B5-B6 Mini exam review

Question 1

___________ competitions is the most competitive environment, with homogeneous products and no differentiation. Many firms and no barriers to entry. Firms are “price takers” (think taxi’s).

Answer 1

Perfect (PURE) Competition

Question 2

_____________competition is a competitive environment where products are differentiated. There are many firms, not many barriers to entry and the firms have the ability to control the price.

Answer 2

Monopolistic Competition

Question 3

A(n) _________________ has less competition and products are similar but differentiated. There is a small number of firms, large barriers to entry, and the ability to control price AND output. This is the ONLY time we see a “kinked demand curve”.

Answer 3

Oligopoly

Question 4

A(n) ______________________________ has no competition with insurmountable barriers to entry. Firms are “price setters” and the products are unique.

Answer 4

Monopoly

Question 5

What type of market structure demands this strategy:
Keep market share and be able to quickly adjust to price.

Answer 5

Perfect (Pure) Competition

Question 6

What type of market structure demands this strategy:
Keep market share, but look to invest in R&D/advertising to help differentiate the product.

Answer 6

Monopolistic Competition

Question 7

What type of market structure demands this strategy:
Focus on market share, differentiate the product, and be able to adapt to price volume changes.

Answer 7

Oligopoly

Question 8

What type of market structure demands this strategy:
Focus on profitability and produce at a level at which profits can be maximized.

Answer 8

Monopoly

Question 9

___________________ policy uses govt spending and taxation to influence the economy.

Answer 9

Fiscal

Question 10

___________________________ policy is used by the central bank to affect the money supply, interest rates, and available credit. Tools include: open market operations, changes in required reserve ration and changes in the discount rate.

Answer 10

Monetary

Question 11

_______________________ represents an organizational commitment to customer-focused performance that emphasizes both quality and continuous improvement.

Answer 11

Total quality management (TQM)

Question 12

____________________ anticipates achievement of efficiency by scheduling the deployment of resources just-in-time to meet customer or production requirements.

Answer 12

Just-in-time management

Question 13

___________________ focuses on the cost of activities and seeks to only invest resources in value added activity.

Answer 13

Activity-based costing

Question 14

_____________________ emphasizes the use of
only those resources required to meet the requirements of customers. It is somewhat like
activity-based approaches, as it seeks to invest resources only in value-added activities.

Answer 14

Lean manufacturing or lean production

Question 15

The appropriate order for developing a business continuity plan for disaster recovery is as follows (6 STEPS):

Answer 15

1. iDENTIFY KEY BUSINESS PROCESS, ASSOCIATED KEY RISKS, AND ACCEPTABLE DOWNTIMES FOR THESE PROCESSES
2. DEVELOP MITIGATION AND CONTINGENCY PLANS TO ADDRESS RISKS AND DOWNTIMES.
3. IDENTIFY MISSION-CRITICAL APPLICATIONS AND DATA.
4. DEVELOP A PLAN FOR HANDLING THESE APPLICATIONS.
5. DETERMINE RESPONSIBILITIES FOR ALL PARTIES INVOLVED.
6. TEST RECOVERY PLANS

Question 16

MCQ-08343
A company implements an enterprise resource planning application to help improve its financial and operational reporting, while gaining other efficiencies related to sales and inventory management. For the implementation, the company hires an individual specializing in preparing the company for the changes through documenting new policies and procedures and developing new training.

This is an example of:

A. Segregation of duties.
B. An economic event.
C. Change management.
D. A social event.

Answer 16

Choice “C” is correct. A situation where a company implements new technology and
hires an individual to help document new policies and procedures and develop training is an example of change management. Typically, these individuals are outside consultants who specialize in specific aspects of change management and can provide expertise to companies going through significant changes, such as new system implementations.

Choice “A” is incorrect. Segregation of duties is a means of reducing risk by applying internal controls, such that no one individual performs too many functions within a process.

Choice “B” is incorrect. Hiring a specialist to assist a company with an application
implementation is a part of the change management process. Although engaging the services of a consultant in change management may be an economic event of the company that is accounted for in the financial records, it is not the best answer for this question.

Choice “D” is incorrect. A company implementing new technology and hiring an outside specialist to assist in the process is not an example of a social event.

Question 17

MCQ-03450
Any business firm that has the ability to control the price of the product it sells:

A. Faces a downward-sloping demand curve.
B. Does not have any entry or exit barriers in its industry.
C. Has a demand curve that is horizontal.
D. Has a supply curve that is horizontal.

Answer 17

Choice “A” is correct. Any business firm that has the ability to control the price of the
product it sells faces a downward-sloping demand curve for the firm. Only the firm in a competitive market is a price-taker facing a horizontal demand curve at the market
equilibrium price.

