B5-3 Flashcards
Considering the SCOR Model of supply chain operations, which of the following key management processes does managing accounts receivable and collections from customers fall into?
a.
Plan.
b.
Source.
c.
Deliver.
d.
Make.
Choice “c” is correct. The “deliver” process encompasses all the activities of getting the finished product into the hands of the ultimate consumers to meet their planned demand. Managing accounts receivable and collections from customers falls into the “deliver” process.
Choices “a”, “b”, and “d” are incorrect, per the above explanation.
Which of the following pricing policies results in establishment of a price to external customers higher than the competitive price for a given industry?
a.
Collusive pricing.
b.
Dual pricing.
c.
Transfer pricing.
d.
Predatory pricing.
Which of the following pricing policies results in establishment of a price to external customers higher than the competitive price for a given industry?
a.
Collusive pricing.
b.
Dual pricing.
c.
Transfer pricing.
d.
Predatory pricing.
Under pure competition, strategic plans focus on:
a.
Profitability from production levels that maximize profits.
b.
Maintaining the market share and planning for enhanced product differentiation.
c.
Maintaining the market share, ensuring product differentiation, and adapting to price changes or required changes in production volume.
d.
Maintaining the market share and being responsive to market conditions related to sales price.
Choice “d” is correct. Under pure (or perfect) competition, strategic plans include maintaining the market share and responsiveness of the sales price to market conditions.
Choices “a”, “b”, and “c” are incorrect because they are characteristics of other types of market structures.
Which of the following is incorrect with regard to value chain analysis?
a.
Value chain analysis must be used in conjunction with the strategic plan of the organization.
b.
Value chain analysis is critical to assessing the competitive advantage of a firm.
c.
The value chain starts with the firm and goes all the way through to the end users of the product.
d.
Value chain analysis is a strategic tool that assists the firm in determining how important the perceived value of the buyers is with respect to the market the firm operates in.
Choice “c” is an incorrect (false) statement and the correct choice. The best description of a value chain is that value starts with the suppliers who provide the raw materials for a production process, continues with the firm and its strategic plan, continues with the value created by the customers, and then ends with the disposal and recycling of the materials.
Choices “a”, “b”, and “d” are incorrect, as all are correct (true) statements with regard to value chain analysis. The question stem asks for those statements that are false.
In the long run, a firm may experience increasing returns due to:
a.
Law of diminishing returns.
b.
Comparative advantage.
c.
The principle of substitution.
d.
Economies of scale.
Choice “d” is correct. In the long run, a firm may experience increasing returns due to economies of scale which come into full play only if a large enough number of units is being produced to make it worth while to set up a fairly elaborate productive organization.
Choice “c” is incorrect. The principle of substitution states that people tend to shift their buying from relatively expensive to relatively cheap goods. Thus, if the price of a product falls, people tend to buy more of it and less of other (relatively) more expensive products.
Choice “a” is incorrect. The law of diminishing returns states that an increase in labor or capital beyond a certain point causes a less-than-proportionate increase in production.
Choice “b” is incorrect. The principle of comparative advantage states that even if one of two regions is absolutely more efficient in the production of every good than is the other, if each region specalizes in the products in which it has a comparative advantage (greatest relative efficiency), trade will be mutually profitable to both regions. Real wages of productive factors will rise in both places. This principle is the basis for international trade.
A company has a policy of frequently cutting prices to increase sales. Product demand is significantly elastic. What impact would this have on the company’s situation?
a.
Quantity increases proportionally less than the price declines.
b.
Quantity increases proportionally more than the price declines.
c.
Price increases proportionally less than the quantity increases.
d.
Price increases proportionally more than the quantity declines.
Choice “b” is correct. Quantity increases will be proportionally more than price declines if product demand is significantly elastic. Price elasticity of demand is measured as the ratio of % change in quantity divided by the % change in price. Values of the price elasticity of demand ratio greater than 1.0 are considered to be elastic. The demand elasticity presumed by the fact pattern equates with a price elasticity measure greater than 1.0 and, therefore, proportional changes in quantity are greater than changes in price.
Choice “a” is incorrect. Quantity increases will be proportionally more than price declines if product demand is significantly elastic. Price elasticity of demand is measured as the ratio of % change in quantity divided by the % change in price. The demand elasticity presumed by the fact pattern equates with price elasticity measures greater than 1.0 and, therefore, proportional changes in quantity greater than changes in price.
