BE FINAL

A problem solving system; a set of rules that offer guidance on how managers can understand and improve their business. This defines: a) An algorithm b) A paradigm c) A framework d) The scientific method.

a) An algorithm

Obstacles, or costs that would have to be incurred by a firm joining industry incumbents in the battle for customers and profits are known as: a) Barriers to entry b) Sunk cost c) The opportunity cost of capital d) A fixed cost of production.

a) Barriers to entry

Incumbent firms (i.e., established firms) can present a credible threat of aggressive price cutting, and threaten other actions to discourage entry into their industry. Such threats create: a) Behavioral barriers to entry b) Monopoly short-term rents c) Structural barriers to entry d) Perceived high costs of entry.

a) Behavioral barriers to entry

Systems that are comprised of many elements that must be coordinated by management and/or which require spontaneous cooperation to produce sustainable competitive advantage. These system are taken to be: a) Complex b) Ambiguous c) Valuable d) Difficult to understand.

a) Complex

Some organizations are fortunate to be able to create and deliver a steady stream of new and improved production/services at ever-lower costs of production. These organizations were described in lecture as: a) Continuous Improvement Firms b) Successful organizations c) Competitive organizations d) Sustainable organizations.

a) Continuous Improvement Firms

To prevent intense rivalry, managers exploit or create barriers to: a) Entry b) Differentiation c) Substitution d) Exit.

a) Entry

To achieve a sustainable competitive advantage, effective executives build and maintain strong competitive positions, invest and re-invest in unique and valuable resources and capabilities that are difficult to: a) Imitate b) Import c) Reverse engineer d) Purchase in the underground economy.

a) Imitate

The first firm to develop a working model or sample in a new product category: a) Is known as a market pioneer b) Will earn scarcity rents c) Is known as a product pioneer. d) Will earn a normal rate of return on invested capital.

a) Is known as a market pioneer

The text suggests that an attractive industry as all of the following except: a) Low barriers to entry b) Low supplier power c) Low intensity of rivalry d) Few substitutes for the industry's products or services.

a) Low barriers to entry

Managing problematic aspects of the human brain begins with professional managers accepting the fact that cognitive biases exist. This statement is: a) True b) False.

a) True

Open markets are best viewed as experimental discovery processes that continuously track changing customers' needs and changes in the availability and costs of resources required to meet those needs. This statement is: a) True b) False.

a) True

Rivals may say they wish to cooperate, but will usually compete aggressively on price and other terms of trade. This statement is: a) True b) False.

a) True

Tangible and intangible resources are rare to the extent that only one or a few organizations in an industry possesses them and control their use. This statement is: a) True b) False.

a) True

Tangible resources are nice to have but-- being tangible-- they are rather easy for rivals and potential new entrants to understand and imitate through purchase in the input markets. This statement is: a) True b) False.

a) True

The Harley-Davidson case discussed in class demonstrated that an organization that actually has resources or capabilities that are valuable, rare and difficult to imitate, and without substitute may not enjoy a sustainable competitive advantage. This conclusion is: a) True b) False.

a) True

The threat of buyer power means that customers enjoys the ability to capture more consumer surplus at the expense of investor profits. 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

Value (in consumption) is the degree to which buyers think those outputs (goods and services) make them better off than they would be if they did without. This statement is: a) True b) False.

a) True

In the text, the concept that focuses on the fact that firms possess different bundles of resources is: a) Organization b) Resource heterogeneity c) Barriers to entry d) Inimitability.

b) Resource heterogeneity

Managers' responses to problems are likely to depend on their understanding of people's motives and their forecast of people's reactions--their responses depend on their underlying model of behavior. Therefore, it is appropriate to characterize managers as: a) Members of the moral-cultural elite b) Social scientists c) Academic economists d) Behavioral experts.

b) Social scientists

The idea that a central authority should be performing only those tasks which cannot be performed effectively at a more immediate or local level was described in lecture as: a) The tyranny of the "or" b) Subsidiarity c) The economics of decentralization d) The 21st Century Management Challenge.

b) Subsidiarity

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

Which one of the following is a term used to explain how the set of opportunities one faces at the current time is influenced by decisions or actions predecessor took in the past: "history matters."? a) Path dependence b) First-motion advantage c) Historical competitive advantage d) Causal ambiguity.

a) Path dependence

In the Barings Bank Case (involving Nick's Leeson's disastrous "betting" in Singapore), the economic analysis of the failure of the bank attributed this failure to: a) Poorly designed organizational architecture at Barings b) Entrenched management in the home office c) Nick's unrealistic understanding of his property rights d) An accounting system that was based on nominal rather than real interest rates.

a) Poorly designed organizational architecture at Barings

In the "Five Forces" algorithm, the people or firms comprising the extended rivalry facing the firm who pay you for doing a good job were referred to in class as: a) Producers of substitutes b) New entrants c) Buyers d) Suppliers.

a) Producers of substitutes

The tangible and intangible assets firms use to conceive of and implement their strategies are known as: a) Resources b) Capacities c) Profit drivers d) Key assets.

