BE 301

The text asserts that all of the following expenses are examples of variable cost except: a) Labor costs b) Cost of raw materials c) Accounting fees d) Electricity cost.

accounting fees

Competitive advantage is most likely to result from the development and use of resources and capabilities that have been built up through an ongoing process of: a) Continuous improvement b) Entrepreneurial discovery c) Accumulation over historical time d) Creative Destruction.

accumulation over historical time

Taken for granted resources and capabilities are often complex and interdependent. They can be implicit and taken for granted by the firm's managers. As such, there is no way to test any given resource to determine its effect on the firm's performance. This condition is known in the resource based view of competitive advantage as: a) Social complexity b) Cultural synergy c) Productive values, attitudes and beliefs d) Casual ambiguity.

casual ambiguity

The text suggests that an attractive industry as all of the following except: a) Low barriers to entry b) Low supplier power c) Low intensity of rivalry d) Few substitutes for the industry's products or services.

low barriers to entry

The text states that only costs and benefits that vary with the consequences of a decision, and labeled these costs and benefits as being: a) Sunk b) Relevant c) Variable d) Consequential.

relevant

Rivals may say they wish to cooperate, but will usually compete aggressively on price and other terms of trade. This statement is: a) True b) False.

true

Tangible and intangible resources are rare to the extent that only one or a few organizations in an industry possesses them and control their use. This statement is: a) True b) False.

true

Tangible resources are nice to have but-- being tangible-- they are rather easy for rivals and potential new entrants to understand and imitate through purchase in the input markets. This statement is: a) True b) False.

true

All else equal, demand for a product is more elastic: a) When it has few substitutes b) In the long-run c) When the expenditure on the product represent a small portion of the budget d) When the product is broadly defined.

in the long-run

Resources and Capabilities are strategic if they are (simultaneously) rare, inimitable, well organized and: a) Developed over a long time period by the same team of managers b) Valuable c) Consumer oriented d) Intangible.

valuable

Resources and capabilities are strategic if they are (simultaneously) rare, inimitable, well organized and: a) Developed over a long time period by the same team of managers b) Valuable c) Consumer oriented d) Intangible.

valuable

Average total cost curves tend to fall over a range, reach a low point, and then start to rise as production volume rises. As discussed in class, the #1 reason cost curves fall over a range is: a) Supplier market power b) Diseconomies of scale c) Law of diminishing returns d) Fixed costs are spread over a growing number of units of output.

law of diminishing returns

You should continue to extend an activity (e.g., adding people to a meeting roster) as long as the marginal benefits (MB) are greater than the marginal costs (MC). When MB=MC, you should stop extending the activity: This is known as: a) Constrained maximization b) The equimarginal rule c) The Pareto rule d) Common sense economics.

the equimarginal rule

What is the main difference that distinguishes monopolies from perfect competitors? a) The number of customers served by that type of firm b) Monopoly firms are more efficient than perfectly competitive firms c) Monopoly firms are more likely to earn above-normal returns over time d) Monopoly firms enjoy government protection from intense rivalry.

monopoly firms are more likely to earn above-normal returns over time

A positive income elasticity of demand (income elasticity greater than zero) for a good means that that good is, in economic theory, a: a) Veblen Good b) Normal good c) Inferior good d) Economic good.

normal good

Industry structure is an important determinant of competitive advantage. Industry types include perfect competition, monopolistic competition, monopoly, and: a) Producers of substitutes b) Cost leaders c) Oligopoly d) New entrants.

oligopoly

Little rivalry; but intense competition (e.g., advertising, product comparison). A selling environment where a handful of interdependent firms produce and sell similar differentiated products or undifferentiated commodities. This selling environment is known as: a) Monopoly b) Oligopoly c) Perfect Competition d) Monopolistic Competition.

oligopoly

Changes in the general environment a firm could exploit to achieve strategic competitiveness are known as: a) Strengths b) Weaknesses c) Opportunities d) Threats.

opportunities

In economies organized along the lines of market capitalism, the capitalist owners of equity (common stocks) receive, as the result of the production processes they finance, what economists refer to as: a. The residual b. Interest payments c. Principle and interest d. Dividends and stock splits.

the residual

The notion that competition is a process by which two or more parties attempt to gain the custom of 3rd parties by offering more favorable terms was referred to in class as: a) The Resource Based view b) Oligopolistic price fixing c) Harvard school economics d) The Industry (external) approach to competitive advantage Economics School

the resource based view

Open markets are best viewed as experimental discovery processes that continuously track changing customers' needs and changes in the availability and costs of resources required to meet those needs. This statement is: a) True b) False.

true

Tangible and intangible resources are rare to the extent that only one or a few organizations in an industry possess them and control their use. This statement is: a) True b) False.

true

Preparing associates for risks and responsibilities of delegation or empowerment, and implementing necessary changes in architecture needed for successful decentralization are: a) Two examples of the principal-agent dilemma b) Two of the economic costs of decentralization c) Examples of solutions to agency conflicts of interest. d) Some of the principle roles and responsibilities of human resources managers.

two of the economic costs of decentralization

In the Stew Leonard's Dairy video, we learned that one key to success was the firm's employees' and managers': a) Willingness to conduct focus groups among suppliers and employees b) Ability to judge coming trends in the external general environment c) Willingness to listen to the customers to understand what they want d) Ability to form small groups of workers to get ideas for improving sales.

willingness to listen to the customers to understand what they want

How hard to work is an extent decision, so marginal analysis can be used to design incentives to encourage hard work. Working hard is important; more important is: a) Working effectively with others b) Working to advance the goals of managers c) Working hard on the right things d) Working until everyone else has stopped working.

working hard on the right things

The difference between efficient behavior of businesses assumed or implied by economic theory and their observed behavior in practice was discussed in class as: a. Comparative advantage b. X-inefficiency c. Dis-economies of scope d. Sunk Costs.

x-inefficiency

You landed a good job in management and you decide to do the Prisoner's Dilemma for your direct reports. You ask them to consider: "Knowing the strategies of the other players, and treating the strategies of the other players as set in stone, can I benefit by changing my strategy. If, knowing this, every player prefers not to switch (or is indifferent between switching and not) then the set of strategies under review is: a) A predominant strategy b) A Nash equilibrium c) The Pareto Efficient Set d) A price fixing agreement.

a Nash equilibrium

In the text, an industry was defined as: a) A group of firms producing goods or services that are close substitutes b) A group of firms with the same cross-price elasticity of demand c) A group of firms that share the same valuable and rare strategic resources d) Firms selling goods or services through similar channels of distribution.

a group of firms producing goods or services that are close substitutes

You serve most or all the needs of a particular group of customers, so for some of the customers, you deliver virtually all of their product or service needs. You are implementing: a) A needs based focus strategy b) Value differentiation c) Integrated low cost/differentiation strategy d) A variety based focus strategy.

a needs based focus strategy

A firm with valuable, rare, inimitable and non-substitutable resources and capabilities can still kick its advantage away due to: a) Moral hazard b) Social complexity non understood by managers c) Out of date technology d) A poorly designed organization.

a poorly designed organization

When you produce and deliver only a sub-set of an industry's technically feasible products or services (i.e., you serve all the customers, but only some of their needs) you are implementing what is known as: a) A needs based focus strategy b) Value differentiation c) Integrated low cost/differentiation strategy d) A variety based focus strategy.

a variety based focus strategy

Where resources are valuable and homogeneous, the supply becomes scarce relative to demand as demand rises for goods and services produced by these resources. Rents earned by owners of these, undifferentiated but scarce resources are known as: a) Differential rents b) Above normal returns c) Scarcity rents d) The residual.

above normal returns

A capitalist firm's residual claimants bear risk and uncertainty since they have a legal claim to economic profit, but that profit can be zero or negative. Residual claimants can diversify their portfolios, but expect: a) Above normal returns on the investments in companies they own, over time b) At least normal returns on the investments they have made, in the short run c) Positive accounting profits in both the short and long run d) Returns equal to the sum of explicit and implicit costs.

above normal returns on the investments in companies they own, over time

To manage the paradigm effect, effective executives should 1) make scanning the environment a habit for all key associates, 2) Manage in group settings, 3) lever the unique attributes of new hires, and 4): a) Hire process consultants from the local university b) Accept the Fact of Cognitive Biases c) Subscribe to several blogs and news magazine d) Act as the formal leader in several work groups to gain experience in maintenance leadership.

accept the fact of cognitives biases

According to the text, money paid to suppliers for inputs, general operating expenses (e.g., salaries for factory managers), depreciation expenses related to investments in building, and interest payments on borrowed funds qualify as: a) Marginal cost b) Implicit costs c) Accounting costs d) Total fixed costs.

accounting costs

A good solution to the post-investment hold-up problem would be to: a) Form trade associations among manufacturers and retailers b) File regulatory action to outlaw these conflicts c) Have the courts of law issue cease and desist orders against retailer opportunism d) Acquire troublesome retailers through a program of vertical integration.

acquire troublesome retailers through a program of vertical integration

Like perfectly competitive firms, monopolistic competitors not only face strong rivals, but fairly free entry and exit as well. So they tend compete away economic profits by: a) Engaging in "creative destruction" b) Adding features and benefits cutting prices c) Eliminating features and benefits that consumers won't notice d) Engaging in price wars.

adding features and benefits cutting prices

A problem solving system; a set of rules that offer guidance on how managers can understand and improve their business. This defines: a) An algorithm b) A paradigm c) A framework d) The scientific method.

an algorithm

Price elasticity is an important concept in managerial economics since knowledge of price elasticity helps managers set pricing strategy. For example, in the inelastic range of the demand curve, increasing the price you charge customers leads to: a) A rightward shift in the demand function for the firm's products/services b) An decrease in marginal costs c) A decrease in income elasticity of demand for Veblen Goods d) An increase in total revenues the firm collects from its customers.

an increase in total revenues the firm collects from its customers

We know that an increase in the market price of a good or services leads rational consumers to purchase, all else equal, less of that good or service. Economic theory argues that this happens because: a) Consumers do not want to reward producers who raise prices of necessities b) An increased in the price of that good or service increases the opportunity cost buying that good or service c) A price increase for this good or service means that other prices will increase due to inflation and it is time to save rather than spend money d) Consumers tend to spend more on complements for the good or service when its price increases.

an increased in the price of that good or service increases the opportunity cost buying that good or service

For some goods and services, as individuals enjoy an increase in their incomes, demand increases. Such goods: a) Tend to be consumed by people who prefer savings to consumption b) Are known in economics as normal goods c) Tend to be subject to high sales taxes at the state and local level d) Are called inferior goods in economics.

are known in economics as normal goods

According to the textbook, wealth is created when: a) Talented managers use marginal analysis to allocate scarce resources b) Assets move from lower to higher-valued uses. c) When capitalism and voluntary transactions are left to produce all economic outcomes d) When governments and business cooperate for the greatest good.

assets move from lower to higher-valued uses

From the point of view of professional economists, when rational decision makers consider the net benefits of any decision they are about to make, they must keep in mind that rational choice occurs: a. Only after considering every possible options b. Within groups of at least people c. At the margin d. At the inflection point of the total cost curve.