Choice “d” is incorrect. Price changes will be proportionately less than quantity changes in instances where price elasticity of demand is determined to be elastic.
Choice “c” is incorrect. Price changes will be proportionately less than quantity changes in instances where price elasticity of demand is determined to be elastic. Price increases, however, would typically result in quantity decreases, not increases.
Elasticity of demand or supply is:
a.
A measure of how flexible the firm is with respect to responding to the needs of the consumers.
b.
A measure of how flexible the demand or supply of a product is when preferences change.
c.
A measure of how sensitive the demand for or supply of a product is to a change in its price.
d.
A measure of how well a firm’s strategic plan is able to adapt to changes in demand or supply.
Choice “c” is correct. Elasticity of demand or supply is a measure of how sensitive the demand for or the supply of a product is to a change in its price.
Choices “a”, “b”, and “d” are incorrect because they are all measures of the success of strategic planning, but they do not define elasticity of demand or supply.
What is strategic planning?
a.
It establishes the general direction of the organization.
b.
It consists of decisions to use parts of the organization’s resources in specified ways.
c.
It establishes the resources that the plan will require.
d.
It establishes the budget for the organization.
Choice “a” is correct. Strategic planning is the creation of an overall strategic plan for an organization to achieve its overall “business objectives.” The strategic plan will establish the general direction of the organization.
Choice “c” is incorrect. Strategic planning will not establish the resources that the plan will require. The resources that the plan will require are part of the implementation of the strategic plan, not part of the plan itself.
Choice “d” is incorrect. Strategic planning will not establish the budget for the organization. Budgets are even further down implementing the plan than are the resources that the plan will require.
Choice “b” is incorrect. Strategic planning does not consist of decisions to use parts of the organization’s resources in specified ways. Again, these decisions are part of the implementation of the strategic plan, not part of the plan itself.
A firm is in heavy competition with a rival firm, and its rivals are consistently able to effectively respond to changes in consumer preferences by making strategic moves in an effort to win over the buyers and gain competitive advantage. Which of the five forces that affect the competitive environment and profitability of a firm does this best demonstrate?
a.
Barriers to entry.
b.
Existence of substitute products.
c.
Bargaining power of customers.
d.
Market competitiveness.
Choice “d” is correct. Market competitiveness is often the most significant of the five forces facing a firm. Firms need to be able to anticipate the strategic moves of rival firms. If a firm is in competition with other firms who are able to respond to changes in various components affecting business, the firm faces a strong competitive force of intensity of competition (market competitiveness).
Choice “a” is incorrect. Barriers to entry are “hoops” or other obstacles that a firm must combat when it attempts to enter a new market.
Choice “b” is incorrect. A firm faces heavy competition from substitute products when similar products exist in the marketplace, and consumers are easily able to switch from one product to another.
Choice “c” is incorrect. Bargaining power of the customers relates to the ability of the customer to directly impact the profitability of the firm by increasing the negotiating power of the customer.
Monopolistic competition is characterized by:
a.
A relatively large group of sellers who produce differentiated products.
b.
A relatively small group of sellers who produce differentiated products.
c.
One or two companies producing similar products.
d.
A relatively large group of sellers who produce a homogeneous product.
Choice “a” is correct. Monopolistic competition is characterized by a relatively large number of sellers who produce differentiated products. There are few barriers to entry and firms exert some influence over the price and the market. Best examples are brand name consumer products.
Choice “b” is incorrect. Relatively few sellers with differentiated products would indicate an oligopoly.
Choice “c” is incorrect. One company would be a monopoly, two an oligopoly.
Choice “d” is incorrect. A relatively large number of sellers and a standardized product indicates perfect competition.
A perfectly inelastic supply curve in a competitive market:
a.
Exists when firms cannot vary input usage.
b.
Means the equilibrium price must be zero.
c.
Says the market supply curve is horizontal.
d.
Implies a vertical demand curve.
Choice “a” is correct. Price elasticity of supply is calculated the same way as demand except that quantity supplied is measured:
Price elasticity
of supply (%)
=
% change in quantity supplied
change in price
Perfectly inelastic supply curves are also vertical representing that supply is insensitive to changes in price; i.e., the quantity supplied will not change as price changes.
