MGT 449
5. Suppose an entrepreneur starts a business earning $2M in revenue in 2009 while at the same time incurring $1.8M in costs. If the entrepreneur's best outside alternative employment opportunity is to earn $300K, what are the firms accounting and economic profits? a) $200K, -$100K b) $200K, $100K c) $300K, $100K d) $300K, -$100K e) $200K, $200K
A) $200K, -$100K
12) True Home Inc., Super Cart Inc., and Daily Things Inc. are three consumer-product retailing companies. Their products consist primarily of day-to-day items that are easy to imitate and sell. All three companies use the same resources and capabilities in the production and distribution of their products. Which of the following is an implication of the market condition indicated in this scenario? A) Any advantage that one firm has will be short-lived. B) Barriers to entry within the industry will be high. C) Resource immobility of the firms will be low. D) The industry structure will be far from perfect competition.
A) Any advantage that one firm has will be short-lived.
5) Which of the following is an implication of low interest rates? A) Consumer demand will increase. B) Economic growth rate will fall. C) Firms will invest less in future growth. D) Cost of capital for firms will be high.
A) Consumer demand will increase.
True Cinemas Inc. and Digi Future Inc. are two companies that own and run movie theaters in malls and other commercial areas. While True Cinemas Inc. pursues a cost-leadership strategy, Digi Future Inc. adopts a differentiation strategy. Which of the following statements is most likely true of this scenario? A) Digi Future and True Cinemas will not be direct competitors to each other and their customer segments will overlap very little. B) True Cinemas and Digi Future will use a similar approach to create value for customers by attempting to offer everything to everybody. C) True Cinemas will charge a premium price for its customers while Digi Future will implement everyday low pricing. D) Digi Future will keep its customer service at an acceptable level while True Cinemas will provide superior customer service.
A) Digi Future and True Cinemas will not be direct competitors to each other and their customer segments will overlap very little.
3) The government of Filvia has mandated that the standard minimum wage in the country be increased to $8,000 per year. This has ensured that all firms in the country pay their employees at least $8,000 per year, which has brought about a higher standard of living for the people of Filvia. Which of the following factors in a firm's general environment does this mandate best indicate? A) Legal factors B) Sociocultural factors C) Technological factors D) Ecological factors
A) Legal factors
39) Balmia Ammunition Inc., a firm controlled and managed by the government of Balmia, is the only company that has the license to produce defense arms in the country. Which of the following industry competitive structures does this best illustrate? A) Monopoly B) Oligopoly C) Perfect competition D) Monopolistic competition
A) Monopoly
18) 3T Inc., a telephone service provider, has a large user base mainly because phone calls and messages between all 3T users are free. When a person switches to a 3T network, his or her entire network of family and friends is likely to switch to the same network to avail the benefit of free calls and messages. In addition, an existing user who gets a new user to register with 3T Inc. is given a free wireless connection. This has helped to keep competition away from 3T. In this scenario, which of the following factors is acting as an entry barrier for 3T Inc.? A) Network effects B) Economies of scale C) High capital requirement D) High fixed costs
A) Network effects
41) Eon Inc., Electravia Inc., and FC Inc., the three largest firms in the consumer electronics industry, hold close to 85 percent of the industry's market share. These companies mainly compete against each other by providing unique features in their products rather than pricing them low. These firms are interdependent, and each firm must consider the strategic actions of its competitors. Which of the following industry competitive structures does this scenario best illustrate? A) Oligopoly B) Perfect competition C) Monopolistic competition D) Monopoly
A) Oligopoly
46) When companies that manufacture shipping containers want to buy iron ore, the purchase decision is solely based on price. This is because there are a large number of sellers in the iron ore industry, and iron ore is a highly undifferentiated commodity. Which of the following industry competitive structures does the iron ore industry best illustrate? A) Perfect competition B) Oligopoly C) Monopoly D) Monopolistic competition
A) Perfect competition
48) In which of the following industry competitive structures do selling firms have the lowest pricing power? A) Perfect competition B) Monopoly C) Oligopoly D) Monopolistic competition
A) Perfect competition
9) Which of the following statements accurately brings out the difference between tangible and intangible resources? A) Tangible assets can be bought on the open market, whereas intangible assets cannot be easily purchased. B) Tangible resources take a longer time to build, whereas intangible assets can be built comparatively easily. C) Tangible resources contribute to a company's competitive advantage, whereas intangible resources fail to do the same. D) Tangible assets are difficult to imitate, whereas intangible assets can be easily replicated.
