Chapter 5 434

Economic contribution is created when the

price a customer is willing to pay for a good or service is more than the cost the firm incurs to produce it.

_______ is best described as the difference between the value a consumer attaches to a good or service and what he or she paid for it.

A consumer surplus

Though the microwaves manufactured by Emergo Inc. and Sensation Electronics Inc. sell at the same price of $600 per unit, the economic value created by Emergo Inc. is more than that of Sensation Electronics Inc. In the context of this scenario, which of the following statements is true?

Emergo has a relative cost advantage over Sensation Electronics.

Which of the following is not a disadvantage of the balanced scorecard approach?

It fails to allow managers to prepare the company for future growth.

Which of the following is a disadvantage of the balanced scorecard approach to measure firm performance?

It provides only limited guidance about which performance metrics to choose.

Red Hot Inc. and Maverick Cycles Inc. are two competing motorcycle companies. While Red Hot's Cost of goods sold/Revenue is 63.4 percent, the Cost of goods sold/Revenue of Maverick Cycles is 54.2 percent. What do you infer from this financial data?

Red Hot is less efficient than Maverick Cycles in producing goods.

When using the balanced scorecard approach to assess a firm's performance, which of the following is not a key question that managers need to answer?

What intangible assets do we need?

The tenet behind the triple bottom line is that

a firm should achieve positive results along the economic, social, and ecological dimensions to gain a sustainable strategy

Rey estimated that a pair of NuFit jeans would be worth $60 for its brand and durability. However, at the NuFit store, the pair of jeans he wanted was available for $45. The difference of $15 in this scenario is referred to as the

consumer surplus

The idea that all available information about a firm's past, current state, and expected future performance is embedded in the market price of the firm's stock is called the

efficient-market hypothesis.

Quick Connect is an instant messaging mobile application. Users have access to a basic version with limited message recipients for free, but they have to pay a fee to have unlimited message recipients or to use advanced features. Which of the following business models does this best illustrate?

freemium

If a company has 25 million shares outstanding, and each share is traded at $400, the ______ is $10 billion.

market capitilization