a) Resources

Organizational architecture is comprised of all of the following elements except: a) Social capital b) Assignment of decision rights c) Performance measurement and evaluation systems d) Reward system.

a) Social capital

Potential new entrants often face high entry costs due to the economics of the industry. They are important part of the market process. Since they reflect the existence of real scarcities they provide a market test for potential entrepreneurs. These are known as: a) Structural barriers to entry b) Obstacles to new competition c) Behavioral barriers to entry d) Shared monopolies.

a) Structural barriers to entry

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

Promoting the formulation of well-understood, well-defined objectives before work begins, clarifying formerly vague or poorly defined initiatives early on, breaking down problems/projects too large or costly for any given team and combining market-based decision rights with management oversight are elements of what we discussed in class as: a) The genius of the "and" b) The tyranny of the "or" c) The 21st Century Management Solution d) The genius of chartering.

a) The genius of the "and"

Designing institutions and organizational architectures that judicially allocate decision rights to those with tacit knowledge, accurately measuring and evaluating he performance of individuals and organizational units, and allocating rewards based on assessment of both subjective and objectives measures of performance. In class, we called this: a) The primary responsibility of top management b) Tasks best left to the managers closest to the action within the firm c) The 21st Century Management Challenge d) Market architecture associated with capitalism in the period 1850 to the present.

a) The primary responsibility of top management

Effective use of local knowledge local tastes and preferences, and price sensitivities of particular customers, conservation of management time, and training opportunities for lower-level managers were discussed in class as being: a) The principle benefits of decentralization in the modern corporation b) The most misunderstood benefits of open markets in capitalist systems in the 21st Century c) Principle elements or components or organization architecture d) An important source of temporary competitive advantage.

a) The principle benefits of decentralization in the modern corporation

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

A property right is a legally enforced right to select use of an economic good. Private rights are assigned to a specific entity; they are alienable in that they can be: a) Transferred to another individual, within limits b) Left to relatives after the holder passes away c) Subject to minimum taxes by the Federal Government d) Given to people living outside the U.S. tax free.

a) Transferred to another individual, within limits

Above-normal profit in open markets is often a temporary phenomenon as this profit attracts capital investments by rivals and new entrants until profits fall back to normal returns. This statement is: a) True b) False.

a) True

Absent fiat, the form of organization that survives in an activity is the one that produces and delivers the goods and services customers value most, at ever lower costs of production, to capture value for investors/associates. This statement is: a) True b) False.

a) True

According to management scholar Peter Drucker, "A small but growing number of big successful company throughout history, when confronted with some change in its competitive or social environment, has refused to accept it." This statement is: a) True b) False.

a) True

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

Colonel Chamberlain got the mutineer soldiers to pick of their muskets and follow him into battle at Gettysburg by applying concepts familiar to psychologists, sociologists, and economists. This statement is: a) True b) False.

a) True

Managers' responses to problems are likely to depend on their understanding of people's motives and their forecast of people's reactions--their responses depend on their underlying model of behavior. This statement is: a) True b) False.

a) True

When channels of distribution, or final users are larger than their suppliers, they may drive hard bargains. This makes buyers more resistant to price increases and increases their consumer surplus at the firm's expense. This statement is: a) True b) False.

a) True

Some tangible or intangible resources and capabilities, while few in number, represent the foundation for sustainable competitive advantages, as long as they are valuable, rare, difficult to imitate, non-substitutable and: a) Well-organized b) Misunderstood by market rivals c) Readily available in the market for resources and capabilities d) Patentable.

a) Well-organized

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

The results of strategic decisions and actions not taken that could have increased value are known as: a. Errors of Omission b. Over-commitment c. Commission Errors d. Blameless ignorance.

a. Errors of Omission

The results of strategic decisions and actions which have the effect of the decreasing the value of the firm are known as: a. Errors of commission b. Error variance c. Sunk costs d. The Costs of doing business.

a. Errors of commission

Understanding human behavior, predicting human behavior and controlling human behavior are the three: a. Primary goals of the social sciences. b. Key activities of the human resources department. c. Major techniques for shaping behavior. d. Preconditions for successful decentralization.

a. Primary goals of the social sciences.

Sometimes, managers make mistakes because they act without gathering all the information possible in order to make decisions in a timely manner. This illustrates the concept discussed in class as: a. Rational ignorance b. Increasing opportunity cost c. The law of diminishing utility d. Agency cost.

a. Rational ignorance

In economies organized along the lines of market capitalism, the capitalist owners of equity (common stocks) receive, as the result of the production processes they finance, what economists refer to as: a. The residual b. Interest payments c. Principle and interest d. Dividends and stock splits.

a. The residual

When I go into a flower shop to buy roses, and give money to the cashier for the roses and walk out, we can say with confidence that at the time of purchase, I thought that: a. The value of the roses was just equal to the amount I paid. b. The value of the roses was greater that than the amount I paid c. The value of the roses was greater than or equal to the amount I paid d. The value of the roses was equal to or less than the amount I paid.

a. The value of the roses was just equal to the amount I paid.

