One Problem with Becoming Too Large Is That Large Firms

question 66

Multiple Choice

One problem with becoming too large is that large firms:

• A) tend to have less market power.
• B) have less potential for economies of scale.
• C) become attractive takeover targets.
• D) usually increase bureaucratic controls.

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Definitions:

Agency Problem

arises in situations where there is a conflict of interest between the principals (owners) and agents (managers) of an organization, leading to potential difficulties in aligning their goals.

Conflict of Interest

A situation where a person's personal interest could potentially interfere with their professional duties or responsibilities, leading to compromised decision-making.

Motivation

Is the set of forces that causes people to behave in certain ways. Individual motivation is also a major determinant of individual performance, but motivation is at the heart of what causes an employee to choose to expend the effort that will support any organizational activity.

Forces

Elements or factors that influence or drive changes within a social, physical, or business environment.