SM Chapter 4

9) As the volume of production in a firm increases, the average cost per unit decreases until some optimal volume of production is reached, after which the average costs of production begin to rise because of A) diseconomies of scale. B) economies of scope. C) diseconomies of scope. D) economies of scale.

A

1) Actions that firms take to gain competitive advantage in a single market or industry are known as A) business-level strategies. B) corporate-level strategies. C) functional-level strategies. D) macro-level strategies.

A

14) ________ focus(es) on the relationship between the volume of production at a given point in time and average unit costs, the ________ focus(es) on the relationship between the cumulative volume of production and average unit costs. A) Economies of scale; learning curve B) Competitive advantage; economies of scale C) Learning curve; economies of scale D) Economies of scale; competitive advantage

A

4) ________ focus(es) on the relationship between the volume of production at a given point in time and average unit costs, the ________ focus(es) on the relationship between the cumulative volume of production and average unit costs. A) Economies of scale; learning curve B) Competitive advantage; economies of scale C) Learning curve; economies of scale D) Economies of scale; competitive advantage

A

58) Which of the following statements about cost leadership and the threat of buyers is accurate? A) If buyers demand increased quality or service, cost leaders can absorb these costs and may still have a cost advantage over the competition. B) Being a cost leader encourages buyer backward vertical integration. C) Firms pursuing a cost-leadership strategy are especially vulnerable to powerful buyers who insist on low prices or higher quality and service from their suppliers. D) Cost leaders are not able to absorb costs associated with buyers' demands for increased quality or service.

A

68) Which of the following statements is accurate? A) In general, economies of scale are relatively easy-to-duplicate bases of cost leadership, but diseconomies of scale are not. B) In general, diseconomies of scale are relatively easy-to-duplicate bases of cost leadership, but economies of scale are not. C) In general, neither economies of scale nor economies are relatively easy-to-duplicate bases of cost leadership. D) In general, both economies of scale and diseconomies of scale are relatively easy-to-duplicate bases of cost leadership.

A

15) Which of the following statements regarding the learning curve and economies of scale is accurate? A) Just as diseconomies of scale are presumed to exist if a firm gets too large, there is a corresponding increase in costs in the learning-curve model as the cumulative volume of production grows. B) Where diseconomies of scale are presumed to exist if a firm gets too large, there is no corresponding increase in costs in the learning-curve model as the cumulative volume of production grows. C) Where diseconomies of scale are presumed to exist if a firm gets too small, there is no corresponding increase in costs in the learning-curve model as the cumulative volume of production grows. D) Just as diseconomies of scale are presumed to exist if a firm gets too small, there is a corresponding increase in costs in the learning-curve model as the cumulative volume of production grows.

B

20) The quality of relations among labor and management, an organization's culture, and the quality of management controls are all examples of A) technological hardware. B) technological software. C) productive inputs. D) economies of scale.

B

26) If Sematech were to choose to narrow its product line in an effort to reduce costs, this would be an example of A) technological software. B) a policy choice. C) a competitive advantage. D) a learning-curve effect.

B

56) Which of the following statements is accurate? A) A cost-leadership competitive strategy increases the threat of new entrants by lowering cost- based barriers to entry. B) Firms with a low-cost position can reduce the threat of rivalry in an industry. C) Cost leaders are especially vulnerable to substitute products. D) Cost leaders are especially vulnerable to the threat of suppliers.

B

71) If Sematech's expansion plans did not produce the desired cost savings but the company decided to continue production expansion in an effort to capture cost reductions, this would be an example of A) economies of scale. B) escalation of commitment. C) diseconomies of scale. D) managerial diseconomies.

B

8) ________ are said to exist when the increase in firm size (measured in terms of volume of production) are associated with lower costs (measured in terms of average costs per unit of production). A) Sustainable competitive advantages B) Economies of scale C) Temporary competitive advantages D) Economies of scope

B

82) The only person in a functional organization who has to have a multifunctional perspective is the A) CFO. B) CEO. C) COO. D) marketing manager.

B

86) The U in U-form structure stands for A) "uniform." B) "unitary." C) "unilateral." D) "unambiguous."

B

3) Cost-leadership and product-differentiation strategies are so widely recognized that they are often called A) common business strategies. B) generic corporate strategies. C) generic business strategies. D) common corporate strategies.

C

18) In order to create a cost advantage, the cost of acquiring low-cost productive inputs must be ________ the cost savings generated by these factors. A) greater than B) equal to C) less than D) greater than or equal to

C

23) By increasing production volume in an effort to reduce costs, Sematech is pursuing which sources of cost advantage? A) size differences and diseconomies of scale B) differential access to productive inputs C) size differences and economies of scale D) technological advantages

C

80) Firms implementing cost-leadership strategies will generally adopt a A) multidivisional structure. B) product divisional structure. C) functional organizational structure. D) matrix structure.

