Chapter 3

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.

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

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

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

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.

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.

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.

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

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

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.

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.

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.

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.

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.

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 gearboxes.

C) Car manufacturers require large-scale production in order to be cost-competitive.

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.

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.

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's ________ relates to its ability to create value for customers while containing the cost to do so. A) incumbency B) threat of entry C) strategic position D) attrition rate

C) strategic position

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 C) switching cost B) opportunity cost D) excise duty

C) switching cost

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

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