MGMT 492 Sample Test 2

A) The firm's number of outstanding shares is 25 million.

(1) The market capitalization of a public company is $5 billion. Each share of the company is traded at $200. What do you infer from this financial data? A) The firm's number of outstanding shares is 25 million. B) The firm pays an annual dividend of 10 percent. C) The firm's total return to shareholder is $5 billion. D) The firm's economic value created is $5 billion.

A) It is valued at less than the sum of its individual business units.

(10) Greenway Industries is a major multinational conglomerate. Its business units compete in a range of industries, including home appliances, pharmaceuticals, commercial real estate, and plastics manufacturing. Although its largest business unit, which produces kitchen appliances, is among the most profitable in the industry, it generates only 35 percent of the company's revenues. Which of the following is most likely true of Greenway's stock price? A) It is valued at less than the sum of its individual business units. B) It is valued at greater than the sum of individual business units. C) It is valued at the exact sum of individual business units. D) It is consistently lower than the industry average.

C) business model.

(2) The translation of strategy into action primarily takes place in a firm's A) mission statement. B) executive summary. C) business model. D) code of conduct.

A) cost-leadership

3) Tangles Costume Jewelry offers slightly lower quality merchandise than competitors at a much lower price. What strategy is Tangles using? A) cost-leadership B) differentiation C) niche marketing D) product diversification

A) jumps to a steeper learning curve

4) Heartbeat Industries has recently introduced a new production method that will make the production of their medical devices more cost-effective. Which of the following will most likely be the result of this innovation? A) jumps to a steeper learning curve B) destabilizes a steeper learning curve C) stabilizes the existing learning curve D) moves down the existing learning curve

B) 3,000-4,000 units

5) When a firm manufactures 2,000-3,000 units of a product, it incurs an average cost of $10 per unit. When it manufactures 3,000-4,000 units of the same product, the average cost per unit reduces to $7. However, manufacturing beyond 4,000 units will raise the average cost per unit to $9. Which of the following is the firm's minimum efficient scale? A) 2,000-3,000 units B) 3,000-4,000 units C) below 2,000 units D) above 4,000 units

D) by regularly introducing incremental improvements in its products

6) How has Apple been able to sustain its competitive advantage in the smartphone industry? A) by reducing its network effects B) by targeting its new products and services toward laggards C) by driving the price for the end user to zero D) by regularly introducing incremental improvements in its products

A) introduction, growth, shakeout, maturity, and decline

7) Which of the following lists the stages of the industry life cycle in the correct order? A) introduction, growth, shakeout, maturity, and decline B) introduction, shakeout, growth, maturity, and decline C) introduction, growth, maturity, shakeout, and decline D) introduction, shakeout, maturity, growth, and decline

C) While the domestic airline industry is mostly free from excess capacity, the internet-enabled appliance industry will have new entrants.

8) While the domestic airline industry is in the maturity stage of the industry life cycle, the internet-enabled appliance industry is in its growth stage. Which of the following can be inferred from the given data? A) The number of competitors will be greater in the domestic airline industry than the internet-enabled appliance industry. B) The internet-enabled appliance industry is ahead of the domestic airline industry in the industry life cycle. C) While the domestic airline industry is mostly free from excess capacity, the internet-enabled appliance industry will have new entrants. D) The mode of competition will be price-based in the internet-enabled appliance industry and will be non-price-based in the domestic airline industry.

B) increase.

9) The Martinez Legal Firm (MLF) recently acquired a smaller competitor, Miller and Associates, which specializes in issues not previously covered by MLF, such as land use and intellectual property cases. Given the increase in the firm's size and complexity, it is likely that its internal transaction costs will A) decrease. B) increase. C) become external transaction costs. D) be eliminated.