MGT 491 OL Ch. 5
Gina paid $900 for a camera that she thought was worth $1100 for all the features included in it. For the consumer electronics firm selling the camera, however, the cost of producing the camera was only $350. What is the consumer surplus in this scenario?
$200
How does a firm capture its producer surplus for a good or service?
As profit per unit sold
_____ most precisely measures how well a company leverages its fixed assets, particularly property, plant, and equipment (PPE).
Fixed asset turnover
_____ are best described as the value of the best forgone alternative use of the resources employed.
Opportunity costs
Which of the following business models has been traditionally used by the magazine and newspaper industry?
Subscription-based
Blue Ego Inc. is a market leader in the cell phone industry. To gain competitive advantage, the company has a post on its official site requesting its suppliers and customers to contribute ideas about the kinds of features and technology they think should be included in the next smartphone. This has helped the company reduce the burden of innovation on its employees, effectively meet customers' needs, and also include the larger community in product development. This process best exemplifies:
crowdsourcing
In the fiscal year 2012, BlackBerry's Cost of goods sold (COGS)/Revenue ratio was higher than that of its competitor, Apple. This implies that BlackBerry needs to work toward:
driving down its costs.
From an investors' or shareholders' perspective, the measure of competitive advantage that matters most is the _____.
return on risk capital
Unlike the financial ratios based on accounting data, total return to shareholders is:
an external performance metric.
In an economic context, strategy for producers is primarily about:
capturing the economic value created as much as possible.
The value a consumer attaches to a product or service is captured in the:
consumer's maximum willingness to pay for it.
Which of the following is an external performance metric?
Total return to shareholders
Which of the following is an advantage of the balanced scorecard?
It allows managers to translate a firm's vision into measureable operational goals.
Manufacturers of electric fragrance diffusers sell the electric outer device at an extremely low price, sometimes even at a loss. However, they make their money on the product by charging a premium on the perfume refills that have to be replaced regularly. Which of the following business models does this best illustrate?
Razor-razor-blade
A firm incurs $100 to manufacture an office table. It fixes the market price of the table as $250, and discounts the price to $200. However, the maximum a person is willing to pay for it is $180. What is the amount of total perceived consumer benefits in this scenario?
$180
A watch-making company has priced one of its wrist watches at $210. Most of its competitors sell similar watches at $180. Selling anything less than $150 would result in a loss for the company. However, the absolute maximum a customer is willing to pay for it is $170. In this scenario, what is the reservation price of the wrist watch?
$170
A firm has 30 million shares outstanding, and each share is traded at $100. Also, each shareholder gets a dividend of $2000 annually. In this case, the market capitalization is _____.
$3 billion, that is, 30 million shares × $100
Which of the following ratios best expresses inventory turnover?
Cost of goods sold/Inventory
The cost of capital to create a product is a fixed cost because it is:
unaffected by consumer demand.
Osion Electronics Inc. incurs a cost of $350 to produce one unit of a cell phone. The company's management has priced the product at $600 in the market. Considering the technological advancement of the cell phone, customers perceive its value to be around $800. What is the economic value created in this scenario?
$450
Blue Horizon Inc. is an Internet service provider. It provides a router free of charge when users sign up for a two-year wireless service plan. In this plan, users pay in advance irrespective of whether they use the Internet package during the two-year period or not. Which of the following business models does this scenario best illustrate?
A combination of the razor-razor-blade model and the subscription-based business model
Which of the following scenarios best illustrates crowdsourcing?
A company encourages the general community to post new product ideas on its official website.
The payable turnover for Apple and BlackBerry (as of fiscal year 2012) was 7.4 and 24.8 respectively. From this data we can conclude that:
Apple has been more efficient than Blackberry in paying creditors and generating interest-free loans from suppliers.
At present, _____ make up the oldest cohort of the workforce.
Baby Boomers
_____ is best described as a process in which a group of people voluntarily performs tasks that were traditionally completed by a firm's employees.
Crowdsourcing
The fixed asset turnover of a company is 8.3. What do you infer from this?
Every dollar spent on the company's fixed assets generates $8.30 of revenue.
Which of the following is an advantage of applying the economic value creation perspective to assess a firm's performance?
In economic value perspective, analysts not only consider historical costs, but also opportunity costs.
Which of the following statements is true of the balanced scorecard?
It attempts to provide a holistic perspective on firm performance.
How does a sustainable strategy typically help a firm?
It helps the firm achieve positive results along the social and ecological dimensions.
Which of the following is an advantage of a triple-bottom line approach?
The approach takes an integrative and holistic view in assessing a company's performance.
Which of the following is NOT an accurate expression of the economic value created per unit of a product sold?
The difference between the price charged and the firm's cost
Which of the following is NOT a limitation of the economic value creation framework?
The framework fails to provide the foundation that will help firms decide between cost-leadership or differentiation strategies.
Which of the following statements is true of the triple bottom line?
Three dimensions, economic, social, and ecological, make up the triple bottom line.
_____, which is the return on risk capital, includes stock price appreciation plus dividends received over a specific period.
Total return to shareholders
Both Vibrant Phones Inc. and Oryxo Inc. incur a cost of $200 to manufacture a single unit of a cell phone. However, Vibrant Phones creates more economic value than what Oryxo does. What does this imply?
Vibrant Phones sells its products at a better price than Oryxo.
Threadless is a community-centered online apparel store that leverages user-generated content. The idea is to turn consumers into prosumers, a hybrid between producers and consumers. Members of the Threadless community do most of the work, which they consider fun: They submit T-shirt designs online, and community members vote on which designs they like best. The designs receiving the most votes are put in production, printed, and sold online. It can be said that Threadless uses the _____ technique.
crowdsourcing
By selling a laptop at $1000 for which consumers are willing to pay up to $1200, a consumer electronics firm makes a profit of $400 per unit. In this scenario, the amount $600, that is ($1200 - $1000) + $400, is the _____.
economic value created
Samantha is a recent fashion graduate. She started her own apparel store with an investment of $300,000. In the first year she made a profit of $60,000. If she had taken up a job as a fashion editor for a magazine, she would have earned $50,000 as salary per year. Also, she could have invested her capital, $300,000, in treasury bonds and earned an interest of $12,000. Thus, the amount $62,000 ($50,000 + $12,000) would be Samantha's _____.
opportunity cost
When GD Inc. declared a dividend of $20,000,000, its market value increased from $8 billion to $8.5 billion. However, it lost a chance to reinvest $20,000,000 in the research and development of a new product which would have earned a profit of $200 million. Thus, this $200 million is referred to as GD Inc.'s _____.
opportunity cost
A high percentage of R&D/Revenue ratio indicates a(n):
strong focus on innovation to improve current products and services.
Using the _____ approach, managers audit their company's fulfillment of its social and ecological obligations to stakeholders such as employees, customers, suppliers, and communities as conscientiously as they track its financial performance.
triple-bottom-line
A defining characteristic of the subscription-based business model is that the:
user pays for access to a product or service whether he or she uses it during the payment term or not.