Perfectly inelastic supply curves would exist if firms cannot vary input usage. Regardless of price, the firm has to use all inputs if it produces at all.
Choices “b”, “d”, and “c” are incorrect.
Considering the SCOR Model of supply chain operations, which of the following key management processes does collecting and processing vendor payments fall into?
a.
Plan.
b.
Source.
c.
Make.
d.
Deliver.
Choice “b” is correct. Once demand has been planned, it is necessary to procure the resources required to meet it and to manage the infrastructure that exists for the sources. Collecting and processing vendor payments falls into the “source” process.
Choices “a”, “c”, and “d” are incorrect, per the above explanation.
Which of the following is incorrect with regard to government intervention in market operations?
a.
Rationing limits the availability of certain goods to a specified level, which lowers demand and prices for a given supply.
b.
A price ceiling is a price that is established above the equilibrium price, which causes a surplus to develop.
c.
Price floors are minimum prices established by law, such as minimum wages and agricultural price supports.
d.
Government intervention may create a price different from the market price, thus causing either a surplus or a shortage.
Choice “b” is correct. This is an incorrect (false) statement and is therefore the correct choice. A price ceiling is a price that is established below the equilibrium price, which causes a shortage to develop. This answer in choice defines a price floor.
Choices “d”, “c”, and “a” are incorrect. These statements are all true. The question stem asks for an incorrect statement so none of the true statements is the right answer.
Under an oligopoly structure, strategic plans focus on:
a.
Maintaining the market share and planning for enhanced product differentiation.
b.
Maintaining the market share and being responsive to market conditions related to sales price.
c.
Profitability from production levels that maximize profits.
d.
Maintaining the market share, ensuring product differentiation, and adapting to changes in price and/or production volume.
Choice “d” is correct. Under oligopoly, strategic plans focus on maintaining market share and call for the proper amount of advertising (to ensure product differentiation) and ways to properly adapt to price changes or required changes in production volume.
Choices “c”, “b”, and “a” are incorrect because they are characteristics of other types of market structures.
A city ordinance that freezes rent prices may cause:
a.
The quantity supplied of rental space exceeds the quantity demanded.
b.
The quantity demanded of rental space exceeds the quantity supplied.
c.
The supply curve for rental space to rise.
d.
The demand curve for rental space to fall.
Choice “b” is correct. A city ordinance that freezes rent prices (such as rent control and rent stabilization in New York City) may cause the quantity demanded for rental space to exceed the quantity supplied. This occurs if the rent controlled price is set below the market clearing price. At the controlled price, the quantity supplied will be constrained due to the low rent prices for the rent-controlled and rent-stabilized properties; builders will not want to build and rent properties for less than they are worth on the open market. The quantity demanded for the rental space will still be artificially high due to the city ordinance, which sets the controlled price below the market price. Thus, the quantity demanded will exceed the quantity supplied. New York City rent control is a perfect example of the effect of a price ceiling and the problems that it can cause.
Choice “d” is incorrect. A city ordinance that freezes rent prices will not cause the demand curve for rental space to fall. Price changes cause movements along the demand curve, not shifts in the demand curve.
Choice “c” is incorrect. A city ordinance that freezes rent prices will not cause the supply curve for rental space to rise. Price changes cause movements along the supply curve, not shifts in the supply curve.
Choice “a” is incorrect. A city ordinance that freezes rent prices will not cause the quantity supplied to exceed the quantity demanded; it would cause the reverse effect.
Factors internal to the organization that impact strategy and are sources of strengths and weaknesses include all of the following, except:
a.
Innovation of product lines.
b.
Marketing effectiveness.
c.
Competence of management.
d.
Regulations and laws.
Choice “d” is correct. Regulations and laws are external factors of opportunities and threats that affect the overall industry.
Choices “b”, “c”, and “a” are incorrect, as internal factors (strengths and weaknesses) of an organization include marketing effectiveness, management competence, and product line innovation.
Which of the following is not true regarding strategic plans?
a.
Various levels of the organization will implement strategic plans differently.
b.
The process of strategic planning begins with the creation of the plan.
c.
Continual re-evaluation and revision of strategic plans is necessary.
d.
Strategic plans will vary by segment based on the characteristics of the segments.