A) Tangible assets can be bought on the open market, whereas intangible assets cannot be easily purchased.
5) The management of a company is assessing the value of all the tangible resources the company owns. Which of the following will be included in this assessment? A) The company's machinery B) The company's patents C) The company's brand equity D) The company's copyrights
A) The company's machinery
11) True Sync Inc. is a software company, which has built and acquired numerous assets over the years. According to the resource-based view of a firm, which of the following assets of True Sync Inc. will best enable it to gain and sustain a competitive advantage? A) The expertise acquired by the employees in the company B) The capital raised by the company from its shareholders C) The headquarters owned by the company D) The resources of the company that are mobile
A) The expertise acquired by the employees in the company
7) Which of the following do the sociocultural forces in a firm's external environment best represent? A) The family size of the firm's target market B) The laws protecting small enterprises in a nation C) The rate of employee attrition within the firm D) The interest rates prevalent in an economy
A) The family size of the firm's target market
10) Which of the following is an example of a firm's intangible resources? A) The firm's organizational culture B) The firm's land and building C) The firm's cash at bank D) The firm's finished goods inventory
A) The firm's organizational culture
42) Why do firms operating in a monopolistically competitive industry have the power to raise the prices of their products or services? A) The firms can differentiate their product offerings. B) The competition in the industry is insignificant. C) The number of buyers in the industry is small. D) The entry barriers in the industry are extremely high.
A) The firms can differentiate their product offerings.
15) Which of the following is most likely an implication of new firms entering an industry? A) The incumbent firms will spend more to satisfy their existing customers. B) The rivalry among existing competitors will reduce. C) The industry's overall profit potential and sales will increase. D) The bargaining power of buyers will reduce.
A) The incumbent firms will spend more to satisfy their existing customers.
14) Trust Machines Inc. is a company that manufactures and markets consumer electronics. The unique microprocessors developed by the company contribute to its high resource immobility. According to the resource-based view of competitive advantage, which of the following is an implication of this situation? A) The resources of Trust Machine Inc. are difficult to replicate or imitate. B) The competitive advantage of Trust Machine Inc. will soon be lost. C) The resource heterogeneity of Trust Machine Inc. is low within the industry. D) The environment in which Trust Machine Inc. operates is closest to perfect competition.
A) The resources of Trust Machine Inc. are difficult to replicate or imitate.
Which of the following statements accurately describes firm effects? A) They attribute firm performance to the actions managers take within a chosen industry. B) They refer to the external circumstances surrounding all the firms in an industry. C) They attribute firm performance to the industry in which the firm competes. D) They refer to the value-creation potential of a large, diversified enterprise.
A) They attribute firm performance to the actions managers take within a chosen industry.
For a firm that operates in an industry where competition is high, which of the following practices will result in inferior performance? A) Trying to be everything to everybody by combining different competitive strategies B) Choosing a distinct but different strategic position in the industry C) Working toward increasing the difference between value creation and cost D) Focusing on creating value for customers rather than destroying rivals
A) Trying to be everything to everybody by combining different competitive strategies
2. If a firm is producing as efficiently as it knows how, then how will the total cost function slope? a) Upward b) Downward c) No Slope d) Downward until an output threshold value, then upward e) Upward until an output threshold value, then downward
A) Upward
Underperformance relative to other firms in the same industry or the industry average results in a(n) ________ for a firm. A) competitive disadvantage B) sustainable competitive advantage C) increased power distance D) diseconomies of scope
A) competitive disadvantage
31) A company is best described as a ________ to an existing company if customers value the existing company's product or service offering more when they are able to combine it with the other company's product or service. A) complementor B) shareholder C) competitor D) strategic equivalent
A) complementor
3) Dandelions Max is a consumer electronics company. It has acquired an edge over its competitors through its ability to provide breakthrough technology at the lowest price in the market. This advantage of Dandelions Max best exemplifies a ________. A) core competency B) resource flow C) capital gain D) markup
A) core competency
Industry effects describe the underlying ________ structure of the industry. A) economic B) ethnographic C) psychographic D) demographic
A) economic
19) In the aircraft manufacturing industry, at least for large commercial jets, Boeing and Airbus are the only competitors. There is not a significant threat of entry because: A) entering the aircraft manufacturing industry requires huge capital investments. B) there is expected to be a huge return on investment within this industry. C) entering the aircraft manufacturing industry means violating government policies. D) there is no credible threat of retaliation from the incumbents.