at the margin

Market prices can fall due to greater competition or shifting industry demand. When price per unit falls to equal average total unit cost, profit is zero. The breakeven price is the price that equals: a) The profit maximization volume of output b) Average avoidable cost per unit c) Average sunk cost d) Marginal revenue.

average avoidable cost per unit

Total cost divided by the total number of inputs produced per time period is called: a) Marginal cost b) Average cost c) Total cost d) Variable cost.

average cost

The value (in the VRIO Framework) of a given resource and capability must be re-assessed periodically to ascertain if the firm's business model and strategy is still relevant. If the firm has to change its theory of the business, a once valuable resource or capability may have lost its value. This is necessary in order to: a) Convert temporary competitive advantage to long run economic profit b) Avoid moral hazard and adverse selection c) Determine the firm's most appropriate generic strategy d) Avoid value migration.

avoid value migration

Obstacles, or costs that would have to be incurred by a firm joining industry incumbents in the battle for customers and profits are known as: a) Barriers to entry b) Sunk cost c) The opportunity cost of captial d) A fixed cost of production.

barriers to entry

Powerful competitive advantages (obvious examples are Coke's brand and Microsoft's control of the personal computer operating system) create a moat around a business such that it can keep competitors at bay and reap extraordinary growth and profits. The idea of a moat runs parallel to the business concept known as: a) Competitive advantage b) Above normal profits c) Barriers to entry d) Inimitable resources and capabilities.

barriers to entry

Over long periods of time, consumers adjust to change is price by finding substitutes and this causes the typical demand curve to: a) Become more horizontal in the diagram that shows the effect of price on quantity demanded b) Shift out and down to the right in the diagram that shows the effect of price on quantity demanded c) Become steeper in the diagram that shows the effect of price on quantity demanded d) Rotate counter-clockwise 90 degrees.

become more horizontal in the diagram that shows the effect of price on quantity demanded

Incumbent firms (i.e., established firms) can present a credible threat of aggressive price cutting, and threaten other actions to discourage entry into their industry. Such threats create: a) Behavioral barriers to entry b) Monopoly short-term rents c) Structural barriers to entry d) Perceived high costs of entry.

behavioral barriers to entry

The discipline that studies the effects of psychological (mass psychology), social, cognitive, and emotional factors on the economic decisions of individuals and institutions and the consequences for market prices, returns, and the resource allocation is known as: a) Social psychology b) Cognition science c) Behavioral economics d) Keynesian economics.

behavioral economics

Features are the physical attributes of products or services. The utility customers receive from buying and using the firm's goods and services are known as: a) Benefits b) Value drivers c) Needs d) Demands.

benefits

A statement of how the value created for customers will be converted to benefits for investors and associates in the: a) Business model b) Statement of Sources and Uses of Cash c) Generic strategies d) Production function

business model

Listing the major characters the story of our business, analyzing how this cast of characters might be motivated to deal with your company, and discussing how any plot twists can your company more effective or efficient are the elements of developing a: a) Business model b) Value proposition c) Profit narrative d) Value chain.

business model

Vertical integration (the "Make" in the Make-Buy Decision) occurs when a firm that was buying inputs in the spot market acquires, or merges with a firm from which it was: a) Competing for customers b) Supplying at least fifty percent of the buyer's needs c) Buying those inputs d) Suing for breach of contract due to post-investment opportunism.

buying those inputs

Some incumbent firm's control resources and capabilities that give them a sustainable competitive advantage. When this advantage is due to the fact that potential imitating firms do not and cannot really understand how the resources or capabilities benefit the incumbent firm, then economists label such resources and capabilities as possessing the quality of: a) Distinctive value b) Social complexity c) Entropy d) Causal ambiguity.

causal ambiguity

When management and staff cannot say for sure which individual or combination of resources or capabilities account for their competitive advantage, rivals and potential new entrants may find it difficult duplicate this resource. This attribute of resources or capabilities is known in economics as: a) Path dependence b) First-mover advantages c) Causal ambiguity d) Moral hazard.

causal ambiguity

Where rivals or potential new entrants cannot understand how resources or capabilities enable a firm to gain an advantage, that advantage may be sustained over time. This attribute of resources or capabilities is known in economics as: a) Path dependence b) First-mover advantages c) Causal ambiguity d) Moral hazard.

causal ambiguity

Professional economists tend to believe that to change human behavior you have to change self-interest; and, to do that you need to: a) Promote the best course of action b) Increase net income c) Alter personal perceptions of intrinsic value d) Change incentives.

change incentives

In the case discussed in class: "Bob Cochran's Big Deal," Bob was unusually proud of completing this particular acquisition was that it had occurred despite the efforts of several other major publishing companies to acquire this specialty-publishing house. As a result, Bob probably overpaid for the acquired firm. As discussed in class, to avoid this in the future, Bob's manager should: a) Send Bob to the local business school for a class in mergers and acquisitions b) Promote Bob to a position where he no longer makes acquisitions c) Change the performance measurement and reward system for Bob's department d) Replace Bob with a less aggressive manager.

change the performance measurement and reward system for Bob's department

One of the factors influencing the position of the demand curves in Price/Quantity diagrams is: a) Changes in the price of inputs b) Changes in the price of substitutes c) Increased suppliers power d) The percentage of the good or service in the customer's budgets.

changes in the price of substitutes

In well-managed firms, problems lead to employee initiative and presentation to management their solution, at which time the management team may grant permission for employees to implement their solution within the context of management monitoring. This process was discussed in class as: a) Delegation b) Decentralization c) Chartering d) Empowerment.

chartering

A systematic pattern of deviation from the norm of rationality in judgment, whereby inferences about other people and situations may be drawn in an illogical fashion is known as: a) Paradigm dependence b) Behaviorism c) Rational ignorance d) Cognitive bias.

cognitive bias

A task leader ensures that the group complete the task in real time. The maintenance leader focuses on social relations and tries to help group avoid: a) The sunk cost fallacy b) Devil's advocacy c) Cognitive biases such as confirmation bias d) Choosing the wrong generic strategic for the situation.

cognitive biases such as confirmation bias

An economic entity's ability to produce a good or service at a lower marginal opportunity cost than some other economic organization (person, organization, and nation) is known as: a) Competitive advantage b) Absolute advantage c) Balance of trade d) Comparative advantage.

comparative advantage

Revenues fall below total economic costs until a turnaround strategy can be implemented, bankruptcy is declared, or the firm's assets are acquired by a better management team. These are the conditions that define: a) Competitive advantages b) Temporary competitive dis-advantage c) Normal returns d) Competitive Disadvantage.

competitive disadvantage

The observed continuous changes in prices and profits due to the actions of others who have an interest in capturing some of the total surplus value created by private firms is known as: a) Temporary competitive advantage b) Competitive turbulence c) Competitive Dynamics d) A source of sustainable competitive advantage.

competitive dynamics

Aspects of your value proposition and business model that sets your product, service and company apart from your competitors' the Net Delivered Customer Value you provide to your customers, and how your value proposition differs from rivals'. These are the elements of: a) The Theory of the Business b) Market structure c) Price elasticity of demand over time d) Competitive positioning.

competitive positioning

Self-satisfaction especially when accompanied by unawareness of actual dangers or deficiencies, or, an instance of usually unaware or uninformed self-satisfaction is known as: a) Competitive parity b) Complacency c) Cognitive bias d) Paradigm effect.

complacency

Systems that are comprised of many elements that must be coordinated by management and/or which require spontaneous cooperation to produce sustainable competitive advantage. These system are taken to be: a) Complex b) Ambiguous c) Valuable d) Difficult to understand.

complex

The human tendency to search for or interpret information in a way that is consistent with, or supportive of, one's preconception. People also tend to interpret ambiguous evidence as supporting their existing position. These statements describe: a) Cognitive dissonance b) The Total Confirming Mindset c) The Theory of Mind d) Confirmation bias.

confirmation bias

The difference between what customers are willing to pay and what they actually have to pay in the open market is known as: a) The customers "return on investment" b) Consumer surplus c) Above-normal returns d) Economic rents.

consumer surplus

Some organizations are fortunate to be able to create and deliver a steady stream of new and improved production/services at ever-lower costs of production. These organizations were described in lecture as: a) Continuous Improvement Firms b) Successful organizations c) Competitive organizations d) Sustainable organizations.

continuous improvement firms

This scientific method seeks to 1) understand natural phenomena, 2) make predictions about the future and 3): a) Understand what motivates people to make economic decisions b) Explain the causes of bad decisions in government and business c) Reduce uncertainty, converting it to risk d) Control natural phenomena to make improvements if possible.

control natural phenomena to make improvements if possible

Factors that affect price elasticity of demand due to the conscious actions of management are known as: a) Slope shifters b) Exogenous factors c) Controllable factors d) Generic strategies.

controllable factors

The tangible and intangible physical assets resources and capabilities that, while few in number, represent the foundation for sustainable competitive are known collectively as: a) Core competencies or strategic resources b) Value drivers c) Strategic assets d) Demand shifters.

core competencies or strategic resources

Cost leaders do not lose sight of the features and benefits provided by differentiators. Their lines are a good approximation of name brands. In the managerial economics literature, this results in: a) Differentiator proximity b) Superior value for the dollar c) Sustainable competitive advantage d) Cost leader proximity.

cost leader proximity

A Generic Strategy formulated and implemented to offer features and benefits that are acceptale to a broad range of customers, which are produced and delivered asfairly standardized goods or services for relatively price-sensitive buyers is known in management circles as: a) Commoditization b) Monetizing the business proposition c) Cost leadership/lowest delivered cost d) Differentiation.

cost leadership/lowest delivered cost

A venture is a decision with economic consequences. In this context, "economic consequences" refer to: a) Increasing returns to scale b) Rising marginal benefits c) Costs, benefits, and risk/uncertainty d) Opportunity costs.

costs, benefits, and risk/uncertainty

In the 3M video, we met Dave Davies and saw the presentation of his business model for a new laser disc division at 3M. To organize his thoughts for presentation, he employed a framework focusing, implicitly, on: a. Pricing and profit over the next 6 months b. Short run cost curves c. Costs, values and price d. The Break-even point in year five.

costs, values and price

Firms that lack market power are price takers and they face horizontal (zero slope), demand functions. As a direct result, if they attempt to raise their prices even a little: a) Customers cut down on their purchases of that firm's product or services to less than half than before the price increase b) Customers change the subjective value of the firm's products or services c) Customers adjust their reservation prices to reflect changing market conditions d) Customers immediately stop purchasing any goods or services from that firm.

customers immediately stop purchasing any goods or services from that firm

Effective executives take care to ensure that decision makers have the relevant skills and information to make good decisions, and then craft organizational architectures appropriate control systems to motivate associates to use their information productively, and delegate authority based on the contingencies of any given situation. These are elements of: a) Chartering b) Empowerment c) Control systems d) Decentralization.

decentralization

In the Brabantia case we read in class, the seniors managers wanted to make the company more innovative. To do this they: gave lower-level managers greater control over their work, increased their authority to make and implement local decisions. By doing this, senior managers changed the firm's: a) Performance measurement system b) Performance evaluation process c) Decision rights assignments d) Reward structure.