As you add one more person to a meeting roster, all else equal, a point will eventually be reached at which additions of the input yield diminishing, and then negative, returns. This statement is: a. True b. False.

a. True

You landed a good job in management and you decide to do the Prisoner's Dilemma for your direct reports. You ask them to consider: "Knowing the strategies of the other players, and treating the strategies of the other players as set in stone, can I benefit by changing my strategy. If, knowing this, every player prefers not to switch (or is indifferent between switching and not) then the set of strategies under review is: a) A predominant strategy b) A Nash equilibrium c) The Pareto Efficient Set d) A price fixing agreement.

b) A Nash equilibrium

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

According to the textbook, wealth is created when: a) Talented managers use marginal analysis to allocate scarce resources b) Assets move from lower to higher-valued uses. c) When capitalism and voluntary transactions are left to produce all economic outcomes d) When governments and business cooperate for the greatest good.

b) Assets move from lower to higher-valued uses.

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

In the text, Chapter 10, firms that implement a value differentiation strategy, elasticity of demand for those firms' goods or services will: a) Increase b) Decrease c) Remain unit elastic d) Be unaffected.

b) Decrease

Which of the listed leadership role is played by someone who, given a certain point of view, takes a position they do not necessarily agree with (or simply an alternative position from the accepted norm), for the sake of debate, or to explore the thought further: a) Task leadership b) Devil's advocacy c) The process of creative destruction d) Entrepreneurial discovery and continuous improvement.

b) Devil's advocacy

Competitive advantage exists when a particular company consistently outperforms other companies in the same industry. Those companies who are able to maintain this record of success over time: a) Show evidence that they are a member of a monopolistic trust b) Enjoy what economists call a sustainable competitive advantage c) Have succeeded in limit entry pricing and predation d) Need not fear new entry in the near future.

b) Enjoy what economists call a sustainable competitive advantage

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

You are leading a business enterprise that has resources or capabilities that are valuable and rare. As a result, investors should understand that their firm, under your management, will: a) Enjoy a sustainable competitive advantage b) Experience a temporary competitive advantage c) Have a competitive disadvantage over the long run d) Enjoy a cost advantage over producers of substitutes.

b) Experience a temporary competitive advantage

The element of organizational architecture that specifies how compensation and other benefits and penalties will be distributed among agents within the organization is known as the performance measurement process. This statement is: a) True b) False.

b) False

According to the Industry (External) point of view of competitive advantage defines competition the process by which two or more parties attempt to gain the custom of third parties by offering them more favorable terms. This statement is: a) True b) False.

b) False.

According to the authors of the text, an industry is defined as a group of firms producing the exact same products or services. This statement is: a) True b) False.

b) False.

Human organizations have a tendency to run down over time: their resources and capabilities can lose their original effect on sustainable competitive advantage. They experience what both physicists and managerial economics professional as causal ambiguity. 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.

Institutional memory is a disease that becomes more virulent the less successful a company or industry becomes. This statement is: a) True b) False.

b) False.

Like empires, human organizations have a tendency to run down over time, for example, their resources and capabilities can lose their original effect on sustainable competitive advantage. Human organizations thus experience what we discussed in class as Secular Decline. This statement is: a) True b) False.

b) False.

Managers may be victimized by the sunk-cost problem when, according to the text, they ignore relevant costs—those costs that vary with the consequences of their decisions. This statement is: a) True b) False.

b) False.

Organizational decision rights are legally enforced rights to select how an economic good is to be used by managers and other associates; these decision rights are also alienable in that they can be transferred to another individual, within the firm. This statement is: a) True b) False.

b) False.

Resources and capabilities that are available to all firms in an industry may be essential to a firm's success (e.g., access to the internet or the employment of readily available human resources), and as such can be a source of competitive advantages. This statement is: a) True b) False.

b) False.

Tacit knowledge is the kind of knowledge that is relatively easy to transfer to another person by means of writing it down or verbalizing it. This statement is: a) True b) False.

b) False.

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.

The military historian Max Boot ("War Made New" Video) strongly suggested that innovative technologies are tangible and tradable, and as such, represent an important source of sustainable competitive advantage in both military and business organizations. This statement is: a) True b) False.

b) False.

The story of the British Navy at Trafalgar and beyond illustrates that sustained competitive advantages are based more on non-tradable resources and capabilities developed over time, rather than purchased resources available to all rivals. This story of the Battle of Trafalgar supports the validity of the industry (External) View or I/O Perspective. This statement is: a) True b) False.

b) False.

We learned in class that among the three elements of the "CIA," the investors are the ones with the human capital required for long term success. This statement is: a) True b) False.

b) False.

When you finally choose a course of action, you forfeit the opportunity to experience all the others possible options. With careful research and measurement, the true value of these forgone opportunities can be known and used in decision making. This statement is: a) True b) False.

b) False.

