflation, representing the current market price.

Potential Output

Potential output refers to the total amount of goods and services an economy can produce when it is operating at full capacity and efficiency, without causing inflation.

Long-run Equilibrium

A state in which all inputs and outputs in an economy are fully adjusted and there is no tendency for change.

Aggregate Supply

The total supply of goods and services that firms in an economy are willing to sell at a given overall price level, across all existing price levels.