BE exam 2
Related diversification takes place when a business expands its activities into product lines that are similar to those it currently offers. This statement is: a) True b) False.
a) True
Taken-for-granted resources or capabilities, complex sets of inter-related capabilities, and multiple non-testable hypotheses about why the firm has been success are factors contributing to the organization component of the VRIO Framework. This statement is: a) True b) False.
b) False.
The ability of a firm's resources and capabilities to create and deliver goods and services is known as value in consumption. This statement is: a) True b) False.
b) False.
A list of features and benefits customer's may value, both absolutely and relative to current of potential rivals offerings is known as the firm's business model. This statement is: a) True b) False.
b) False.
According to the Resource Based View, the goal of business strategy and policy is to transform competitive market structures into monopoly market structures, and convert attractive industry structures to more unattractive industry structures. This statement is: a) True b) False.
b) False.
If average product is decreasing, then marginal product must be increasing. This statement is: a) True b) False.
b) False.
People who create new paradigms (paradigm shifters) tend to be industry experts; new rules are written on the edge. This statement is: a) True b) False.
b) False.
In the Value Chain diagram, firm infrastructure, human resource management, technology develop and procurement were collectively referred to as: a. Cost drivers b. Value drivers c. Support activities d. Primary activities.
c. Support activities
The higher the price, the lower the quantity demanded, because consumers' opportunity cost to acquire that good or service increases, and they must make more tradeoffs to acquire the more expensive product. This statement is: a) True b) False.
a) True
When firms succeed in doing the job customers have hired the firm to do for them, the happy result is: a) Decreasing income elasticity of demand for those products or services b) Rivals' decision to reduce their own prices c) Reduction of the prices complementary goods d) Decreasing price elasticity of the firm's own products or services.
a) Decreasing income elasticity of demand for those products or services
Over long periods of time, consumers adjust to change is price by finding substitutes and this causes the typical demand curve to: a) Become more horizontal in the diagram that shows the effect of price on quantity demanded b) Shift out and down to the right in the diagram that shows the effect of price on quantity demanded c) Become steeper in the diagram that shows the effect of price on quantity demanded d) Rotate counter-clockwise 90 degrees.
a) Become more horizontal in the diagram that shows the effect of price on quantity demanded
Features are the physical attributes of products or services. The utility customers receive from buying and using the firm's goods and services are known as: a) Benefits b) Value drivers c) Needs d) Demands.
a) Benefits
A statement of how the value created for customers will be converted to benefits for investors and associates in the: a) Business model b) Statement of Sources and Uses of Cash c) Generic strategies d) Production function
a) Business model
Listing the major characters the story of our business, analyzing how this cast of characters might be motivated to deal with your company, and discussing how any plot twists can your company more effective or efficient are the elements of developing a: a) Business model b) Value proposition c) Profit narrative d) Value chain.
a) Business model
The tangible and intangible physical assets resources and capabilities that, while few in number, represent the foundation for sustainable competitive are known collectively as: a) Core competencies or strategic resources b) Value drivers c) Strategic assets d) Demand shifters.
a) Core competencies or strategic resources
Managers often diversify into other business to create a business portfolio of related firms. They do this on the belief that the cost of production in one or more of the businesses in the portfolio would be lower than if they were operating as separate, free-standing firms. This effect of diversification is known as: a) Economics of scope b) Managerial dis-economies of scale c) M-form dividend d) The Conglomerate Effect.
a) Economics of scope
One of the famous Parkinson's Laws is that an organization, once it has built its edifice, begins to decline. This is an example of the general problem the systems over time come to lack of order or predictability; they gradually decline into disorder. This is known as: a) Entropy b) Return to mean performance c) Organizational decline d) Managerial dis-economies of scale.
a) Entropy
Average total cost curves tend to fall over a range, reach a low point, and then start to rise as production volume rises. The primary reasons cost curves fall over a range before rising are: 1) Law of Diminishing Marginal Return, and 2): a) Fixed costs are spread over a growing number of units of output b) Economies of scale are realized with greater production in a production facility c) As volume rises, economies of scope have a greater influence on costs d) Synergies are a function of production volume.
a) Fixed costs are spread over a growing number of units of output
What the product/service does, or lets the user do, that benefits the user (e.g., how the Rational Combi-Steamer Oven saves space in professional kitchens) is known as: a) Functionality b) Net benefits c) Consumer surplus d) Image value.
