Chapter 9

Which of the following is false with respect to the strategy of cost leadership?

A firm following a strategy of cost leadership is following a generic strategy narrow in scope

Which of the following represents total surplus in t he value creation equation, (B-P) + (P-C)?

B - C

Which of the following represents consumer surplus in the value creation equation, (B-P) + (P-C)?

B-P

What type of strategy seeks to serve all customer groups in the market by offering a full line of related products?

Broad-coverage strategy

What term describes the situation when a firm earns a higher rate of economic profit than the average rate of economic profit of other firms competing within the same market?

Competitive advantage

What is the perceived benefit of a product per unit consumed minus the product's monetary price?

Consumer surplus

When multiple firms' price-quality positions line up along the same indifference curve offering a consumer the same amount of consumer surplus, what term describes the situation?

Consumer surplus parity

Benefit proximity refers to which of the following?

Cost leading firms offering products with slightly less benefit

What term best describes a targeting strategy in which the firm offers a variety or related products to a particular class of customers?

Customer specialization

What type of good is one whose quality can be assessed only after the customer has used it for a while?

Experience good

Under what type of strategy does a firm either offer a narrow set of varieties, serve a narrow set of customers, or do both?

Focus strategy

What is another term for a "win-win" business opportunity?

Gains from trade

Which of the following is a concept developed by Michael Porter that describes, in broad terms, how it positions itself to compete in the market it serves?

Generic strategy

What type of curve can be used to describe the set of price-quality combinations that yields the same consumer surplus to an individual?

Indifference curve

What term coined by Michael Porter describes a tool that can be used to show how nearly every industry can be broken down into smaller pieces known as segments?

Industry segmentation matrix

What kind of strategy is one by which a firm maintains price parity with its competitors and profits from its benefit or cost advantage primarily through high price-cost margins, rather than through a higher market share?

Margin strategy

What term describes the price at which a consumer is indifferent between buying a product and going without it?

Maximum willingness-to-pay

Which of the following statements best describes a characteristic of geographic specialization focus strategies?

Offers a variety of products and/or sells to a variety of customer groups within a narrow geography

Which of the following represents producer surplus in the value creation equation, (B-P) + (P-C)?

P-C

Which of the following is a characteristic of an experience good?

Quality can be assessed only after the customer has used it for a while

Select the letter corresponding to the best answer. For a given consumer, any price-quality combination along the indifference curve yields the _______________

Same consumer surplus

What type of good is one whose quality is relatively easy to evaluate before purchase?

Search good

What kind of strategy is one by which a firm exploits its benefit or cost advantage through a higher market share rather than through high price-cost margins?

Share strategy

Which of the following is a capability?

Sourcing skills

What term coined by Michael Porter describes a firm that pursues elements of cost leadership and benefit leadership at the same time and in the process fails to achieve either a cost advantage or a benefit advantage?

Stuck in the middle

Consumer surplus is measured as which of the following?

The perceived benefit of a product per unit consumed minus the product's monetary price

The steepness (slope) of an indifference curve indicates which of the following?

The tradeoff a consumer is willing to make between price and quality

Which of the following is not a common characteristic of capabilities?

They are easy to reduce to simple algorithms or procedure guides

What is one way to measure a firm's willingness-to-pay?

Value added analysis

Which of the following terms is a concept, developed by Michael Porter, which describes the activities within firms and across firms that add value along the way to the ultimate transacted good or service?

Value chain

What term describes the process of using market prices of unfinished and semi-finished goods to estimate the incremental value-created by distinctive parts of the value chain?

Value-added analysis

Which of the following best describes a focus strategy?

When a firm either offer a narrow set of varieties, serve a narrow set of customers, or do both

Which of the following is a resource?

Workers with firm-specific expertise or know-how