Archive for August 2017

One of the limitation of Five Forces is that

One of the limitation of Five Forces is that




a) These tools reduce producer surplus
b) For one firm to increase profit, it takes it from other participants in the industry
c) Does not provide a firm with sustainable competitive advantage
d) Both b and c



ANS B

All of the following are example of entry barriers, except

All of the following are example of entry barriers, except



a) Government protection through patents or licensing requirements
b) Strong brands
c) Low capital requirements for entry
d) Lower costs driven by economies of scale



ANS C

Industries with high barriers to entry

Industries with high barriers to entry



a) Pushes profits to normal returns
b) increases the likelihood of firms entering the industry
c) help firms sustain profits
d) increases the number of competitors



ANS C

Which of the following is true?

Which of the following is true?



a) Industry structure determines firm conduct which in turn determines firms' performance
b) Industry structure determines firm performance which in turn determines firms' conduct
c) Industry conduct determines firm structure which in turn determines firms' performance
d) Industry performance determines firm conduct which in turn determines firms' structure



ANS A

Cost-reduction generate

Cost-reduction generate




a) Increases in long-run profitability
b) Increases in long-run profitability only if the cost reduction is difficult to imitate
c) Increases in product differentiation
d) Reduction in competitive intensity



ANS B

Low cost strategies are usually found in industries where

Low cost strategies are usually found in industries where



a) Products are not particularly differentiated
b) Price competition tends to be fierce
c) Both a and b
d) None of the above



ANS C

The five forces model is a framework

The five forces model is a framework



a) For increasing buyer force in the market
b) For improving competition in the industry
c) For analyzing the attractiveness of an industry
d) Of matching resources and capabilities of the firm



ANS C

An industry with a high four-firm concentration ratio implies

An industry with a high four-firm concentration ratio implies




a) firms have high supplier power
b) firms have low supplier power
c) buyers have a high supplier power
d) buyers have a low supplier power



ANS A

All these increase differentiation, except

All these increase differentiation, except



a) Product branding
b) Reducing quality
c) Advertising
d) Limiting availability



ANS B

Supplier power tends to be low when:

Supplier power tends to be low when:



a) Suppliers are less concentrated
b) Inputs provided by the supplier are not vital
c) Inputs are less differentiated
d) All the above



ANS D

Firms maintain their competitive edge by

Firms maintain their competitive edge by




a) Providing a good at lower costs than their rivals
b) Providing a superior product at the same cost as your rival
c) Being innovative
d) All the above



ANS D

A sudden increase in the market demand in a competitive industry leads to

A sudden increase in the market demand in a competitive industry leads to




a) Losses in the short-run and average profits in the long-run
b) Above average profits in the short-run and average profits in the long-run
c) New firms being attracted to the industry
d) Demand creating supply



ANS C

A sudden decrease in the market demand in a competitive industry leads to

A sudden decrease in the market demand in a competitive industry leads to




a) Losses in the short-run and average profits in the long-run
b) Above average profits in the short-run and average profits in the long-run
c) New firms being attracted to the industry
d) Demand creating supply




ANS A

A sudden decrease in the market demand in a competitive industry leads to

A sudden decrease in the market demand in a competitive industry leads to




a) A market equilibrium price higher than the original equilibrium in the short-run
b) A market equilibrium price equal to the original equilibrium in the long-run
c) Both a and b
d) None of the above



ANS B

All these are characteristics of a monopoly except,

All these are characteristics of a monopoly except,




a) There is one seller of the product
b) Has few substitutes
c) Controls a large share of the market
d) Controls a small share of the market



ANS D

A monopoly has

A monopoly has




a) A perfectly elastic demand curve
b) A perfectly elastic supply curve
c) A downward sloping demand curve
d) A upward sloping demand curve



ANS C

A market tends to be monopolistic if

A market tends to be monopolistic if




a) The good has too many substitutes
b) The good has very few substitutes
c) The good has too many complements
d) The good has very few complements



ANS B

A sudden rise in the market demand in a competitive industry leads to

A sudden rise in the market demand in a competitive industry leads to




a) A market equilibrium price higher than the original equilibrium in the short-run
b) A market equilibrium price equal to the original equilibrium in the long-run
c) Both a and b
d) None of the above



ANS C

If a firm in a perfectly competitive industry is experiencing average revenues greater than average costs, in the long-run:

If a firm in a perfectly competitive industry is experiencing average revenues greater than average costs, in the long-run:




a) Some firms will leave the industry and price will rise
b) Some firms will enter the industry and price will rise
c) Some firms will leave the industry and price will fall
d) Some firms will enter the industry and price will fall



ANS D

A perfectly competitive industry has

A perfectly competitive industry has




a) A perfectly elastic demand curve
b) A perfectly elastic supply curve
c) A downward sloping demand curve
d) A downward sloping supply curve



ANS: C

A perfectly competitive firm has

A perfectly competitive firm has




a) A perfectly elastic demand curve
b) A perfectly elastic supply curve
c) A downward sloping demand curve
d) A downward sloping supply curve



ANS A

The short run supply curve for a perfect competitive firm is

The short run supply curve for a perfect competitive firm is




a) Marginal cost curve
b) Average revenue curve
c) Marginal revenue curve
d) Marginal cost curve above its average variable cost curve



ANS D

How does Ebay differ from an economist's view of a perfect competitive market?