A) entering the aircraft manufacturing industry requires huge capital investments.
Keeping in mind Apple's competitive advantage, which of the following products was introduced by Apple in 2007? A) iPhone B) iTunes C) iPod D) iPad
A) iPhone
16) Economies of scale are cost advantages that accrue for firms with: A) larger output. B) low employee turnover. C) high capital risks. D) high fixed costs.
A) larger output.
15) The competitive advantage that one firm has will be short-lived in an industry where: A) perfect competition exists. B) capabilities of a firm are not easily replicable. C) resource immobility is high. D) resource heterogeneity is high.
A) perfect competition exists.
34) Competitive rivalry based solely on ________ is destructive to firms as it transfers most of the value created in the industry to the customers. A) price-cutting B) promotional campaigns C) new product releases D) product differentiation
A) price-cutting
11) A firm's strategic position is likely to be strong when: A) the gap between the value the firm's product generates and the cost to produce it is large. B) all the five forces in Porter's model are strong. C) the entry barriers within the industry it operates in are low and the exit barriers are high. D) its suppliers and vendors can easily forward integrate and buyers can backward integrate.
A) the gap between the value the firm's product generates and the cost to produce it is large.
8. Which of the following would be the range of elasticity for a product with an "inelastic" demand? a) η < 1 b) η = 1 c) η > 1 d) η > 2 e) none of the above
A) η < 1
37) How can a firm change its industry structure from monopolistically competitive or oligopolistic to a near monopoly? A) By implementing frequent price-cuts B) By developing proprietary technology C) By decreasing its pricing power D) By reducing the entry barriers in its industry
B) By developing proprietary technology
If SA Pharmaceuticals obtains an 18 percent return on invested capital, which of the following will help determine if it has a competitive advantage over other pharmaceutical companies? A) Assessing the value based on the shareholders' expectations of return on their capital B) Comparing the return to the return on invested capital obtained by other firms in the industry C) Evaluating the liquidity ratios for other pharmaceutical companies D) Comparing the value to the history of the firm's return of investment over a number of years
B) Comparing the return to the return on invested capital obtained by other firms in the industry
21) In which of the following situations is a company that exists in the telecommunications industry most likely to face the highest threat of entry? A) If the capital requirements in the industry are high B) If the industry has recently become deregulated C) If the company is able to put up a credible threat of retaliation D) If the customer switching costs in the industry are high
B) If the industry has recently become deregulated
1) Nike has come a long way from its humble beginnings. It has been able to outperform adidas in sales and become the undisputed leader in the athletic shoe and apparel industry. Which of the following statements accurately explains one of the main reasons for Nike's success? A) It made the unorthodox move to spend basically its entire budget for a specific sport on a single star athlete. B) It focused on sponsoring future athletic superstars who embodied a likely success story. C) It spread its marketing budget more widely. D) It stopped spending money on celebrity endorsements and started restricting its expenditure for sponsoring only track and field sports stars.
B) It focused on sponsoring future athletic superstars who embodied a likely success story.
27) Which of the following is a drawback of Porter's five forces model? A) The model describes competition narrowly as a firm's closest competitors. B) Managers cannot determine the changing speed of an industry or the rate of innovation. C) The model fails to consider that threat of substitutes can come from outside a given industry. D) It fails to provide a basis for deriving implications for a firm's strategic position within an industry.
B) Managers cannot determine the changing speed of an industry or the rate of innovation.