a) Functionality
Soon you will graduate from college and get a job. After a few years your income rises from $40,000 to $100,000 per year. You have been renting an apartment but after the pay increase you buy a house. This implies that: a) Houses are, for you, a normal good b) Houses are, for you, inferior goods c) Renting and owning are complementary goods for you d) You need more information about the trend in housing prices.
a) Houses are, for you, a normal good
Firms in competitive markets have no market power. As a result, the managers of such firms may try to increase their market power in order to: a) Increase their pricing power b) Increase price elasticity of demand in their market c) Gain competitive parity d) Avoid competitive disadvantage and bankruptcy.
a) Increase their pricing power
Firms in competitive markets lack market power. As a result, the managers of such firms may try to increase their market power in order to: a) Increase their pricing power and profit potential b) Increase price elasticity of demand in their market c) Gain competitive parity d) Avoid competitive disadvantage and bankruptcy.
a) Increase their pricing power and profit potential
The lack of knowledge (or ignorance), especially of current paradigms and habits, is known as: a) Nescience b) Rational ignorance c) The knowledge gap d) A strategic information void.
a) Nescience
Universally recognized scientific achievements that, for a time, provide model problems and solutions for a community of practitioners (e.g., theories of the business developed and used by managers) are known as: a) Paradigms b) Entrepreneurial discoveries c) Mental mindsets d) Paradigm shifters.
a) Paradigms
All real and perceived costs that customers anticipate and actually experience in the full cycle of using the product or service: a) Perceived Non-price User Costs b) Marginal costs c) Implicit costs d) Long term average costs.
a) Perceived Non-price User Costs
The significance of a good in consumer budgets, the availability of close substitutes, and the length of the time period for consumer adjustments in consumption of the good are the three factors discussed in class as effecting: a) Price elasticity of demand b) Cross-price elasticity of demand for complements c) Income elasticity of demand for individuals d) Income elasticity of demand for different demographic groups.
a) Price elasticity of demand
Marginal returns to an input, holding the other input fixed, will at some point start to decrease as its use is increased. In class we defined this phenomenon as: a) The Law of Diminishing (Marginal) Returns b) The First Law of Demand c) The Principle of Comparative Advantage d) Model Drift in the Kuhn Cycle.
a) The Law of Diminishing (Marginal) Returns
Thinking in terms of production functions, a situation where all inputs are variable and managers use planning curves rather than operating curves for determining output is known in economics as: a) The Long Run b) The Efficiency Frontier c) The Nike Zone d) The Short Run.
a) The Long Run
The notion that competition is a process by which two or more parties attempt to gain the custom of 3rd parties by offering more favorable terms was referred to in class as: a) The Resource Based view b) Oligopolistic price fixing c) Harvard school economics d) The Industry (external) approach to competitive advantage Economics School
a) The Resource Based view
The set of assumptions regarding how well the firm's value proposition, business model and strategy fit with external reality is known as: a) The Theory of the Business b) The CVAS (Customer Value Assumption Set) c) SWOT analysis d) The Value Chain.
a) The Theory of the Business
According to the economist Joseph Schumpeter. the "process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one" is known as: a) The process of creative destruction b) The Law of Nemesis c) The Paradigm Effect d) The Myth of Sisyphus.
a) The process of creative destruction
An important objective of external environment scanning is to avoid the paradigm effect by raising the organization's consciousness of the importance of considering adjustments to theory of the business. This statement is: a) True b) False.
a) True
Consumer transaction costs include the costs of learning product characteristics and quality, negotiating terms of sale, and enforcing warrantees, guarantees, etc. This statement is: a) True b) False.
a) True
Managers can keep demand for their products relatively inelastic by promoting risk taking and innovation in their organizations to keep the average age of their products relatively low. This statement is: a) True b) False.
a) True
Using the VRIO Framework to analyze sustainable competitive advantage reveals that the ability and willingness to do valuable things that others are unable and/or unwilling to do may be valuable, rare and inimitable, and a source of SCA. This statement is: a) True b) False.
a) True
Resources or capabilities allow a business to formulate and successfully implement strategies that realize its value proposition and business model are: a) Valuable b) Rare c) Inimitable d) Organized.