decision rights assignments

In the text, Chapter 10, firms that implement a value differentiation strategy, elasticity of demand for those firms' goods or services will: a) Increase b) Decrease c) Remain unit elastic d) Be unaffected.

decrease

When firms succeed in doing the job customers have hired the firm to do for them, the happy result is: a) Decreasing income elasticity of demand for those products or services b) Rivals' decision to reduce their own prices c) Reduction of the prices complementary goods d) Decreasing price elasticity of the firm's own products or services.

decreasing income elasticity of demand for those products or services

Firms form or join cartels to improve their performance. Defecting to improve individual performance is rational and common. This is because managers of cartels are rational actors and believe that: a) Defection will be difficult to prove in court b) Defection results in above-normal returns and they will be rewarded for these returns by investors c) They may be charged with collusion, but can plead guilty to a lesser charge d) The regulation of collusion will be ended in the near future.

defection results in above-normal returns and they will be rewarded for these returns by investors

Buyers typically view soft drinks to be complementary goods to salty snacks. If Pepsi increased the price of Pepsi-Cola, what would you expect to happen, all else equal, in the salty snacks business? a) Demand for salty snacks would rise to twice the current price. b) Demand for salty snacks would fall c) Demand for salty snacks would fall to zero d) Demand for salty snacks would rise.

demand for salty snacks would fall

A mathematical representation of the relationship between the quantity demanded and all factors influencing demand is known in economics as: a) The First Law of Demand b) Supply function c) Demand function d) Indifference curve.

demand function

Mathematical or graphic depictions of relation between market price, quantity demanded, and demand, and elasticity is known as the: a) Marginal cost curve b) Demand function c) Value proposition d) Business model.

demand function

Resources or capabilities are generally immobile if their value is greatest where they were developed and first: a) Created b) Implemented c) Invented d) Deployed.

deployed

A formal organization of sellers or buyers that agree to fix the prices they charge customers: a) Describes and two-party non-repeating Game (as in Game Theory) b) Is legal or illegal in the U. S. depending on where their headquarters is located c) Describes what is known as a shared monopoly or trust d) Is most likely to be found in the industry structure known as perfect monopoly.

describes what is known as a shared monopoly or trust

Which of the listed leadership role is played by someone who, given a certain point of view, takes a position they do not necessarily agree with (or simply an alternative position from the accepted norm), for the sake of debate, or to explore the thought further: a) Task leadership b) Devil's advocacy c) The process of creative destruction d) Entrepreneurial discovery and continuous improvement.

devil's advocacy

The generic strategy formulated and implemented to produce or deliver goods or services that might appeal to a subset of customers currently underserved by the broad scope generic strategies is known as: a) Market segmentation b) Differentiation Focus c) Cost Leadership d) Value Creation.

differentiation focus

Differentiators strive for "acceptable cost", out of concern that the listed price for products or services may exceed what the firm's target customers are willing to pay. This is known as the attempt to achieve: a) Net Delivered Customer Value (NDCV) b) Optimality c) Cost containment d) Differentiator Proximity.

differentiator proximity

Managers spend a lot of time trying to motivate their subordinates to make good decisions. This process requires that managers ask three questions: who is making the bad decisions, does the decision maker have the right incentives to make a good decision; and: a) Does the decision maker share the basic goals and objectives of the organization? b) Does the decision maker have the technical skills required to make great decisions? c) Does the decision maker have the enough information to make good decisions? d) Does the decision maker have enough on the job experience to make good decisions?

does the decision maker have the enough information to make good decisions?

An estimate of a firm's economic profit; returns in excess of the required return of the companies investors (i.e., shareholders and debt holders); and, the profit earned by the firm less the cost of financing the firm's capital base were associated with the concept of: a) Sustainable Competition. b) Normal returns c) Economic Value Added d) Competitive Advantage.

economic value added

An estimate of a firm's rents or economic profit; returns in excess of the required return of the companies investors (i.e., shareholders and debt holders); and, the profit earned by the firm less the cost of financing the firm's capital base were associated with the concept of: a. Sustainable Competition. b. Normal returns c. Economic Value Added d. Competitive Advantage.

economic value added

In capitalist economic systems, the residual is the amount left for investors after all other claimants to the value that has been created are compensated. This is the surplus value created by total investments which include funds provided by banks, bondholders, and shareholders. In class, we described this performance measure as: a. Economic value added b. Accounting profit c. Land rents d. Return on capital expenditure.

economic value added

Managerial and employee behavior changed significantly-- and for the better--at both the Pacific Heating and Cooling Company and the Coca-Cola Company, after policy-level managers introduced and implemented: a) Activity Based Accounting (ABC) b) Economic Value Added (EVA) accounting methods c) SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis d) Changes in decision rights of lower-level managers.

economic value added (EVA) accounting methods

Managers often diversify into other business to create a business portfolio of related firms. They do this on the belief that the cost of production in one or more of the businesses in the portfolio would be lower than if they were operating as separate, free-standing firms. This effect of diversification is known as: a) Economics of scope b) Managerial dis-economies of scale c) M-form dividend d) The Conglomerate Effect.

economics of scope

The cost advantages that enterprises obtain due to increases in the size or volume of output per time period where fixed costs are spread out over more units of output was discussed in lecture as: a. Absolute advantage b. Comparative advantage c. X-efficiency d. Economies of Scale.

economies of scale

The reduction in average total cost realized by producing two or more product or service lines using the same facilities and leveraging buying power and production competencies across divisions is known as: a) Economies of scale b) Cost leadership c) Economies of scope d) Cost containment.

economies of scope

Competitive advantage exists when a particular company consistently outperforms other companies in the same industry. Those companies who are able to maintain this record of success over time: a) Show evidence that they are a member of a monopolistic trust b) Enjoy what economists call a sustainable competitive advantage c) Have succeeded in limit entry pricing and predation d) Need not fear new entry in the near future.

enjoy what economists call a sustainable competitive advantage

One of the famous Parkinson's Laws is that an organization, once it has built its edifice, begins to decline. This is an example of the general problem the systems over time come to lack of order or predictability; they gradually decline into disorder. This is known as: a) Entropy b) Return to mean performance c) Organizational decline d) Managerial dis-economies of scale.

entropy

To prevent intense rivalry, managers exploit or create barriers to: a) Entry b) Differentiation c) Substitution d) Exit.

entry

Monopoly firms can earn positive profit for a longer period of time than competitive firms, but entry and imitation eventually: a) Erode their profit as well b) Cause their industry to become perfectly competitive c) Lead to price wars d) Produce a Nash Equilibrium.

erode their profit as well

The results of strategic decisions and actions which have the effect of the decreasing the value of the firm are known as: a. Errors of commission b. Error variance c. Sunk costs d. The Costs of doing business.

errors of commission

The mistake of failing to make a decision that would have increased the value of the firm is known as: a) Opportunity cost b) Loss leadership c) Errors of omission d) Errors of commission.

errors of omission

The results of strategic decisions and actions not taken that could have increased value are known as: a. Errors of Omission b. Over-commitment c. Commission Errors d. Blameless ignorance.

errors of omission

In economics, people who are will to give up a sufficiently small of amount of the things that they value in exchange for a sufficiently large amount of other things that they value are being: a. Maximizers b. Value drivers c. Evaluative d. Customer oriented.

evaluative

Humans tend to be rational: they make tradeoffs. In contemplating tradeoffs, most people stand ready to give up a sufficiently small amount of something they value in exchange for a sufficiently large amount of something else they value. This aspect of human nature is known as: a. The marginal rule. b. Moral hazard. c. Evaluativeness. d. Optimization.

evaluativeness

You are leading a business enterprise that has resources or capabilities that are valuable and rare. As a result, investors should understand that their firm, under your management, will: a) Enjoy a sustainable competitive advantage b) Experience a temporary competitive advantage c) Have a competitive disadvantage over the long run d) Enjoy a cost advantage over producers of substitutes.

experience a temporary competitive advantage

Firms competing in monopolistically competitive industries: a) Cannot differentiate their products or services due to their lack of market power b) Face demand and marginal revenue functions that slope downward to the right c) Compete on the basis of lowest delivered cost generic strategy d) Cannot earn economic profits in the long run unless they join a cartel.

face demand and marginal revenue functions that slope downward to the right

Which one of the following is a factor that can compromise the stability of formal price fixing agreements? a) Job turnover among the managers who agree to fix prices or quantities in the original agreement b) Falling demand that may create tension among colluders (e.g., recession) c) The price fixing agreement may be too complex to understand d) Social media make secrecy almost impossible to maintain for very long.

falling demand that may create tension among colluders (e.g., recession)

A list of features and benefits customer's may value, both absolutely and relative to current of potential rivals offerings is known as the firm's business model. This statement is: a) True b) False.

false

According to the Industry (External) point of view of competitive advantage defines competition the process by which two or more parties attempt to gain the custom of third parties by offering them more favorable terms. This statement is: a) True b) False.

false

According to the Resource Based View, the goal of business strategy and policy is to transform competitive market structures into monopoly market structures, and convert attractive industry structures to more unattractive industry structures. This statement is: a) True b) False.

false

According to the authors of the text, an industry is defined as a group of firms producing the exact same products or services. This statement is: a) True b) False.

false

As illustrated in the Rational Combi-steamer Oven DVD, managers who engage in efforts to discover customers' needs, design, produce, and deliver goods and services based on revealed customer needs and inputs are demonstrating the manufacturing mindset. This statement is: a) True b) False.

false

Human organizations have a tendency to run down over time: their resources and capabilities can lose their original effect on sustainable competitive advantage. They experience what both physicists and managerial economics professional as causal ambiguity. This statement is: a) True b) False.

false

If average product is decreasing, then marginal product must be increasing. This statement is: a) True b) False.

false

Institutional memory is a disease that becomes more virulent the less successful a company or industry becomes. This statement is: a) True b) False.

false

Like empires, human organizations have a tendency to run down over time, for example, their resources and capabilities can lose their original effect on sustainable competitive advantage. Human organizations thus experience what we discussed in class as Secular Decline. This statement is: a) True b) False.

false

Managers may be victimized by the sunk-cost problem when, according to the text, they ignore relevant costs—those costs that vary with the consequences of their decisions. This statement is: a) True b) False.

false

Organizational decision rights are legally enforced rights to select how an economic good is to be used by managers and other associates; these decision rights are also alienable in that they can be transferred to another individual, within the firm. This statement is: a) True b) False.

false

People who create new paradigms (paradigm shifters) tend to be industry experts; new rules are written on the edge. This statement is: a) True b) False.

false

Resources and capabilities that are available to all firms in an industry may be essential to a firm's success (e.g., access to the internet or the employment of readily available human resources), and as such can be a source of competitive advantages. This statement is: a) True b) False.

false

Tacit knowledge is the kind of knowledge that is relatively easy to transfer to another person by means of writing it down or verbalizing it. This statement is: a) True b) False.

false

Taken-for-granted resources or capabilities, complex sets of inter-related capabilities, and multiple non-testable hypotheses about why the firm has been success are factors contributing to the organization component of the VRIO Framework. This statement is: a) True b) False.

