Chapter 8

26. Which of the following is not a way teams "collude" within professional sports markets? a) Agreeing on ticket prices b) Agreeing on rules and schedules c) Employing the same pool of referees d) Sharing national broadcast revenues e) Agreeing on rookie drafts

a) Agreeing on ticket prices

11. Which of the following factors requires the least consideration when assessing supplier power relative to the downstream industry it sells to? a) Competitiveness of the output market b) Purchase volume of downstream firms c) Availability of substitute inputs d) Threat of forward integration by suppliers e) Ability of suppliers to price discriminate

a) Competitiveness of the output market

6. Which of the following does not tend to affect the threat of entry? a) Expectations about pre-entry competition b) Government protection of incumbents c) Consumers highly valuable reputation/consumers are brand loyal d) Experience curve e) Network externalities

a) Expectations about pre-entry competition

33. Price competition is increased when which of the following occurs?? a) Many sellers in the market b) Products are differentiated c) Firms are producing at capacity d) Buyers have high switching costs e) Firms purchase raw materials from the same suppliers

a) Many sellers in the market

35. Which of the following factors requires the least consideration when assessing supplier power relative to the upstream industry in which it buys raw materials? a) Number of competitors in downstream market b) Purchase volume of raw materials c) Availability of substitute inputs d) Number of upstream suppliers e) Ability of suppliers to price discriminate

a) Number of competitors in downstream market

30. Who are the most powerful suppliers in professional sports? a) Players unions b) Referees c) Owners d) Politicians e) Cities

a) Players unions

22. How did European governments help Airbus aggressively pursue a 50% market share in its early years of operation? a) Subsidies b) High-interest loans c) Helping to ensure scope economies from military aircraft division d) Paying in excess of cost for military aircraft e) Guaranteeing a set level of annual aircraft purchases

a) Subsidies

31. In which of the following ways can entry erode incumbents' profits? a) Entrants divide market demand among fewer sellers b) Entrants decrease market concentration c) Entrants usually grow the market for all parties d) Entrants increase market concentration e) Entrants reduce internal rivalry

b) Entrants decrease market concentration

5. In which of the following ways can entry erode incumbents' profits? a) Entrants divide market demand among fewer sellers b) Entrants decrease market concentration c) Entrants usually grow the market for all parties d) Entrants increase market concentration e) Entrants reduce internal rivalry

b) Entrants decrease market concentration

29. Which of the following is a complement to professional sports? a) Merchandise sales b) Gambling c) Luxury Boxes at stadiums d) Food and beverage sales e) None of the above

b) Gambling

4. Which of the following conditions does not tend to heat up price competition? a) Many sellers in the market b) Products are differentiated/buyers have high switching costs c) Some firms have excess capacity d) The industry is stagnant or declining e) There are large/infrequent sales orders

b) Products are differentiated/buyers have high switching costs

8. Substitutes erode profits because of which of the following factor? a) Substitutes compete for similar inputs driving up production costs b) Substitutes divide demand and drive up internal rivalry c) Firms producing substitutes use similar worker skills dividing the labor pool d) Manufacturers of substitutes enter markets later and have lower sunk costs e) None of the above

b) Substitutes divide demand and drive up internal rivalry

24. Which of the following is the most likely substitute for commercial aircraft travel between Chicago and Tokyo? a) Bicycle b) Teleconferencing c) Automobile d) Commuter train e) Walking

b) Teleconferencing

21. Which of the following is a trend that Chicago area hospitals should least likely be worried about with respect to pricing? a) The FTC recently won an antitrust case that forced the members of the Evanston Northwestern Healthcare system to negotiate independently with insurers b) There has been considerable consolidation (hospital mergers) in regional submarkets, including the city of Chicago and the important North Shore suburbs c) Employers are asking employees to bear more of their own health care costs. At the same time some employers are reconsidering the decision to opt for wide, but costly MCO networks d) If regulatory barriers fall, entry by specialty hospitals in wealthier communities could skim off some of the areas' most profitable patients e) Employers, payers, regulators and patients are demanding and getting more information about hospital quality

b) There has been considerable consolidation (hospital mergers) in regional submarkets, including the city of Chicago and the important North Shore suburbs

12. What concept developed by Brandenburger and Nalebuff as a counterpart to Porter's five-forces consists of suppliers, customers, competitors and complementors? a) McKinsey 7-S Framework b) Value net c) BCG Market Share Matrix d) 6 C's of Marketing e) 4 P's of Marketing

b) Value net

20. Which of the following is true about hospital industry profits from 1980 to 2000 and a five forces analysis? a) Virtually every factor caused profits to increase b) Virtually every factor caused profits to decrease c) Most factors are not applicable to the industry d) The Value Net cannot be used to evaluate the industry e) None of the above

b) Virtually every factor caused profits to decrease

32. Which of the following is a component of the Value Net? a) Suppliers b) Customers c) Competitors d) Complementors e) All of the above

c) Competitors

3. Which of the following best describes the term, internal rivalry? a) Divisions competing within a firm for resources b) Differing product lines from one manufacturer competing c) Firms jockeying for share within a market. d) Firms competing for resources to produce goods e) Suppliers dividing factors between competing firms

c) Firms jockeying for share within a market.