Choice “b” is correct. The process of strategic planning actually begins with defining the firm’s vision and mission statements and then moves to setting the goals and objectives of the firm before it considers creation of the strategic plan.
Choices “a”, “c”, and “d” are all incorrect because they are all true statements regarding strategic plans.
The demand curve for a product reflects which of the following?
a.
The impact of prices on the amount of product offered.
b.
The impact that price has on the purchase amount of two related products.
c.
The willingness of producers to offer a product at alternative prices.
d.
The impact that price has on the amount of a product purchased.
Choice “d” is correct. The demand curve illustrates the maximum quantity of a specific good that consumers are willing and able to purchase at each and every price, all else being equal. Thus, the demand curve reflects the impact that price has on the amount of a product purchased.
Choice “a” is incorrect. The supply curve, not the demand curve, measures the maximum quantity of a specific good that sellers are willing and able to produce at each and every price.
Choice “c” is incorrect. The movement of points along the supply curve, not the demand curve, represents a change in quantity supplied as a result of a change in price and is the measure of a willingness of producers to offer a product at alternative prices.
Choice “b” is incorrect. Cross elasticity, not the demand curve, measures the impact that price has on the purchased amount of two related goods (either substitute or compliment).
The local video store’s business increased by 12 percent after the movie theater raised its prices from $9.50 to $11.00. This is an example of:
a.
Independent goods.
b.
Substitute goods.
c.
Complementary goods.
d.
Superior goods.
Choice “b” is correct. For substitute goods, as the price of one good goes up, the demand for another, substitute good increases as consumers desire the lower-priced substitute good.
Choice “d” is incorrect. Superior goods. Just as the demand for inferior goods declines with an increase in the income level of a consumer, superior goods will experience a spurt in demand as prices are raised.
Choice “c” is incorrect. The demands for mutually “complementary goods” fluctuate together (e.g., more cereal purchases are accompanied by an increase in the demand for milk).
Choice “a” is incorrect. Independent goods have unrelated demand functions (e.g., bread and vacuum cleaners).
Karen Parker wants to establish an environmental testing company that would specialize in evaluating the quality of water found in rivers and streams. However, Parker has discovered that she needs either certification or approval from five separate local and state government agencies before she can commence business. Also, the necessary equipment to begin would cost several million dollars. However, Parker believes that if she is able to obtain capital resources, she can gain market share from the two major competitors.
The large capital outlay necessary for the equipment is an example of a(n):
a.
Created barrier.
b.
External cost.
c.
Entry barrier.
d.
Minimum efficiency scale.
Choice “c” is correct. Large capital (money) requirements are the basic example of barriers to entry. A barrier to entry effectively prevents firms from entering the market to compete against existing firms.
Choice “d” is incorrect. Minimum efficient scale is the output level at which long run average costs are minimized. Here, Parker has not even been able to enter the industry.
Choice “a” is incorrect. A created barrier is made by firms already in the industry. Here, Parker’s barrier was not created.
Choice “b” is incorrect. An external cost is a cost that the company does not account for, but passes on to the detriment of society.
In the pharmaceutical industry where a diabetic must have insulin no matter what the cost and where there is no substitute, the diabetic’s demand curve is best described as:
a.
Elastic.
b.
Perfectly elastic.
c.
Perfectly inelastic.
d.
Indifferent.
Choice “c” is correct. When a good is demanded, no matter what the price, demand is described as perfectly inelastic. The demand “curve” is a vertical line at the quantity demanded with price making no difference.
Choices “b” and “a” are incorrect. There is no such thing as perfect elasticity. However, the more elastic demand is, the greater the change in quantity demanded for price changes.
Choice “d” is incorrect. Diabetics are indifferent to changes in the price of insulin, and to economists, this is perfectly inelastic demand.
Karen Parker wants to establish an environmental testing company that would specialize in evaluating the quality of water found in rivers and streams. However, Parker has discovered that she needs either certification or approval from five separate local and state government agencies before she can commence business. Also, the necessary equipment to begin would cost several million dollars. However, Parker believes that if she is able to obtain capital resources, she can gain market share from the two major competitors.
The market structure Karen Parker is attempting to enter is best described as:
a.
Pure competition.
b.
A natural monopoly.
c.
Monopolistic competition.
d.
An oligopoly.
Choice “d” is correct. Major competitors and substantial capital requirements (high barriers to entry) are oligopolistic market conditions.