a) Valuable
In economic organizations, many activities go into the design, production and delivery of goods and services. The activities whose execution creates value for customers (real and perceived) determining the position and elasticity of the demand function are known, collectively, as: a) Value Drivers b) Differentiators c) The Cost-Benefit Algorithm d) Cost Drivers.
a) Value Drivers
The value of a given resource or capability must be reassessed periodically to ascertain if the firm's business model and strategy are still relevant. If not reassessed periodically, a once- valuable resource or capability may become: a) less valuable, and no longer strategic b) more valuable, but remain strategic c) less valuable but remain strategic d) more value and more strategic.
a) less valuable, and no longer strategic
To manage the paradigm effect, effective executives should 1) make scanning the environment a habit for all key associates, 2) Manage in group settings, 3) lever the unique attributes of new hires, and 4): a) Hire process consultants from the local university b) Accept the Fact of Cognitive Biases c) Subscribe to several blogs and news magazine d) Act as the formal leader in several work groups to gain experience in maintenance leadership.
b) Accept the Fact of Cognitive Biases
Like perfectly competitive firms, monopolistic competitors not only face strong rivals, but fairly free entry and exit as well. So they tend compete away economic profits by: a) Engaging in "creative destruction" b) Adding features and benefits cutting prices c) Eliminating features and benefits that consumers won't notice d) Engaging in price wars.
b) Adding features and benefits cutting prices
We know that an increase in the market price of a good or services leads rational consumers to purchase, all else equal, less of that good or service. Economic theory argues that this happens because: a) Consumers do not want to reward producers who raise prices of necessities b) An increased in the price of that good or service increases the opportunity cost buying that good or service c) A price increase for this good or service means that other prices will increase due to inflation and it is time to save rather than spend money d) Consumers tend to spend more on complements for the good or service when its price increases.
b) An increased in the price of that good or service increases the opportunity cost buying that good or service
For some goods and services, as individuals enjoy an increase in their incomes, demand increases. Such goods: a) Tend to be consumed by people who prefer savings to consumption b) Are known in economics as normal goods c) Tend to be subject to high sales taxes at the state and local level d) Are called inferior goods in economics.
b) Are known in economics as normal goods
One of the factors influencing the position of the demand curves in Price/Quantity diagrams is: a) Changes in the price of inputs b) Changes in the price of substitutes c) Increased suppliers power d) The percentage of the good or service in the customer's budgets.
b) Changes in the price of substitutes
Self-satisfaction especially when accompanied by unawareness of actual dangers or deficiencies, or, an instance of usually unaware or uninformed self-satisfaction is known as: a) Competitive parity b) Complacency c) Cognitive bias d) Paradigm effect.
b) Complacency
Buyers typically view soft drinks to be complementary goods to salty snacks. If Pepsi increased the price of Pepsi-Cola, what would you expect to happen, all else equal, in the salty snacks business? a) Demand for salty snacks would rise to twice the current price. b) Demand for salty snacks would fall c) Demand for salty snacks would fall to zero d) Demand for salty snacks would rise.
b) Demand for salty snacks would fall
The generic strategy formulated and implemented to produce or deliver goods or services that might appeal to a subset of customers currently underserved by the broad scope generic strategies is known as: a) Market segmentation b) Differentiation Focus c) Cost Leadership d) Value Creation.
b) Differentiation Focus
Firms in competitive markets try to increase their market power because greater market power: a) Increases demand which leads to greater economies of scale b) Increases pricing power and the potential for above normal returns c) Gives the firm the ability to avoid a Nash equilibrium d) Provides the necessary and sufficient condition for above-normal returns.
b) Increases pricing power and the potential for above normal returns
A generic strategy which attempts to provide many customers with just the features and benefits they value, at relatively low cost (but not as low as the cost leader); it features some differentiated features and benefits (but less than a true diversifier) is known as: a) Cost-value balancing b) Integrated low cost/differentiation c) Stuck in the middle d) Needs focus.
b) Integrated low cost/differentiation
Which one of the following goods would display an inverse income elasticity of demand? a) Automobiles built by Lexus b) Items from Dollar Stores, a low price retailer c) Shoes sold at Nordstrom's d) Bread made by Wheatfields, a local high-end baker.
b) Items from Dollar Stores, a low price retailer
On-going entrepreneurial discoveries and continuous improvements to generate a steady stream of new and improved products at ever-lower costs were referred to in lecture as: a) Value Drivers b) Margin Drivers c) Primary activities d) Cost Drivers.