When you observe a business firm earning returns in excess of the minimum required by the companies investors, it would be correct to believe that the business enjoys competitive parity. This statement is: a) True b) False.

b) False.

The study of strategic or interactive decisions making which entails mathematical models of conflict and cooperation between intelligent rational decision-makers is known as: a) Competitive dynamics b) Game theory c) Industrial organization economics (I/O) d) Value chain analysis.

b) Game theory

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

Firms producing goods and services customers accept as performing similar services as the goods and services you have been selling them are known as: a) Potential new entrants b) Producers of substitutes c) New entrants d) Emerging market leaders.

b) Producers of substitutes

Some resources or capabilities are new, unique and otherwise scarce; they may support a temporary or sustainable competitive advantage. In resource-based analysis, such resources would be: a) Valuable b) Rare c) Socially ambiguous d) Inimitable.

b) Rare

In the great game of business, both producers and consumers accept the fact that in policy, "You win some; lose some." The result is that markets tend to oscillate between competitive parity and a) Temporary competitive advantage b) Sustained competitive advantage c) Normal returns d) Zero economic value added

b) Sustained competitive advantage

Buyer power is enhanced, ceteris paribus, where: a) Buyers are not concentrated as an industry group b) Switching costs are low c) Buyers are not significant purchasers of industry outputs d) Firms sell goods or services that are highly differentiated.

b) Switching costs are low

Buyer power is enhanced, ceteris paribus, where: a) Buyers are not concentrated as an industry group b) Switching costs are low c) Buyers are not significant purchasers of industry outputs d) Firms sell goods or services that are highly differentiated.

b) Switching costs are low

To achieve and sustain a competitive advantage, effective executives build and maintain strong competitive positions, create barriers to entry, or take advantage of naturally high costs of entry. This describes the means to create sustainable competitive advantage according to: a) The Harvard theory of competitive advantage b) The Five Forces Model c) The resource-based approach to competitive advantage d) The Resource (internal) view.

b) The Five Forces Model

According to D. S. Landes, "every situation bears the seed of its own reversal. Nothing good lasts indefinitely, because others will want to share in it." This is known as: a) The process of creative destruction b) The Law of Nemesis c) The Paradigm Effect d) The Myth of Nescience.

b) The Law of Nemesis

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.

According to both the text and lecture, a major management challenge is designing organizations that maximize the likelihood that local decision makers have both the relevant information to make good decisions, and: a) The right to make decisions outside their authority boundary b) The incentives to use that information productively c) The vision, virtues and talents to merit trust d) Ability to use algorithms to make better decisions.

b) The incentives to use that information productively

According to both the text and lecture, a major management challenge is the problem of implementation: how to craft organizational designs that maximize the likelihood that local decision makers have both the relevant information to make good decisions, and: a) The right to make decisions outside their authority boundary b) The incentives to use that information productively c) The vision, virtues and talents to merit trust d) Ability to use algorithms to make better decisions.

b) The incentives to use that information productively

It was Thomas Malthus who first made the argument that in "every age and in every state" population increases are limited by the means of subsistence, and that when the means of subsistence increases, population will also increase, and that the population increase will be limited by "misery and vice". In business, the equivalent of the Malthusian trap is the empirical regularity known as: a) Bankruptcy b) The long term zero profit equilibrium. c) Mean reversal d) Competitive advantage.

b) The long term zero profit equilibrium.

Industrial organization economics (the "external" view) explains mean reversion and the indifference principle in terms of: a) The zero-profit equilibrium b) The operation the five forces of competition c) The interaction of supply and demand d) Marginal analysis.

b) The operation the five forces of competition

Producers of very close functional substitutes pose a threat to other firms in their industry. Namely, consumers have choices, prices fall, costs rise (e.g., for adverts, product development, etc.). This describes the element of the Five Forces of Competition model known as: a) Supplier and buyer power b) The threat of rivalry c) The threat of substitutes d) The threat of new entry.

b) The threat of rivalry

According to the Froeb text, individual economists can have different opinions on many issues, but what unites economists is their: a) Belief that all decision makers have the knowledge needed to make good decisions b) Their use of the rational-actor paradigm to predict human behavior. c) Their willingness to incorporate other social sciences into their analysis of human action d) Their rejection of other social sciences as relevant to understanding economic behavior.

b) Their use of the rational-actor paradigm to predict human behavior.