false

The ability of a firm's resources and capabilities to create and deliver goods and services is known as value in consumption. This statement is: a) True b) False.

false

The element of organizational architecture that specifies how compensation and other benefits and penalties will be distributed among agents within the organization is known as the performance measurement process. This statement is: a) True b) False.

false

The military historian Max Boot ("War Made New" Video) strongly suggested that innovative technologies are tangible and tradable, and as such, represent an important source of sustainable competitive advantage in both military and business organizations. This statement is: a) True b) False.

false

The story of the British Navy at Trafalgar and beyond illustrates that sustained competitive advantages are based more on non-tradable resources and capabilities developed over time, rather than purchased resources available to all rivals. This story of the Battle of Trafalgar supports the validity of the industry (External) View or I/O Perspective. This statement is: a) True b) False.

false

We learned in class that among the three elements of the "CIA," the investors are the ones with the human capital required for long term success. This statement is: a) True b) False.

false

When you finally choose a course of action, you forfeit the opportunity to experience all the others possible options. With careful research and measurement, the true value of these forgone opportunities can be known and used in decision making. This statement is: a) True b) False.

false

When you observe a business firm earning returns in excess of the minimum required by the companies investors, it would be correct to believe that the business enjoys competitive parity. This statement is: a) True b) False.

false

Payments for interest on debt, rent, lighting, inventory, and wages and benefits are known as: a) Opportunity cost b) Fixed cost c) Explicit costs d) Economic cost.

fixed cost

Average total cost curves tend to fall over a range, reach a low point, and then start to rise as production volume rises. As discussed in class, one reason cost curves fall over a range is: a) Supplier market power b) Diseconomies of scale c) First law of demand d) Fixed costs are spread over a growing number of units of output

fixed costs are spread over a growing number of units of output

Average total cost curves tend to fall over a range, reach a low point, and then start to rise as production volume rises. The primary reasons cost curves fall over a range before rising are: 1) Law of Diminishing Marginal Return, and 2): a) Fixed costs are spread over a growing number of units of output b) Economies of scale are realized with greater production in a production facility c) As volume rises, economies of scope have a greater influence on costs d) Synergies are a function of production volume.

fixed costs are spread over a growing number of units of output

In the discussion of net delivered customer or consumer value (NDCV), what the product/service does (features), that lets the consumer or user solve problems (benefits) is known as: a) End user value b) The marketing mindset c) Value Proximity d) Functionality.

functionality

What the product/service does, or lets the user do, that benefits the user (e.g., how the Rational Combi-Steamer Oven saves space in professional kitchens) is known as: a) Functionality b) Net benefits c) Consumer surplus d) Image value.

functionality

The study of strategic or interactive decisions making which entails mathematical models of conflict and cooperation between intelligent rational decision-makers is known as: a) Competitive dynamics b) Game theory c) Industrial organization economics (I/O) d) Value chain analysis.

game theory

The firm's specific, integrated approach to creating value, shifting out demand and decreasing elasticity in order to increase pricing power, and claim value for investors and associates is known as the: a) Production function b) Demand function c) Value proposition d) Generic strategy.

generic strategy

A firm experiencing constant economies of scale will have a long-run average cost curve that is: a) Upward sloping b) Vertical in the range of the minimum efficient scale c) Downward sloping d) Horizontal or flat and parallel to the quantity axis.

horizontal or flat and parallel to the quantity axis

Soon you will graduate from college and get a job. After a few years your income rises from $40,000 to $100,000 per year. You have been renting an apartment but after the pay increase you buy a house. This implies that: a) Houses are, for you, a normal good b) Houses are, for you, inferior goods c) Renting and owning are complementary goods for you d) You need more information about the trend in housing prices.

houses are, for you, a normal good

To achieve a sustainable competitive advantage, effective executives build and maintain strong competitive positions, invest and re-invest in unique and valuable resources and capabilities that are difficult to: a) Imitate b) Import c) Reverse engineer d) Purchase in the underground economy.

imitate

According to the Resource-based View, the way to achieve a sustainable competitive advantage (SCA) would be to: a) Deploy and leverage tradeable, tangible resources and capabilities b) Engage in tacit collusion with the firm's major suppliers c) Invest in and leverage strategic resources and capabilities d) Challenge the patents of all new entrants to create a behavioral barrier to entry.

invest in and leverage strategic resources and capabilities

Managers and other decision makers often pay attention to costs that they should ignore. In addition, they tend to ignore costs to which they should pay attention. A type of cost managers should pay more attention to was discussed in class as: a. Sunk cost b. Explicit cost c. Accounting cost d. Implicit cost.

implicit cost

In the Brabantia and O.M. Scott cases and the Union Pacific video that we read or viewed in class, we learned that a challenging but effective way to improve the performance of an organization would be to: a) Hire new executives b) Orient all new employees on the essential aspects of the firm's culture c) Improve the firm's "rules of the game" known as organizational architecture d) Employ good management consultants.

improve the firm's "rules of the game" known as organizational architecture

Firms in competitive markets have no market power. As a result, the managers of such firms may try to increase their market power in order to: a) Increase their pricing power b) Increase price elasticity of demand in their market c) Gain competitive parity d) Avoid competitive disadvantage and bankruptcy.

increase their pricing power

Firms in competitive markets lack market power. As a result, the managers of such firms may try to increase their market power in order to: a) Increase their pricing power and profit potential b) Increase price elasticity of demand in their market c) Gain competitive parity d) Avoid competitive disadvantage and bankruptcy.

increase their pricing power and profit potential

Among the best approaches to addressing resistance to change among employees in the face of changes in the external environment is: a) Terminating those resisting change b) Providing incentives for people to retire early c) Increased and sustained communications and education d) Decentralization.

increased and sustained communications and education

Firms in competitive markets try to increase their market power because greater market power: a) Increases demand which leads to greater economies of scale b) Increases pricing power and the potential for above normal returns c) Gives the firm the ability to avoid a Nash equilibrium d) Provides the necessary and sufficient condition for above-normal returns.

increases pricing power and the potential for above normal returns

These functions show all combinations of two goods (e.g., food and clothing, bonus money and integrity) that yield the same level of utility. They have negative slopes, indicating that in a world of scarcity, there must be tradeoffs between goods. These functions are known as: a) Demand functions b) Supply curves c) Indifference curves d) Budget constraints.

indifference curves

The field of economics dealing with the strategic behavior of firms, regulatory policy, antitrust policy and market competition is known as: a) Public choice theory b) Microeconomic theory c) Applied economic analysis d) Industrial organization economics.

industrial organization economics

Distinctive Capabilities, unique historical conditions, causal ambiguity, and social complexity contribute to the sustainability of their competitive advantage through resource: a) Value b) Rareness c) Inimitability d) Organization.

inimitability

Characteristics of resources or capabilities that make it difficult for rival firms to recognize, acknowledge, and respond to the incumbent firm's resource- or capability-based competitive advantage make those resources or capabilities: a) Valuable b) Rare c) Inimitable d) Organized.

inimitable

A generic strategy which attempts to provide many customers with just the features and benefits they value, at relatively low cost (but not as low as the cost leader); it features some differentiated features and benefits (but less than a true diversifier) is known as: a) Cost-value balancing b) Integrated low cost/differentiation c) Stuck in the middle d) Needs focus.

integrated low cost/differentiation

The first firm to develop a working model or sample in a new product category: a) Is known as a market pioneer b) Will earn scarcity rents c) Is known as a product pioneer. d) Will earn a normal rate of return on invested capital.

is known as a market pioneer

Which one of the following goods would display an inverse income elasticity of demand? a) Automobiles built by Lexus b) Items from Dollar Stores, a low price retailer c) Shoes sold at Nordstrom's d) Bread made by Wheatfields, a local high-end baker.

items from dollar stores, a low price retailer

A production philosophy that considers the expenditures of resources in any aspect other than the direct creation of value for the end consumer to be wasteful and a target for elimination is known as: a) The Asian Production Miracle b) Just in Time Inventory Management c) Lean Production d) Total Quality Control.

lean production

The value of a given resource or capability must be reassessed periodically to ascertain if the firm's business model and strategy are still relevant. If not reassessed periodically, a once- valuable resource or capability may become: a) less valuable, and no longer strategic b) more valuable, but remain strategic c) less valuable but remain strategic d) more value and more strategic.

less valuable, and no longer strategic

If a monopolist set its profit maximizing price (where MR=MC) the level of supernormal profit would attract new firms into the market. Therefore, the monopolist may decide to set a price below this profit maximizing level, but still enable it to make higher profits than in a competitive market. Industrial organization economists call this strategy: a) Profit optimization b) Satisficing c) Proximity d) Limit entry pricing.

limit entry pricing

The generic strategy formulated and implemented to produce and deliver goods or services to price-sensitive buyers was referred to as: a) Focus strategy b) Lowest delivered cost strategy c) Needs-based strategy d) Limit-entry pricing strategy.

lowest delivered cost strategy

High capital requirements create the need for potential entrants to: a) Pay slotting fees b) Engage in heaving spending on promotional branding c) Make large investment before entering an industry to share in profits d) Look for lower interest rates on their bonds.

make large investment before entering an industry to share in profits

On-going entrepreneurial discoveries and continuous improvements to generate a steady stream of new and improved products at ever-lower costs were referred to in lecture as: a) Value Drivers b) Margin Drivers c) Primary activities d) Cost Drivers.

margin drivers

Average cost can be a poor indicator of performance or guide to decisions. Usually, for making decisions at the margin, it is better to use: a) Marginal cost b) Total cost c) Sunk cost d) Explicit cost.

marginal cost

A selling environment where a large number of independent firms produce and sell differentiated products or services. This selling environment is known as: a) Monopoly b) Oligopoly c) Perfect Competition d) Monopolistic Competition.

monopolistic competition

Low to moderate buyer power, fairly strong supplier power, many substitutes, and a moderate threat of new entry. This is the industry attractiveness profile of the selling environment known as: a) Monopoly b) Oligopoly c) Perfect Competition d) Monopolistic Competition.

monopolistic competition

According to the text, a firm is earning negative economic profits, it implies that: a) The firm's accounting profits are zero b) The firm's accounting profits are positive c) The firm's accounting profits are negative d) More information is needed to determine accounting profits.

more information is needed to determine accounting profits

All else equal, changes in the price of goods causes: a) A shift in the entire demand function b) A shift in the supply function c) Movement along an individual demand curve d) Movement along an individual supply function.

movement along an individual demand curve

Many times in the history of business competition in American, the top two firms in an oligopolistic industry attempt, over time to gain a competitive advantage over their rival. If one gains the upper hand, the other firm tends to fight back. This back and forth rivalry occurs when: a) Neither firm is able to find a dominant strategy b) The firms are in an industry where the MES (Minimum Efficient Scale) is undefined c) Both firms have specific assets they need to protect d) Neither firm has unique, strategic resources to afford them a sustainable competitive advantage.

neither firm has unique, strategic resources to afford them a sustainable competitive advantage