40) The telecommunication industry of United Canava is primarily dominated by three large firms, AD Telecom Inc., Mystic Telecom Corp., and Total Talk Inc. Instead of cutting prices competitively, these firms have resorted to non-price competition through branding and product differentiation. Which of the following industry competitive structures are these companies most likely in? A) Monopolistic competition B) Oligopoly C) Monopoly D) Perfect competition
B) Oligopoly
2) The ________ allows the scanning, monitoring, and evaluating of changes and trends in a firm's macro environment. A) VRIO framework B) PESTEL framework C) BCG matrix D) SWOT analysis
B) PESTEL framework
25) While industry forces have been favorable for a long time in the U.S. automotive industry, recent dynamics have lowered the profit potential of competing in this industry and thus reduced its attractiveness. The continued success of Tesla Motors in the industry will depend on other firm and industry factors. Which of the following represents one such factor that directly affects Tesla Motors? A) There is a lack of balance in demand and supply: demand far exceeds capacity within the industry. B) Since suppliers of its key sources are few, the bargaining power of suppliers is high. C) Since individual buyers do not have many choices, their bargaining power is low. D) There is a noticeable absence of complementary products and services for the industry
B) Since suppliers of its key sources are few, the bargaining power of suppliers is high.
4. Which of the following best describes marginal cost? a) The per-unit-of-output cost for a product b) The incremental cost of producing one more unit of output. c) A cost invariant to the firm's output d) The sum of all costs associate with the production of a product e) The cost of fixed items such as general and administrative expenses
B) The incremental cost of producing one more unit of output.
43) When fashion magazines face competition from fashion blogs on the web, which of the following forces in Michael Porter's five forces model primarily gets stronger? A) The availability of complements B) The threat of substitutes C) The emergence of entry barriers D) The bargaining power of suppliers
B) The threat of substitutes
24) Which of the following features about a buyer indicates that the buyer has high bargaining power? A) When the buyer cannot credibly threaten to backwardly integrate into the industry. B) When the buyer operates in an industry where products are undifferentiated. C) When the buyer faces high switching costs. D) When the buyer cannot purchase specific products from other sellers.
B) When the buyer operates in an industry where products are undifferentiated.
20) In an industry, the threat of entry is high when: A) expected returns are high. B) capital requirements are low. C) technological know-how is industry specific. D) switching costs are high.
B) capital requirements are low.
29) Samsung and Google cooperate as complementors to compete against Apple's strong position in the mobile device industry, while at the same time Samsung and Google are increasingly becoming competitive with one another. This scenario best illustrates the process of: A) monopolization B) co-opetition C) perfect competition D) conglomeration
B) co-opetition
10) In the ________ developed by Michael Porter, competition is not defined narrowly as a firm's closest competitors but rather more broadly to include other factors in an industry like buyers, suppliers, potential new entry of other firms, and the threat of substitutes. A) VRIO framework B) five forces model C) value chain analysis D) PESTEL framework
B) five forces model
13) The resource-based view of a firm assumes that the: A) resources of firms are highly scarce and hence the government interferes to ensure equal distribution. B) resource bundles of firms competing in the same industry are unique to some extent and thus differ from one another. C) resource bundles of firms competing in the same industry tend to be highly mobile, moving easily from firm to firm. D) resources of firms are highly exhaustible and hence they cannot contribute to their competitive advantage.
B) resource bundles of firms competing in the same industry are unique to some extent and thus differ from one another.
Derek, a retired CEO, invests capital in a start-up company that creates mobile applications. He mentors the entrepreneur and the employees of the company because he wants the company to perform well and survive in the market. Thus, Derek is the start-up company's ________. A) headhunter B) stakeholder C) employee D) category captain
B) stakeholder
22) The relative bargaining power of suppliers is high when: A) suppliers depend heavily on the industry for a large portion of their revenues. B) suppliers provide products that are differentiated. C) incumbent firms can credibly threaten to backward integrate into the industry. D) incumbent firms face low supplier switching costs.
B) suppliers provide products that are differentiated.
14) The telecom industry in the country of Andalus is an industry characterized by the presence of strong network effects, high brand loyalty, high economies of scale, and proprietary technology among incumbent firms. Thus, in the telecom industry, the: A) entry barriers are most likely non-existent. B) threat of new entrants is most likely low. C) threat of substitutes is most likely high. D) bargaining power of buyers is most likely low.
B) threat of new entrants is most likely low.