28. What professional sports complement poses the biggest dilemma? a) Cheerleaders b) Mascots c) Gambling d) Television e) Radio

c) Gambling

19. Which of the following is generally thought of as a supplier in the hospital industry? a) Medicaid b) Admitting physicians c) Hospital-based physician d) Patients e) Medicare

c) Hospital-based physician

23. Which of the following is not a significant entry barrier in the commercial airframe manufacturing market? a) High development costs b) Learning curve in production c) Raw materials and labor d) Airlines prefer to purchase from the same manufacturer e) Airlines are reluctant to purchase from startups

c) Raw materials and labor

2. Which of the following is not a part of the five-forces framework? a) Supplier Power b) Internal rivalry c) Regulation d) Buyer Power e) Substitutes and Complements

c) Regulation

14. Which of the following is not a factor that could intensify internal rivalry in the Chicago hospital market? a) Relatively large number of hospitals b) Considerable variation in production costs c) Relatively small number of doctors d) Excess capacity e) Aging baby boomers increasing demand for admissions

c) Relatively small number of doctors

7. Which of following factors should be considered when assessing complements and substitutes? a) Availability of close substitutes and/or complements b) Price-value characteristics of substitutes/complements c) Price elasticity of industry demand d) All of the above e) None of the above

d) All of the above

15. Which of the following is not a feature of selective contracting (used by Managed Care Organizations) that intensified internal rivalry? a) Had infrequent (contract lengths of two to three years) and lumpy (one insurer may have represented over 5% of a hospital's business) sales b) Treated all hospitals as identical c) Kept price negotiations between insurers and hospitals secret, encouraging hospitals to lower prices to win contracts d) Contracted with hospitals that patients were most loyal to e) Created pressure for hospitals to win each individual contract with no thought of future consequences

d) Contracted with hospitals that patients were most loyal to

17. What type of entrant would be described as a new entrant with no current brand identity, distribution channels or presence within an industry? a) Fast follower b) Passive c) Aggressive d) Innovator e) De novo

d) Innovator

18. Which of the following is generally thought of as a buyer in the hospital industry? a) Pharmaceutical drug houses b) Medical equipment companies c) Technician d) Patients e) Nurse

d) Patients

34. What term refers to the ability of firms to negotiate purchase prices that extract higher profits from buyers? a) Substitutes and Complements b) Competition c) Customer power d) Seller power e) Buyer power

d) Seller power

13. Which of the following is not a component of the Value Net? a) Suppliers b) Customers c) Competitors d) Supplementors e) Complementors

d) Supplementors

1. Which of the following is not a potential limitation of the five-forces framework? a) It pays little attention to factors that might affect demand b) It focuses on a whole industry rather than on individual firms that may occupy unique positions that insulate them from some competitive forces c) The framework does not explicitly account for the role of government, except when government is a supplier or buyer d) The framework provides a structured way to systematically work through wide-ranging and often complex issues e) The framework is a qualitative analysis method

d) The framework provides a structured way to systematically work through wide-ranging and often complex issues

25. What entity as a supplier has the most substantial power over manufacturers in the commercial aircraft market? a) Raw materials suppliers b) Airlines c) Aircraft leasing companies d) Unions e) Passengers

d) Unions

27. Which of the following is not a barrier to entry in professional sports markets? a) Each league has rules governing the addition of new franchises b) Potential new owners must pay current owners hundreds of millions of dollars c) Most potential owners must offer to build new stadiums d) Incumbent teams have rights to veto franchises in their own geographic markets e) Because the number of potential billionaire owners has risen dramatically, the purchase prices have dropped

e) Because the number of potential billionaire owners has risen dramatically, the purchase prices have dropped

10. What term refers to the ability of individual customers to negotiate purchase prices that extract profits from sellers? a) Substitutes and Complements b) Competition c) Customer power d) Seller power e) Buyer power

e) Buyer power

16. Which of the following trends or methods has since helped reduce the pricing rivalry that had intensified by the late 1990s? a) Patients began accepting MCOs with "narrow networks" and MCOs had the upper hand in negotiating with hospitals for inclusion in networks b) Hospitals removed brand identities c) Hospitals dropped "centers of excellence" from their hospitals d) Hospitals consolidating away from related products e) Hospitals consolidated (conducted mergers)

e) Hospitals consolidated (conducted mergers)

9. Why are suppliers in a competitive upstream market said to have "indirect power"? a) They can sell their services to the lowest bidder b) They are always concentrated c) Their customers are always locked into relationships with them d) The price they charge never depends on supply and demand in the upstream market e) The can sell their services to the highest bidder

e) The can sell their services to the highest bidder