Which of the following types of firms a guaranteed to make above-normal returns? a) Both perfectly competitive and monopoly firms b) Neither perfectly competitive nor monopoly firms c) A perfectly competitive firm, but not a monopolist. d) A monopoly firm but not a perfectly competitive firm.

neither perfectly competitive nor monopoly firms

The lack of knowledge (or ignorance), especially of current paradigms and habits, is known as: a) Nescience b) Rational ignorance c) The knowledge gap d) A strategic information void.

nescience

Perceived Benefits (Value in Product Use + Value of Service) minus Perceived Costs (Non-Price User Cost + Transactions Costs + Time Costs + Participation Costs + Psychic Costs) was discussed in class as: a) The Residual b) Net Delivered Customer Value (NDCV) c) The Value Proposition d) The Value Drivers in the Value Chain.

net delivered customer value (NDCV)

In our more complete analysis of the Old West Steak House Case, we learned that to determine whether the firm earned an economic profit requires a careful analysis of its sales, expenses, capital base and: a) Value added b) Employee conduct c) Fixed costs d) Opportunity cost of capital.

opportunity cost of capital

In the Harley-Davidson case we read in class, CEO Vaughn Beals, a former production engineer, began Harley's successful turnaround by focusing on operations and production improvements. Senior production engineer, Walter Anderson, contributed by replaced assembly lines with work cells, thus reducing the total movement of materials throughout the system. Thus, Beals and Anderson diagnosed Harley's problem as one of: a) Value b) Rareness c) Inimitability d) Organization.

organization

Judicious delegation of decision rights to those with tacit knowledge, and accurate measurement and evaluation of individual and unit contribution to the firm's success are two of the components of a firm's: a) Governance structure b) Standing operating procedures c) Organizational Architecture d) Value chain.

organizational architecture

The set of explicit and implicit expectations of behavior within a business organization that inform or shape employee expectations is known as: a) Value chain specifications b) Organizational rules of the firm c) Organizational culture d) Management goals and objectives.

organizational culture

Human organizations have a tendency to run down over time. Their resources and capabilities can lose their original effect on sustainable competitive advantage. We called this: a) Competitive Disadvantage b) Competitive Parity c) Organizational Entropy d) Parkinson's syndrome.

organizational entropy

In business, the tendency of a critical mass of managers and associates to resist changes in their strategies and organizational structure and practices despite senior management's efforts to implement these needed changes is known as: a) The limits to growth b) Managerial dis-economies of scope c) Cognitive biases d) Organizational inertia.

organizational inertia

People who create new ways of doing business; they tend to be outsiders. It takes courage for someone identified with an existing paradigm. Such people are known as: a) Behavioral economists b) Game Changers c) Paradigm Shifters d) Agents of creative disruption.

paradigm shifters

Universally recognized scientific achievements that, for a time, provide model problems and solutions for a community of practitioners (e.g., theories of the business developed and used by managers) are known as: a) Paradigms b) Entrepreneurial discoveries c) Mental mindsets d) Paradigm shifters.

paradigms

Which one of the following is a term used to explain how the set of opportunities one faces at the current time is influenced by decisions or actions predecessor took in the past: "history matters."? a) Path dependence b) First-motion advantage c) Historical competitive advantage d) Causal ambiguity.

path dependence

All real and perceived costs that customers anticipate and actually experience in the full cycle of using the product or service: a) Perceived Non-price User Costs b) Marginal costs c) Implicit costs d) Long term average costs.

perceived non-price user costs

In this industry structure (selling environment), individual firms produce a product or service with very close substitutes so that they very elastic demand, each has many rivals, and exit barriers are low. This is known as: a) Monopoly b) Oligopoly c) Perfect Competition d) Monopolistic Competition.

perfect competition

You are in an industry where there is a large number of buyers and sellers dealing in homogeneous products or services under conditions of perfect information and free entry and exit. This is called: a) Pure monopoly b) Oligopoly c) Monopolistic competition d) Perfect competition.

perfect competition

Normal returns means zero economic profit. Normal returns are "normal" in that this is the long-run performance equilibrium of the vast majority of businesses. Individual firms operating in perfectly competitive industries are known as price takers. As such, these firms face which of the following? a) Unit elastic demand functions b) Inelastic demand functions c) Perfectly elastic demand functions d) Demand functions that are downward sloping to the right.

perfectly elastic demand functions

In the Barings Bank Case (involving Nick's Leeson's disastrous "betting" in Singapore), the economic analysis of the failure of the bank attributed this failure to: a) Poorly designed organizational architecture at Barings b) Entrenched management in the home office c) Nick's unrealistic understanding of his property rights d) An accounting system that was based on nominal rather than real interest rates.

poorly designed organizational architecture at Barings

A pricing strategy where identical or largely similar goods or services are transacted at different prices by the same provider in different markets or territories, or for different customers is called: a) Value differentiation b) Claiming value c) Price discrimination d) Cost-plus pricing.

price discrimination

The significance of a good in consumer budgets, the availability of close substitutes, and the length of the time period for consumer adjustments in consumption of the good are the three factors discussed in class as effecting: a) Price elasticity of demand b) Cross-price elasticity of demand for complements c) Income elasticity of demand for individuals d) Income elasticity of demand for different demographic groups.

price elasticity of demand

Understanding human behavior, predicting human behavior and controlling human behavior are the three: a. Primary goals of the social sciences. b. Key activities of the human resources department. c. Major techniques for shaping behavior. d. Preconditions for successful decentralization.

primary goals of the social sciences

When one person or entity is hired to make decisions that impact, or are on the behalf of another person, the relationship is known in economics as: a. Employment contract b. Principal-agent relationship c. Master-servant relationship d. Service agreement.

principal-agent relationship

The costs of negotiating deals between buyers and suppliers, or paying attorney fees to draft a supply contract, or settling buyer-vendor conflicts, etc. were discussed in class as: Net producer surplus a) Selling and administration expenses b) Producer transaction costs c) Buyer overhead d) Cost of goods sold.

producer transaction costs

Firms producing goods and services customers accept as performing similar services as the goods and services you have been selling them are known as: a) Potential new entrants b) Producers of substitutes c) New entrants d) Emerging market leaders.

producers of substitutes

In the "Five Forces" algorithm, the people or firms comprising the extended rivalry facing the firm who pay you for doing a good job were referred to in class as: a) Producers of substitutes b) New entrants c) Buyers d) Suppliers.

producers of substitutes

Producers of outputs that perform similar services to a firm's outputs permit customers can switch to alternatives in response to price increases. These producers can reduce profits to seller firms because they: a) Provide markets for new entrants b) Increase the marginal costs of producing goods and services c) Provide to consumers a source on new and improved products and services at lower costs d) Increase the price elasticity of the firms competing in market where these producers exist.

provide to consumers a source on new and improved products and services at lower costs

Some resources or capabilities are new, unique and otherwise scarce; they may support a temporary or sustainable competitive advantage. In resource-based analysis, such resources would be: a) Valuable b) Rare c) Socially ambiguous d) Inimitable.

rare

Some resources can only be acquired by one or very few companies in an industry. This characteristic of resources and capabilities impedes the ability of imitating firm to recognize, acknowledge, or respond to your resource-based success. This characteristic is known as is known in the VRIO framework as: a) Value b) Rareness c) Inimitability d) Organization.

rareness

Sometimes, managers make mistakes because they act without gathering all the information possible in order to make decisions in a timely manner. This illustrates the concept discussed in class as: a. Rational ignorance b. Increasing opportunity cost c. The law of diminishing utility d. Agency cost.

rational ignorance

Intangible resources and capabilities are complex, and their actual effect on performance is ambiguous. But if you have them and leverage them, it will be difficult for others to: a) Acquire them through reverse engineering b) Find a Nash Equilibrium c) Recognize, understand, and imitate them d) Create barriers to new entry in real time.

recognize, understand, and imitate them

Sometimes incumbent firms in an industry use the force of government to create a barrier to the entry of new firms, or to hobble new entrants before they can get established. Economists call this practice: a) Predation b) Limit entry pricing c) Rent seeking d) Price discrimination.

rent seeking

Which one of the following is the field of economics that deals with the problem of transforming short-run competitive advantage into a sustainable competitive advantage through the control of heterogeneous (superior), immobile resources and capabilities: a) Industry Structure Theory b) Structure-Conduct-Performance Paradigm c) Resource (Internal) or Resource-Based View d) Industry (External) View.

resource (internal) or resource-based view

In the text, the concept that focuses on the fact that firms possess different bundles of resources is: a) Organization b) Resource heterogeneity c) Barriers to entry d) Inimitability.

resource heterogeneity

The tangible and intangible assets firms use to conceive of and implement their strategies are known as: a) Resources b) Capacities c) Profit drivers d) Key assets.

resources

Which one of the following defines a fellow firm's (or potential new entrants) resources or capabilities that effectively supplant or neutralize the incumbent's resource-based competitive advantage: a) Resources or capabilities that are mobile b) Resources or capabilities that are non-tradable c) Resources or capabilities that support temporary competitive advantage d) Resources or capabilities that are substitutes in production.

resources or capabilities that are substitutes in production

When we don't know what is going to happen next, but we do know what the possible distribution of outcomes looks like, we are dealing with: a) Uncertainty b) Threats c) Opportunities d) Risk.

risk

In the long run, elasticity, |e|, increases since, all else equal, products attract imitators and customers may get bored. Economists call this: a) The first law of demand. b) Substitution effect c) Time elasticity of demand d) Second law of demand.

second law of demand

Refer to the Merrill-Lynch case discussed in class. If analysts behaved badly due to their individual preference for bonus money versus actin with integrity, management should: a) Invest in ethics training b) Select analysts who prefer moral action versus high bonuses c) Make efforts to change the culture of Merrill-Lynch by investing in ethics training d) Change the reward system to re-shape analysts' economic opportunities.

select analysts who prefer moral action versus high bonuses

Market prices can fall due to greater competition or shifting industry demand. When price per unit falls to equal average total unit cost, profit is zero. The breakeven price is the average avoidable cost per unit. When price falls below that, it's economic to: a) Renegotiate supply contracts b) Shut down production c) Continue to produce but cut back on labor d) Consider a merger with a more profitable firm.

shut down production

A phenomenon referring to the situation where the demand for a certain good by individuals of a higher income level is inversely related to the demand for the good by individuals of a lower income level: a) Conspicuous consumerism b) Snob appeal c) Curb appeal d) Snob effect.

snob effect

Organizational architecture is comprised of all of the following elements except: a) Social capital b) Assignment of decision rights c) Performance measurement and evaluation systems d) Reward system.

social capital

Valuable and rare resources or capabilities may sometimes be based on such things as interpersonal relationship, culture and other social phenomena that make them difficult for other firms to copy. Which one of the following terms is associated with this source of sustainable competitive advantage? a) Causal ambiguity b) Rent seeking behavior c) Social complexity d) Behavioral barriers to entry (BTE).

social complexity

When a valuable resource or capability is founded on such things as interpersonal relationship, culture and other organizational phenomena, they will not be able to imitate that resource in real time, those resources or capabilities can be the foundation of sustainable competitive advantage due to: a) Causal ambiguity b) Rent seeking behavior c) Social complexity d) Behavioral barriers to entry (BTE).