C

84) Which of the following compensation policies is most likely to enhance a firm's ability to pursue a low-cost strategy? A) awarding employees bonuses based on the total amount of goods produced B) awarding employees bonuses based on customer comment cards C) awarding employees bonuses that are equal to 50% of the total cost savings achieved based on employee suggestions and initiatives D) awarding employees bonuses based solely on how long they have been employed with the company

C

16) Learning-curve-cost advantages are A) restricted only to manufacturing firms. B) restricted only to firms in services industries. C) restricted only to firms in extraction industries. D) not restricted to manufacturing.

D

2) Which of the following is NOT a potential source of diseconomies of scale? A) physical limits to efficient size B) worker de-motivation C) distance to markets and suppliers D) learning-curve economies

D

24) If Sematech's efforts to increase its production capacity resulted in increased complexity and an inability of managers to control and operate the firm efficiently, this would be an example of A) physical limits to efficient size. B) worker de-motivation. C) distance to markets and suppliers. D) diseconomies of scale.

D

6) A firm that chooses a ________ focuses on gaining advantages by reducing its cost below all of its competitors. A) diversification strategy B) product-differentiation business strategy C) corporate strategy D) cost-leadership business strategy

D

66) Which of the following is less likely to be a rare source of cost advantage? A) technological software B) learning-curve economies of scale C) differential low-cost access to productive inputs D) policy choices

D

72) If Sematech were to continue seeking methods to maintain the company's cost-leadership position that would be costly to duplicate, which of the following is most likely to be a basis of cost leadership that may be costly to duplicate? A) establishing economies of scale B) exploiting learning-curve economies C) purchasing new technological hardware D) securing differential access to low-cost productive inputs

D

83) Firms pursuing a cost-leadership strategy are typically characterized by A) loose cost control systems. B) a de-emphasis on quantitative cost goals and costs. C) infrequent cost control reports. D) close supervision of labor, raw materials, inventory, and other costs.

D

91) If Lucy Sullivan were a Sematech manager who oversaw the finance operations in the company's functional structure, Lucy would be considered a A) chief executive officer. B) divisional manager. C) chief operating officer. D) functional manager.

D

29) In general, cost advantages are not possible when competing firms produce similar products. T or F

F

40) Economies of scale focus on the relationship between the cumulative volume of production and average unit costs, while the learning curve focuses on the relationship between the volume of production at a given time and average unit costs. T or F

F

41) If a firm gets too large, it will eventually experience both diseconomies of scale and an increase in costs associated with the learning-curve effect as cumulative volume of production grows. T or F

F

42) Learning curve-cost advantages are restricted solely to manufacturing and the advantage associated only with the manufacturing business function. T or F

F

46) One of the least important productive inputs in almost all companies is labor and it is unlikely that differential low cost access to labor can give a firm a cost advantage. T or F

F

61) The threat of rivalry is increased when low-cost firms set their prices equal to those of higher cost competitors. T or F

F

74) Sources of cost advantage that are unlikely to be rare include learning-curve economies, differential low-cost access to productive inputs and technological software. T or F

F

93) Compensation at cost-leadership firms is usually tied directly to product innovation and customer service efforts. T or F

F

32) When a firm has high levels of production, it is often able to purchase and use specialized manufacturing tools that cannot be kept in operation in small firms. T or F

T

38) Large transportation costs can offset cost reductions attributable to the exploitation of economies of scale in manufacturing. T or F

T

39) The link between cumulative volumes of production and cost has been formalized in the concept of the learning curve. T or F

T

43) Efforts to move down the learning curve quickly by acquiring market share may not necessarily enable the firm to obtain a cost advantage over rivals. T or F

T

44) Differential low-cost access to productive inputs may create cost differences among firms producing similar products in an industry. T or F

T

5) Cost leadership, flexibility, collusion, and product differentiation are so widely recognized that they are often called generic business strategies. T or F

T

73) If cost-leadership strategies can be implemented by numerous firms in an industry, or if no firms face a cost disadvantage in imitating a cost-leadership strategy, then being a cost leader does not generate a sustained competitive advantage for a firm. T or F

T

77) In general, economies of scale and diseconomies of scale are relatively easy-to-duplicate bases of cost leadership. T or F

T

78) Even when a particular source of cost advantage is rare, it must be costly to imitate in order to be a source of sustained competitive advantage. T or F

T