The job of profit-responsible managers is to build and run business units that prosper by producing goods and services at an acceptable cost to the unit, which goods and services provide value for internal or external customers, at a reasonable price. Cost, value and price were referred to in class as: a) Economic thinking skills b) Three Pillars of commercial success c) Managerial economics algorithm d) The Triangular Framework.

b) Three Pillars of commercial success

The property of a resource or capability that permits it to be purchased and sold in asset markets, at a location distant from where it was produced is known as: a) Immobility b) Tradability c) Marketability d) Fungible.

b) Tradability

Preparing associates for risks and responsibilities of delegation or empowerment, and implementing necessary changes in architecture needed for successful decentralization are: a) Two examples of the principal-agent dilemma b) Two of the economic costs of decentralization c) Examples of solutions to agency conflicts of interest. d) Some of the principle roles and responsibilities of human resources managers.

b) Two of the economic costs of decentralization

Resources and Capabilities are strategic if they are (simultaneously) rare, inimitable, well organized and: a) Developed over a long time period by the same team of managers b) Valuable c) Consumer oriented d) Intangible.

b) Valuable

Resources and capabilities are strategic if they are (simultaneously) rare, inimitable, well organized and: a) Developed over a long time period by the same team of managers b) Valuable c) Consumer oriented d) Intangible.

b) Valuable

When one person or entity is hired to make decisions that impact, or are on the behalf of another person, the relationship is known in economics as: a. Employment contract b. Principal-agent relationship c. Master-servant relationship d. Service agreement.

b. Principal-agent relationship

Decisions which have economic consequences that are made under conditions of risk or uncertainty were described in class as: a. Gambles b. Ventures c. Long-range plans d. Working in the business.

b. Ventures

Competitive advantage is most likely to result from the development and use of resources and capabilities that have been built up through an ongoing process of: a) Continuous improvement b) Entrepreneurial discovery c) Accumulation over historical time d) Creative Destruction.

c) Accumulation over historical time

Powerful competitive advantages (obvious examples are Coke's brand and Microsoft's control of the personal computer operating system) create a moat around a business such that it can keep competitors at bay and reap extraordinary growth and profits. The idea of a moat runs parallel to the business concept known as: a) Competitive advantage b) Above normal profits c) Barriers to entry d) Inimitable resources and capabilities.

c) Barriers to entry

The discipline that studies the effects of psychological (mass psychology), social, cognitive, and emotional factors on the economic decisions of individuals and institutions and the consequences for market prices, returns, and the resource allocation is known as: a) Social psychology b) Cognition science c) Behavioral economics d) Keynesian economics.

c) Behavioral economics

When management and staff cannot say for sure which individual or combination of resources or capabilities account for their competitive advantage, rivals and potential new entrants may find it difficult duplicate this resource. This attribute of resources or capabilities is known in economics as: a) Path dependence b) First-mover advantages c) Causal ambiguity d) Moral hazard.

c) Causal ambiguity

Where rivals or potential new entrants cannot understand how resources or capabilities enable a firm to gain an advantage, that advantage may be sustained over time. This attribute of resources or capabilities is known in economics as: a) Path dependence b) First-mover advantages c) Causal ambiguity d) Moral hazard

c) Causal ambiguity

In the case discussed in class: "Bob Cochran's Big Deal," Bob was unusually proud of completing this particular acquisition was that it had occurred despite the efforts of several other major publishing companies to acquire this specialty-publishing house. As a result, Bob probably overpaid for the acquired firm. As discussed in class, to avoid this in the future, Bob's manager should: a) Send Bob to the local business school for a class in mergers and acquisitions b) Promote Bob to a position where he no longer makes acquisitions c) Change the performance measurement and reward system for Bob's department d) Replace Bob with a less aggressive manager.

c) Change the performance measurement and reward system for Bob's department

In well-managed firms, problems lead to employee initiative and presentation to management their solution, at which time the management team may grant permission for employees to implement their solution within the context of management monitoring. This process was discussed in class as: a) Delegation b) Decentralization c) Chartering d) Empowerment.

c) Chartering

A task leader ensures that the group complete the task in real time. The maintenance leader focuses on social relations and tries to help group avoid: a) The sunk cost fallacy b) Devil's advocacy c) Cognitive biases such as confirmation bias d) Choosing the wrong generic strategic for the situation.

c) Cognitive biases such as confirmation bias

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

A venture is a decision with economic consequences. In this context, "economic consequences" refer to: a) Increasing returns to scale b) Rising marginal benefits c) Costs, benefits, and risk/uncertainty d) Opportunity costs.

c) Costs, benefits, and risk/uncertainty

In the Brabantia case we read in class, the seniors managers wanted to make the company more innovative. To do this they: gave lower-level managers greater control over their work, increased their authority to make and implement local decisions. By doing this, senior managers changed the firm's: a) Performance measurement system b) Performance evaluation process c) Decision rights assignments d) Reward structure.

c) Decision rights assignments

A formal organization of sellers or buyers that agree to fix the prices they charge customers: a) Describes and two-party non-repeating Game (as in Game Theory) b) Is legal or illegal in the U. S. depending on where their headquarters is located c) Describes what is known as a shared monopoly or trust d) Is most likely to be found in the industry structure known as perfect monopoly.

c) Describes what is known as a shared monopoly or trust

Managers spend a lot of time trying to motivate their subordinates to make good decisions. This process requires that managers ask three questions: who is making the bad decisions, does the decision maker have the right incentives to make a good decision; and: a) Does the decision maker share the basic goals and objectives of the organization? b) Does the decision maker have the technical skills required to make great decisions? c) Does the decision maker have the enough information to make good decisions? d) Does the decision maker have enough on the job experience to make good decisions?

c) Does the decision maker have the enough information to make good decisions?