19) Onyx Tech Inc.'s competency in designing and manufacturing efficient microprocessors has made its laptops the most advanced computers in the market. This competency, along with the just-in-time manufacturing system, has enabled Onyx Tech Inc. to increase its profitability by lowering its production costs. Thus, Onyx's competency in designing and manufacturing microprocessors will be considered a(n) ________ resource in the VRIO framework. A) perishable B) valuable C) tangible D) inexhaustible
B) valuable
4) Which of the following is an example of a firm's resources? A) Liabilities such as bills payables and short-term debts B) Routine activities like order taking and invoicing customers, performed in a firm C) Assets such as land and building owned by a firm D) Assistance available from the government in the form of rules and regulations
C) Assets such as land and building owned by a firm
8) Coral Think Inc. is a new company in the publishing industry. It has raised sufficient capital from multiple sources. It is planning to use its capital to purchase certain assets. Which of the following assets will be the most difficult for Coral Think Inc. to acquire using its capital? A) Tools and equipment B) Land and building C) Brand name D) Inventory
C) Brand name
28) Which of the following strategies will be most detrimental to firms that are close rivals operating in an oligopolistic industry structure? A) Competing against each other through lifestyle advertisements B) Competing against each other through new-product introductions C) Competing against each other through price-cutting D) Competing against each other through product differentiation
C) Competing against each other through price-cutting
47) Which of the following is a feature of a monopolistically competitive industry? A) A single firm B) High entry barriers C) Differentiated products D) No pricing power
C) Differentiated products
44) Which of the following is a feature of an oligopolistic industry structure? A) Standardized or undifferentiated products B) Limited pricing power C) High entry barriers D) Many small sellers
C) High entry barriers
38) In Galvania Republic, the federal government owns and manages all the nuclear power plants. This is because the business would not be profitable if there was more than one supplier in the nuclear power industry. Which of the following industry competitive structures does the scenario best illustrate? A) Perfect competition B) Oligopoly C) Natural monopoly D) Monopolistic competition
C) Natural monopoly
Which of the following statements about strategy is NOT true? A) Grandiose statements of desire, on their own, are not strategy. B) Strategy is as much about deciding what not to do, as it is about deciding what to do. C) Operational effectiveness and competitive benchmarking should be treated as strategy. D) Strategy is about creating superior value, while containing the cost to create it.
C) Operational effectiveness and competitive benchmarking should be treated as strategy.
Which of the following is NOT an example of a software company's external stakeholder? A) Alliance partners B) Creditors C) Project managers D) Customers
C) Project managers
6. Which of the following best describes marginal revenue? a) How sales revenue varies as a function of how much product is sold b) The incremental sales from producing one more unit of output c) Rate of change in total revenue that results from the sale of ΔQ additional units of output d) The total sales for a given product based on plant output e) Percentage change in quantity divided by percentage change in price
C) Rate of change in total revenue that results from the sale of ΔQ additional units of output
33) In the smartphone industry, Google is a complementor to Samsung. Which of the following statements best explains why this is true? A) Google accounts for a large quantity of Samsung's overall sales. B) Samsung apps are tailored exclusively for Google smartphones and tablets. C) Samsung's smartphones increase in value when they are pre-installed with Google's Android system. D) Google's smartphones increase in value because they face strong buying power from Samsung.
C) Samsung's smartphones increase in value when they are pre-installed with Google's Android system.
________ is best described as a set of goal-directed actions a firm takes to gain and sustain superior performance relative to competitors. A) Credo B) Competency management C) Strategy D) Behavior modification
C) Strategy
12) Keeping in mind the five forces in the airline industry, which of the following best explains the situation in the industry? A) Entry barriers in the industry are high resulting in hardly any new airlines popping up. B) Consumers in the industry make decisions based on price, thus reducing the intensity of rivalry in the industry. C) Substitutes are readily available in the form of trains and buses, thus reducing the profit potential in the industry. D) Suppliers have weak bargaining power because they offer products that are not differentiated.
C) Substitutes are readily available in the form of trains and buses, thus reducing the profit potential in the industry.
32) In which of the following situations is the power of suppliers high in an industry? A) Suppliers offer products that are undifferentiated. B) Suppliers can credibly threaten to backward integrate into the industry. C) Suppliers' industry is more concentrated than the industry it sells to. D) Suppliers depend heavily on the industry for their revenues.