Choice “B” is incorrect. Firms in competitive industries have no entry or exit barriers
and are price-takers.

Choice “C” is incorrect. Only firms in perfectly competitive markets (price-takers) face horizontal demand curves.

Choice “D” is incorrect. A firm controlling the price of the product it sells would not
cause a horizontal supply curve.

Question 18

MCQ-07030
The manufacturer of a high priced car emphasizes the prestige, performance, and safety of
the vehicle. The strategy pursued by the manufacturer can be best characterized as:
A. Differentiation focused on a narrow range (niche) of buyers.
B. Cost leadership focused on a narrow range (niche) of buyers.
C. Cost leadership focused on a broad range of buyers.
D. Differentiation focused on a broad range of buyers

Answer 18

Choice “D” is correct. The manufacturer’s attempt to appeal to prestige, performance,
and safety targets a broad range of motivations in the automotive market and markets
to wealthy individuals, corporations, etc. The manufacturer seeks to differentiate itself
from other vehicles with various superlatives, however, there is not one feature that is
specifically emphasized. The differentiation of the product is focused on a broad range
of buyers.

Choice “A” is incorrect. Differentiation focused on a narrow range (niche) of buyers
would differentiate the product within the context of a very few buyers and might
specifically emphasize one feature such as prestige (for the status conscious
professional), performance (for the auto enthusiast), or safety for families, etc.
Choice “B” is incorrect. Cost leadership focused on a narrow range (niche) of buyers
would emphasize price to a specific group interested in price.
Choice “C” is incorrect. Cost leadership focused on a broad range of buyers would
emphasize price to a large number of buyers, not various features.

Question 19

MCQ-03493
Under an oligopoly structure, strategic plans focus on:
A. Profitability from production levels that maximize profits.
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. Maintaining the market share, ensuring product differentiation, and adapting to
changes in price and/or production volume.

Answer 19

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.

Question 20

MCQ-12437

A company currently sells 100,000 units of product A at $10 per unit. The company also sells 100,000 units of product B at the same price. The company raises the price of both products by 10 percent. Product A has an elasticity of 1.5. Product B has an elasticity of 3.0.

Which of the following effects will the price increase most likely have on company
revenues?

A. Company revenues will increase for product A but not product B.
B. Company revenues will increase for both products.
C. Company revenues will decrease for both products.
D. Company revenues will increase for product B but not product A.

Answer 20

Choice “C” is correct. Price elasticity of demand measures the percentage change in quantity demanded relative to the percentage change in price. When price elasticity is greater than one, the good is considered price elastic and the percentage change in quantity demanded from an absolute value perspective will exceed the percentage change in price. The assumption for normal goods is that the quantity demanded will decline when price increases.

For both products A (1.5) and B (3.0), which are price elastic, an increase in price will
lead to a greater decrease in quantity demanded. And because revenue is equal to Price × Quantity, the decline in quantity will exceed the increase in price and the overall result will be a decline in revenue for both products.

Choice “A” is incorrect. Revenues will decrease for both products A and B.
Choice “B” is incorrect. Revenues will decrease because the goods are price elastic.
Choice “D” is incorrect. Revenues will decrease for both products A and B.

Question 21

MCQ-03820
An increase in the minimum wage:

I. Will move employers down the labor demand curve, causing the quantity of labor demanded to fall.
II. Is likely to increase the supply of labor, as more people will be willing to work for the higher wage.

A. Only I.
B. Both I and II.
C. Neither I nor II.
D. Only II.

Answer 21

Choice “C” is correct; neither statement I nor statement II are correct. Statement I is
incorrect, as an increase in the minimum wage will move employers up, not down, the labor demand curve, causing the quantity of labor demanded to fall. Statement II is incorrect, as an increase in the minimum wage leads to a decrease in the quantity demanded of labor and an increase in the quantity supplied of labor. It does not increase the supply of labor, only the quantity supplied of labor.

Question 22

MCQ-07839
All of the following represent significant political risks except:

A. A weak local currency which increases the demand for imported products.
B. The inability to convert a foreign currency into another currency.
C. The tendency of a local government to try and block foreign firms from operating
in its economy.
D. Barriers to trade established by local governments.

Answer 22

Choice “A” is correct. Exchange rates (and variations in rates) do pose a risk to
international business operations, but they are not a political risk. In addition, a weak
local currency will reduce the demand for imported goods.

Choice “B” is incorrect. A foreign currency that cannot be converted into another
currency does represent a political risk.
Choice “C” is incorrect. A local government making it difficult for foreign firms to operate does represent a political risk.
Choice “D” is incorrect. Barriers to trade established by local governments represent a political risk