Part I

1) Define the term or concept in a brief paragraph. 2) Relate the term to the general issue of managerial economics as well as, 3) providing an example of the term in use.

Economies of Scale                                        Economies of Scope

Creative Destruction                                      Marginal Cost

Economic Costs                                              Economic Profits

Agency Relationship                                       Performance Based Incentives

Transaction Costs                                          Vertical Integration

Part II

2. Short Essay Questions

Write a short but well -constructed essay.  Explain your answer fully.  The answers should show evidence of critical analysis and explanations of the points you will be making in the answers to your questions.

1. Larger firms often are confronted with "coordination problems".  What are coordination problems and how can the firm create ways to deal with and mitigate these problems?
2. Competitive advantage is very important for the firm.  How does a firm create and preserve competitive advantage?  As part of your answer discuss how competitive advantage comes about.