The mistake of failing to make a decision that would have increased the value of the firm is known as: a) Opportunity cost b) Loss leadership c) Errors of omission d) Errors of commission.

c) Errors of omission

In the Brabantia and O.M. Scott cases and the Union Pacific video that we read or viewed in class, we learned that a challenging but effective way to improve the performance of an organization would be to: a) Hire new executives b) Orient all new employees on the essential aspects of the firm's culture c) Improve the firm's "rules of the game" known as organizational architecture d) Employ good management consultants.

c) Improve the firm's "rules of the game" known as organizational architecture

Among the best approaches to addressing resistance to change among employees in the face of changes in the external environment is: a) Terminating those resisting change b) Providing incentives for people to retire early c) Increased and sustained communications and education d) Decentralization.

c) Increased and sustained communications and education

Distinctive Capabilities, unique historical conditions, causal ambiguity, and social complexity contribute to the sustainability of their competitive advantage through resource: a) Value b) Rareness c) Inimitability d) Organization.

c) Inimitability

Characteristics of resources or capabilities that make it difficult for rival firms to recognize, acknowledge, and respond to the incumbent firm's resource- or capability-based competitive advantage make those resources or capabilities: a) Valuable b) Rare c) Inimitable d) Organized.

c) Inimitable

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

A production philosophy that considers the expenditures of resources in any aspect other than the direct creation of value for the end consumer to be wasteful and a target for elimination is known as: a) The Asian Production Miracle b) Just in Time Inventory Management c) Lean Production d) Total Quality Control.

c) Lean Production

High capital requirements create the need for potential entrants to: a) Pay slotting fees b) Engage in heaving spending on promotional branding c) Make large investment before entering an industry to share in profits d) Look for lower interest rates on their bonds.

c) Make large investment before entering an industry to share in profits

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

Producers of outputs that perform similar services to a firm's outputs permit customers can switch to alternatives in response to price increases. These producers can reduce profits to seller firms because they: a) Provide markets for new entrants b) Increase the marginal costs of producing goods and services c) Provide to consumers a source on new and improved products and services at lower costs d) Increase the price elasticity of the firms competing in market where these producers exist.

c) Provide to consumers a source on new and improved products and services at lower costs

Changes in the general environment a firm could render the firm's theory of the business obsolete are known as: a) Strengths b) Weaknesses c) Opportunities d) Threats.

d) Threats.

Intangible resources and capabilities are complex, and their actual effect on performance is ambiguous. But if you have them and leverage them, it will be difficult for others to: a) Acquire them through reverse engineering b) Find a Nash Equilibrium c) Recognize, understand, and imitate them d) Create barriers to new entry in real time.

c) Recognize, understand, and imitate them

Sometimes incumbent firms in an industry use the force of government to create a barrier to the entry of new firms, or to hobble new entrants before they can get established. Economists call this practice: a) Predation b) Limit entry pricing c) Rent seeking d) Price discrimination.

c) Rent seeking

Which one of the following is the field of economics that deals with the problem of transforming short-run competitive advantage into a sustainable competitive advantage through the control of heterogeneous (superior), immobile resources and capabilities: a) Industry Structure Theory b) Structure-Conduct-Performance Paradigm c) Resource (Internal) or Resource-Based View d) Industry (External) View.

c) Resource (Internal) or Resource-Based View

Valuable and rare resources or capabilities may sometimes be based on such things as interpersonal relationship, culture and other social phenomena that make them difficult for other firms to copy. Which one of the following terms is associated with this source of sustainable competitive advantage? a) Causal ambiguity b) Rent seeking behavior c) Social complexity d) Behavioral barriers to entry (BTE).

c) Social complexity

When a valuable resource or capability is founded on such things as interpersonal relationship, culture and other organizational phenomena, they will not be able to imitate that resource in real time, those resources or capabilities can be the foundation of sustainable competitive advantage due to: a) Causal ambiguity b) Rent seeking behavior c) Social complexity d) Behavioral barriers to entry (BTE).

c) Social complexity

Examples of resources or capabilities that are under the exclusive control of the incumbent firm include Patents and copyrights, Exclusive licenses, and Valuable relationships and: a) Access to the court system b) Membership in trade associations c) Strong values, attitudes and beliefs d) Customer goodwill.

c) Strong values, attitudes and beliefs

In the video featuring Max Boot, the author of "War Made New," the author argued that the key to sustainable competitive advantage in both military and civilian organization is: a) New technology b) Choosing the right enemy or rivals c) Superior organization and management d) The German General Staff Model of strategy implementation.

c) Superior organization and management

You are managing a successful firm which is earning above-normal returns. Imitating firms would like to entry your market. Unfortunately for them, they don't know the cause of your success. When the causes of sustained competitive advantage is ambiguous, it could be due to: a) Resources and capabilities that were developed in a foreign nation where the firm has done business b) The existence of teams who perform complex operations within the value chain c) Taken-for-granted resources or capabilities. d) The firm's elaborate cultural rituals.

c) Taken-for-granted resources or capabilities.