How does Ebay differ from an economist's view of a perfect competitive market?




a) Ebay has few buyers whereas perfect competitive industry assumes many buyers
b) Ebay has few sellers whereas perfect competitive industry assumes many sellers
c) There is limited information in ebay whereas perfect competitive industry assumes full information for both buyers and sellers
d) There is no difference between these two markets.



ANS C

Profits of a monopoly are driven to zero

Profits of a monopoly are driven to zero




a) In the long-run as all assets are mobile in the long-run
b) Immediately in the short-run as assets move from low-valued uses to high-valued uses instantly
c) In the long run because the demand curve becomes more inelastic
d) In the short run because the demand curve becomes more elastic



ANS A

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

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.



ANS C

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

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.



ANS C

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)

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.




ANS B

Effective executives take care to ensure that decision makers have relevant skills and information to make good decisions. They also delegate authority based on

Effective executives take care to ensure that decision makers have relevant skills and information to make good decisions. They also delegate authority based on




a) The contingencies of any given situation
b) The skill sets and moral judgement of the employee
c) The employee's number of year of experience
d) The executive's personal judgment.



ANS A

Which one of the following is an organizational control on agent behavior that regulates agent behavior before the behavior actually takes place, prohibiting actions that would violate policy, rules, cultural norms, etc.?

Which one of the following is an organizational control on agent behavior that regulates agent behavior before the behavior actually takes place, prohibiting actions that would violate policy, rules, cultural norms, etc.?




a) Regulation of conduct
b) Posterior Restraints
c) The liability standard
d) Prior restraints.



ANS D

Paradigms are common; rules are everywhere. Paradigms are useful; they tell us

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.



ANS D

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

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.



ANS A

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

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.



ANS C

The text authors argue that it is much easier to get out of bad situation when parties are involved in repeated "prisoners' dilemma" games. One general rule of thumb for getting out of bad situations is to be unclear about your intentions. This statement is

The text authors argue that it is much easier to get out of bad situation when parties are involved in repeated "prisoners' dilemma" games. One general rule of thumb for getting out of bad situations is to be unclear about your intentions. This statement is




a) True
b) False.



ANS B

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

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.



ANS C

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

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.



ANS C

Which of the following is true?

Which of the following is true?



a) Moral hazard is primarily an issue prior to a transaction.
b) Adverse selection is primarily an issue after a transaction
c) Moral hazard is a result of information asymmetry
d) Resolving moral hazard resolves adverse selection.



ANS C

The prisoners' dilemma is an example of

The prisoners' dilemma is an example of




a) A sequential game
b) A simultaneous-move game
c) A shirking game
d) A dating game.



ANS B

Customers are the ones with the money and credit. Investors are the ones with the capital & votes. Associates are the ones with the skills & inputs. These parties were referred to in class as

Customers are the ones with the money and credit. Investors are the ones with the capital & votes. Associates are the ones with the skills & inputs. These parties were referred to in class as




a) Stockholders
b) Constituents
c) People who can say "no." to the firm.
d) Stakeholders.



ANS D

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?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?

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.



ANS C

In this type of industry or selling environment, firms produce a product or service with very close substitutes so that they very elastic demand, they have many rivals and no cost advantages with no entry or exit barriers. This is the selling environment known as

In this type of industry or selling environment, firms produce a product or service with very close substitutes so that they very elastic demand, they have many rivals and no cost advantages with no entry or exit barriers. This is the selling environment known as



a) Monopoly
b) Monopolistic competition
c) Oligopoly
d) Perfect competition.



ANS D

What is the main difference that distinguishes monopolies from perfect competitors?

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.



ANS C

Which of the following types of firms a guaranteed to make above-normal returns?

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.



ANS B

At the level of the individual competitor in a market economy, which one of the following types of firm discussed in class faces a downward sloping demand function?

At the level of the individual competitor in a market economy, which one of the following types of firm discussed in class faces a downward sloping demand function?




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.




ANS D

A generic strategy which attempts to provide their loyal customers with just the features and benefits they value, at relatively low cost (but not as low as the cost leader), and the differentiated features they really value is known in the managerial economic literature as

A generic strategy which attempts to provide their loyal customers with just the features and benefits they value, at relatively low cost (but not as low as the cost leader), and the differentiated features they really value is known in the managerial economic literature as



a) Features-Benefits optimization
b) The needs focus strategy
c) Stuck in the middle
d) Integrated low cost/differentiation.



ANS D
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