social complexity

Managers' responses to problems are likely to depend on their understanding of people's motives and their forecast of people's reactions--their responses depend on their underlying model of behavior. Therefore, it is appropriate to characterize managers as: a) Members of the moral-cultural elite b) Social scientists c) Academic economists d) Behavioral experts.

social scientists

Consider the case of a business firm that is a system comprised of many elements that must be coordinated by management and/or which require spontaneous cooperation to produce sustainable competitive advantage, this system would be: a) Self-Contained b) Synergistic c) Valuable but not rare d) Socially complex.

socially complex

Changes in income, changes in number of buyers, changes in the prices of complements and the prices of substitutes, and expectations about future price movements are: a) Some of the factors affecting price elasticity of demand b) Some of the factors that cause parallel, horizontal shifts in supply functions c) Factors affecting cross price elasticity of demand d) Some of the factors that cause parallel, horizontal shifts in demand curves.

some of the factors that cause parallel, horizontal shifts in demand curves

Customers are the ones with the money and credit. Investors are the ones with the capital and votes. Associates are the ones with the skills and purchased inputs. These three important groups comprise what was in class called a firm's: a) Equity investors b) Bond holders c) Stakeholders d) Advocates.

stakeholders

Tangible and intangible assets firms use to conceive of and implement their strategies are called resources in Resource Based View. When such resources meet the criteria set forth in the VRIO framework discussed in the text and lecture, those resources qualify as: a) Key success factors b) Core components of competitive advantage c) Substitutes in production d) Strategic resources.

strategic resources

Examples of resources or capabilities that are under the exclusive control of the incumbent firm include Patents and copyrights, Exclusive licenses, and Valuable relationships and: a) Access to the court system b) Membership in trade associations c) Strong values, attitudes and beliefs d) Customer goodwill.

strong values, attitudes and beliefs

Potential new entrants often face high entry costs due to the economics of the industry. They are important part of the market process. Since they reflect the existence of real scarcities they provide a market test for potential entrepreneurs. These are known as: a) Structural barriers to entry b) Obstacles to new competition c) Behavioral barriers to entry d) Shared monopolies.

structural barriers to entry

As we learned in the Old west Steak House case, Mr. Kharash used the CVP framework to organize his efforts to help the Donnelly brothers improve financial performance. CVP is shorthand for economic costs, market prices and: a) Economic value added (EVA) b) Value chain optimization c) Subjective value d) Enterprise value.

subjective value

The idea that a central authority should be performing only those tasks which cannot be performed effectively at a more immediate or local level was described in lecture as: a) The tyranny of the "or" b) Subsidiarity c) The economics of decentralization d) The 21st Century Management Challenge.

subsidiarity

Taking into consideration costs incurred in the past, which will not occur in future, when making decisions at the margin is known as: a. Marginal cost illusion b. Average cost anomaly c. Sunk cost fallacy d. Marginal benefit puzzle.

sunk cost fallacy

In the video featuring Max Boot, the author of "War Made New," the author argued that the key to sustainable competitive advantage in both military and civilian organization is: a) New technology b) Choosing the right enemy or rivals c) Superior organization and management d) The German General Staff Model of strategy implementation.

superior organization and management

In the video shown in class, Max Boot, author of a book called War Made New, suggested that in military history (and this extends to private firms, as well), success is often built on: a) A steady stream of new and improved products b) Geographical advantages c) The passage of long periods of time d) Superior organization and management.

superior organization and management

In the Value Chain diagram, firm infrastructure, human resource management, technology develop and procurement were collectively referred to as: a. Cost drivers b. Value drivers c. Support activities d. Primary activities.

support activities

In the video on the Anheuser-Busch Brewery in St. Louis we saw illustrated all nine elements of the value chain. Infrastructure, human resource management, technology development, and procurement comprise, in the value chain framework: a) Value drivers b) Primary functions c) The four components of in-bound logistics d) Support activities.

support activities

In the great game of business, both producers and consumers accept the fact that in policy, "You win some; lose some." The result is that markets tend to oscillate between competitive parity and a) Temporary competitive advantage b) Sustained competitive advantage c) Normal returns d) Zero economic value added.

sustained competitive advantage

The one-time costs customers incur when they buy from a different supplier. Examples of these costs include acquiring new equipment, retraining employees, and psychic costs of ending a relationship. These are known as: a) Training costs b) Capital costs c) Diseconomies of scale d) Switching costs.

switching costs

Buyer power is enhanced, ceteris paribus, where: a) Buyers are not concentrated as an industry group b) Switching costs are low c) Buyers are not significant purchasers of industry outputs d) Firms sell goods or services that are highly differentiated.

switching costs are low

This knowledge is the valuable knowledge of the circumstances of time and place. It is idiosyncratic because only one or a few people have it. This knowledge was defined in lecture as: a) Explicit knowledge b) Implicit knowledge c) Tacit knowledge d) General knowledge.

tacit knowledge

You are managing a successful firm which is earning above-normal returns. Imitating firms would like to entry your market. Unfortunately for them, they don't know the cause of your success. When the causes of sustained competitive advantage is ambiguous, it could be due to: a) Resources and capabilities that were developed in a foreign nation where the firm has done business b) The existence of teams who perform complex operations within the value chain c) Taken-for-granted resources or capabilities. d) The firm's elaborate cultural rituals.

taken-for-granted resources or capabilities

The Helweg Floors case described a situation where a sales person, Milt Friedman, filled an order by a customer to install flooring by taking lumber out of inventory for the job and using the cost of the lumber when it entered inventory. This was an error caused by Milt: a) Taking account of the historical, sunk costs, in pricing the deal rather than the opportunity cost going forward b) Underestimating the full cost of capital, labor and depreciations of wood working equipment c) Failing to consider the amount time it would take to fill the order d) Ignoring the possibility that another more profitable order might enter the back log since the shop is running a full capacity.

taking account of the historical, sunk costs, in pricing the deal rather than the opportunity cost going forward

In the case "Who Moved My Tofu" (about strategies for selling Tofu in Wichita, KS) were learned that there were three basic elements to the marketing strategy for selling products or services to reluctant customers: a) Price, product, and positioning b) Promotion, pricing, and product placement c) Target marketing, shaping preferences, and shaping opportunities. d) Kohlberg's Three Levels of Awareness.

target marketing, shaping preferences, and shaping opportunities

The military historian Max Boot ("War Made New" Video) strongly suggested that innovative technologies are tangible and tradable, and as such, represent a source of: a) Sustainable competitive advantage. b) Enhanced accounting profits c) Temporary competitive advantage d) Valuable trademarks and copyright.

temporary competitive advantage

In the reading titled, "The IBM Story: Not Asking the Right Questions," illustrated the importance and value of the: a) The Goldman Algorithm b) The Five Forces of Competitive c) Marginal Analysis d) The CVP Triangle/Algorithm.

the CVP triangle/algorithm

It is the tool Resource-based economists use to understand how firms in unattractive industries earn above-normal returns over time. They apply the framework to analyze how firm's internal resources and capabilities contribute to their success within their industry. This cognitive tool or framework is known as: a) The Five Forces Model of Competition b) Industrial Organization (I/O) Economics c) The VRIO Framework d) The CVP Triangle.

the VRIO framework

Determinants of pice elsticity of demand include: the significance of good in consumer budgets, the availability of close substitutes, and: a) The amount of time people have to adjust to the higher price b) Availabity of multiple, rivals c) Availabiliy of low price goods in local markets d) The extent of non-price costs in the product or service.

the amount of time people have to adjust to the higher price

The combination of buyer power, supplier power, the availability of substitutes, and the threat of new entry contribute to the: a) The determination of management compensation b) The performance of individual firms in a given industry c) The average profitability of firms in an industry d) The duration of the Waving Hand Equilibrium.

the average profitability of firms in an industry

The statement that explains how the firm is to monetize its value proposition in known in managerial economics circles as: a) The master planning document b) The Statement of Sources and Uses of Revenue c) The Value Proposition d) The Business Model.

the business model

In the case discussed in class called "Setting Price at the Margin," we observed an encounter between a potential airline customer and an airline ticket agent. This case was used to illustrate the importance, even for lower level managers and employees, of understanding: a. The difference between short and long run cost curves b. Increasing returns to scale c. The difference between average and marginal costs when making decisions d. The nature of the supply curve in terms of marginal and variable costs.

the difference between average and marginal costs when making decisions

As managers and their organizations produce more units of output over time, they tend to gain operating efficiency and increased labor productivity from their production experiences. This phenomenon produces what is known in economics as: a) Economics of scope b) Minimum efficient scale (MES) c) The experience curve d) Learning by doing what managers want.

the experience curve

Price discrimination allows firms to capture more consumer surplus because they can charge different prices to different groups of customers. Necessary conditions for successful price discrimination are: a) The inability of consumers to make secret deals with rivals of the firm b) The firm's ability to calculate the Net Delivered Customer Value enjoyed by its customers c) The firm's ability to determine individual customer's price elasticity of demand d) The ability of individual customers to delay their purchases until prices fall.

the firm's ability to determine individual customer's price elasticity of demand

All else equal, when the price of a good or service increases, the amount consumers demand of the good or service will decrease, and vice versa. This phenomenon is known as: a) Decreasing Elasticity b) Inverse Square Law c) The First Law of Demand d) Activity-Based Accounting.

the first law of demand

To achieve and sustain a competitive advantage, effective executives build and maintain strong competitive positions, create barriers to entry, or take advantage of naturally high costs of entry. This describes the means to create sustainable competitive advantage according to: a) The Harvard theory of competitive advantage b) The Five Forces Model c) The resource-based approach to competitive advantage d) The Resource (internal) view.

the five forces model

The bargaining power of buyers, the bargaining power of suppliers, threat of substitutes, threat of new entry and intensity of rivalry all combine to influence or determine: a) Competitive positioning b) Projected profit potential c) The Five Forces of Competition d) Market success.

the five forces of competition

Promoting the formulation of well-understood, well-defined objectives before work begins, clarifying formerly vague or poorly defined initiatives early on, breaking down problems/projects too large or costly for any given team and combining market-based decision rights with management oversight are elements of what we discussed in class as: a) The genius of the "and" b) The tyranny of the "or" c) The 21st Century Management Solution d) The genius of chartering.

the genius of the "and"

In the Oil Ventures International case discussed in the text, senior managers clearly ignored the accurate advice of the junior geologist and overbid for the oil tract in the Gulf of Mexico. This was clearly a value-decreasing decision and the board needs to understand why management acted in this way. According to the authors, the main problem was that: a) The firm's selection process for top managers was flawed b) The junior geologist did a poor job informing management of the true value of the tract c) The incentives created by the firm's bonus plan shaped the misconduct of management d) The board of directors needed to an overbid to avoid very high corporate taxation.

the incentives created by the firm's bonus plan shaped the misconduct of management

According to both the text and lecture, a major management challenge is designing organizations that maximize the likelihood that local decision makers have both the relevant information to make good decisions, and: a) The right to make decisions outside their authority boundary b) The incentives to use that information productively c) The vision, virtues and talents to merit trust d) Ability to use algorithms to make better decisions.