b) Margin Drivers
Perceived Benefits (Value in Product Use + Value of Service) minus Perceived Costs (Non-Price User Cost + Transactions Costs + Time Costs + Participation Costs + Psychic Costs) was discussed in class as: a) The Residual b) Net Delivered Customer Value (NDCV) c) The Value Proposition d) The Value Drivers in the Value Chain.
b) Net Delivered Customer Value (NDCV)
A positive income elasticity of demand (income elasticity greater than zero) for a good means that that good is, in economic theory, a: a) Veblen Good b) Normal good c) Inferior good d) Economic good.
b) Normal good
The costs of negotiating deals between buyers and suppliers, or paying attorney fees to draft a supply contract, or settling buyer-vendor conflicts, etc. were discussed in class as: Net producer surplus a) Selling and administration expenses b) Producer transaction costs c) Buyer overhead d) Cost of goods sold.
b) Producer transaction costs
Some resources can only be acquired by one or very few companies in an industry. This characteristic of resources and capabilities impedes the ability of imitating firm to recognize, acknowledge, or respond to your resource-based success. This characteristic is known as is known in the VRIO framework as: a) Value b) Rareness c) Inimitability d) Organization.
b) Rareness
Market prices can fall due to greater competition or shifting industry demand. When price per unit falls to equal average total unit cost, profit is zero. The breakeven price is the average avoidable cost per unit. When price falls below that, it's economic to: a) Renegotiate supply contracts b) Shut down production c) Continue to produce but cut back on labor d) Consider a merger with a more profitable firm.
b) Shut down production
Firms may choose to maintain an internal focus on resources and capabilities rather than external focus on rivals. They base their competitive advantage on the control of a few key strategic resources and capabilities. This description captures the essence of: a) The Harvard School of Managerial Economics b) The Resource-Based View of competitive advantage. c) The Industry (external) approach to competitive advantage School of economics d) Industrial Organization Economic.
b) The Resource-Based View of competitive advantage.
Economic organizations are best viewed as bundles of activities performed by organizational members as they translate strategies into performance. The visual representation of the activities people perform in economic organizations is called: a) Competitive strategy map b) The Value Chain c) The CVP Triangle Algorithm d) The Strategy Vector.
b) The Value Chain
The top firms in an oligopoly selling environment swill naturally attempt to gain a sustainable competitive advantage over their rivals. Unfortunately for them, the firms that lack distinctive, immobile resources and capabilities will jockey for position over time. This is known as: a) Oligopolistic Dynamic b) The Waving Hand Equilibrium c) Monopolistic rivalry d) Monopolistic Competition
b) The Waving Hand Equilibrium
Top firms in oligopoly industries may continue to jockey for position through time. The back-and-forth cycle of leadership and followership was characterized in class as: a) Cutthroat competition b) The waving hand equilibrium c) Austrian Dynamics d) Cartel instability.
b) The waving hand equilibrium
When you observe that many customers appear to be under-served by the features and benefits of goods and services considered average or standard, the appropriate generic strategy to implement would be: a) Market segmentation b) Value differentiation c) Cost Leadership d) Operational Excellence
b) Value differentiation
The difference between efficient behavior of businesses assumed or implied by economic theory and their observed behavior in practice was discussed in class as: a. Comparative advantage b. X-inefficiency c. Dis-economies of scope d. Sunk Costs.
b. X-inefficiency
Vertical integration (the "Make" in the Make-Buy Decision) occurs when a firm that was buying inputs in the spot market acquires, or merges with a firm from which it was: a) Competing for customers b) Supplying at least fifty percent of the buyer's needs c) Buying those inputs d) Suing for breach of contract due to post-investment opportunism.
c) Buying those inputs
The observed continuous changes in prices and profits due to the actions of others who have an interest in capturing some of the total surplus value created by private firms is known as: a) Temporary competitive advantage b) Competitive turbulence c) Competitive Dynamics d) A source of sustainable competitive advantage.
c) Competitive Dynamics
Factors that affect price elasticity of demand due to the conscious actions of management are known as: a) Slope shifters b) Exogenous factors c) Controllable factors d) Generic strategies
c) Controllable factors
A Generic Strategy formulated and implemented to offer features and benefits that are acceptale to a broad range of customers, which are produced and delivered asfairly standardized goods or services for relatively price-sensitive buyers is known in management circles as: a) Commoditization b) Monetizing the business proposition c) Cost leadership/lowest delivered cost d) Differentiation.
