Chapter 5 Quiz

Global Reach Corp. is a public company whose shares are currently trading in the market at $150 each. The company manufactures smartphones at the cost of $300 per unit and sells them in the market for $500 each. What is the company's producer surplus? - $150 - $300 - $650 - $200

$200

By selling a television at $1,200 for which consumers are willing to pay up to $1,300, a consumer electronics firm makes a profit of $500 per unit. What is the economic value created in this scenario? - $600 - $1,300 - $1,200 - $700

$600

Which of the following is an advantage of accounting data? - Accounting data consider off-balance sheet items, which makes comparing companies with different capital structures easy. - Accounting profitability ratios not only show us the outcomes from past decisions, but also provide information to guarantee future performance. - Accounting data can be easily transformed into financial ratios to help assess and evaluate the competitive performance of firms. - Accounting data focus mainly on intangible assets, which are more important than tangible assets in firms' stock market valuations.

Accounting data can be easily transformed into financial ratios to help assess and evaluate the competitive performance of firms.

_______ 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. - Consumer equity - Consumer lifetime value - Consumer surplus - Consumer price index

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 and Sensation Electronics have achieved a competitive parity. - Sensation Electronics has differentiated its products more than Emergo Inc. has. - Emergo has a relative cost advantage over Sensation Electronics. - Sensation Electronics has been able to create more producer surplus for itself than Emergo.

Emergo has a relative cost advantage over Sensation Electronics.

Which of the following is not a disadvantage of the balanced scorecard approach? - It is a tool merely for strategy implementation, not for strategy formulation. - It fails to allow managers to prepare the company for future growth. - It fails to provide much insight into how metrics that deviate from the set goals can be put back on track. - It provides only limited guidance about which metrics to choose to measure competitive advantage.

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 fails to allow managers and executives to find a balance between financial and strategic goals. - It only relies on an internal view of the firm, ignoring the external view. - It fails to allow managers to align their different perspectives to create a more focused corporation overall. - It provides only limited guidance about which performance metrics to choose.

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

In the financial year 2016, for every $100 in revenues, Microsoft earned $21.5 in profit, while Apple earned $20.6 in profit. This demonstrates that - Microsoft was more efficient than Apple in producing its goods. - Apple's inventory turnover was more than that of Microsoft's. - Microsoft was using its capital more efficiently to generate revenue than Apple. - Microsoft's return on revenue was higher than that of Apple.

Microsoft's return on revenue was higher than that of Apple.

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. - Red Hot has a higher profit margin than Maverick Cycles. - Red Hot and Maverick Cycles have achieved a competitive parity. - Red Hot is able to command a greater price premium for its products than Maverick Cycles.

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? - How do customers view us? - How do we create value? - What intangible assets do we need? - How do shareholders view us?

What intangible assets do we need?

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 - reservation price - producer surplus - break-even price

consumer surplus

The sum of consumer surplus and producer surplus for a good or service equals the - reservation price. - firm's profit. - economic value created. - total return to shareholders.

economic value created.

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 - time compression economies. - upper-echelons theory. - price-demand function. - efficient-market hypothesis.

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? - subscription-based - freemium - pay-as-you-go - razor-razor-blade

freemium

If a company has 25 million shares outstanding, and each share is traded at $400, the ______ is $10 billion. - total return to shareholders - market capitalization - customer lifetime value - return on revenue

market capitalization

Economic contribution is created when the - revenue generated by selling a unit of a product is equal to the cost incurred by the firm in producing it. - price a customer is willing to pay for a good or service is more than the cost the firm incurs to produce it. - price a customer is willing to pay for a good is less than what it costs the firm to manufacture it. - value a consumer attaches to a good or service is lesser than what he or she paid for it.

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

The tenet behind the triple bottom line is that - a firm should solely focus on increasing the economic value created for its customers. - a firm's primary objective should be increasing the total returns to its shareholders. - a firm should achieve positive results along the economic, social, and ecological dimensions to gain a sustainable strategy. - a firm's return on revenue can be broken down into three ratios: COGS/Revenue, R&D/Revenue, and SG&A/Revenue.

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