C) Suppliers' industry is more concentrated than the industry it sells to.
20) Gene Craft Inc. is the market leader in the pharmaceutical industry. Though most of its resources are common to those of its competitors, a few rare resources have helped the company gain and sustain a competitive advantage. Which of the following assets of Gene Craft Inc. is most likely to be considered a rare resource that is best contributing to its competitive advantage? A) The company's raw material supplies B) The company's plant and machinery C) The company's chemical patents D) The company's land and buildings
C) The company's chemical patents
1. The basic law of demand says that all other things being the same, _______________________. a) The lower the price of a product, the less of it consumers will purchase b) The higher the price of a product, the less of it consumers will purchase c) The lower the price of a product, the more of it consumers will purchase d) The higher the price of a product, the more of it consumers will purchase e) The greater the number of units of a product sold in the past, the more of it consumers will purchase that product in the future
C) The lower the price of a product, the more of it consumers will purchase
Which of the following scenarios illustrates a firm that has a sustainable competitive advantage? A) SM Inc. almost doubled its sales to 8500 units this year compared to its previous year's sales of 5000 units, though the industry average is 10,000 units. B) Newon Inc. generated a revenue of $300,000 this financial year, which is close to the industrial revenue average of $320,000. C) TrueLink Corp. was able to hold its market share of 68 percent in the social networking industry for more than three years. D) Max Electrova Inc. was able to outperform its competitors with its new production system, in terms of revenue, for a brief period of four months.
C) TrueLink Corp. was able to hold its market share of 68 percent in the social networking industry for more than three years.
45) Beans Inc. operates in a perfectly competitive agricultural industry. Classica Apparel Inc., in contrast, operates in a monopolistically competitive industry. Keeping this information in mind, which of the following statements is true? A) While Beans Inc. will communicate the degree of product differentiation through advertising, Classica Apparel Inc. will need no advertising. B) Beans Inc. will face competition from many sellers, whereas Classica Apparel Inc. will be the only seller in the market. C) While Classica Apparel Inc. will have the power to set the prices for its products, Beans Inc. will have little or no ability to do so. D) Beans Inc. will have many buyers for its products, whereas Classica Apparel Inc. will have very few buyers for its products.
C) While Classica Apparel Inc. will have the power to set the prices for its products, Beans Inc. will have little or no ability to do so.
23) Soapsuds Inc., a manufacturer of cleaning agents, supplies its products to All Needs Inc., a supermarket chain. It demands that All Needs create more shelf space in its stores for Soapsuds' products. However, All Needs Inc. refuses to do this. Instead, it decides to produce its own range of cleaning agents with its own label "All Wash." In this scenario, All Needs Inc. has exercised its bargaining power as a buyer through ________. A) crowdsourcing B) product differentiation C) backward integration D) forward integration
C) backward integration
A firm that achieves superior performance relative to other firms in the same industry or the industry average has a(n) ________. A) equity leverage B) power position C) competitive advantage D) balanced scorecard
C) competitive advantage
35) Demand for traditional fast-food providers such as McDonald's, Burger King, and Wendy's has been on a decline in recent years. Consumers have become more health conscious and demand has shifted to alternative restaurants like Subway, Chick-fil-A, and Chipotle. Attempts by McDonald's and Wendy's to steal customers from one another include frequent discounting tactics such as dollar menus. Such competitive actions are indicative of ________. A) profitability increases B) perfect competition C) cut-throat competition D) natural monopolies
C) cut-throat competition
Pure Food Inc., a multinational company, relies on its media partner Radio Ex to regularly advertise its offers, sales, and new products. Radio Ex is invested in this relationship because it generates most of its revenue from advertising Pure Food's products. In this scenario, Radio Ex is Pure Food Inc.'s ________. A) stockholder B) internal stakeholder C) external stakeholder D) workforce
C) external stakeholder
Stakeholder strategy is an integrative approach to managing a diverse set of stakeholders effectively in order to ________. A) single-mindedly focus on the stockholders alone B) minimize the difference between value creation and cost C) gain and sustain competitive advantage D) minimize the joint value created
C) gain and sustain competitive advantage
8) A firm's ________ relates to its ability to create value for customers (V) while containing the cost to do so (C). A) incumbency B) threat of entry C) strategic position D) attrition rate
C) strategic position
In ________, a firm frames a guiding policy to address the competitive challenge. A) strategy implementation B) strategy control C) strategy formulation D) strategy analysis
C) strategy formulation
17) First Ledger Inc., an auditing company, replaced its existing accounting software with new accounting software from another supplier. Since the new software has different features and abilities, First Ledger Inc. has had to spend $10,000 on training its employees to use it. In this scenario, $10,000 represents First Ledger Inc.'s ________. A) octroi charge B) opportunity cost C) switching cost D) excise duty
C) switching cost
18) If a resource is rare or unique to a particular firm, then: A) the industry in which the firm operates will experience perfect competition. B) it will be less costly for rivals to imitate the resource. C) the firm will be able to maintain a competitive advantage for a long period. D) the mobility of the resource will be high.