The military historian Max Boot ("War Made New" Video) strongly suggested that innovative technologies are tangible and tradable, and as such, represent a source of: a) Sustainable competitive advantage. b) Enhanced accounting profits c) Temporary competitive advantage d) Valuable trademarks and copyright.

c) Temporary competitive advantage

The bargaining power of buyers, the bargaining power of suppliers, threat of substitutes, threat of new entry and intensity of rivalry all combine to influence or determine: a) Competitive positioning b) Projected profit potential c) The Five Forces of Competition d) Market success.

c) The Five Forces of Competition

To gain and maintain a sustainable competitive advantage, firms should take aggressive action to build and maintain strong barriers to entry. This concept of competition is known as: a) The resource based view b) Limit entry pricing c) The Industry (external) approach to competitive advantage School d) Game Theory.

c) The Industry (external) approach to competitive advantage School

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

The combination of buyer power, supplier power, the availability of substitutes, and the threat of new entry contribute to the: a) The determination of management compensation b) The performance of individual firms in a given industry c) The average profitability of firms in an industry d) The duration of the Waving Hand Equilibrium.

c) The average profitability of firms in an industry

As managers and their organizations produce more units of output over time, they tend to gain operating efficiency and increased labor productivity from their production experiences. This phenomenon produces what is known in economics as: a) Economics of scope b) Minimum efficient scale (MES) c) The experience curve d) Learning by doing what managers want.

c) The experience curve

In the Oil Ventures International case discussed in the text, senior managers clearly ignored the accurate advice of the junior geologist and overbid for the oil tract in the Gulf of Mexico. This was clearly a value-decreasing decision and the board needs to understand why management acted in this way. According to the authors, the main problem was that: a) The firm's selection process for top managers was flawed b) The junior geologist did a poor job informing management of the true value of the tract c) The incentives created by the firm's bonus plan shaped the misconduct of management d) The board of directors needed to an overbid to avoid very high corporate taxation.

c) The incentives created by the firm's bonus plan shaped the misconduct of management

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

In the economic analysis of the turnaround at the O. M. Scott Co., you read that the firm was able to improve performance significantly by changing: a) The amount paid to middle level managers b) The prices of their lawn care products c) The organization's "Rules of the Road" d) The firm's organizational architecture.

c) The organization's "Rules of the Road"

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

The legal principle that law should govern a nation, as opposed to arbitrary decisions by individual government officials, is known as: a) The rule of Kings b) Common law c) The rule of law d) Equal justice before the law.

c) The rule of law

Profitable markets that yield high returns will tend to attract new firms into the market. This is known as: a) Bargaining power of suppliers b) Bargaining power of buyers c) The threat of new entrants d) The threat of intense competition.

c) The threat of new entrants

Resources and capabilities that are valuable but readily available to all firms are not rare, and cannot be the source of sustainable competitive advantage. Such resources or capabilities are referred to in managerial economics as: a) Fungible b) Migratory c) Tradeable d) Short-supplied.

c) Tradeable

Tangible and intangible resources are rare to the extent that only one or a few organizations in an industry possess them and control their use. This statement is: c) True d) False.

c) True

Socially complex systems are comprised of many elements that must be coordinated by management and/or which require spontaneous cooperation to produce sustainable competitive advantage. This is complex but: a) Causally indeterminate b) A common source of competitive advantage in high tech industries c) Unambiguous d) Support a culture-based competitive advantage.

c) Unambiguous

Socially complex systems are comprised of many elements that must be coordinated by management and/or which require spontaneous cooperation to produce sustainable competitive advantage. This is complex but: a) Causally indeterminate b) A common source of competitive advantage in high tech industries c) Unambiguous d) Support a culture-based competitive advantage.

c) Unambiguous

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

In class we discussed managerial decision making from an economic perspective. When managers establish goals and objects, consider two or more viable alternatives, and assess the economic consequences and risks of each alternative, they are engaged in: a) Economic analysis b) Financial analysis c) Venture analysis d) Futures analysis.

c) Venture analysis

In the Stew Leonard's Dairy video, we learned that one key to success was the firm's employees' and managers': a) Willingness to conduct focus groups among suppliers and employees b) Ability to judge coming trends in the external general environment c) Willingness to listen to the customers to understand what they want d) Ability to form small groups of workers to get ideas for improving sales.

c) Willingness to listen to the customers to understand what they want

How hard to work is an extent decision, so marginal analysis can be used to design incentives to encourage hard work. Working hard is important; more important is: a) Working effectively with others b) Working to advance the goals of managers c) Working hard on the right things d) Working until everyone else has stopped working.

c) Working hard on the right things

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.

Some incumbent firm's control resources and capabilities that give them a sustainable competitive advantage. When this advantage is due to the fact that potential imitating firms do not and cannot really understand how the resources or capabilities benefit the incumbent firm, then economists label such resources and capabilities as possessing the quality of: a) Distinctive value b) Social complexity c) Entropy d) Causal ambiguity.

d) Causal ambiguity.