Choice “a” is incorrect. Pure competition has small barriers to entry and numerous suppliers.
Choice “b” is incorrect. A natural monopoly suggests that economic conditions allow only one supplier for efficiency purposes.
Choice “c” is incorrect. Monopolistic competition has easier barriers to entry and more firms competing to supply the market than oligopoly.
The competitive model of supply and demand predicts that a surplus can only arise if there is a:
a.
Minimum price below the equilibrium price.
b.
Maximum price above the equilibrium price.
c.
Minimum price above the equilibrium price.
d.
Maximum price below the equilibrium price.
Choice “c” is correct. The competitive model, illustrated below, predicts a surplus is created when supply exceeds quantity demanded at that price. Hence, a surplus occurs when minimum price is set above equilibrium.
[Image 39f559ba110c34b2dca459c3782462c8]
Choices “b”, “a”, and “d” are incorrect, per the graph and explanation above.
Economic theory identifies two basic types of goods: inferior goods and superior goods. As consumer income rises, a lower percentage of earnings are expended on inferior goods while a higher percentage of earnings are spent on superior goods. Overall strategies for achieving organizational missions would most likely match with types of goods as follows:
a.
Cost leadership strategies for superior goods, differentiation strategies for inferior goods.
b.
Cost leadership strategies for inferior goods, differentiation strategies for superior goods.
c.
Cost leadership strategies would most likely be used for both inferior and superior goods.
d.
Differentiation strategies would most likely be used for both inferior and superior goods.
Rule: Overall strategies are divided into two different types that are defined as follows:
Cost leadership: Organization seeks to capture market share through maintaining the lowest cost.
Differentiation: Organization seeks to capture market share by demonstrating product value.
Choice “b” is correct. Organizations that sell economically inferior goods (necessities such as cotton swabs, light bulbs, etc.) are more likely to posture themselves as cost leaders than organizations that sell economically superior goods (luxuries such as cruise packages, fine china, jewelry, etc.) who will likely seek to differentiate the value of their product as part of their strategy.
Choices “a”, “c”, and “d” are incorrect. Economically inferior products would likely be associated with cost leadership, not differentiation while economically superior products would likely be associated with differentiation.
Considering the SCOR Model of supply chain operations, which of the following key management processes does implementing changes in engineering fall into?
a.
Deliver.
b.
Plan.
c.
Source.
d.
Make.
Choice “d” is correct. The “make” process encompasses all the activities that turn the raw materials into finished products that are produced to meet a planned demand. Implementing changes in the engineering process falls into the “make” process.
Choices “b”, “c”, and “a” are incorrect, per the above explanation.
Under monopoly, strategic plans focus on:
a.
Maintaining the market share, ensuring product differentiation, and adapting to price changes or required changes in production volume.
b.
Maintaining the market share and being responsive to market conditions related to sales price.
c.
Maintaining the market share and planning for enhanced product differentiation.
d.
Profitability from production levels that maximize profits.
Choice “d” is correct. Under monopoly, strategic plans ignore market share and focus on profitability from production levels that will maximize profits.
Choice “b” is incorrect. Continuous price responses to maintain market share is a characteristic of perfect competition.
Choice “c” is incorrect. Under monopolistic competition, strategic plans include maintaining the market share (as with pure competition), but they also likely include plans for enhanced product differentiation and allocation of resources to advertising, product research, etc.
Choice “a” is incorrect. Coordinating production volume and price changes along with product differentiation is a characteristic of oligopoly.
In applying the Supply Chain Operations Reference (SCOR) Model, a company would include all of the following in its planning except for:
a.
Selecting vendors.
b.
Assessing capacity concerns and capabilities.
c.
Making make/buy decisions.
d.
Determining demand requirements.
Choice “a” is correct. Selecting vendors is a source decision, not a plan decision. The SCOR model includes a series of processes or steps defined as plan, source, make, and deliver. The process of planning consists of developing a way to properly balance aggregate demand and aggregate supply within the goals and objectives of the firm and plan for the necessary infrastructure. Selecting vendors is a “source” step that implements that plan.
Choice “d” is incorrect. Determining demand requirements is an example of an activity performed in the plan stage of the SCOR model.
Choice “b” is incorrect. Assessing capacity concerns and capabilities is an example of an activity performed in the plan stage of the SCOR model.