C) the firm will be able to maintain a competitive advantage for a long period.
11. Which of the following would be the range of elasticity for a product with an "inelastic" demand? a) η < 1 b) η = 1 c) η > 1 d) η > 2 e) none of the above
C) η > 1
1)Which of the following factors best contributes to the U.S. automotive industry being characterized by high entry barriers? A)New entrants in the automotive industry expect that incumbents will not or cannot retaliate. B)Few industrial products are as easy to build as cars powered by internal combustion engines. C)Car manufacturers require large-scale production in order to be cost-competitive. D)New auto companies create electric cars powered by simpler motors and gear boxes.
C)Car manufacturers require large-scale production in order to be cost-competitive.
3. If TC(Q)=1000Q2 +100Q+10, what is the formula for AC(Q)? a) 2000Q+100 b) 2000Q2 +100Q c) 1000Q2 +100Q+10 d) 1000Q+100+10/Q e) 100Q+10+1/Q
D) 1000Q+100+10/Q
30) ________ is best described as cooperation by competitors to achieve a strategic objective. A) Liquidation B) Amalgamation C) Conglomeration D) Co-opetition
D) Co-opetition
2) ________ are best described as unique strengths, embedded deep within a firm, that allow a firm to differentiate its products and services from those of its rivals, creating higher value for the customer or offering products and services of comparable value at lower cost. A) Resource leverages B) Equity reserves C) Capital gains D) Core competencies
D) Core competencies
9. In what special situation might the law of demand not hold? a) In a perfectly competitive market b) When there is a high price elasticity of demand c) When MR=MC d) If high prices confer prestige
D) If high prices confer prestige
7) GN Corp. and BC Inc. are two competing firms in the same industry. GN Corp.'s tangible assets are valued at $15 billion and its intangible assets are valued at $35 billion. BC Inc.'s tangible assets are valued at $5 billion and its intangible assets are valued at $45 billion. What can be concluded from this information? A) There is no resource heterogeneity between the two firms, BC Inc. and GN Corp. as they operate in the same industry. B) It is easier to buy intangible assets with cash than tangible assets. C) It takes longer time to build tangible assets than intangible assets. D) It is likely that BC Inc. is better enabled than GN Corp. to gain and sustain a competitive advantage.
D) It is likely that BC Inc. is better enabled than GN Corp. to gain and sustain a competitive advantage.
Which of the following forces tends to be more important in determining a firm's performance? A) The entry barriers in the industry B) The underlying economic structure C) The number and size of other firms in the industry D) The actions of managers within the firm
D) The actions of managers within the firm
4) Which of the following represents an economic factor in a firm's external general environment? A) The bargaining power of the firm's suppliers and buyers B) The government regulations and laws in the country in which the firm exists C) The values and norms prevalent in the society in which the firm operates D) The stage of the business cycle that the country is in
D) The stage of the business cycle that the country is in
13) Which of the following statements is NOT true about the five forces in Porter's competitive analysis model? A) The relative strengths of the five forces that shape competition are context-dependent. B) Competition in the model is described as the tug-of-war between the five forces to capture as much as possible of the economic value created in an industry. C) An analysis of the five forces provides the basis for how a firm should position itself to gain and sustain a competitive advantage. D) The stronger the five forces in an industry, the greater the industry's profit potential.
D) The stronger the five forces in an industry, the greater the industry's profit potential.