Professional economists tend to believe that to change human behavior you have to change self-interest; and, to do that you need to: a) Promote the best course of action b) Increase net income c) Alter personal perceptions of intrinsic value d) Change incentives.

d) Change incentives.

A systematic pattern of deviation from the norm of rationality in judgment, whereby inferences about other people and situations may be drawn in an illogical fashion is known as: a) Paradigm dependence b) Behaviorism c) Rational ignorance d) Cognitive bias.

d) Cognitive bias.

An economic entity's ability to produce a good or service at a lower marginal opportunity cost than some other economic organization (person, organization, and nation) is known as: a) Competitive advantage b) Absolute advantage c) Balance of trade d) Comparative advantage.

d) Comparative advantage.

Revenues fall below total economic costs until a turnaround strategy can be implemented, bankruptcy is declared, or the firm's assets are acquired by a better management team. These are the conditions that define : a) Competitive advantages b) Temporary competitive dis-advantage c) Normal returns d) Competitive Disadvantage.

d) Competitive Disadvantage.

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.

The human tendency to search for or interpret information in a way that is consistent with, or supportive of, one's preconception. People also tend to interpret ambiguous evidence as supporting their existing position. These statements describe: a) Cognitive dissonance b) The Total Confirming Mindset c) The Theory of Mind d) Confirmation bias.

d) Confirmation bias.

This scientific method seeks to 1) understand natural phenomena, 2) make predictions about the future and 3): a) Understand what motivates people to make economic decisions b) Explain the causes of bad decisions in government and business c) Reduce uncertainty, converting it to risk d) Control natural phenomena to make improvements if possible.

d) Control natural phenomena to make improvements if possible.

Effective executives take care to ensure that decision makers have the relevant skills and information to make good decisions, and then craft organizational architectures appropriate control systems to motivate associates to use their information productively, and delegate authority based on the contingencies of any given situation. These are elements of: a) Chartering b) Empowerment c) Control systems d) Decentralization.

d) Decentralization.

Resources or capabilities are generally immobile if their value is greatest where they were developed and first: a) Created b) Implemented c) Invented d) Deployed.

d) Deployed.

The field of economics dealing with the strategic behavior of firms, regulatory policy, antitrust policy and market competition is known as: a) Public choice theory b) Microeconomic theory c) Applied economic analysis d) Industrial organization economics.

d) Industrial organization economics.

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 the Harley-Davidson case we read in class, CEO Vaughn Beals, a former production engineer, began Harley's successful turnaround by focusing on operations and production improvements. Senior production engineer, Walter Anderson, contributed by replaced assembly lines with work cells, thus reducing the total movement of materials throughout the system. Thus, Beals and Anderson diagnosed Harley's problem as one of: a) Value b) Rareness c) Inimitability d) Organization.

d) Organization.

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.

Which one of the following defines a fellow firm's (or potential new entrants) resources or capabilities that effectively supplant or neutralize the incumbent's resource-based competitive advantage: a) Resources or capabilities that are mobile b) Resources or capabilities that are non-tradable c) Resources or capabilities that support temporary competitive advantage d) Resources or capabilities that are substitutes in production.

d) Resources or capabilities that are substitutes in production.

When we don't know what is going to happen next, but we do know what the possible distribution of outcomes looks like, we are dealing with: a) Uncertainty b) Threats c) Opportunities d) Risk.

d) Risk.

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

Consider the case of a business firm that is a system comprised of many elements that must be coordinated by management and/or which require spontaneous cooperation to produce sustainable competitive advantage, this system would be: a) Self-Contained b) Synergistic c) Valuable but not rare d) Socially complex.

d) Socially complex.

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 shown in class, Max Boot, author of a book called War Made New, suggested that in military history (and this extends to private firms, as well), success is often built on: a) A steady stream of new and improved products b) Geographical advantages c) The passage of long periods of time d) Superior organization and management.

d) Superior organization and management.

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.

A situation where someone in the organization sees an opportunity to create value, and are authorized to exploit that opportunity even though it's not part of their "rolls and responsibilities," was discussed in class as: a) Entrepreneurial discovery b) Continuous improvement c) Comparative advantages d) The Nike Zone.

d) The Nike Zone.

Although water is on the whole more useful, in terms of survival, than diamonds, diamonds command a higher price in the market. This apparent logical contradiction is known as: a) The hard as diamonds syndrome b) The paradigm effect c) Value migration d) The paradox of value.

d) The paradox of value.

The organizational architectural process that specifies the criteria that will be used to judge the contribution of decision agents (employees or associates) within the organization is known as: a) The Authority Boundary b) The Nike Zone c) The reward system d) The performance measurement and evaluation system.

d) The performance measurement and evaluation system.

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.

On occasion, employees will engage in intentional, value-decreasing behavior. This was discussed in class as: a. Virtue b. Luck c. Blameless ignorance d. Vice.

d. Vice.