c) Cost leadership/lowest delivered cost
A mathematical representation of the relationship between the quantity demanded and all factors influencing demand is known in economics as: a) The First Law of Demand b) Supply function c) Demand function d) Indifference curve.
c) Demand function
According to the Resource-based View, the way to achieve a sustainable competitive advantage (SCA) would be to: a) Deploy and leverage tradeable, tangible resources and capabilities b) Engage in tacit collusion with the firm's major suppliers c) Invest in and leverage strategic resources and capabilities d) Challenge the patents of all new entrants to create a behavioral barrier to entry.
c) Invest in and leverage strategic resources and capabilities
Average total cost curves tend to fall over a range, reach a low point, and then start to rise as production volume rises. As discussed in class, the #1 reason cost curves fall over a range is: a) Supplier market power b) Diseconomies of scale c) Law of diminishing returns d) Fixed costs are spread over a growing number of units of output.
c) Law of diminishing returns
All else equal, changes in the price of goods causes: a) A shift in the entire demand function b) A shift in the supply function c) Movement along an individual demand curve d) Movement along an individual supply function.
c) Movement along an individual demand curve
Human organizations have a tendency to run down over time. Their resources and capabilities can lose their original effect on sustainable competitive advantage. We called this: a) Competitive Disadvantage b) Competitive Parity c) Organizational Entropy d) Parkinson's syndrome.
c) Organizational Entropy
People who create new ways of doing business; they tend to be outsiders. It takes courage for someone identified with an existing paradigm. Such people are known as: a) Behavioral economists b) Game Changers c) Paradigm Shifters d) Agents of creative disruption.
c) Paradigm Shifters
All else equal, when the price of a good or service increases, the amount consumers demand of the good or service will decrease, and vice versa. This phenomenon is known as: a) Decreasing Elasticity b) Inverse Square Law c) The First Law of Demand d) Activity-Based Accounting.
c) The First Law of Demand
Making scanning the environment a habit for all key associates, managing in group settings, and levering the unique attributes of new hires are strategies working managers can employ to deal with: a) The complexities of related diversification b) The Waving Hand Equilibrium c) The Paradigm Effect d) Managerial dis-economies of scale.
c) The Paradigm Effect
It is the tool Resource-based economists use to understand how firms in unattractive industries earn above-normal returns over time. They apply the framework to analyze how firm's internal resources and capabilities contribute to their success within their industry. This cognitive tool or framework is known as: a) The Five Forces Model of Competition b) Industrial Organization (I/O) Economics c) The VRIO Framework d) The CVP Triangle.
c) The VRIO Framework
Recognizing and identifying the significant, emerging trends in the external context (opportunities and threats) and understanding how changes in the external context may affect the firm's strategic actions, and raising the organization's consciousness of the importance of considering adjustments to theory of the business are: a) The goals of the paradigm audit b) The objectives of evaluating the firm's strengths and weaknesses c) The objectives of external context analysis d) The goals of managing in group settings.
c) The objectives of external context analysis
The process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one is known as: a) Task leadership b) Devil's advocacy c) The process of creative destruction d) Entrepreneurial discovery and continuous improvement.
c) The process of creative destruction
All else equal, as price increases, demand curves become more price elastic as purchase becomes larger share of budget. Economists call this: a) The budget constraint effect b) The second law of demand c) The third law of demand d) the equimarginal rule.
c) The third law of demand
Normal returns means zero economic profit. Normal returns are "normal" in that this is the long-run performance equilibrium of: a) Firms producing normal goods b) Most of the firms in implementing cost leadership strategy c) The vast majority of businesses in the economy d) Firms participating in cartels or trusts.
c) The vast majority of businesses in the economy
What customers prefer in the goods and services they consume is constantly shifting for most firms. The firm's value proposition, business model and theory of the business may become out of date. Customer's "vote with their dollars" by shifting to firm's with better value propositions and business models. This is known as: a) The Paradigm Problem b) The Kuhn Cycle c) Value migration d) Manufacturing Mindset.
c) Value migration
A good solution to the post-investment hold-up problem would be to: a) Form trade associations among manufacturers and retailers b) File regulatory action to outlaw these conflicts c) Have the courts of law issue cease and desist orders against retailer opportunism d) Acquire troublesome retailers through a program of vertical integration.
d) Acquire troublesome retailers through a program of vertical integration.