the incentives to use that information productively

According to both the text and lecture, a major management challenge is the problem of implementation: how to craft organizational designs that maximize the likelihood that local decision makers have both the relevant information to make good decisions, and: a) The right to make decisions outside their authority boundary b) The incentives to use that information productively c) The vision, virtues and talents to merit trust d) Ability to use algorithms to make better decisions.

the incentives to use that information productively

Positive profit attracts entry, and negative profit leads to exit. The text used in this course states that the ability of an asset to move from lower- to higher-valued uses is the force that moves an industry toward long-run equilibrium. This is known as: a) The cause of competitive disadvantage b) The Indifference Principle c) The Waving Hand Equilibrium d) The primary contributor to below-normal returns.

the indifference principle

The ability of assets to move from lower- to higher-valued uses is the force that moves an industry toward long-run equilibrium. That is, owners of mobile assets will make the same profit no matter where it goes. We call this phenomenon: a) The Paradigm Effect b) Equilibration c) Parkinson's Law d) The Indifference Principle.

the indifference principle

To gain and maintain a sustainable competitive advantage, firms should take aggressive action to build and maintain strong barriers to entry. This concept of competition is known as: a) The resource based view b) Limit entry pricing c) The Industry (external) approach to competitive advantage School d) Game Theory.

the industry (external) approach to competitive advantage school

Competition exists where there is a large number of buyers and sellers dealing in homogeneous goods and services and where entry and exit are easy and information flows freely. This statement accurately reflects: a) The Harvard Paradigm b) The Industry (External) View or I/O Perspective c) The Resource (Internal) or Resource-Based View d) The Waving Hand Equilibrium.

the industry (external) view or I/O persepctive

Marginal returns to an input, holding the other input fixed, will at some point start to decrease as its use is increased. In class we defined this phenomenon as: a) The Law of Diminishing (Marginal) Returns b) The First Law of Demand c) The Principle of Comparative Advantage d) Model Drift in the Kuhn Cycle.

the law of diminishing (marginal) returns

According to D. S. Landes, "every situation bears the seed of its own reversal. Nothing good lasts indefinitely, because others will want to share in it." This is known as: a) The process of creative destruction b) The Law of Nemesis c) The Paradigm Effect d) The Myth of Nescience.

the law of nemesis

Thinking in terms of production functions, a situation where all inputs are variable and managers use planning curves rather than operating curves for determining output is known in economics as: a) The Long Run b) The Efficiency Frontier c) The Nike Zone d) The Short Run.

the long run

It was Thomas Malthus who first made the argument that in "every age and in every state" population increases are limited by the means of subsistence, and that when the means of subsistence increases, population will also increase, and that the population increase will be limited by "misery and vice". In business, the equivalent of the Malthusian trap is the empirical regularity known as: a) Bankruptcy b) The long term zero profit equilibrium. c) Mean reversal d) Competitive advantage.

the long term zero profit equilibrium

In the early days of Hurco Co. (video presentation), management decided to design, produce and deliver their machine tools on the basis of operating efficiency and cost control rather than customer needs. This behavior of the old Hurco illustrates: a) The Manufacturing Mindset b) Being Stuck in the Middle c) Strategic incoherence d) Value migration.

the manufacturing mindset

Effective executives who think economically, will only add variable factors (e.g., people attending a meeting, farm workers tilling the land) when the marginal benefit of adding another unit of the variable factor exceeds their marginal cost. They stop adding units of a variable factor when: a) They reach the point of decreasing returns b) Variable costs are minimized c) Marginal benefits are maximized d) The marginal cost of adding units of the variable factor just equals the marginal benefit.

the marginal cost of adding units of the variable factor just equals the marginal benefit

As illustrated in the Rational Combi Oven video, managers who engage in efforts to discover customers' needs, design, and produce and deliver goods and services based on revealed customer needs and inputs are displaying: a) Consumer Sovereignty b) Strategic incoherence c) The Marketing Mindset d) Value migration.

the marketing mindset

A situation where someone in the organization sees an opportunity to create value, and are authorized to exploit that opportunity even though it's not part of their "rolls and responsibilities," was discussed in class as: a) Entrepreneurial discovery b) Continuous improvement c) Comparative advantages d) The Nike Zone.

the nike zone

Recognizing and identifying the significant, emerging trends in the external context (opportunities and threats) and understanding how changes in the external context may affect the firm's strategic actions, and raising the organization's consciousness of the importance of considering adjustments to theory of the business are: a) The goals of the paradigm audit b) The objectives of evaluating the firm's strengths and weaknesses c) The objectives of external context analysis d) The goals of managing in group settings.

the objectives of external context analysis

Industrial organization economics (the "external" view) explains mean reversion and the indifference principle in terms of: a) The zero-profit equilibrium b) The operation the five forces of competition c) The interaction of supply and demand d) Marginal analysis.

the operation the five forces of competition

In the economic analysis of the turnaround at the O. M. Scott Co., you read that the firm was able to improve performance significantly by changing: a) The amount paid to middle level managers b) The prices of their lawn care products c) The organization's "Rules of the Road" d) The firm's organizational architecture.

the organization's "rules of the road"

Economists measure the responsiveness of percentage change quantity demanded to percentage changes in price as: a) The intercept of the demand function in Price/Quantity Space b) The own-price elasticity of demand c) The hypotenuse of the price-quantity triangle d) The right hand leg of the CVP triangle.

the own-price elasticity of demand

Eventually, most assumption sets regarding how well the firm's value proposition, business model and strategy fit with external reality become inappropriate for the emerging realities of demographics, market rivalry, and new technologies. Managers need to change their theory of the business, but often do not. According to lecture, failure to change is due to: a) The insularity of top management b) The manufacturing mindset c) Recent setbacks in value creation d) The Paradigm Effect.

the paradigm effect

Making scanning the environment a habit for all key associates, managing in group settings, and levering the unique attributes of new hires are strategies working managers can employ to deal with: a) The complexities of related diversification b) The Waving Hand Equilibrium c) The Paradigm Effect d) Managerial dis-economies of scale.

the paradigm effect

Although water is on the whole more useful, in terms of survival, than diamonds, diamonds command a higher price in the market. This apparent logical contradiction is known as: a) The hard as diamonds syndrome b) The paradigm effect c) Value migration d) The paradox of value.

the paradox of value

The organizational architectural process that specifies the criteria that will be used to judge the contribution of decision agents (employees or associates) within the organization is known as: a) The Authority Boundary b) The Nike Zone c) The reward system d) The performance measurement and evaluation system.

the performance measurement and evaluation

Economists recommend that you should keep adding variable inputs to a production process until: a. The point where profits are greater than costs b. The minimum of the sum of the average and total cost curves c. The inflection point in the total production function d. The point where marginal benefits and marginal costs are equal.

the point where marginal benefits and marginal costs are equal

Designing institutions and organizational architectures that judicially allocate decision rights to those with tacit knowledge, accurately measuring and evaluating he performance of individuals and organizational units, and allocating rewards based on assessment of both subjective and objectives measures of performance. In class, we called this: a) The primary responsibility of top management b) Tasks best left to the managers closest to the action within the firm c) The 21st Century Management Challenge d) Market architecture associated with capitalism in the period 1850 to the present.

the primary responsibility of top management

Effective use of local knowledge local tastes and preferences, and price sensitivities of particular customers, conservation of management time, and training opportunities for lower-level managers were discussed in class as being: a) The principle benefits of decentralization in the modern corporation b) The most misunderstood benefits of open markets in capitalist systems in the 21st Century c) Principle elements or components or organization architecture d) An important source of temporary competitive advantage.

the principle benefits of decentralization in the modern corporation

According to the economist Joseph Schumpeter. the "process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one" is known as: a) The process of creative destruction b) The Law of Nemesis c) The Paradigm Effect d) The Myth of Sisyphus.

the process of creative destruction

The process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one is known as: a) Task leadership b) Devil's advocacy c) The process of creative destruction d) Entrepreneurial discovery and continuous improvement.

the process of creative destruction

Firms may choose to maintain an internal focus on resources and capabilities rather than external focus on rivals. They base their competitive advantage on the control of a few key strategic resources and capabilities. This description captures the essence of: a) The Harvard School of Managerial Economics b) The Resource-Based View of competitive advantage. c) The Industry (external) approach to competitive advantage School of economics d) Industrial Organization Economic.

the resource-based view of competitive advantage

Consumer research attempts to reach out to consumers. The depth and detail of the two-way flow of information between the firm and customers is known as: a) The marketing mindset b) The manufacturing mindset c) The richness of the relationship d) Consumer focus.

the richness of the relationship

The legal principle that law should govern a nation, as opposed to arbitrary decisions by individual government officials, is known as: a) The rule of Kings b) Common law c) The rule of law d) Equal justice before the law.

the rule of law

In the reading, "Alliance Structure Makes the Pie Bigger," there was a description of the CVP triangle or framework. In that article, the left leg of the triangle was said to represent: a) The value customers place on the good or service being analyzed b) The market prices that result from the adversarial relationship between buyers and sellers c) The total profit potential (TPP) divided between sellers and buyers d) The seller's opportunity cost of producing and selling a good or service.

the seller's opportunity cost of producing selling a good or service

People framing their bets will often pay attention to costs they should ignore going forward. In economics, this error is known as: a) The average cost fallacy b) The hidden cost problem c) The sunk (irrelevant) cost problem d) The opportunity cost fallacy.

the sunk (irrelevant cost problem)

The set of assumptions regarding how well the firm's value proposition, business model and strategy fit with external reality is known as: a) The Theory of the Business b) The CVAS (Customer Value Assumption Set) c) SWOT analysis d) The Value Chain.

the theory of the business

All else equal, as price increases, demand curves become more price elastic as purchase becomes larger share of budget. Economists call this: a) The budget constraint effect b) The second law of demand c) The third law of demand d) the equimarginal rule.

the third law of demand

Profitable markets that yield high returns will tend to attract new firms into the market. This is known as: a) Bargaining power of suppliers b) Bargaining power of buyers c) The threat of new entrants d) The threat of intense competition.

the threat of new entrants

Producers of very close functional substitutes pose a threat to other firms in their industry. Namely, consumers have choices, prices fall, costs rise (e.g., for adverts, product development, etc.). This describes the element of the Five Forces of Competition model known as: a) Supplier and buyer power b) The threat of rivalry c) The threat of substitutes d) The threat of new entry.

the threat of rivalry

Economic organizations are best viewed as bundles of activities performed by organizational members as they translate strategies into performance. The visual representation of the activities people perform in economic organizations is called: a) Competitive strategy map b) The Value Chain c) The CVP Triangle Algorithm d) The Strategy Vector.

the value chain

Manufacturing companies create value by acquiring raw materials and using them to produce something useful. Retailers bring together a range of products and present them in ways that are more convenient to customers. An algorithm showing the interconnected activities required to create value for customers in manufacturers and retailers is known as: a) The Goldman Algorithm b) The Capital Asset Pricing Model c) The REM Model d) The Value Chain.