Exis Inc. and Stelma Inc. are two companies that have been manufacturing typewriters for almost 30 years. Due to the reduced demand for typewriters today, both companies' average return on invested capital is approximately -5 percent. The current industry average is 2 percent. In this scenario, Exis Inc. and Stelma Inc. most likely have: A) economies of scope instead of economies of scale. B) competitive advantage over other firms in their industry. C) strategic alliance with each other. D) competitive parity with each other.
D) competitive parity with each other.
26) When applying the five forces model, the first step should ideally be: A) assessing the overall industry structure. B) drawing a strategic group map. C) identify the underlying drivers of each force. D) defining the relevant industry.
D) defining the relevant industry.
6) In a firm's external environment, ________ primarily capture population characteristics related to age, gender, family size, ethnicity, sexual orientation, religion, and socioeconomic class. A) ecological trends B) economic trends C) political trends D) demographic trends
D) demographic trends
6) Intangible assets add great value to a firm primarily because the firm's: A) tangible assets require a higher degree of capital than its intangible assets. B) capabilities are by nature typically tangible. C) reputation and brand equity are accumulated quickly and can be leveraged easily. D) knowledge and culture take time to develop and are generally difficult to imitate.
D) knowledge and culture take time to develop and are generally difficult to imitate.
36) During periods of high industry growth: A) rivals are focused on taking market share away from one another. B) firms indulge in intense promotional campaigns. C) new product releases with minor modifications become common. D) price competition among firms frequently decreases.
D) price competition among firms frequently decreases.
16) The "Gold Crisps" potato wafers manufactured by True Foods Inc. have been the highest selling wafers in the market. Though the market for wafers is flooded with competitors, True Foods Inc. has been able to maintain its market position for a long time. This is mainly attributed to the unique taste of the wafers that comes from the unique natural flavoring used by the company. This competency of True Foods Inc. will be considered as a(n) ________ resource in the VRIO framework. A) intangible B) virtual C) inexhaustible D) rare
D) rare
17) Connect Plus Cellular is a leading mobile network operator. Since most of the resources used by Connect Plus Cellular is easily available, the company's brand name is the only resource that distinguishes it from the other operators. No other competitor in the industry has a strong brand name like that of Connect Plus Cellular. This unique asset that has helped the company gain a competitive advantage will be considered as a(n) ________ resource in the VRIO framework. A) imperishable B) mobile C) tangible D) rare
D) rare
Through ________, a firm puts its guiding policy into practice by employing a set of coherent actions. A) strategy formulation B) strategy analysis C) strategy control D) strategy implementation
D) strategy implementation
Cadia Foods Inc. was the first company to start selling energy drinks in its country—a product that gained popularity among diverse groups. Soon, other companies started to sell their own brands of energy drinks, thereby giving Cadia Foods ample competition. In response, Cadia Foods decided to limit its variety of energy drinks to only two. However, it ensured that these two flavors were free of calories and low in cost. With this innovation, Cadia Foods Inc. consistently outperformed its competitors for ten years. In this scenario, Cadia Foods Inc. has maintained a ________ through its innovative strategy. A) fiduciary responsibility B) balanced scorecard C) consistent power position D) sustainable competitive advantage
D) sustainable competitive advantage
9) The primary objective of Porter's five forces model is to: A) break down a firm's value chain activities into primary and support. B) replace a firm's competitive advantage with competitive parity. C) reduce the gap between the value of a firm's product and its cost of production. D) understand the profit potential of different industries.
D) understand the profit potential of different industries.
7. At what point can a firm achieve a profit maximizing quantity? a) MR>MC b) MC=D c) MR<MC d) MR=D e) MR=MC
E) MR=MC
10. Which of the following would not be a characteristic of a good with an elastic demand? a) The product lacks unique features that differentiate it from competing products b) The product is a high percentage of a consumer's total expenditures c) The good is an input used to make a product that is sensitive to changes in price d) There are many substitutes available for the good e) The product has high switching costs
E) The product has high switching costs
12. Which characteristic is present in a perfectly competitive market? a) Firms produce identical or nearly identical products b) Market price is beyond the control of any individual firm c) A firm's demand curve is perfectly horizontal at the market price d) Firms can enter and exit the market very easily e) all of the above
E) all of the above