Price elasticity is an important concept in managerial economics since knowledge of price elasticity helps managers set pricing strategy. For example, in the inelastic range of the demand curve, increasing the price you charge customers leads to: a) A rightward shift in the demand function for the firm's products/services b) An decrease in marginal costs c) A decrease in income elasticity of demand for Veblen Goods d) An increase in total revenues the firm collects from its customers.
d) An increase in total revenues the firm collects from its customers.
The value (in the VRIO Framework) of a given resource and capability must be re-assessed periodically to ascertain if the firm's business model and strategy is still relevant. If the firm has to change its theory of the business, a once valuable resource or capability may have lost its value. This is necessary in order to: a) Convert temporary competitive advantage to long run economic profit b) Avoid moral hazard and adverse selection c) Determine the firm's most appropriate generic strategy d) Avoid value migration.
d) Avoid value migration.
Taken for granted resources and capabilities are often complex and interdependent. They can be implicit and taken for granted by the firm's managers. As such, there is no way to test any given resource to determine its effect on the firm's performance. This condition is known in the resource based view of competitive advantage as: a) Social complexity b) Cultural synergy c) Productive values, attitudes and beliefs d) Casual ambiguity.
d) Casual ambiguity.
Aspects of your value proposition and business model that sets your product, service and company apart from your competitors' the Net Delivered Customer Value you provide to your customers, and how your value proposition differs from rivals'. These are the elements of: a) The Theory of the Business b) Market structure c) Price elasticity of demand over time d) Competitive positioning.
d) Competitive positioning.
Cost leaders do not lose sight of the features and benefits provided by differentiators. Their lines are a good approximation of name brands. In the managerial economics literature, this results in: a) Differentiator proximity b) Superior value for the dollar c) Sustainable competitive advantage d) Cost leader proximity.
d) Cost leader proximity.
Differentiators strive for "acceptable cost", out of concern that the listed price for products or services may exceed what the firm's target customers are willing to pay. This is known as the attempt to achieve: a) Net Delivered Customer Value (NDCV) b) Optimality c) Cost containment d) Differentiator Proximity.
d) Differentiator Proximity.
In the discussion of net delivered customer or consumer value (NDCV), what the product/service does (features), that lets the consumer or user solve problems (benefits) is known as: a) End user value b) The marketing mindset c) Value Proximity d) Functionality.
d) Functionality.
The firm's specific, integrated approach to creating value, shifting out demand and decreasing elasticity in order to increase pricing power, and claim value for investors and associates is known as the: a) Production function b) Demand function c) Value proposition d) Generic strategy.
d) Generic strategy.
A firm experiencing constant economies of scale will have a long-run average cost curve that is: a) Upward sloping b) Vertical in the range of the minimum efficient scale c) Downward sloping d) Horizontal or flat and parallel to the quantity axis.
d) Horizontal or flat and parallel to the quantity axis.
If a monopolist set its profit maximizing price (where MR=MC) the level of supernormal profit would attract new firms into the market. Therefore, the monopolist may decide to set a price below this profit maximizing level, but still enable it to make higher profits than in a competitive market. Industrial organization economists call this strategy: a) Profit optimization b) Satisficing c) Proximity d) Limit entry pricing.
d) Limit entry pricing.
Many times in the history of business competition in American, the top two firms in an oligopolistic industry attempt, over time to gain a competitive advantage over their rival. If one gains the upper hand, the other firm tends to fight back. This back and forth rivalry occurs when: a) Neither firm is able to find a dominant strategy b) The firms are in an industry where the MES (Minimum Efficient Scale) is undefined c) Both firms have specific assets they need to protect d) Neither firm has unique, strategic resources to afford them a sustainable competitive advantage.
d) Neither firm has unique, strategic resources to afford them a sustainable competitive advantage.
In business, the tendency of a critical mass of managers and associates to resist changes in their strategies and organizational structure and practices despite senior management's efforts to implement these needed changes is known as: a) The limits to growth b) Managerial dis-economies of scope c) Cognitive biases d) Organizational inertia.
d) Organizational inertia.