the value chain

When I go into a flower shop to buy roses, and give money to the cashier for the roses and walk out, we can say with confidence that at the time of purchase, I thought that: a. The value of the roses was just equal to the amount I paid. b. The value of the roses was greater that than the amount I paid c. The value of the roses was greater than or equal to the amount I paid d. The value of the roses was equal to or less than the amount I paid.

the value of the roses was just equal to the amount I paid

The vector of features and benefits consumer will receive by purchasing and using the firm's goods and/or services (e.g., for one-star, three-star or hotels like Formula One discussed in class that implement integrated cost-leadership/differentiation strategies) is known as: a) The generic strategy b) The business model c) The industry structure d) The value proposition.

the value proposition

Normal returns means zero economic profit. Normal returns are "normal" in that this is the long-run performance equilibrium of: a) Firms producing normal goods b) Most of the firms in implementing cost leadership strategy c) The vast majority of businesses in the economy d) Firms participating in cartels or trusts.

the vast majority of businesses in the economy

The top firms in an oligopoly selling environment swill naturally attempt to gain a sustainable competitive advantage over their rivals. Unfortunately for them, the firms that lack distinctive, immobile resources and capabilities will jockey for position over time. This is known as: a) Oligopolistic Dynamic b) The Waving Hand Equilibrium c) Monopolistic rivalry d) Monopolistic competition.

the waving hand equilibrium

Top firms in oligopoly industries may continue to jockey for position through time. The back-and-forth cycle of leadership and followership was characterized in class as: a) Cutthroat competition b) The waving hand equilibrium c) Austrian Dynamics d) Cartel instability.

the waving hand equilibrium

According to the Froeb text, individual economists can have different opinions on many issues, but what unites economists is their: a) Belief that all decision makers have the knowledge needed to make good decisions b) Their use of the rational-actor paradigm to predict human behavior. c) Their willingness to incorporate other social sciences into their analysis of human action d) Their rejection of other social sciences as relevant to understanding economic behavior.

their use of the rational-actor paradigm to predict human behavior

When a firm is experiencing decreasing marginal costs, it implies that: a) There are diminishing marginal productivity b) There are increasing average costs c) There is constant marginal productivity d) There is increasing marginal productivity.

there is increasing marginal productivity

Monopoly firms have a downward sloping curve in the short-run because: a) They have no close substitutes b) There are no barriers to entry c) They have no cost advantage over their rivals d) None of the above

they have no close substitutes

Changes in the general environment a firm could render the firm's theory of the business obsolete are known as: a) Strengths b) Weaknesses c) Opportunities d) Threats.

threats

The job of profit-responsible managers is to build and run business units that prosper by producing goods and services at an acceptable cost to the unit, which goods and services provide value for internal or external customers, at a reasonable price. Cost, value and price were referred to in class as: a) Economic thinking skills b) Three Pillars of commercial success c) Managerial economics algorithm d) The Triangular Framework.

three pillars of commercial success

A competitive firm can earn positive or negative profit in the short run until entry or exit occurs. In the long run, competitive firms are condemned: a) To shut down their operations as price falls to below breakeven price. b) To make an early appearance in bankruptcy court c) To earn only an average rate of return d) To earn a negative economic value added (EVA).

to earn only an average rate of return

The property of a resource or capability that permits it to be purchased and sold in asset markets, at a location distant from where it was produced is known as: a) Immobility b) Tradability c) Marketability d) Fungible.

tradability

Resources and capabilities that are valuable but readily available to all firms are not rare, and cannot be the source of sustainable competitive advantage. Such resources or capabilities are referred to in managerial economics as: a) Fungible b) Migratory c) Tradeable d) Short-supplied.

tradeable

A property right is a legally enforced right to select use of an economic good. Private rights are assigned to a specific entity; they are alienable in that they can be: a) Transferred to another individual, within limits b) Left to relatives after the holder passes away c) Subject to minimum taxes by the Federal Government d) Given to people living outside the U.S. tax free.

transferred to another individual, within limits

Above-normal profit in open markets is often a temporary phenomenon as this profit attracts capital investments by rivals and new entrants until profits fall back to normal returns. This statement is: a) True b) False.

true

Absent fiat, the form of organization that survives in an activity is the one that produces and delivers the goods and services customers value most, at ever lower costs of production, to capture value for investors/associates. This statement is: a) True b) False.

true

According to management scholar Peter Drucker, "A small but growing number of big successful company throughout history, when confronted with some change in its competitive or social environment, has refused to accept it." This statement is: a) True b) False.

true

An important objective of external environment scanning is to avoid the paradigm effect by raising the organization's consciousness of the importance of considering adjustments to theory of the business. This statement is: a) True b) False.

true

As an economy specializes more and more into one product (e.g., cheese versus wool or guns versus butter), the opportunity cost of producing that product increases, because we are using more and more resources that are less efficient in producing it. This statement is: a. True b. False.

true

As you add one more person to a meeting roster, all else equal, a point will eventually be reached at which additions of the input yield diminishing, and then negative, returns. This statement is: a. True b. False.

true

Colonel Chamberlain got the mutineer soldiers to pick of their muskets and follow him into battle at Gettysburg by applying concepts familiar to psychologists, sociologists, and economists. This statement is: a) True b) False.

true

Consumer transaction costs include the costs of learning product characteristics and quality, negotiating terms of sale, and enforcing warrantees, guarantees, etc. This statement is: a) True b) False.

true

Demand curves have a negative slope because consumers' opportunity cost to acquire that good or service increases with higher price, and they must make more costly tradeoffs to acquire the more expensive product. This statement is: a) True b) False.

true

In the reading "The Rational Actor Model," the rational agent or actor is assumed to take account of available information, probabilities of events, and potential costs and benefits in determining preferences, and to act consistently in choosing the self-determined best choice of action. This statement is: a) True b) False.

true

Managers can keep demand for their products relatively inelastic by promoting risk taking and innovation in their organizations to keep the average age of their products relatively low. This statement is: a) True b) False.

true

Managers' responses to problems are likely to depend on their understanding of people's motives and their forecast of people's reactions--their responses depend on their underlying model of behavior. This statement is: a) True b) False.

true

Managing problematic aspects of the human brain begins with professional managers accepting the fact that cognitive biases exist. This statement is: a) True b) False.

true

Related diversification takes place when a business expands its activities into product lines that are similar to those it currently offers. This statement is: a) True b) False.

true

The Harley-Davidson case discussed in class demonstrated that an organization that actually has resources or capabilities that are valuable, rare and difficult to imitate, and without substitute may not enjoy a sustainable competitive advantage. This conclusion is: a) True b) False.

true

The higher the price, the lower the quantity demanded, because consumers' opportunity cost to acquire that good or service increases, and they must make more tradeoffs to acquire the more expensive product. This statement is: a) True b) False.

true

The plant size or output level at which long-run average cost first reaches its minimum point is known as minimum efficient scale. This statement is: a) True b) False.

true

The text used the case of Cadbury India to illustrate the advantages of using EVA (economic value added) to measure profitability. By adopting EVA, the firm prevented managers from ignoring some implicit costs of production. This statement is: a) True b) False.

true

The threat of buyer power means that customers enjoys the ability to capture more consumer surplus at the expense of investor profits. This statement is: a) True b) False.

true

To pursue comparative advantage means simply to sacrifice that which is more valuable for the sake of that which is less valuable. This statement is: a) True b) False.

true

Using the VRIO Framework to analyze sustainable competitive advantage reveals that the ability and willingness to do valuable things that others are unable and/or unwilling to do may be valuable, rare and inimitable, and a source of SCA. This statement is: a) True b) False.

true

Value (in consumption) is the degree to which buyers think those outputs (goods and services) make them better off than they would be if they did without. This statement is: a) True b) False.

true

When channels of distribution, or final users are larger than their suppliers, they may drive hard bargains. This makes buyers more resistant to price increases and increases their consumer surplus at the firm's expense. This statement is: a) True b) False.

true

Socially complex systems are comprised of many elements that must be coordinated by management and/or which require spontaneous cooperation to produce sustainable competitive advantage. This is complex but: a) Causally indeterminate b) A common source of competitive advantage in high tech industries c) Unambiguous d) Support a culture-based competitive advantage.

unambiguous

Resources or capabilities allow a business to formulate and successfully implement strategies that realize its value proposition and business model are: a) Valuable b) Rare c) Inimitable d) Organized.

valuable

The result of successfully doing the job customers have hired the firm to do for them, and the utility customers receive from the firm's ability to do what customers pay them to do, was defined in class as: a) Economic surplus b) Economic Value Added c) Normal Returns d) Value.

value

When you observe that many customers appear to be under-served by the features and benefits of goods and services considered average or standard, the appropriate generic strategy to implement would be: a) Market segmentation b) Value differentiation c) Cost Leadership d) Operational Excellence.

value differentiation

In economic organizations, many activities go into the design, production and delivery of goods and services. The activities whose execution creates value for customers (real and perceived) determining the position and elasticity of the demand function are known, collectively, as: a) Value Drivers b) Differentiators c) The Cost-Benefit Algorithm d) Cost Drivers.

value drivers

What customers prefer in the goods and services they consume is constantly shifting for most firms. The firm's value proposition, business model and theory of the business may become out of date. Customer's "vote with their dollars" by shifting to firm's with better value propositions and business models. This is known as: a) The Paradigm Problem b) The Kuhn Cycle c) Value migration d) Manufacturing Mindset.

value migration

Some firms are fortunate to have key employees (e.g., Ken Iverson of Nucor Steel) who display psychological resources and capabilities that enhance competitive advantage, but which others in imitating firms are unwilling or unable to adopt. This particular "path to inimitability" was described in class in terms of: a) Values, Attitudes and Beliefs: b) Historical conditions. c) Causal ambiguity d) Social Complexity.

values, attitudes and beliefs

In class we discussed managerial decision making from an economic perspective. When managers establish goals and objects, consider two or more viable alternatives, and assess the economic consequences and risks of each alternative, they are engaged in: a) Economic analysis b) Financial analysis c) Venture analysis d) Futures analysis.

venture analysis

Decisions which have economic consequences that are made under conditions of risk or uncertainty were described in class as: a. Gambles b. Ventures c. Long-range plans d. Working in the business.

ventures

On occasion, employees will engage in intentional, value-decreasing behavior. This was discussed in class as: a. Virtue b. Luck c. Blameless ignorance d. Vice.

vice

Business executives understand that their associates people who bring human skills to their firm, or supply material inputs to the firm. Associate receive compensation by way of: a) Dividend distributions b) Wages and benefits c) Negotiated supply contracts d) Profit sharing plans.

wages and benefits

Some tangible or intangible resources and capabilities, while few in number, represent the foundation for sustainable competitive advantages, as long as they are valuable, rare, difficult to imitate, non-substitutable and: a) Well-organized b) Misunderstood by market rivals c) Readily available in the market for resources and capabilities d) Patentable.

well-organized

Paradigms are common; rules are everywhere. Paradigms are useful; they tell us: a) What the firm's competitive strategy should be b) How to create organizations that can produce a steady stream of new and improved good or services. c) Why some industries are, on average, more profitable than others. d) What we should view as important.

what we should view as important