Choice “c” is incorrect. Making make/buy decisions is an example of an activity performed in the plan stage of the SCOR model.
When the supply of and demand for a good both increase:
a.
Equilibrium price will increase.
b.
Equilibrium price will decrease.
c.
Equilibrium quantity may increase, decrease, or remain unchanged.
d.
Equilibrium price may increase, decrease, or remain unchanged.
Choice “d” is correct. When the supply of and demand for a good both increase, equilibrium quantity increases. However, the impact on price is indeterminate. If demand and supply increase by the same amount, price will remain unchanged (as illustrated above). However, if demand increases by more than supply, price will increase. Conversely, if supply increases by more than demand, price will decrease.
[Image 939224722e31f3e47316ce8767d23745]
Choices “a” and “b” are incorrect, since the impact on price is indeterminate.
Choice “c” is incorrect, since equilibrium quantity will increase.
An increase in the demand and the supply for a product will cause which of the following?
I.
The equilibrium quantity to increase.
II.
The equilibrium quantity to remain unchanged.
III.
The equilibrium price to remain unchanged.
IV.
The equilibrium quantity to decrease.
a.
I only.
b.
I and III only.
c.
II only.
d.
II and III only.
Choice ‘‘a’’ is correct. The equilibrium quantity will certainly increase, but the effect on price cannot be determined; it may increase, decrease, or remain unchanged.
Choices ‘‘d’’, ‘‘c’’, and ‘‘b’’ are incorrect, per the above explanation.
If a group of consumers decide to boycott a particular product, the expected result would be:
a.
An increase in the product price to make up lost revenue.
b.
A decrease in the demand for the product.
c.
That companies in the industry would experience higher economic profits.
d.
An increase in product supply because of increased availability.
Choice “b” is correct. A consumer boycott will decrease demand for the product being boycotted.
Choice “a” is incorrect. Increasing price will further reduce the quantity demanded. The effect on revenue is uncertain.
Choice “d” is incorrect. Supply will be unaffected by a boycott.
Choice “c” is incorrect. A boycott of a particular product will reduce the overall profits of the industry.
In competitive markets, an increase in an effective minimum wage will:
a.
Decrease the supply of labor.
b.
Increase unemployment.
c.
Have a neutral effect on the demand for labor.
d.
Decrease unemployment
Choice “b” is correct. When the “minimum” wages are increased, employers may elect to hire fewer employees thereby increasing unemployment.
Choice “c” is incorrect. An increase in the minimum wage will have an effect on the demand for labor.
Choice “a” is incorrect. The supply of labor will likely go up as the wage being paid increases.
Choice “d” is incorrect. As the minimum wage increases, unemployment will increase.
Which of the following characteristics would indicate that an item sold would have a high price elasticity of demand?
a.
Changes in the price of the item are regulated by governmental agency.
b.
The item is considered a necessity.
c.
The item has many similar substitutes.
d.
The cost of the item is low compared to the total budget of the purchasers.
Choice “c” is correct. If an item has many similar substitutes, its price elasticity of demand will be high. Customers can always switch to a substitute, so a change in price may affect demand substantially.
Choice “d” is incorrect. If the cost of an item is low compared to the total budget of the purchasers, it will make little difference how much it costs. For example, in a business the cost of paper clips will probably not be a significant factor.
Choice “b” is incorrect. If an item is considered a necessity (e.g., insulin to diabetics), the price elasticity of demand will be relatively low (i.e., inelastic). Purchasers will buy it regardless of the cost, and demand will not change all that much.
Choice “a” is incorrect. If the price of an item is regulated by a government agency, the demand may not be highly price elastic because any price changes (if made) will be controlled and implemented gradually over time.
An increase in the price of crude oil will have what affect on the equilibrium price and quantity of gasoline?
a.
Price will rise and quantity will rise.
b.
Price will fall and quantity will fall.
c.
Price will rise and quantity will fall.
d.
Price will fall and quantity will rise.
Choice “c” is correct. Crude oil is an input to the production of gasoline. When the price of an input increases, supply shifts left, causing equilibrium price to rise and equilibrium quantity to fall.
Choice “d” is incorrect, since price will rise and quantity will fall.
Choice “b” is incorrect, since price will rise.
Choice “a” is incorrect, since quantity will fall.