In the long run, elasticity, |e|, increases since, all else equal, products attract imitators and customers may get bored. Economists call this: a) The first law of demand. b) Substitution effect c) Time elasticity of demand d) Second law of demand.
d) Second law of demand.
Changes in income, changes in number of buyers, changes in the prices of complements and the prices of substitutes, and expectations about future price movements are: a) Some of the factors affecting price elasticity of demand b) Some of the factors that cause parallel, horizontal shifts in supply functions c) Factors affecting cross price elasticity of demand d) Some of the factors that cause parallel, horizontal shifts in demand curves.
d) Some of the factors that cause parallel, horizontal shifts in demand curves.
Tangible and intangible assets firms use to conceive of and implement their strategies are called resources in Resource Based View. When such resources meet the criteria set forth in the VRIO framework discussed in the text and lecture, those resources qualify as: a) Key success factors b) Core components of competitive advantage c) Substitutes in production d) Strategic resources.
d) Strategic resources.
In the video on the Anheuser-Busch Brewery in St. Louis we saw illustrated all nine elements of the value chain. Infrastructure, human resource management, technology development, and procurement comprise, in the value chain framework: a) Value drivers b) Primary functions c) The four components of in-bound logistics d) Support activities.
d) Support activities.
The one-time costs customers incur when they buy from a different supplier. Examples of these costs include acquiring new equipment, retraining employees, and psychic costs of ending a relationship. These are known as: a) Training costs b) Capital costs c) Diseconomies of scale d) Switching costs.
d) Switching costs.
The statement that explains how the firm is to monetize its value proposition in known in managerial economics circles as: a) The master planning document b) The Statement of Sources and Uses of Revenue c) The Value Proposition d) The Business Model.
d) The Business Model.
Eventually, most assumption sets regarding how well the firm's value proposition, business model and strategy fit with external reality become inappropriate for the emerging realities of demographics, market rivalry, and new technologies. Managers need to change their theory of the business, but often do not. According to lecture, failure to change is due to: a) The insularity of top management b) The manufacturing mindset c) Recent setbacks in value creation d) The Paradigm Effect.
d) The Paradigm Effect.
Manufacturing companies create value by acquiring raw materials and using them to produce something useful. Retailers bring together a range of products and present them in ways that are more convenient to customers. An algorithm showing the interconnected activities required to create value for customers in manufacturers and retailers is known as: a) The Goldman Algorithm b) The Capital Asset Pricing Model c) The REM Model d) The Value Chain.
d) The Value Chain.
The vector of features and benefits consumer will receive by purchasing and using the firm's goods and/or services (e.g., for one-star, three-star or hotels like Formula One discussed in class that implement integrated cost-leadership/differentiation strategies) is known as: a) The generic strategy b) The business model c) The industry structure d) The value proposition.
d) The value proposition.
When a firm is experiencing decreasing marginal costs, it implies that: a) There are diminishing marginal productivity b) There are increasing average costs c) There is constant marginal productivity d) There is increasing marginal productivity.
d) There is increasing marginal productivity.
Paradigms are common; rules are everywhere. Paradigms are useful; they tell us: a) What the firm's competitive strategy should be b) How to create organizations that can produce a steady stream of new and improved good or services. c) Why some industries are, on average, more profitable than others. d) What we should view as important.
d) What we should view as important.
Average total cost curves tend to fall over a range, reach a low point, and then start to rise as production volume rises. As discussed in class, one reason cost curves fall over a range is: a) Supplier market power b) Diseconomies of scale c) First law of demand d) chs are spread over a growing number of units of output
d) chs are spread over a growing number of units of output
The cost advantages that enterprises obtain due to increases in the size or volume of output per time period where fixed costs are spread out over more units of output was discussed in lecture as: a. Absolute advantage b. Comparative advantage c. X-efficiency d. Economies of Scale.
d. Economies of Scale.
Firms in competitive markets have no market power. As a result, the managers of such firms may try to increase their market power in order to: e) Increase their pricing power f) Increase price elasticity of demand in their market g) Gain competitive parity h) Avoid competitive disadvantage and bankruptcy.
e) Increase their pricing power
Normal returns means zero economic profit. Normal returns are "normal" in that this is the long-run performance equilibrium of: e) Firms producing normal goods f) Most of the firms in implementing cost leadership strategy g) The vast majority of businesses in the economy h) Firms participating in cartels or trusts.
g) The vast majority of businesses in the economy